SAP S/4HANA Supply Chain for Transportation Management: Freight Cost Allocation to Material Valuation

This blog post will help readers to understand how the Transportation Cost associated with the transportation of the cargo (Material) can be used to valuate the Material, in short the Material value also reflects the cost of transport together with cost of the material purchased.

This feature is enabled using SAP S/4HANA Supply Chain for Transportation Management and integration to SAP S/4HANA Settlement Management.

More information on Settlement Management can be found in the link below

https://help.sap.com/viewer/f89cf0387e8a460c8a37990b268da59f/1909.001/en-US/0ae0b3533ebb823de10000000a4450e5.html

Note:  I have demonstrated the functionality in this blog post using system screen images with relevant data for ease of understanding for the readers. It should be noted that these screens and the data is from SAP’s internal test systems and has no relation to any external source.

Business Scenario: Normally applicable to our Shipper Customers (manufacturers) who are now using SAP Transportation Management functionality in SAP S/4HANA OP and create Freight Orders to plan the Inbound Delivery of their materials.

Purchase Order for the Material is issued by the Shipper Customer to the Material Supplier and the Transportation needs to be planned and paid as well by the Customer. The Shipper Customer expects that Material accounts for the purchase and transportation cost. Normally in such scenarios the Material price control is set to Moving Average Pricing in the Material Master.

Lets assume that Shipper Customer is using SAP S/4HANA On-Premise  1809 or 1909 release and no more using

In above scenario we have below process flows:

Flow 1: Purchase Order on Material Supplier > Inbound Delivery > Goods Receipt

Below Accounting Entries are created:

Debit Material

Credit GR/IR

Flow 2: Inbound Delivery/Purchase Order on Material Supplier is integrated to SAP Transportation Management for organising the Transport. This results into below flow

Freight Order > Select Transportation Service provider > Charge Calculation > Freight Settlement Document Creation and Posting > Purchase Order on Transportation Service Provider Creation (Technical PO) > Service Acceptance

Below Accounting Entries are created:

Debit Freight

Credit GR/IR

Transporter’s Invoice gets cleared against the GR/IR.

In parallel (with integration to the SAP S/4HANA Settlement Management integration below accounting entries are also created (provided the setup is correctly done):

Debit Material

Credit Freight Clearing

I will focus on the key aspects of the integration to the SAP S/4HANA Settlement Management and not on the general integration of Purchase Order / Inbound Delivery integration with SAP S/4HANA Transportation Management

In order to have the transportation cost debited to the Material, it is important to have Cost Distribution Level at the Order/Delivery Item.

Freight Settlement Document used in this process should also have the Cost Distribution activated

The Charge Elements used in the Freight Order Charges need to be assigned to the Condition Types used by the SAP S/4HANA Settlement Management function. Mapping table is provided under the SPRO > Transportation Management > Settlement > Freight Settlement > Integration for Settlement Posting > Mapping for Cost Distribution > Assign Transportation Charge Type to Condition Type

The control to decide if the Material Valuation be affected by the Freight Cost is in the below setting. This is also the integration point between SAP Transportation Management and SAP S/4HANA Settlement Management function.

SPRO > Transportation Management > Settlement > Freight Settlement > Integration for Settlement Posting > Mapping for Cost Distribution > Posting using Settlement Management > Basic Settings for Creation of Settlement Management Docs

More information on the setup can be found in the below help documentation

https://help.sap.com/viewer/e3dc5400c1cc41d1bc0ae0e7fd9aa5a2/1909.001/en-US/5b5d73be618b4574ac8c9352045fa220.html

Once the Freight Settlement document is posted (and rest all set-up is correctly configured) system will have posted the Freight Cost on the Material.

Transaction Code to view such postings is WLFLTM2

I hope this Blog Post gives you some insight to the integration of SAP Transportation Management and SAP S/4HANA Settlement Management function, there is much more to explore though on various use cases with this integration.

Happy Reading !!!