How Transportation Management’s Cost Distribution works in SAP S/4HANA Cloud
Freight cost associated with the movement of the goods in the supply chain are an important aspect of the overall supply chain cost. These freight costs either from management reporting (controlling and product costing) or from legal perspective (accounting guidelines of the local or global nature) have to be treated in a right way in the finance module. The broad rules of the accounting posting is based on the following scenarios
- The freight costs associated with the legal entity for outbound movement of the goods to fulfill a customer delivery (Sales process) shall be posted as expenses and these expenses could be associated with the Cost of Goods Sold (COGS) in accounting.
- The freight costs associated with the legal entity for inbound movement of the goods to fulfill a value addition later on them (example raw material move which later will be converted/transformed to a finished product) shall be posted as the cost for procuring the material or cost incurred during value addition
Overall from a freight cost posting to financials we have the following 2 requirements
- Ability to post the freight cost to be able to book the liability towards the Carrier / service provider and which also forms the basis for the Carrier invoice process
- Ability to breakdown and distribute the freight cost at the level of each transportation requirement/demand i.e. Order/Delivery item so that the right financial treatment for the share of the cost could be attributed in finance as mentioned in the section for Business Context above.
TM settlement process hence realizes these broad requirement by integrating with the Material Management (MM) Procurement Module by create the service Purchase order and posting the service confirmation for the same. With this step the requirement of posting the liability towards the carrier/service provider is reflected from accounting perspective.
TM uses the distributed cost at the level of the order/delivery item and integrates with Settlement Management module to fulfill the requirement of the posting of the freight cost as per the needs of the scenario i.e. post to expense or post to material.
In this blog post, will be explain how cost distribution works in S/4HANA Cloud.
Freight Agreements should be created. Freight Orders should be calculation status “Calculated”, otherwise Freight Orders will not be displayed in the app “Monitor Accruals Posting”.
Service Products for Independent charge type should be created, please check the blog post “How to create Transportation Management based service products for a charge type in S/4HANA CE?“.
I will take Gross Weight as an example Cost Distribution Rule.
Login as “transportation_mgr” and go to the app “Monitor Accruals Posting“.
Click “For Confirmation” tab and open the freight order which was created.
Open the Freight Order and go to the Charges Tab. Check the Calculation Status, should be set to Calculated. Charge lines should be displayed. Posting Status at the header, charge items and charge lines should be set to “Ready for Confirmation”.
Go to Cost Distribution tab and Check the distributed cost based on Gross weight.
Cost distribution for Product 20
- Charge type SD01: (Weight of product20/ (weight of product (10 + 20)) * Root charge of SD01.
I.e. (18/(18+36)) * 20 = 6.667 USD.
- Charge type SF00: (Weight of product20/ (weight of product (10 + 20)) * Root charge of SF00.
I.e. (18/(18+36)) * 100 = 33.33 USD.
- Charge type SF04: 100USD
SF04 charge (Base FTL Charge) which is with resolution base product is not distributed but directly assigned since this is already with resolution base Product and is directly applied to the Product 20.
- Charge type SF06: (Weight of product20/ (weight of product (10 + 20)) * Root charge of SF06.
I.e. (18/(18+36)) * 0.90= 0.3 USD.
- Charge type SF08: (Weight of product20/ (weight of product (10 + 20)) * Root charge of SF08.
I.e. (18/(18+36)) * 10= 3.33 USD.
- Charge type SG02: (Weight of product20/ (weight of product (10 + 20)) *Root charge of SO02.
I.e. (18/(18+36)) * 2 = 0.67 USD.
- Charge type SG04: (Weight of product20/ (weight of product (10 + 20)) *Root charge of SO04.
I.e. (18/(18+36)) * 2 = 0.67 USD.
- Charge type SO03: (Weight of product20/ (weight of product (10 + 20)) * Root charge of SO03.
I.e. (18/(18+36)) * 0 = 0 USD.
- Charge type SO05: (Weight of product20/ (weight of product (10 + 20)) * Root charge of SO05.
I.e. (18/(18+36)) * 0.45 = 0.15 USD.
Click “Confirm for Posting” button in freight order.
- A Message saying freight order posted should be displayed.
- Posting status should change to Posted from ready for confirmation.
- Posting status of All charge Elements in charges tab should be posted.
After successful Posting, the freight order will be available in the Posted tab.
Go to the Freight Order details, in the document flow tab, the service entry sheets should be created. Make a note of the same.
Login as “purchaser” and go to the app “Manage Service Entry Sheets“, search for the newly created service entry sheet.
Open the Service Entry Sheet(SES), make note of the Purchase Order(service PO) number displayed.
Go to Items tab and check the amount and quantity of the items.
Go to the app “Manage Purchase Orders” and open the Purchase Order from the Service Entry Sheet.
- In General Information check
- Purchasing Group (005)
- Purchase organization (1710)
- Company code (1710)
- Now go to items tab and Check if service products created for all independent charge type in freight order is available. Also order quantity and price unit for all the items and compare with quantity and price/unit in charges tab of freight order.
- If quantity and price/unit for a charge type in charges tab of freight order is not available then order quantity and price unit in purchase order item will be 1 AU.
- Now click on the 1st item in items tab and it navigates to Items object page
- check the Tax code, Tax code should be according to the settings done, for the Above Example tax code should be “I0”.
- Go to Pricing tab and check the Conditions and their amounts
- Where PMPO is the condition which is mapped to Independent charge and FF06 is the condition mapped to Dependent charge in customizing.
- Check Tax code, Conditions and their amounts for all the items also.
Again, login with “transportation_mgr” and go to the app “Freight Cost Allocation Document“.
Open the relevant Freight Cost Allocation Document,
In General information Tab:
Settlement document type should be “Freight cost Allocation (Expense)(2TM1).
In Item Tab:
Check Freight cost Allocation document items gross Amount, It should be same as Distribution Amount in Distribution tab of Freight order.
- Now click on any item of Freight cost Allocation document
In Profitability Tab:
- Check Sales order Number – This should be same sales order used in the Freight order.
- Company code – This should be same as the company code used in the Freight order.
- In Pricing Elements Tab :
- Check that only one condition (TM Cost Distribution (FF08)) is display.
In Reference Document Information Tab:
- Here you should be able to see the reference documents. Ex Sales order, Delivery, Freight order As shown Below.
Login as “ap_accountant” and create a supplier invoice for the Freight Order. Check the Reference Document, total amount etc, should match with Freight Document details.
Login as “transportaion_mgr”, and go to the app “Monitor Accruals Posting“, search for the Freight Order, the Freight Order will note be displayed as supplier invoice is created.
Open the Freight Order in the “Manage Freight Orders” app and go to Charges tab.
The Posting Status will be changed to “Invoice Verified“.
Summary: Now you should be able to understand the distribution of freight costs and how supplier invoice is created with reference to the freight document in SAP S/4HANA Cloud.
Great blog Dimpu Ajay ! 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?
I have the same question! Let me know if you figure this out.
Just did some digging and this is what myself and the team found:
The steps to connect the GL account to the Cost Center are as follows:
OBYC->FR1->Valuation Class (from Service Master) ->GL account-> OKB9->Assign Default Cost Center to GL account
This blog was helpful in figuring this out.
Let me know if this helped you.
Hi Jacob - Yes, GBB-VBR, FR1 and WRX are the account determination required in transportation integration.
Generally for procurement side, transportation cost will be capitalized with V price material and for S price materials, freight cost recognized as Price Difference.
Regarding outbound, it will be posted to profitability segment.
It's provided by Dimpu in the first screen shot. We may end up having two GL - one for inbound and one for outbound.