Sales Orders

Sales orders for material items define demands and drive supply chain activities. Variations of sales orders drive purchase orders for drop shipments and special orders, and production orders directly linked to a sales order. Sales order line items may be for other types of sales, such as selling resource time and special charges.

The structure of a sales order serves as the starting point for further explanation. This section covers variations in sales order processing and highlights key considerations such as order- related text, delivery promises, and material reservations .

Structure and Life Cycle of a Sales Order for Material Items

The basic structure of a sales order consists of header information and line item information, where the sales order number can be manually or automatically assigned. As a reflection of this basic structure, the sales order number and line number uniquely identify a scheduled shipment. The sales order header identifies the sold-to customer and the customer s ship-to address, and optionally identifies a different customer for bill-to purposes. This customer information provides default values for the sales order header, and some header information provides default values for the line items.

The life cycle of a sales order consists of several steps, with two steps represented by an order status as explained below.

• Open . An open status indicates the sales order is being created. An order header has been created, and one or more line items can be defined. Information can be changed on the sales order and an order acknowledgment printed, but the order cannot be shipped. The order status must be manually changed from open to released.

• Released . A released status indicates the sales order information has been completely entered and all line items are released for shipment. Information cannot be changed on a released sales order, but it can be manually reopened to allow changes. A released order allows shipment transactions and generation of pick documents for warehouse management purposes.

A line item is automatically flagged as completely shipped when its shipped quantity equals the order quantity. This represents an implied closure. The order is automatically deleted when order quantities for all line items have been posted as completely shipped and invoiced. Historical information about a system-deleted sales order can be viewed on the screens for posted shipments and posted credit memos. Prior to deletion, a sales order can be optionally archived for the purpose of historical look-up or comparison of archived versions.

Sales Order Variations for Material Items

Several variations in sales order line items can be designated for material items, such as drop shipments, special orders, and kit items. Production orders can also be generated for line items containing a manufactured item.

Special Order for Purchased Material A line item can be designated as a special order, typically for a new non-stock item but also for an existing item or non-stock item. The item can be shipped after purchase order receipt.

Drop Shipment for Purchased Material A line item can be designated as a drop shipment, with the ship-to address information specified in the sales order header. After creation of the associated purchase order, a purchase order receipt and then a sales order shipment and invoice must be entered, followed by entry of the purchase invoice.

Kit of Material Items Kit items are defined on the item master along with an assembly list of components. The kit item can represent a product that is sold and priced as a single item or as a set of components . Hence, a kit item can appear as a single line item or multiple line items on a sales order.

Sales Order Linkage to Production Orders Many make-to-order manufacturing environments require production orders linked to sales orders. Several approaches can be used to establish direct linkage between the sales order and production order(s). The production order can be generated from the sales order during order entry, manually entered afterward (with direct reference to the sales order), or generated by planning calculations for a make-to-order manufactured item. These methods were previously described in Chapter 3.

Other Types of Sales Order Line Items

A sales order for a material item represents one type of line item. Other line item types can be designated, such as text, resource time, item charges, G/L charges, and fixed asset.

• Line Item Text . Line item text can be manually entered as a description, or selected from a list of predefined standard text (identified by standard text codes). Multiple lines of line item text can be entered. The user can optionally override the predefined standard text description.

• Selling Resource Time. A resource item typically represents a person or machine, with information defined in a separate resource master. A resource item can be shipped and invoiced without requiring an inventory balance.

• G/L Charges . A sales order line specified for a G/L account can be shipped and invoiced without requiring an inventory balance. Typical examples include restocking charges, sales allowance, freight, setup fees, or other special charges that are not associated with any given item.

• Item Charges. A sales order line specified for item charges also represents a special charge (as described above), but in this case it must be assigned or allocated to one or more line items. An item charge code must be predefined and associated with relevant G/L account numbers such as sales and cost of sales. An example of the user-defined code would be freight or setup fee. Item charges can be manually or automatically assigned to other line items, with automatic assignment based on equal amounts per line or proportional amounts based on value.

• Selling a Fixed Asset . The sales order line indicates the identifier for a fixed asset and the sales price, and the shipment transaction updates information in the fixed assets application.

 

Pricing and Discounting on Sales Orders

An item s price and discounts can be automatically or manually assigned on a sales order, as previously described in Chapter 2. Automatic assignment typically reflects a predefined price book or a negotiated agreement with the customer. The pricing and discounting information applies to individual sales order line items.

Some sales order situations require an invoice discount or service charge based on total order value. The amount can be manually assigned or automatically calculated. Automatic calculation reflects information defined for each customer, with invoice discounts expressed as a percentage and service charges expressed as an amount. For example, an order exceeding $100 obtains a 10 percent discount, or a $25 service charge applies to a minimum order value of less than $500. The service charge appears as a separate line on the sales order (identified by the G/L account description for service charges). An invoice discount percentage and a service charge amount can both be defined for a customer.

Sales Order Considerations

Sales order processing in a simplistic sense involves identification of the customer and the desired item, quantity, price, and ship-from location. Many situations require additional considerations, such as the use of textual explanations , customer item numbers, delivery promises, and so forth.

Order-Related Text Many situations require textual explanations or additional descriptive information about the sales order and its line items. Order-related text can be specified in three ways: as comments in the order header, as line item text, and as extended text carried forward from the item master.

• Comments. An order-related comment can be defined with multiple lines of free-form text. Several policies determine whether comments will carry forward to related sales documents. For example, sales setup policies determine whether order-related comments will be carried forward from a blanket order, or whether order-related comments will be subsequently copied to the shipment and invoice.

• Line Item Text . Line item text can be manually entered as a description, or selected from a list of predefined standard text and optionally overridden.

• Carry Forward of Item-Related Extended Text . Extended text is defined for a specific item, along with effectivity dates and policies that determine whether it will carry forward to sales documents such as the sales order. An item s extended text can be automatically added to sales order line items (based on an item policy) or inserted upon manual request during order entry. The system considers the effectivity dates specified for the extended text. The extended text description can be overridden on the document.

Using Item Numbers vs. Cross-Reference Numbers A sales order line item for material can identify the item number or a cross-reference number that represents the customer item number or a catalog number.

Shipment Dates and Delivery Dates Each sales order line identifies three delivery dates: requested, promised, and planned delivery dates. The requested delivery date acts as reference information. Demands and shipments are driven by the promised delivery date, or by the planned delivery date when a promised date has not been specified. The promised and requested delivery dates specified in the order header act as default values for each line item; they also provide a means for mass updating all line item delivery dates. These delivery dates provide the basis for measuring on-time shipments.

Each sales order line item also identifies two shipment dates that represent the start and completion of outbound warehouse handling activities such as picking, packing, and labeling an order s items. These dates are termed the shipment date and planned shipment date , as shown in Figure 5.1. Each ship-from location has a specified outbound warehouse handling time, such as one working day, which defaults to the line item.

Figure 5.1: Sales Order Delivery Dates vs. Shipment Dates

The difference between a planned shipment date and delivery date represents the shipping time for transporting materials between the ship-from site and the customer s ship-to location. The system assigns a shipping time that reflects the shipping agent and service (such as FedEx second-day delivery) specified for the line item. This line item information defaults from the header, which defaults from the customer ship-to address. Figure 5.1 illustrates the differences between shipment dates and delivery dates.

Making Delivery Promises Order promises identify the earliest ship date for a specified quantity of a material item. Order promises based on availableto-promise (ATP) logic consider the item s inventory and scheduled receipts, and gross requirements such as other sales order commitments. In contrast, order promises based on capable-to-promise (CTP) logic consider the item s lead-time as previously described in Chapters 2 and 3.

The order promising function can be invoked during entry of a sales order. It applies to all line items on the sales order, using either ATP logic or CTP logic or both. The user can accept the calculations for earliest ship dates, and the system automatically updates all sales order line items. A company setup policy defines a look-ahead window (such as 30 or 90 days) for ATP purposes; an inventory setup policy defines a delay (such as 1 or 2 days) before the lead-time associated with a new order can be considered for CTP purposes.

Identifying Past Due Shipment Dates The system automatically flags sales order line items as late order shipping when the work date exceeds the shipment date.

Aligning Shipment Dates on Sales Order Lines An open sales order allows changes to planned shipment dates, either on an individual line item basis or via mass change.

• Changes to Individual line Items. A change to the planned shipment date (or delivery date) indicates when a line item will really ship, regardless of promises or customer requests . However, the planned shipment date is automatically realigned when the promised delivery date is changed.

• Mass Changes to All Line Items. Changing the promised delivery date in the header can optionally realign all line items to the new date. An alternative approach can be used to align all lines to the latest shipment date assigned to a line.

Indicating a Special Order or Drop Shipment A purchasing code (defined as part of purchasing setup) indicates whether the line item is a special order or a drop-shipment.

Generating a Production Order for the Sales Order The create production order function provides options for selecting order status (planned, firm planned, or released) and order source (item or sales order), and then generates a production order linked to the sales order.

Reserving Material for a Sales Order A reservation (also termed a hard allocation) for an item s inventory can be made manually or automatically, subject to reservation policies defined for the item and customer. With manual assignment during order entry, the user can prompt a review of existing inventory and manually select inventory to be reserved. A production order or purchase order can also be reserved for a sales order. Reservations can be made for lot- and serial- traced material as well as non-traced material.

Stock-Out Warnings An optional stock-out warning during the entry of a sales order line item identifies when there is insufficient available inventory at the ship-from site. It also indicates the earliest available date (based on the item s lead-time) and whether item substitutes exist. It does not provide time-phased available-to-promise information, and represents a simplistic tool for making valid delivery promises.

Identifying Item Substitutions for Sales Orders A flag indicates whether substitute items exist for the item after entering line item data. Information about the substitute items (such as interchangeability, explanatory conditions, and availability) can be viewed, and selection of a substitute item automatically updates information on the sales order line item.

Generating a Credit Memo or Return Order from a Sales Order Some situations require identification of items that must be returned or credited while a user is in the midst of sales order entry. These items can be identified as sales order line items with a negative quantity. The user can then choose whether to create a return order or a credit memo for the designated line items, and the designated lines are deleted from the sales order.

Using a Template to Create Line Items A short-cut approach for creating multiple line items involves a template (termed a standard customer sales code) . A template typically represents repeat orders although it may serve other creative purposes, such as viewing a group of related items for up-selling or cross-selling purposes. Another example includes a group of service parts that should be sold together. Each template has a user-defined identifier and defines a list of items and quantities. A template must be assigned to an individual customer before usage. A template can be viewed and selected during order entry, where selection automatically creates additional sales order line items for the template s items and quantities. Templates can also be created on the fly during order entry.

Creating a Sales Order via Copying an Existing Sales Document The copy feature can be used to create sales order line items or the entire order from an existing sales document, such as another sales order, quote, or a previously shipped order. When copying just the line items, the system incrementally adds new line items with the same item, quantity, and ship-from site, and optionally recalculates prices and discounts based on the customer and date. The incremental additions allow multiple copy efforts. The system assigns a shipment date based on header information.

When copying an entire sales document, the system replaces the sales order header information (such as the customer) and deletes existing lines before copying the new lines.

Changing the Sell-to Customer on a Sales Order Changing the sell-to customer for a sales order (prior to ledger entries) has several impacts. The change results in new header information and an optional change for the bill-to customer. Any existing line items get deleted and re-added with the applicable price and discount information, and the default ship-from site associated with the customer.

Sales Forecast Consumption by Sales Orders A sales order line for a material item consumes the item s sales forecast (if specified).

Forecast consumption logic considers the shipment date within an implied forecast period. Note that a sales order related to a blanket order consumes the blanket order quantity rather than a sales forecast.

Identifying Salespeople and Handling Commissions The salesperson assigned to each customer acts as a default on sales orders for the bill-to customer, where salespeople (and their commission percentage) must be predefined. Sales commissions are calculated based on posted invoices and displayed on a Sales Commission Report.

Sending a Sales Order Confirmation A sales order confirmation can be printed or faxed, printed to file and attached to an e-mail message, or sent via a Biztalk outbound document. An agreement concerning the Biztalk outbound document must be previously defined for the customer as part of the setup information for Biztalk partners ; the system provides a warning when an agreement does not exist.

Statistics for Sales Orders An order s statistics include calculated totals for sales, cost, and the profit amount and percentage, a calculated invoice discount that can be manually overridden, and calculated totals for quantity, volume, net weight, and gross weight. The statistics window also displays calculated tax amounts segmented by tax identifier.

Posting a Sales Order Shipment and Invoice

Shipping activities represent the completion of sales order processing, and different approaches can be taken to report shipping activity for material items. The basic approach focuses on reporting shipping activity against line items on an individual sales order. In many cases, the printed sales order serves as a pick list and turnaround document for recording actual quantities shipped from stocking locations. The turnaround document serves as the basis for entering data on the sales order window (or an equivalent version for shipping purposes) for all line items. The window displays default values for each line item s quantity and stocking location to help minimize data entry efforts. Posting the data creates a shipment and updates inventory balances . Some situations require an invoice to accompany the shipment, so that posting can optionally create the sales invoice. After posting a shipment, a Biztalk shipment notification can be generated from the posted shipment window.

Chapter 7 describes other approaches to reporting sales order shipments, such as using a pick document and shipment document.

Some customers want a single invoice for multiple shipments, as designated by the Combine Shipments flag on the customer master (which defaults to the sales order header). After shipments have been recorded, performing the periodic activity for Combine Shipments (for a selected sell-to or bill-to customer) gathers all the uninvoiced shipments into one invoice and optionally posts the invoices.