Improved Incoterm Handling in SAP TM

Dear friends of SAP TM,

We already covered here the topic of incoterm locations in documents of SD/LE/MM and how they are mapped to ‘real’ location master data objects in SAP TM. And furthermore we talked about the freight unit stage building depending on the incoterm location in this blog post.

Now it’s time to give an update as with release SAP S/4HANA oP2022 some new features have been released:

• SAP TM is now able to consider the incoterm version, including those clauses that include incoterm location 2.
• Thereby, in documents of SD/LE/MM now ‘real’ location master data objects can be maintained replacing the ‘free text’ with its mapping to ‘real’ locations.

Let’s start with some background…most of you will already be familiar with incoterms and their semantics. Hereby it’s important to mention that incoterms have evolved in different versions (2000, 2010, 2020) to cover logistic processes more accurate. Means, clauses have been added and removed. And we now also have clauses where a second incoterm location can be maintained. With that, it can be differentiated better where cost and risk transfer actually happen during a transport.

New features of improved incoterm handling in SAP TM

SAP TM has now been enhanced with the capability to consider the incoterm version and the incoterm location 2 from a predecessor document in SD/LE/MM, where this information can be maintained. And considering the incoterm location 2, an additional setting in the logistics integration profile is now available regarding stage building.

As part of this improved incoterm handling, documents of SD/LE/MM are now enabled to have incoterm locations as ‘real’ location master data objects. So in logistics integration, the error prone mapping between a ‘free text’ and the location is not necessary anymore.

Enhancement of logistics integration profile

But let us get into details…starting with the customizing of the logistics integration profile:

Here, the existing settings have been moved to a section called ‘Static Stage Building’.

What is new is the option for ‘Advanced Stage Building’, which means the following:

• Incoterm location 2 is considered here (and only here, not in the Static Stage Building)
• It can be decided whether only planning-relevant stages should be built.

Enhancement in incoterm handling

To show the enhancements, we make an example with the following scenario:

The supplier, where the customer purchases his goods, has a delivering company which differs from the selling company, meaning we have a scenario of intercompany sales. This makes things a bit more complex, as now incoterm locations 1 and 2 come into play for the external and internal transfer of costs and risk. And our supplier has incoterm FAS (Free Alongside Ship) with incoterm location 1 of MHA_UNLOAD for the handling within the enterprise (‘internal incoterm’)..

With that, we want to create a sales order with incoterm CIF (Costs, insurance & freight) for the arrangement between supplier and customer (‘external incoterm’). Furthermore, we have incoterm location 1 of MHA_PORT and incoterm location 2 of MHA_UNLOAD in our sales order.

That means:

• The delivering company carries the cost from the source location to loading / unloading point MHA_UNLOAD.
• The selling company carries the cost from the loading / unloading point MHA_UNLOAD to the port of discharge MHA_PORT.
• At the port of discharge MHA_PORT the cost and risk is transferred to the customer

So we create the following sales order:

Here you see, that additional fields regarding incoterm handling have been implemented. Especially, incoterm locations 1 and 2 are now location master data objects which can also be selected with a respective search help.

This means, that during logistics integration no mapping between free text and location is considered anymore but the location is just taken over to the TM freight unit. This obviously makes life much easier because I’m sure many of you (and myself…) struggled here with typos or case-sensitive location names.

Furthermore, the locations are together with the other information about incoterms and the setting from the logistics integration profile passed to the stage building algorithm, resulting in the following freight unit:

Here you see, that the stages have been build according to the maintained incoterm locations:

• Stage 1 represents the transport until the internal transfer of cost from delivering to selling company
• Stage 2 represents the transport until the external transfer of cost to the customer

So, the accurate consideration of incoterms in regards to incoterm version, incoterm locations 1 and 2 is surely another big step for SAP TM, enhancing the planning capabilities significantly.

Those enhancements are available with release SAP S/4HANA oP2022.

I appreciate any comment or question!

Best regards,

Michael