Issue

On the roadmap of Syensqo is to consolidate multiple GBU warehouses into a single warehouse. By doing so it will be possible to arrange shipments by ZIP code and to arrange milkrun orders for trucking companies, optimising the truck capacity and order handling. With the higher truck capacity not only transportation costs can be reduced, but this will also have a positive environment impact, which fit into Syensqo's sustainability strategy.

By combining multiple deliveries into one freight order, users don't need to be concerned about splitting freight costs over the different material items. SAP system is capable to distribute freight charges. This will reduce the handling time of users dealing with multiple freight orders for arranging milkrun transports outside of the system.

SAP TM was originally development to support transportation service providers. This means that many of the tools required to support consolidation scenarios are available in the system. However, with the shippers scenario, when multiple Company Codes are involved, there are gaps in the solution. To make sure accounting entries are correct some system enhancements are required. The accounting entries generated are explained in the below paragraphs.

Recommendation

The recommendation for Syensqo is then to extend SAP standard Transportation Management with a enhanced solution to allow cross-company consolidations, including invoice differences distributed.

It is quite common for companies that operate with multiple company codes in one country to extend the standard SAP solution to support cross company consolidation. Considering the company structure and the roadmap of Syensqo cross company consolidation provides an important opportunity with the new ERP Rebuild system.

As in transportation invoice differences are common (e.g. difference is weight measurement or discrepancies in actual distance) allowed tolerances with freight invoices are desirable. To make sure all freight costs are properly distributed to the origin it is often preferred to also do proper cost distribution on invoice differences.

Glossary

Freight Order - Order for which transportation services are ordered with a carrier and execution is tracked. The content of the transportation order is filled with materials from the outbound or inbound delivery. 

Cost Distribution - In the freight order the charges can be distributed among the cargo items. Higher utilisation of a freight order by a delivery, the higher percentage of the transportation costs are attributed to this delivery. This distribution will be reflected into the accounting.

Freight PO - A Freight PO is a purchase order that is generated to cater for invoice verification process. The charges calculated on the freight order are posted and represented on this type of service purchase order.

Service Entry Sheet (SES) - A document that contains confirmation of services that have been performed by the Supplier.

Settlement Management Documents (SMD) - Accounting document that contains the result of the cost distribution as calculated in the freight order. The SMD contains the currency value, it contains the reference to the original documents and materials, it determines the G/L account where charges need to be posted to.

Intercompany Settlement - Transaction between companies to resolve unequal balances. It will create and post intercompany balancing entries to ensure each company's net balance equals zero.

Background & Context

In consolidation scenario's multiple deliveries can be combined to optimise transportation capacity. There can be many scenario's where cargo can be combined into one order, e.g. multiple deliveries into one container, milkrun scenarios, multi containers combined into one freight booking, etc. To make this possible for multiple company codes then certain functions need to be custom built.

Description of a scenario:

Lets consider a simple scenario where cargo for one customer is combined into one container.

1. Cargo is picked up at plant for company code 1100.
2. Additional cargo is loaded into the same container at plant for company code 1200.
3. Additional cargo is loaded into the same container at plant for company code 1300.
4. Truck delivers container at port.
5. One Freight Order is created for transportation of the entire shipment
6. Transportation charges are calculated on the Freight Order.
7. Cost Distribution (standard SAP) is distributing the costs based on cargo weight.
8. Freight charges are posted in a Freight PO for invoice verification. This is on company code 1100 only.
9. At the same time when the Freight PO is posted, the system is posting Settlement Management Documents (SMD) which assign a proportion of the transportation charges to each company code. This is based on the Cost Distribution. (standard SAP).
10. For the SMD documents for company code 1200 and 1300, the system will create an Intercompany Settlement (custom built) to compensate company code 1100 for the freight costs to be paid to carrier.
11. When the invoice is received, then this is verified and posted against the Freight PO in Company Code 1100.
12. Invoice differences are posted against price differences account (standard) or additional SMD documents are generated to distribute the invoice differences (custom built).

Option A) No Cross Company Consolidation

To have an understanding of what the issue is with standard solution, a short description of what happens in the system when there are no enhancements.

When the Freight-PO and SES are posted, the system is parking the costs on the Freight Clearing account. Subsequently the SMD posting has to balance the clearing account by assigning the freight charges to the correct expense account. When there are multiple company codes involved, then these costs are posted to an account in a different company code. When this happens, the Freight Clearing accounts will be out of balance. Those will be considered discrepancies in the accounting and need to be resolved.

 For this reason, if there are no enhancements applied, the standard configuration is to prevent consolidation across company codes.

Option B) Accounting postings including Invoice Differences posted to Price Differences

The sequence of account postings in the solution where invoice differences are posted to price differences are as following:

Event 1) Creation of PO and SES

Event Description: When posting freight charges from TM to ERP, the system will generate a Freight-PO and Service Entry Sheet (SES). In this process the SES is a technical document to support the end-to-end process.
Accounting: The system will post the charges against a Freight Clearing account.

Event 2) SMD Posting

Event Description: Automatically after creating the F-PO and SES the system will immediately create SMD documents. 
Accounting: For each SMD document the freight charges are posted against a Freight Expense account. These charges are booked against the Freight Clearing account if the SMD document is the same Company Code as the related F-PO. If the SMD document is in a different Company Code than the F-PO, then freight charges are booked against an Intercompany Settlement account, and in the Company Code of the F-PO a booking is generated from  Freight Clearing account to Intercompany Settlement account.

Event 3) Invoice Posting

Event Description: When an invoice is received, then this is entered in the system. Invoices can have invoice differences.
Accounting: The system will clear the GR/IR for Freight account. If there are any differences in the amount of the invoice and the GR/IR amount then these differences will be posted against a Price Differences account.

Event 4) Intercompany Allocation Cycle

Event Description: From an accounting perspective Company Code 1100 operated as a central procurement of freight services. Consequently the procuring Company Code recharges the affiliates with the freight services 'consumed' by the affiliates. This can be done by Intercompany Allocation cycles using using Universal Allocation.
Accounting: Open Intercompany Settlements are recharged and made payable between to 'central' Company Code. 

Option C) Accounting postings including Invoice Differences posted to origin

The sequence of account postings in the solution where invoice differences are posted to origin are as following:

Event 1) Creation of PO and SES - Same as Event 1 for Option B.

Event 2) SMD Posting - Same as Event 2 for Option B.

Event 3) Invoice Posting

Event Description: When an invoice is received, then this is entered in the system. Invoices can have invoice differences.
Accounting: The system will clear the GR/IR for Freight account. If there are any differences in the amount of the invoice and the GR/IR amount then these differences will be posted against the Freight Clearing account.

Event 4) SMD for Invoice

Event Description: Automatically after posting the Invoice, in case of invoice differences the system will immediately create SMD documents. The system will collect SMD documents of the F-PO and distribute the invoice differences according to the same ratio. For these amounts new SMD documents are generated.
Accounting: The logic for SMD documents with invoice differences follow the same logic as normal freight SMD documents. Freight charges are posted against a Freight Expense account. If the SMD is the same Company Code as the related F-PO then it is booked against the Freight Clearing account. If the SMD document is in a different Company Code than the F-PO, then freight charges are booked against an Intercompany Settlement account, and in the Company Code of the F-PO a booking is generated from  Freight Clearing account to Intercompany Settlement account.

Event 5) Intercompany Allocation Cycle - Same as Event 4 for Option B.

Assumptions

Consolidation Across Legal Entities

This KDD is written in the assumption that it covers consolidation across multiple legal entries. When there are multiple GBU's within the same Company Code then the scenario is not considered a cross company consolidation.

Consolidation across different SAP Instances

With embedded SAP TM in S/4 HANA it is not possible to cater for cases where different company codes are operating in different SAP Instances. This will be out of scope.

Cost Account vs Material Account

This document has focussed on the cost account for freight costs. This is mostly applicable in the outbound scenario. If instead of a cost account the freight charges need to be posted to a Material Account (mostly applicable for inbound scenario), then the same logic will be applied.

Organisational Structure of Transportation Planning 

As currently transportation planners are embedded in the GBU, it is assumed that future organisational structure will have more centralised grouping. This grouping can be done by Geography (plants that are located close to each other), Mode of Transport, Special Business Process (e.g. integration with external TMS, Shuttling Capacity).

How this transportation planning grouping will look like, will be part of detailed design.

GBU level cost reporting

Freight costs are distributed down to delivery items level. To analyse freight costs per plant / company code / GBU level, the reports need to be based on distributed costs from SMD documents.

Constraints

Authorisations

In the authorisation concept, the requirements for transportation will be included in such a way that transportation planner have the necessary authorisation to view, create and edit documents for multiple business units. There where data is considered sensitive only dedicated transportation planners can view business documents where they have been specifically authorised for.

Impacts

When transportation planner plan for multiple business units, there can be impact on the organisational assignment of these planners. Should transportation planners stay on the payroll of the GBU, or should they be reassigned to a shared service organisational unit? In certain cases it might be important to anticipate these organisational structure consequences. 

Business Rules

Business Rules in Consolidation

There where materials are not to be consolidated, Dangerous Goods integration and incompatibilities will be used to automatically check transportation planning results (part of Advanced TM version). 

Evaluation

Consolidated transport across multiple company codes is an opportunity that can be fulfilled with the use of SAP TM. It gives greater flexibility to transportation planners to optimise the use of transportation capacity and to save costs.

With invoice differences distributed across freight, it gives the most accurate accounting result. And each company will pay their full share of the transport.

Change log

Workflow history