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Sales and Distribution (SD)
The SAP Sales and Distribution (SD) module allows organizations to store and manage customer- and product-
related data. The functionalities of this module include sales support, sales, shipping and transportation,
billing, credit management, and foreign trade.
SD Organizational Structure (SAP SE, 2022)
The SD organizational structure consists of several organizational units, such as the following:
• Client – an independent environment in the system.
• Company Code – the smallest organizational unit where a legal set of books can be maintained.
• Credit Control Area – grants and monitors a credit limit for customers. It can also include one or more
company codes.
• Sales Organization – responsible for the sale of specific products or services. It is also responsible for
legal liability for products and customer claims.
• Distribution Channel – refers to how products or services such as wholesale, retail, or direct sales
reach the customer.
• Division – refers to how materials, products, or services are grouped.
• Sales Area – the combination of Sales Organization, Distribution Channel, and Division. It determines
conditions for sales activities such as pricing.
• Plant – or Delivering Plant, a plant from which the goods should be delivered to the customer.
• Other SD organization units include a Shipping Point, Loading Point, Sales Office, Sales Group, and
Sales Person.
Figure 1 shows the enterprise structure of Global Bike in SAP ERP (Sales.) It highlights the organizational units
of its Sales and Distribution, such as the Distribution Channel, Division, Company Code, Credit Control Area,
and Sales Organization.
Figure 1. Global Bike’s enterprise structure in SAP ERP. Retrieved from SAP SE/SAP UCC.
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SD Master Data (SAP SE, 2022)
The SD Master Data has three (3) types: Customer Master, Material Master, and Condition Master.
Customer Master
This master data contains all the necessary information for processing orders, deliveries, invoices, and
customer payments. Customers must have a master record, but one-time customers can also be enough. A
one-time customer is a customer the business does not deal with regularly.
The Customer Master information is further divided into three (3) areas: General Data, Company Code Data,
and Sales Area Data.
General Data are the information relevant to the entire organization, such as the client name and address;
Company Code Data are specific keywords assigned to the company or a process, such as payment and bank.
Sales Area Data includes the Sales Office Currency of the sales organizations.
Material Master
This master data contains all the information that a company needs to manage about a material. It is used by
most components within the SAP system, such as Sales and Distribution, Materials Management, Production,
Plant Maintenance, Accounting and Controlling, and Quality Management.
Material master data is stored in functional segments called Views, such as:
Figure 2. Material master views. Retrieved from SAP SE/SAP UCC.
The Material Master is divided into three (3) areas: General Information, wherein it contains material
information relevant to the entire organization such as material name, weight, and unit of measurement, Sales
which includes specific details on the Delivery Plant and Loading Group; for example, and Storage Location
which provides for specific information about the Stock Quantity, for instance.
Condition Master (Pricing)
This master data includes prices, surcharges (additional charge), discounts, freights (goods transferred from
place to place), and taxes. It can be defined as dependent on various data, such as material-specific and
customer-specific data, and it can also be dependent on any document field.
An output is information sent to the customer using various media such as email, mail, fax, and Electronic Data
Interchange (EDI).
An output type defines how the output should be transmitted. Examples of output types in SD processing are
order confirmations, freight lists, and invoices.
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SD Processes (SAP SE, 2022)
The SD Processes, particularly the Order-to-Cash process, include the following steps in order:
1. Pre-sales Activities
2. Sales Order Entry
3. Check Availability
4. Pick Materials
5. Pack Materials
6. Post Goods Issue
7. Invoice Customer
8. Receipt of Customer Payment
These make up the Sales Order Process.
Pre-sales Activities
The Sales Support component of SD assists the process of sales, distribution, and marketing of companies and
their products and services to the customers.
Pre-sales Activities fulfill the following functionalities:
o Creating and tracking customer contacts and communications (sales activity)
o Implementing and tracking direct mailing, Internet, and trade fair campaigns based on customer
attributes
All pre-sales activities aim to equip the sales technician with all the information necessary to negotiate and
complete the potential sale. This information includes the following:
o Past sales activity
o Past communication
o Contact information
o General company information
o Credit limits and usage
o Current backorders
Pre-sales activities have documents that include inquiries and quotations.
An inquiry is a customer’s request to a company for information or quotation concerning their products or
services without any obligation to purchase. An inquiry may center around the cost and material/service
availability and contain specific quantities and dates.
This document is maintained in the system and a quotation is created to address questions for the potential
customer.
A quotation presents the customer with a legally binding offer to deliver specific products or a selection of a
certain amount of products in a specific timeframe at a predefined price. It is legally binding on the vendor.
Some conditions can apply at various levels of the quotation based on certain factors. These conditions can
apply to these levels:
o To the entire quotation
o At item level, to the material to be supplied or to the planned procurement in the case of services
o At the service-line level for individual (tasks or activities)
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Sales Order Entry
Sales order processing can originate from a variety of documents and activities, such as when customers
contact the business for an order via phone or e-mail, existing contracts, and quotations.
The electronic document for a sales order entry created should contain the following basic information:
o Customer information
o Material/Service and quantity
o Pricing (conditions)
o Specific delivery dates and quantities
o Shipping information
o Billing information
The sales document is made up of three (3) primary areas. The header contains data relevant to the sales
order, such as customer data and total order cost. Line item(s) have information about the specific product,
such as the material, quantity, and cost of an individual line. Scheduled line(s) uniquely belongs to a Line Item
and contains delivery quantities and dates for partial deliveries.
The sales order entry contains all the information needed to process customers’ requests. It includes the
following:
• Delivery Schedule: Whenever an order is created, the requested delivery date for the order or each
line item must be entered into the system. The system will then determine a delivery timeline to
determine the material availability or the ATP (Availability to Promise) data. The system will determine
this date using predefined forward and backward scheduling rules.
• Shipping Point and Route Determination: During the creation of the sales order, the system must
determine the shipping point from which the material will be shipped and the route wherein the
material will take to get from the warehouse to the customer’s location.
• Pricing: The system displays pricing information for all sales documents on the pricing screens at .
Header pricing is valid for the whole order, and it is the cumulative of all line items within the order,
while line item pricing is for each specific material.
The system automatically searches for prices, discounts, surcharges, calculated taxes, and freights.
Aside from taxes and freights that can be set up automatically, the company can manually manipulate
the pricing at the header and the line item level within the sales order by entering a condition type
and amount.
• Credit Limit Check allows the company to manage its credit exposure and risk for each customer by
specifying customer limits. During the sales order process, the system will alter the sales report about
the customers’ credit situation that arises. The systems can also be configured to block orders and
deliveries if necessary.
Availability Check
It determines the material availability date and considers all inward and outward inventory movements. Three
(3) proposed delivery methods include one-time delivery, complete delivery, and delayed proposal.
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Shipping & Transportation
The shipping process begins when the delivery document is created for the sales order. This document
controls, supports, and monitors several sub-processes for progressing the shipping such as Picking, Packing,
and Post Goods Issues.
The delivery creation checks orders and materials to determine if a delivery is possible and whether there is
a delivery block that puts the order on hold. Other factors involved in delivery creation include:
o Availability confirmation o Route assignment update
o Total weight and volume o Picking location assignment
determination o Sales order update
o Packing proposal generation o Batches determination
o Scheduling checking o Quality checking
o Partial deliveries consideration o Sales order update
A delivery document initiates the delivery process and is the control mechanism for Picking, Packing, Loading,
and Posting Goods Issues. Changes to delivery concerning the products and quantities are allowed.
Picking
The following should be considered during this process:
o Quantities based on delivery note
o Assigned date when picking should begin
o Automated storage location assignment
o Supports serial number/lot number tracking and batch management
o Integrated with Warehouse Management
Loading and Packing
The packaging to be used for specified products is identified in this process. It also includes identifying and
updating accounts associated with returnable packaging. Other functionalities include:
o Tracking packed products by container
o Ensuring weight/volume restrictions are enforced
o Assigning all packed items to the required means of transportation
Goods Issue
An event that could indicate a legal change in ownership of the products. The legal change in ownership
depends on the Incoterm or the set of internationally recognized rules defining the responsibilities of sellers
and buyers and what is written in the sales order terms and conditions. This event also signals that the goods
have left the seller's premises.
Billing
The billing process is used to generate the customer invoice and would also update the customer’s credit
status.
The billing document is created by coping data from the sales order and/or delivery document. It has two (2)
types: order-based billing and delivery-based billing. This document will automatically create a debit posting
to the customer’s sub-ledger account and credit to the company’s revenue account.
At this point, the sales process is passed over to Financial Accounting to await payment. Billing methods
include delivery-based invoicing, collective invoicing, and split invoicing.
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Payment
It is the final step in the sales order process, which the Financial Accounting department manages. Payment
will create a posting clearing the liability in the Accounts Receivable (AR) account and increase the company’s
bank account.
The final payment includes posting payments against invoices and reconciling differences between payment
and invoice.
Document Flow
The document flow and order status feature in SAP can be used to find the status of an order at any point in
time. The SAP updates the order status whenever a change is made to any document created in the customer
order management cycle (Order-to-Cash).
References:
O’Donnell, J. (2019). SAP sales and distribution (SAP SD). [Web Article]. Retrieved on January 11, 2024, from
https://www.techtarget.com/searchsap/definition/SAP-Sales-and-Distribution-SAP-SD
Partner (2022 SAP SE/SAP UCC Magdeburg from Academic Competency Centre)
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