Commodity Pricing in Central Purchase Contracts in Central Procurement
The following article will guide you about how the price of commodity is determined in a Central Purchasing Contract with SAP S/4 HANA Cloud- Central Procurement.
Central Purchasing Contract
A central purchase contract is a global, long-term agreement between an organization and a supplier regarding the supply of materials or the performance of services within a certain period as per predefined terms and conditions. A central contract enables the purchasers from various parts of a company at different locations to take advantage of the negotiated terms and conditions with Suppliers.
With 2005 Release, it is now possible to incorporate commodity pricing as well in the central contract. Users can apply complex pricing formulae, and also can mention the commodity weights and price conditions.
Before we move to how part, let us understand what commodity pricing in the context of Sourcing and Procurement is. Suppose you have material which has components which are precious metals, you would need to calculate the metal surcharges automatically. In the case of base metals and some precious metals, metal prices are determined in global commodity exchanges. (Not all metals are traded on commodity exchanges – in these cases the price is set by the supplier.)
For Ex: If you have a casing that consists of metals like Copper / Aluminium and usually if you talk to your supplier and negotiate the price, there is a market price component that is based on the actual price of the copper at the Metal Exchange. So you have a contract that has some constant quantity and the price will be updated everyday from the Local Metal Exchange and this is something which we will calculate.
Commodity Pricing in S/4HANA Central Contract
The commodity pricing gives customers the possibility to have formulas in their pricing which can take the market price of such a commodity into account when a central contract is created. Basically, based on these formulas, the system will take the market price into account in the central contract.
Please be informed that with 2005 release, SAP supports the manual entry of the market prices which is available, the automatic download & update from stock exchange is planned for coming releases.
Please find the steps below to realize the same in the system.
1. Maintain the Market Price in Decision Table
Make sure that you have logged in as Purchaser for Central Procurement. Open the fiori app: Process Formula – Assembly Component
Provide the relevant information to view the decision Table. It is based on BRFplus Application and Function ( For more details refer Link )
User can maintain the market price based on different parameters. Check out the current market price per unit for the metals- Copper and Aluminium.
Here in this example for the considered validity period, it is 5.13 Euros and 1.54 Euros respectively.
2. Configuration for Commodity Codes and Condition Type
With the 2005 release, new configuration steps for assigning commodity codes and condition types related to Sourcing and Procurement have been added to Configure Your Solution in the Manage Your Solution app.
Please find the steps in the screen shot below.
3. Realize the price in Central Contract
Go to App: Manage Central Purchase Contract.
3.1 General Information
Provide all relevant information in the General Information section like : Contract type , Description , Purchasing Organization , Supplier, Validity etc.
Move to items section and click on Create to add the relevant Material and details.
Move to Commodity section, and add the relevant commodity codes and weight.
Move to Conditions Section and add the configured condition type and validity.
You could see that the price is taken from the decision table. In this example, for this validity period we had noted the price for copper
and aluminium for the period April 2020. In the screen shot you could see the same price is been considered.
User can now save the contract.
For more information on SAP S/4HANA Cloud, check out the following links:
- SAP S/4HANA Cloud release info: http://www.sap.com/s4-cloudrelease
- Beth’s blog on 2005 updates for Workflows
- Sven Denecken’s SAP S/4HANA Cloud 2005 Release Blog
- The Link Collection for Sourcing & Procurement here
- Early Release Webinar Series here
- Inside SAP S/4HANA Podcast here
- Best practices for SAP S/4HANA Cloud here
- SAP S/4HANA Cloud Customer Community: register here
- Feature Scope Description here
- What’s New here
- Help Portal Product Page here
- Implementation Portal here