Although the third-party sales process is relatively simple, it uses links to other SAP modules, such as Sales & Distribution, Procurement, Logistic Invoice Verification, and Customer Invoicing. A lack of understanding of these links on the part of execution personnel can disrupt a smoothly running system, creating inefficiencies and destroying customer satisfaction. I’ll show you how to automate the processes smoothly and how to configure third-party orders and set up master data to ensure trouble-free operations. If you are new to the third-party sales concept, see the sidebar, "Basic Guide to Third-Party Sales."

Prerequisites

For third-party order processes to run efficiently and smoothly, you must set up the configuration and master data correctly as follows:

Configuration

The sales document type is of the utmost importance, as it determines whether the sales order is a third-party order. I recommend that you set up a third-party order by an Item Category at item Level (Figure 1), say ZTAS within Item category group NORM. It may be beneficial to set up different item categories if the customers are in different areas of business, say general chemicals or specialty chemicals. It may also be beneficial to set up different order types, with a combination of item categories. Follow menu path Sales & Distribution>Sales>Sales document>Sales Document Item>Define Item Categories.>New Item.

Figure 1

Creation of new item category, ZTAS

Master Data

Third-party orders are strongly influenced by master data, so it needs to be set up with particular care. The master data maintenance for new materials, vendors, contracts, and transfer prices also cannot be overemphasized.

Material master: The purchasing view of the material master needs to have the automatic purchase order (PO) (Autom. PO) flag checked (Figure 2). This ensures that the purchase requisition is converted into a PO.

Figure 2

Set up flags in Material Master purchasing view

Vendor master: The automatic PO flag needs to be set for automatic PO creation on the purchasing data view (Figure 3).

Figure 3

Set up flags in Vendor Master purchasing data view

Purchasing Contracts: The contracts (Value Contracts) with vendors necessitate setup of a number of predetermined pieces of information required for the automatic creation of POs. These need to be set up carefully. Important fields to consider are:

• Vendor’s material number: Vendor material number (Vend. Mat.) is required to automate the creation of the PO in the vendor’s system as a result of an EDI process. An incorrect material number can cause a major problem (Figure 4).
  
  
• International commercial terms (Incoterms): The Incoterms are info records and are adopted from the sales order.
  
  
• Transfer Pricing: The price at which the material will be transferred between vendor and sales company is decided and maintained as Net order price.
  
  
• Confirmation Control Key: This is necessary to receive an order confirmation, which creates an inbound delivery with reference to the PO at a later stage. An inbound delivery will not be created if ConfContrK is not set up. Use standard confirmation control key 0001.
  
  
• Under- and Overdelivery tolerances: Set Underdel tol. and Overdeliv. Tol. to appropriate amounts, or the system sets the PO to complete if there is a short or excessive delivery. Overdelivery tolerance blocks a goods receipt in the event of a delivery exceeding the overdelivery tolerance.
  
  
• Maintain Source List: The source list, particularly the Vendor field, needs to be maintained within the contract. Otherwise the system does not create the PO and subsequent processes of inbound delivery (Figure 5).

Figure 4

Key fields on the Value Contract view

Figure 5

Maintain Vendor on the Maintain Source List screen to ensure proper creation of subsequent processes

See Table 1 for a reference chart showing a number of common problems with third-party sales orders, along with their causes and solutions.

Process

Typically, material types control whether a material is produced only internally, is ordered only from third-party vendors, or whether both are possible. For example, a material that is defined as a trading good can only be ordered from a third-party vendor. However, if you manufacture your own finished products, you may also want, from time to time, to be able to order the same type of product from other vendors. In addition, procurement type could be “internal” (i.e., company production), “external” (i.e., vendor-supplied), or “both.” If a product could be procured internally or produced, it should be set to “both.”

The important steps involved in third-party order processes are as follows:

1. Purchase requisition: The third-party sales order creates a purchase requisition at the time of sales order creation.
   
   How to automate it: Set up a contract for the material with an automatic update of info records, which creates a vendor info record in background. In addition, the source lists are created to link material with the vendor. Where there could be multiple vendors, the preferred vendor is set up within the Source list. The purchase requisitions are thus created with procurement source (i.e., vendor assignment), automatically in the background at the time of creation of a third-party sales order.
   
   
2. Purchase order: The purchase requisition is automatically converted into a PO for the vendor. The PO refers to the purchasing requisitions created at sales order creation and adopts important data and features automatically.
   
   How to automate it: The purchase requisitions with vendor assignments are converted into POs by a batch job using transaction ME59 ABAP program with requisite parameters. This ensures automatic creation of POs. The materials and vendors are set up with Automatic PO flags.
   
   
3. Inbound delivery: The vendor ships the material to the customer and the communication, in the form of an advance ship notification (ASN), creates an inbound delivery. Inbound deliveries provide online shipping visibility. The data from the PO is adopted in the inbound delivery.
   
   How to automate it: Inbound deliveries are created automatically in background by a batch job using transaction VL31N ABAP program with requisite parameters. Typically, this batch job runs nightly.
   
   
4. Goods receipt for inbound delivery: After a certain number of days, typically the transportation time, a batch job run performs goods receipt posting with reference to inbound deliveries. The inbound delivery date is of the utmost importance; this must be an accepted number of days that matches the arrival date of the shipping agent closely. The batch jobs check this date for creation of a goods receipt an accepted number of days after this date.
   
   How to automate it: Goods receipts are created automatically in the background by a batch job using transaction MIGO ABAP program with requisite parameters. Goods receipts are performed in a given period, such as seven days. This period (X) can be set up within the program variant with adjustment of posting date for inbound delivery. Typically, this batch job runs nightly.
   
   
5. Invoicing: The goods receipt posting triggers an automatic batch job for creation of customer sales invoices and communication to the customer via EDI. The sales invoices reference the sales order. The data from the inbound delivery is adopted in the billing document.
   
   How to automate it: The invoice creation can be done automatically in background by a batch job using transaction VF06 ABAP program with requisite parameters.
   
   
6. Invoice verification: The invoice verification for payment of vendor invoice is processed any time after the goods receipt is posted.
   
   How to automate it: Typically, it is not automated unless the vendor is an Evaluated Receipt Settlement (ERS) vendor.