pricing sales

8/14/2019 Pricing Sales

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Pricing in Sales

Sales & Distribution


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Topics

1. Introduction

2. Condition Technique

3. Pricing in Sales Documents

4. Special Pricing Functions

5. Pricing Report & Analysis


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Introduction

Pricing is an intrinsic part of Sales & Distribution. Systemhas provided extensive features to map various pricingscenarios in business environment.Pricing term is used to explain the calculation of pricesfor customers or vendors and costs for internalpurposes.Conditions are extensively used in pricing. Theserepresent a set of circumstances that apply when a price

is calculated. These are based on many variable factorslike Customer, Material, Order quantity, Period etc.Condition technique is main basis of pricing in sales.


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Condition Technique

Condition Technique is method designed in SAP which isutilized in various functionalities. In Pricing this method isused by system to determine prices.There are various elements used in

condition technique, which are setup andcontrolled in customizing.A variety of important information like which gross priceand what discounts are applicable to which customer in

sales order is determined by condition technique insystem.It is an universal technique, the basic elements of whichremain same in different functionalities of Sales &

Distribution.


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Condition Technique

Elements used in Condition Technique Followingelements are used in condition technique in pricingCondition TypesCondition type is representation in system of some aspect of daily pricing activities in business environment. For each kind of price in business transaction a condition type can be created incustomizing. Example for Prices, Surcharge, Discount etc.Various Controls are provided in condition type definition incustomizing to suit the numerous price types.

System has predefined condition types for all categories of pricetypes. These are utilized in the standard pricing procedures usedfor standard scenarios. Few of them are as under:


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Condition Technique

Standard condition types are normally copied to new customer condition types and modified to suit specific pricing requirementsin business transactions.

State TaxUTX1

County TaxUTX2

City TaxUTX3

Output TaxMWST

FreightKF00

Discount Value (Manual)HB00

Customer/MaterialDiscount

K005

PricePR00

DescriptionConditionType


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Condition Technique

Condition TableCondition table defines combination of fields that identify acondition record. Specific condition data is stored in system ascondition record.

Example: Condition table 005 is used for customer specificmaterial prices. Key fields of this table are displayed below:In this table first two fields identifyorganizational data and last two fields

describe relationship between customer and selected materials.


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Condition Technique

Access SequencesAccess Sequence is a search strategy used by system to findvalid condition record for particular condition type. It determinesthe sequence in which search is conducted.

Access sequence consists of one or more accesses. Thissequence establishes which condition records have priority andit tells the system where to look first, second and so on till avalid record is found.

Access sequence contains the condition tables and the standardprocedure to maintain the sequence of condition table is fromMost Specific to General.


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Condition Technique

Example of Access Sequence:PR00 is standard access sequence used for condition type Price.

As seen above the access is arranged from Most Specific(Customer/Material) to General (Material).

Additional controls are explained in customizing guide


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Condition Technique

Pricing ProceduresPricing Procedure is a group of condition types arranged inparticular sequence to have correct prices being determined in asales document.

Various controls of pricing are setup in Pricing procedure likeProcessing condition types manuallyRequirements for specific condition typesPrinting of Condition types

etc.

Standard system contains many pre-defined pricing proceduresfor various business scenarios. These contain frequently usedcondition types again pre-defined in system.


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Condition Technique

Example of Standard Pricing Procedure in system


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Condition Technique

Relationship betweenelements in conditiontechnique explainedin figure


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Pricing in Sales Documents

Pricing Elements in business transactions are definedas condition types in system. These elements can beclassified in four basic categories

1. PricesPrice is basic gross or net price of item in sales document.This element forms the basis of pricing. In standard systemMaterial Price, Price List type & Customer Specific Price arepredefined.

2. Surcharges and DiscountsBusiness requires variety of surcharges and discounts in salesprocessing and wide range of Condition types are predefinedin system to suit the requirements. These condition types canbe copied to new ones and customized to match specificrequirements.


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3. Freight ChargesFreight costs relate to Shipping which are used to pass on thecosts to customer and displayed in Billing documents. InStandard system there are predefined condition types for Freight based on Incoterms which are internationally

recognized shipping terms.

4. Sales taxesTaxes form key element in any business transaction andsystem provides for condition types for the same. Example for tax determination in US there are condition types available for State, County and City sales taxes as well as on jurisdictioncodes.


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Graphical example of Pricing in Sales document


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Header & Item ConditionsThese are basic categorization of condition types.

Header ConditionHeader conditions are ones that apply to header of salesdocument. These have no condition records maintained andare entered manually in sales document. No access sequenceis maintained for these condition types. Example- Freight,Absolute Discount etc.

Item ConditionCondition types used only at item level are called itemconditions. Most of condition types are item conditions andautomatic pricing is carried out for them. Example- Materialprice, Customer Price, Customer Discount etc.


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Special Pricing Functions

There are many special Pricing Functions provided insystem to map various business pricing requirements.Some of the important ones are explained here.

Promotional Pricing Agreements

There are two types of agreements for carrying out marketingprograms with wide-ranging discount structures i.e. promotionsand sales dealsa. Promotion It represents a high-level marketing plan for particular products or product lines, like for a specific period

some products may need to be promoted.b. Sales Deal Sales Deal is fine-tuning of a promotion and cancontain specific condition records for the sales deal. These canbe product line specific, multiple sales deals could exist for apromotion.


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Customer Expected PriceExtended pricing functionality enables to take into account theCustomers expected price which can be displayed in Billingdocuments. These can be used to avoid customer disputes for prices especially in industries like Consumer PackagedIndustries.

Two condition types are predefined in system where data can beentered manually.

It can be customized that during order entry if expected priceand actual price differ beyond specified amount, order can bemarked incomplete and hence not processed to delivery or billing.

Customer Expected ValueEDI2

Customer Expected PriceEDI1

DescriptionCondition Type


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CostDuring Pricing business may want to compare prices with cost or view margin contribution, system has predefined condition for this.

Condition type VPRS Cost is available which can be used inPricing. Condition category G is assigned to this condition typeby which system copies the valuation data from material master to the condition. The Standard or Moving Average Price iscopied depending on material master maintenance.


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Group ConditionsSome conditions are used as basis for determining scale valuefrom several items. For such scenario system has providedGroup condition and routine.Following figure demonstrates group condition in sales.

Here group condition typeK029 exists for whichCondition record is

maintained for materialgroup 02 which appliesto both materials.


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Condition ExclusionIn pricing for sales and billing documents, more than onecondition record may apply to a particular item at any one time,condition exclusion process can be used to compare possibleconditions in order to determine such things as the best price for a customer.

The system can use condition exclusion to select the best priceor discount in six different ways:

Selecting the best condition record of a particular condition typefrom within one exclusion groupSelecting the most unsuitable condition from within one exclusiongroupSelecting the best condition record for a condition typeSelecting the most unsuitable condition record for a condition typeSelecting the best conditions from different exclusion groupsExcluding all condition types in the second exclusion group if aparticular condition type in the first exclusion group exists in thedocument


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Pricing Analysis & Reports

Pricing AnalysisPricing being extensive and complex to an extent,system has provided for an important tool called PricingAnalysis.

In Item Conditions screen in sales document option isprovided to analyze pricing information which allows user to check how system has calculated various pricingelements of an item.

The tool is extremely useful when pricing is notdetermined as customized and further analysis needs tobe done.


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Pricing Analysis & Reports

Pricing ReportsPricing data stored in system can get very extensive andfor extracting information on such data, pricing reportsare created.

Pricing reports put together information about conditionrecords, condition types, and condition tables accordingto various different criteria, like for example

Customer specific agreements for certain period.Condition record for customers in specific region or country.

Pricing Reports are created in customizing and can be executedvia application menu.