Most large organizations use SAP, and more than 75% of the world’s transactions happen within SAP systems.
Many of these organizations running SAP have their plants or operations across several countries and execute intercompany transactions. SAP has supported intercompany processing for both variants from the very early days of SAP R/3.
SAP’s intercompany solution in SAP R/3, SAP ERP, and SAP S/4HANA (until the 2022 on-premise release) are referred to as classical intercompany solutions, as SAP released an advanced version of the intercompany solution in the on-premise release of SAP S/4HANA 2022. In the following sections, we’ll cover classic intercompany sales, classic intercompany stock transfer, and the limitations of both.
The high-level process flow for intercompany sales is shown in the figure below. A sales order (1) is created with reference to the purchase order (B) from the customer (A) with the selling organization in Germany and delivering plant in the US. This makes the sales order relevant for intercompany transactions because a standard sales order has the sales organization and delivering plant be from the same country or company. An outbound delivery (2) is created at the US delivering plant (organization) for shipping directly to the external customer (A). Goods issue (3) is executed on the outbound delivery (2) for material flow directly to the external customer (A). The US organization creates an intercompany invoice (4) with reference to the outbound delivery with the German organization as the payer for the materials supplied by the US to the external customer. The German company will also create an external customer invoice (5) with the external customer (A) as the payer of the invoice. The external customer then does the goods receipt (C) and creates the supplier invoice (D) in their own system. In classic intercompany sales, materials are directly delivered to the external customer.
The high-level process for intercompany stock transfer is shown in the next figure. The receiving company in Germany creates an intercompany purchase order (1) for the procurement of a product from the manufacturing or warehousing unit of their US affiliate. The receiving company in Germany generally starts this procurement based on some forecast for sales or production of another product. The delivering company in the US creates an outbound delivery (2) with reference to the purchase order for the transfer of goods from the US to Germany. A goods issue is posted on the outbound delivery (2), which transfers the stock to stock-in-transit and creates at inbound delivery (4) at the German receiving plant. Stock moves from stock in transit at the delivering plant to stock in transit at the receiving plant with proof of delivery (POD). (3) happening in between the movement of stock from the US to Germany. Then, the goods receipt (5) is posted on the inbound delivery (4) at the receiving plant once they receive the stock physically. An intercompany invoice (6) is created after the goods issue of the outbound delivery (2) with the receiving company in Germany as payer of the invoice. In classic intercompany stock transfer, materials or goods are physically received by the receiving organization.
Classic intercompany solutions have existed in SAP ERP for more than 30 years, but there are several limitations from both logistics and finance perspectives for intercompany sales, as highlighted in the next figure, and intercompany stock transfer.
The major limitations for intercompany sales in SAP are as follows:
Likewise, the intercompany stock transfer process also has similar limitations:
SAP has released a new intercompany functionality called advanced intercompany sales and advanced intercompany stock transfer with the SAP S/4HANA 2022 release to eliminate the limitations of the classic intercompany functionality. This advanced intercompany solution also provides a new orchestration and monitoring framework for end-to-end logistic and finance processes with the SAP Fiori app called Monitor Value Chains. This advanced intercompany sales and advanced intercompany stock transfer solution is just the initial solution and will evolve in upcoming releases.
Advanced intercompany sales and advanced intercompany stock transfer need to be activated separately in SAP S/4HANA with additional configurations, settings, master data, and so on because they don’t come as a default advanced intercompany solution in SAP S/4HANA.
Note: An additional license isn’t required to use advanced intercompany sales and advanced intercompany stock transfer in the SAP S/4HANA 2022+ release. This solution can’t be down ported to earlier releases such as SAP S/4HANA 2021.
Editor’s note: This post has been adapted from a section of the e-book Introducing Advanced Intercompany Sales and Stock Transfer with SAP S/4HANA by Mrinal K. Roy.