Issue
Syensqo has multiple intercompany processes implemented across the GBU's with manual tracking of stock in transit. Complex master data and Enterprise structure data (port plants, trading plants etc..) is maintained in order to support this process. There are also multiple custom applications/reports to track the stock in transit. This KDD is to assess the options to harmonise the intercompany processes and evaluate the advanced intercompany process available in SAP.
Recommendation
It is recommended to implement Advanced Intercompany Sales / Advanced Intercompany Stock Transfer processes for Syensqo for all intercompany scenarios. Implementing the Advanced intercompany processes will ensure simplification and standardization across Syensqo by ensuring application of intercompany policies, procedures, regulatory compliance, process governance, reporting etc. The Advanced intercompany processes reduce manual effort by automating the intercompany transactions, providing a better error handling mechanism, and improved Intercompany Reconciliation.
The following processes are classified as intercompany in Syensqo. Based on the comprehensive analysis, many of these intercompany processes can be effectively managed using standard Sales, Intracompany, or other existing processes and the recommendation is documented in the table below.
| Process | Description | Process Recommendation | Transfer Price Recommendation |
|---|---|---|---|
| Stock Replenishment | Transfer stock from one entity to another entity | Advanced Intercompany Stock Transfer | Advanced intercompany processes support the transfer price conditions in Purchase and Sales Orders for Cost+, Sales-, Trading price as a standard. |
| Direct Shipment (Drop Shipment / Intercompany Sales) | Sales done by the selling entity to customer with sending entity's plant, goods are shipped from the sending entity | Advanced Intercompany Sales | |
| Direct Trading (Third Party Sales) | Sales done by Syensqo and the sale is fulfilled using an external purchase order. The goods are shipped directly to the customer from the vendor | 3rd Party Sales Order + External Purchase Order | N/A |
| Indirect Trading (Buy - Sell) | Sales done by Syensqo and the sale is fulfilled using an external purchase order. The goods are shipped to the warehouse and then sent to the customer | Sales Order between customer and the selling entity, External Purchase Order between Selling entity and the supplier | N/A |
| Consignment | Goods are sent to the customer and stored in customer site. Customer is billed only when the goods are consumed | Consignment Sales Process | N/A |
| Stock Transfer | Stock is moved to different plants within the same entity | Standard Intracompany Stock Transfer | N/A No transfer price required. |
| Sample / Free goods | Samples and free goods are sent to the customers / distributors | Sales order process to send the samples from the sending entity to customer Advanced Intercompany Stock Transfer to move the stock with valuation from one entity to another entity (if required) | N/A |
| Intercompany Returns | Return of the goods from one entity to another entity | Advanced Intercompany returns process | N/A |
| Intercompany Recharges | Intercompany process allocating costs or revenues from one legal entity within a corporate group to another legal entity within the same group. There are no logistics processes in this process | Standard Intercompany Recharges | N/A |
Background & Context
Following are all the As-Is processes that are treated as intercompany processes in Syensqo and following the details of the same. You can note that each of these processes have a different logistics and finance flows and are dependent on manual triggering the GI/GR documents.
| Process | Description | Logistics Flow | Transport Management | Transfer Price | SIT Definition |
|---|---|---|---|---|---|
| Stock Replenishment | Transfer goods/spares from one entity to another entity | Purchase Order: Standard purchase order Logistics: GI/GR Invoice: Posted with EDI Transportation Invoice: Posted against the Transportation Service Purchase order | Separate service purchase order: Multiple shipment cost documents are raised In case both sending and receiving entities are paying for the freight (depending on the arrangement agreed) - Multiple shipping documents and the split is done manually | Cost+ Trading price | It is defined as stock in transit in the selling company if the GR is not yet done in the receiving company |
| Direct Shipment (Drop Shipment / Intercompany Sales) | Sales done by the selling entity to customer with sending entity's plant, goods/spares are shipped from the sending entity | Sales Order: Standard sales order with sending entity plant Purchase Order: No Logistics: GI/GR Invoice: Automatic invoice is generated on the back of customer billing (EDI) Transportation Invoice: Posted against the Transportation Service Purchase order | Separate service purchase order: Multiple shipment cost documents are raised Service purchase order raised in the delivering company code | Cost+ Trading price Transfer price is determined and stored in the Sales Order | It is defined as stock in transit in the purchasing company if the invoice to final customer is not yet done |
| Direct Trading (Third Party Sales) | Sales done by Syensqo and the sale is fulfilled using an external purchase order. The goods/spares are shipped directly from the vendor | Sales Order: Standard sales order with a third-party item category Purchase order: Created from Sales Order Logistics: Customer inbound / GR(auto) Invoice/Billing: Generated on back of customer inbound. Transportation Invoice: Posted against the Transportation Service Purchase order | Separate service purchase order: Multiple shipment cost documents are raised shipment cost is captured against inbound delivery Note : Multiple trading plants are created to cater to the transportation and taxes for this scenario | Cost+ | N/A |
| Indirect Trading (Buy - Sell) | Sales done by Syensqo and the sale is fulfilled using an external purchase order. The goods/spares are shipped to the warehouse and then sent to the customer | Sales Order: Standard sales order with a third-party item category Purchase order: Created from Sales Order Logistics: GI / GR Invoice/Billing: Standard PO invoice and Sales order billing | Separate service purchase order for PO and SO: Multiple shipment cost documents are raised | Cost+ Trading price | It is defined as stock in transit in the purchasing company if the delivery to final customer is not yet done |
| Customer Consignment | Goods/Spares are sent to the customer and stored in customer site. Customer is billed only when the goods are consumed | Sales Process: Consignment process Note: There are virtual plants created in the countries where Syensqo presence is not there. The movement of the stock to the virtual plant will follow the stock transfer process / Stock Replenishment process | Separate service purchase order: Multiple shipment cost documents are raised The shipment cost is captured against the SO inbound delivery | Sales Order | N/A |
| Stock Transfer | Transfer goods/Spares between plants in the same legal entity. This could be within the same country and across countries (i.e. Plants abroad scenario) | Purchase Order: Standard UB purchase order Logistics: GI / GR Invoice / Billing: Required only in the case of plants abroad. VAT invoice generated in such case | Separate service purchase order: Multiple shipment cost documents are raised in case of Plant abroad scenarios The shipment cost is captured against the stock transfer order | Standard cost of the material in the sending plant | N/A |
| Sample / Free goods | Samples and free goods are sent to the customers / distributors | Sales Process : Sample Sales process (KDD : CRM Platform, Processes and Integration - 2) | Sales orders raised to send the sample goods | N/A | N/A |
| Intercompany Returns | Return of the goods from one entity to another entity | Standard Purchase orders with the Return flag enabled Returns purchase order | Separate service purchase order: Multiple shipment cost documents are raised The shipment cost is captured against the purchase order | Cost + Sales - Traded Price | N/A |
| Intercompany Recharges | Intercompany process allocating costs or revenues from one legal entity within a corporate group to another legal entity within the same group. There are no logistics processes in this process | Standard Purchase / Sales invoices raised across the company codes | N/A | N/A | N/A |
Assumptions
- Cross system intercompany processes are considered as External Purchases and External Sales
- Valuated stock in transit will be implemented for Syensqo
- Intercompany sales, equipment transfer, repairs are not common in Syensqo and any such processes will be processed as Intercompany Recharges
- All direct materials use Outbound / Inbound delivery process
- Profit Center (Intracompany) valuation is not used in Syensqo
Constraints
- Transfer price / Multiple valuation should be enabled in order to get the full benefits of Advanced Intercompany Processes. This is the subject of a separate KDD KDD018 - GAAP Ledgers and Currency Types.
Impacts
Change Management and Training
- Change in the process will largely impact the logistics / Sales / Finance teams. Additional training required for Business / IT to understand the new process, automation (value chain) and error handling
Data Cleansing and Collection
- There will be data cleansing required to create the Intercompany Business Partners along with the recon accounts etc..
- Material master data
- Material extensions at plant level for both Purchasing and Sales Views
- Source of supply data i.e. contracts etc.. for the MRP to create the correct
Cutover
- During the cutover planning an approach needs to be defined to cater for the Intercompany transactions which are in transit to be loaded into the new system
Finance
- Finance / Accounting team to cater for the change in the valuated stock in transit approach from the As-Is and update the current accounting principles/treatment
- The process to be verified and signed off by Tax / Legal / Audit / Regulatory teams to make sure that the proposed process fulfils all the regulatory requirement
Logistics
- More documented generated to capture the Intercompany process (technical sales and purchase orders) which would take some time to get used to - The training will help to identify the leading document and the corresponding downstream documents
Performance
- Because the total number of documents processed by the S/4HANA system is greater in the Advanced scenarios than the comparable Classic scenarios, a slight performance impact might be expected. Traditional system sizing uses the number of sales transactions as one input. When using the Advanced scenarios, the total number of documents processed by the system for any given business transaction could be doubled.
Business Rules
Following are the Business Rules proposed as part of this KDD
- There should at least be one plant per Sales Org where Intercompany Sales is applicable. In case a plant is not available then a virtual plant to be created
- Intercompany contracts (both procurement and sales) are mandatory for the Intercompany processes
Options considered
The following options were considered for the evaluation:
Option A: Implement the Classic Intercompany Sales / Classic Intercompany Stock Transfer
Classic Intercompany Sales
Classic Intercompany Sales involves a scenario where one company within a group sells goods or services to another company within the same group. The process ensures proper documentation and accounting for these transactions, adhering to regulatory requirements. It typically includes order processing, billing, and delivery, managed seamlessly within the SAP system.
As Part of this process, the Sales Order is created in the system by the selling entity with the plant from the sending/delivery company. All the logistics transactions are carried out on the Sales Order which is created. There is no Stock in Transit for the selling company once the GI is done by the Delivering company.
Classic Intercompany Stock Transfer
Below is an overview of the Classic intercompany sales process. As Part of this process, Purchase Order is created in the system by the Receiving entity with supplier as the sending/delivery entity. All the logistics transactions are carried out on the Purchase Order which is created. The POD process is used to transfer the SIT stock from sending/delivery entity to receiving entity.
Option B: Implement the Advanced Intercompany Sales / Advanced Intercompany Stock Transfer
Advanced Intercompany Sales:
As Part of this process, the Sales Order is created in the system by the selling entity and the system then creates a corresponding Purchase Order and Sales Order to support the end-to-end process automatically. All the logistics transactions are carried out on the relevant sales / purchase order. Stock in transit is available in both Selling and Delivery companies.
Following is the high-level process flow for Advanced intercompany Sales.
Advanced Intercompany Stock Transfer:
Following is the high level process flow for Advanced intercompany stock transfer:
Evaluation
*The evaluation scoring system ranges from Low to Very High. In this system, a low score indicates a negative attribute, such as high costs.
| Criteria | Classic Intercompany Sales / Classic Intercompany Stock Transfer | Rating | Advanced Intercompany Sales / Advanced Intercompany Stock Transfer | Rating |
|---|---|---|---|---|
| Process Completeness | Process has gaps specifically for Intercompany Sales (Incoterm derivations , settlements etc..) and manual steps / customisations are required to patch the gaps | Medium | Seamless intercompany stock transfer between affiliated organizations | High |
| Document Flow | Simple Intercompany Sales: All the transactions are based on the Sales Order Intercompany Stock Transfer: All the transactions are based on the Purchase Order | High | Complex There are extra sales orders and purchase orders created to support the process. The logistics / finance documents are posted against the relevant Sales Order / Purchase Order These extra documents are created automatically in the background and provide extra tracking / audit capabilities | Medium |
| ATP fulfilment / Prioritisation | The changes in the customer sales order are not automatically applied across the document. Custom enhancements are required for the same | Low | Changes in a customer-facing sales order are consistently applied by the system throughout the end-to-end document flow | High |
| Usability | Multiple Fiori apps to support the process | High | Multiple Fiori apps to support the process | High |
| Valuated Stock in Transit (SIT) | There are gaps in the SIT process. Intercompany Sales: The valuated stock can be posted against the sending entity and not the selling entity. | Medium | SIT is supported Eliminate existing custom reports | High |
| Transportation | Incoterms: Not all combinations of Incoterms can be used due to the issue with the SIT Issues with Freight settlements, cost accruals and distributions | Low | All the incoterm combinations can be used Freight settlements, cost accruals and distributions will always be in the right company code | High |
| Costing | The costs are not captured in the selling entities for the Intercompany sales. The actual costs are captured for sending / receiving entities for Intercompany stock transfer | Medium | The costs are accurately captured in the selling / sending / receiving entities due to the presence of multiple documents | High |
| Margin Analysis | Intercompany Sales: Margin analysis is available only at the selling company | Low | Intercompany Sales: Margin analysis is available at both selling and sending entity | High |
| Automation | No out of the box automation | Low | Automation available via process value chains which can be configured as per the requirement | High |
| Legal / Regulatory | Doesn't fulfil all the legal compliance requirements ex: IFRS15 (For intercompany Sales) | Medium | Legal compliance with the IFRS 15 matching principle with EBRR Audit transparency | High |
| Reporting | Reports and KPI's are available only for the Sending / Receiving entities. Some additional reports required to be built for Margin analysis and SIT | Medium | Reporting and KPI's are available in Selling / Sending / Receiving entities Out of the box reports to support the operations and error management | High |
| Implementation Complexity | Medium Complex | Medium | Complex | Low |
| Total Evaluation | Medium | High |
See also
Following is some additional content to support the above recommendation
| Link |
|---|
| KDD008 - Transfer Pricing |
| CRM Platform, Processes and Integration - 2 |
| Intercompany process documentation from SAP |
Change log
Workflow history
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