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Author's profile photo Pascal Renet

Cost Distribution with Basic Transportation Management in SAP S/4HANA Cloud

Whilst the functionality of ‘Cost distribution’ features much more prominently in the Advanced version of SAP Transportation Management, it should be not be missed, that elements of this functionality also exist in Basic Transportation Management in SAP S/4HANA Cloud – and what is there should not be sneezed at.

If your organisation requires the use of transportation services, then there is no doubt that freight spend represents a sizeable expenditure and the ability to report on freight costs in your financial reporting is of great importance. Moreover, you need to be able to allocate those freight costs correctly and accurately to other parts and processes of your organisation. For example:

  • To understand the true cost of transportation of materials
  • To understand the profitability of a sales order, a customer, a product…
  • To invoice your customers with the true cost of transportation (Pulling cost from the freight order to the customer billing document)


Before we work through an example, let’s cover some basic knowledge to understand where charges can exist, so that we have a better understanding of how they can be distributed back to a source object.

At what level can charges exist?

In the context of transportation management, the charge calculation can happen at different levels on a freight order, as illustrated below:

  • At the Freight Order Level (ROOT): The charges here will be distributed to all the items being transported in a freight order
  • At the Stage Level (STAGE): The charges here will be distributed to all the items that are relevant at this stage
  • At the product level (PRODUCT): The charges here will be distributed to the item being transported


Levels at which freight costs can be calculated


To further illustrate this hypothetical use case, let’s assume we have a freight order that has:

  • A freight cost of $110 at the (ROOT) freight order level. This cost of $110 will be distributed to all the items in the freight order
  • 2 items (products) having a gross weight of 100 Kg and 150 Kg respectively. This means that the total freight order gross weight is 250 Kg (item 1 accounts for 40% of the weight and item 2 for 60% of the weight). We also see that item 1 has a $100 freight cost (at the product level) and item 2 has a $150 freight cost (at the product level). The freight cost of each product will be distributed back to the sales order to which it is associated.


Example use case

Assuming that we have Gross Weight based cost distribution rule, then the cost distribution of this freight order should look like this:

We have the $110 cost at the freight order level, distributed back to the items based on their gross weight. So, 40% of the $110 ($44) will go to the sales document/item linked to product 1 and 60% of the $110 ($66) will go to the sales document/item linked to product 2. The freight costs recorded at the product level, will each be distributed back completely to the sales document/item they are linked to.

A system example

Let’s now move on to a real system example.

To set the scene, I have already created two sales orders, for two different customers (both in California).

Both sales orders only have one item and their details are as below.


Sample Data

We will go on to create one freight order. The goods will be loaded onto a truck from our Distribution Centre in Palo Alto, CA, and then delivered to our customers, stopping in Vacaville first and then going on to Stockton.

We have planned the freight units onto a freight order and the planning looks as below:


The planned freight order

If we look at the created freight order we can follow the document flow information and correlate this back to the items transported.


Freight Order: Document Flow

We now move on to assigning a Carrier and maintaining the Purchase Organisation and Group, so that a freight agreement can be determined, and the freight order costed.

Once this is done, the freight charges are visible in the freight order.

What we see is that:

  • The total freight cost of the freight order is 260 $
  • $250 represents the Freight rate, which is set at the Freight Order (Root) level. We have gone with a simple charge of 1$ per 1Kg. So a total weight of 250Kg = $250
  • We also have a loading charge for one product, with a flat rate of $10


Freight charges in the freight order

We can further drill down to find out which product is attracting this loading charge – it is product PR-TG11.


Detailed charge information in the freight order

You will also note that once charges exist in your freight order, the cost distribution is performed in the background when you save it – and you are notified of this.


Cost distribution notification

As this is not the object of this blog post, we have moved forward and created the deliveries, performed the picking, recorded the goods issue, and updated the execution statuses on the freight order – the freight order is now completed from a logistical point of view.


The freight order is executed.


The next step in the process is to perform the accrual posting, and it is in this step that we will be able to see the details of the cost distribution. To do this we open the application named ‘Monitor Accrual Postings’ and go to the ‘Cost Distribution’ tab of the document, where we have all the details we need.

  • In yellow, we see the total cost of the freight order which was $260. If we move further down the screen we can see that 42.3% of the freight costs were distributed to one item and the remaining 57.7% to the other item. This represented $110 and $150 respectively.
  • In orange, we see the freight rate, which if you recall was based on the total gross weight of the freight order (the charge was at the root level). The freight cost was distributed to the 2 items based on their gross weight. So, one item received $100 (40%) and the other received $150 (60%).
  • Lastly, in cyan, we see the loading charge, which was at the product level. This charge was, therefore ‘distributed’ 100% to the sales document to which it was linked.


Cost distribution details


As stated in the opening of this post, the purpose of cost distribution is to allow you to account and allocate a cost accurately to a source document or object. To follow up on our freight order, you could leverage the embedded SAC to build your own reports and for example analyse the profitability of a sales order item to analyse the freight spend vs the revenue from the sale, for a product, customer…


Leverage eSAC to build custom dashboards and reports

Configuration options

Lastly, before we close this post, you will have noticed that in this example, I used a cost distribution rule based on the gross weight. This is not the only option that is available to you.

To set a different distribution rule, or see the other options, then go into your configuration environment, for the application area ‘Supply Chain’, sub-application ‘Transportation Management’, in the item ‘Transportation Charge Management’ and the step ‘Define Charges Profile’.


Accessing the cost distribution customising

You will see the distribution options available.


Cost distribution options available



In closing, in this blog post, we have learned demonstrated how cost distribution works in Basic Transportation Management, how you can leverage it to assign a freight cost to a source object, and how you can configure it to suit your requirements.

Do not hesitate to leave your feedback and questions in the comment section below.

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      Author's profile photo Venkata Vidyasagar Reddy Lekkala
      Venkata Vidyasagar Reddy Lekkala

      Very Nice and Useful

      Author's profile photo Pascal Renet
      Pascal Renet
      Blog Post Author

      Thank you for the kind comment - glad you found it useful.

      Author's profile photo rohit a goel
      rohit a goel

      Hi Pascal,

      Thanks for the blog find it useful. I am from finance community and I am missing the finance postings in this blog. The issue which I see in the cost distribution is that there are two sets of financial postings one at the time of service entry where I will accrue the liability for the freight vendor so at the time of service entry which GL I will debit and if I will debit Income Statement account at the time of service entry then what GL postings will happen at the time of Cost Distribution. I am struggling to find a document in from SAP learning hub/blogs/help document etc. but there is no clear explanation of the end to end process from finance point of view. I would appreciate if you can share any insight into same or if there is any blog I can refer.



      Author's profile photo Eric Etienne
      Eric Etienne

      Hi Rohit this blog is also interesting

      Author's profile photo Eric Etienne
      Eric Etienne

      Hi Pascal, Thank you very much for the insights.

      Being in a STO intercompany scenario the Freigt charges distribution are currently posted to the destination plant/company. This is unfortunatly inconsistent with the current SES postings post the charges to the source plant/company. How to manage the switch to distribute the costs to the Source plant/company?

      Thank you very much in advance for your advice.

      Author's profile photo Lynn Yoke Ling Guan
      Lynn Yoke Ling Guan

      Did you manage to get a solution for this?

      Author's profile photo Erno Nykanen
      Erno Nykanen

      Great blog Pascal Renet ! One thing I was wondering: what's the account determination and assignment setup used here? Is the SES posted with VBR to a cost center and then cost distribution done with FR1 & FR2 to the market segment/inventory value?