What is Sales Area in SAP SD?
This is probably the first thing you learn when you start with SAP SD Module. I know there are many articles, blogs, and videos on this topic and you probably would think what else this article is going to offer?
Well! Stay with me for a few more minutes.
Let’s start with:
What does every SAP Consultant know?
In simple terms, Sales Area = Sales Org + Dist. Channel + Division. We maintain this assignment in SPRO.
By definition, Sales Area is a combination of three organizational units that define customer and material reach. It excludes non-required or unfeasible combinations of different organizational units. It looks pretty simple, but what if I tell you have missed a lot of things?
Components of Sales Area:
Sales Org: It is an organization unit that sells, distributes, and negotiates terms of sales for products.
Distribution Channel: This is a channel via which products/services reach customers. For e.g.: Retail, Online, E-commerce, and direct sales.
Division: It is a grouping of broad categories of products in one organization unit. For every division, you can make customer-specific agreements on, for example, partial deliveries, pricing, and terms of payment.
Which information do SAP Consultants miss out on?
The Sales Area assignment sets the base of your ERP Implementation. Most of the companies which are already on SAP ERP have this assignment in place and would rarely change it. The scenario where a company would need a new Sales Area assignment would be during introducing a new Distribution Channel or introducing a new division of products.
Sales Area is more than just an assignment. We should define sales areas considering a lot of factors like Pricing Strategy, Legal observation, Business Practices, etc. It touches every point of the Order to Cash (OTC) cycle from quotation to revenue recognition. Let’s dive deeper to understand how Sales Area and its associated data impacts on overall organization’s ERP setup:
What all gets Influenced by the Sales Area:
- Pricing: One of the most important impacts of the Sales Area is on product pricing strategies. We can maintain different product pricing in different Sales Areas. We can configure SAP Sales order pricing for the same product & customer based on Sales Area.
- Master Data Defaults: There are some sales region-specific attributes that should be present in the system prior to successful order processing. We store all these customer-specific attributes in Customer Master Data (Tcode: VD03) and material-specific attributes in Material Master Data (Tcode: MM03) under Sales Area Specific section. If plan to create only Sale Area but you see a lot of multi-valued attributes and you cannot fit them all under one sales area, then probably you should go back and check if you need to create one more sales area? Some examples of these attributes are: Customer Group, Sales District, Default Currency, Terms of payment, Invoicing Dates, Shipping conditions, Delivery priority, Business Partners, Material Group, Unit of measurement, Tax settings, etc. This information gets defaulted in the sales order as per your selection of Sales Area but can be modified in the sales order manually if needed. Remember, changing important parameters like tax setting, and incoterm in sales orders will re-trigger the order pricing.
- Reporting: Sales Area is your first differentiator in all your business reports. Be it sales orders created in the past month, or orders invoiced in the past year, sales area becomes one of the most important factors for business reports.
- Sales Order Processing: Each sales order you process in SAP requires Sales Area as a pre-requisite. So when you provide a sales area, you narrow down the region & rules in which customers and materials should transact.
- Shipping & Deliveries: You would say that shipping point determination is determined based on the storage location, delivering Plant, and loading group. So the Sales area is not directly involved. However, one attribute, “Delivering Plant” is determined from Master Data – Sales Area tab. Delivery attributes for the same customer may vary for each sales region and hence we should have sales area data as an umbrella to hold all sales region-specific master data attributes.
- Credit Management: Credit limits, exposure, and risk categories may vary per sales region.
- Localization: Sales Area Data allows localization of sales operations, considering local business practices, languages, and legal requirements.
- Compliance and Legal Requirements: Different sales areas might have unique legal and compliance requirements, which can be managed effectively through sales area data.
- Listings & Exclusions (L&E): When any organization receives an order to produce a product exclusive to a particular client, then they would have to hide that product from other clients. In that case, you use the L&E feature in SAP. This feature allows you to set the rules based on Sales Area.
- Intercompany Sales: This is an internal sale between two wings of the same company. In this scenario, the purchasing company should be extended to the Sales Area of the Selling Company.
Remember: Once you create Sales Area Data in Customer or Material Master, you can not delete it.
I hope this will give you a holistic perspective.
For Sure, I am missing many more such Sales Area dependencies. Please add them to the comments.
Happy learning 🙂