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Product Hierarchy Pricing with Batch ManagementSAP S/4HANA CloudAuthor: Sai Kasturi, SAPS/4HANA Cloud Competence CenterPUBLIC

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Content Introduction to Product Hierarchy Product Hierarchy with Batch Management Product Hierarchy – Business Case Steps for System Setup (Apps & Config Steps) Product Hierarchy Setup Pricing setup for batches 2019 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC3

Introduction to Product Hierarchy A product hierarchy is a method of classifying your company’s products / services by their essential components into a logical structure. It enables the grouping of products and defines the relationship between products and groups at different hierarchy levels.With CE 1911, Product Hierarchy is supported in the following areas in SalesRootNodeFashion RetailerMenWomenKidsa)Pricingb)Batch se note that this blog will only cover the deltasettings necessary to run the product hierarchy withbatch management in Sales n KleinWinterAccessoriesRound NeckSlim fitTommyHilfigerTrousersMediumFull SleeveShortsHugo BossHoodiesRalphLaurenUS PoloAssn. 2019 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLICBlackRegular fitYellowLargeX-LargeWhiteProduct CodesDenimSmallBluePlease refer to my previous blog “Product Hierarchyin Sales, Billing & Analytics” for details on producthierarchy and pricing setup.Access Link:Product Hierarchy in Sales, Billing & AnalyticsLeafNode4

Product Hierarchy with Batch Management In the logistics process, that is from procurement to sales, manyorganizations use batch management for managing their inventory. In context with Product Hierarchy in Sales, Batch determination in a Salesorder can be used to apply specific price calculations based on a batch. You can use batch determination for all types of goods movements fromwarehouse, to find batches that meet defined customer specifications. Batch determination can be either be triggered manually or through anautomatic determination process, using batch search strategy. For eachsearch strategy you can specify the conditions under which batchdetermination is to be triggered and the search criteria that should beused. Batch determination can be triggered at two points in the Sales processi.e. either when the sales order is entered, or when the delivery is created. You can use batch determination in Sales in the following areas: Sales quotation Quantity contract Sales order (or scheduling agreement) Delivery 2019 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC Example: Batch determination in a Sales order is triggered ifcustomer A orders material B, assuming that this customer onlyaccepts batches with particular specifications. You use your batch determination (manual or automatic) in Salesorder to look for these particular specifications and apply specificsurcharge (premium) for this customer in pricing. To demonstrate the price calculation based on batch, I will use anexample with manual batch determination in this blog.5

Product Hierarchy – Business Case Below is an example of Product Hierarchy applied to a Fashion Retailerbusiness. Pricing (surcharge) can be determined at any intermediate node levelbased on the direction & distance maintained at access sequence i.e. (root leaf or leaf root). Neither root node nor leaf node is considered during pricing, because theroot node equals the hierarchy identifier (ID) and the leaf node equals thematerial or product master data.Example: Surcharge (premium) CalculationPricing calculation with surcharge based on product hierarchy.Pricing Condition types: DPH1 (Leaf Root) – Standard ZPH2 (Root Leaf) – Custom DPH1 – Level 7 (refer to slide 16) ZPH2 – Level 3 (refer to slide 14) Calvin Klein – 5% Clothing – 7% Tommy Hilfiger – 7% Footwear – 6% Hugo Boss – 3% Sportswear – 8% Ralph Lauren – 6% Accessories – 4% US Polo Assn. – 2% For creating a business example in the system, above surcharge percentagescan be applied to Product Hierarchy Nodes. Please refer to pricing section of this document for more details on pricingconfiguration. 2019 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC6

Steps for System SetupProduct Hierarchy Setup1.Create Hierarchy Nodes: Configure Nodes for Product Hierarchies(Config Step: 103298)2.Create Hierarchy: App – Manage Product Hierarchies3.Assign Product Hierarchy to Sales Area: App – Manage ProductHierarchy Assignments4.Assign Product Hierarchy to Products: Manage Product Hierarchies5.Determination of Product Hierarchy in Sales Order: Define relevantdate for product hierarchy determination (Config Step: 103303)Pricing Setup for Batches1.Set Access Sequences (Config Step: 103121)2.Set Condition Types for Pricing (Config Step: 101120)3.Set pricing procedures (Config Step: 101117)4.Set pricing procedure determination (Config Step: 101118)5.Create Pricing Condition Records: App – Set material pricesPlease refer to my earlier blog for product hierarchy setupAccess Link:Product Hierarchy in Sales, Billing & Analytics 2019 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC7

Pricing Setup for Batches1.Set Access Sequences (Config Step: 103121)2.Set Condition Types for Pricing (Config Step: 101120)3.Set pricing procedures (Config Step: 101117)4.Set pricing procedure determination (Config Step: 101118)5.Create Pricing Condition Records: App – Set material prices

Step 1: Set Access Sequences (Config Step: 103121) Access Sequence by definition is a search strategy used to find the appropriate value fora specific condition type. The search strategy guides the system in which it has to search for the data. An access sequence consists of one or more accesses, which in turn is composed ofcondition tables / fields. For Product Hierarchy, use the standard condition type DPH1 – Leaf to Root direction. However, if you wish to determine surcharge in the opposite direction i.e. Root to Leaf,then the standard condition type DPH1 can be copied to create a custom condition type(example – ZPH2, refer to slide 16 for pricing configuration).Field Catalog(list of e(sequence ofconditiontables) 2019 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC9

Product Hierarchy – Price Determination (surcharge)Direction of Hierarchy EvaluationIn a hierarchy, this field specifies the direction in which thesystem searches through the nodes to find a relevantcondition record. For the search on a specific path between leaf node androot node, you can select the following directions: Root to Leaf: The system starts from the rootnode level (considered as hierarchy level number1) and searches towards the leaf node level.Create a new access sequence ZPH2 by copying DPH1 and change the direction & distance like below Leaf to Root: The system starts from the leaf nodelevel and searches towards the root node level. Depending on the selected direction, the systemsearches on the specific path through all nodes - but notin the leaf node and root node - until it finds a valid subnode with a condition record. Then the search stops. If you do not enter a value in distance field or if you enter"0", the system searches all nodes until a first conditionrecord is found. 2019 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC If you enter value “2“ in distance field, the systemsearches for a relevant condition record in the secondnode, leaving the root node or leaf node, based ondirection selected.10

Step 2: Set Condition Types for Pricing (Config Step: 101120) Price elements are represented in the system as condition types such as prices, surcharges, discounts, taxes or freight. The values of these price elements arestored in the form of condition master records. The SSCUI configuration allows to configure the condition type, for example, define whether a discount is calculated as a percentage or a fixed amount. Further,you can assign an access sequence to a condition type, which is a search strategy to identify an appropriate value based on a set criteria. For this business example, copy the standard condition type DPH1 and create a custom condition type ZPH2. Assign the access sequence ZPH2 (created in previous step) to condition type ZPH2. 2019 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC11

Step 3: Set pricing procedures (Config Step: 101117) Pricing procedure is a logical grouping of condition types that are taken into account in a specific sequence for calculating prices in a sales document. During thesales document processing, the system automatically determines the appropriate pricing procedure based on a determination criteria (maintained in SSCUI –101118). For this business example, copy the standard pricing procedure ‘Y10101’ with product hierarchy condition type DPH1 (step 195) and create a custom pricingprocedure ‘Z10101’. Copy step 195 – DPH1 to add new condition type ZPH2 (step 197) to the pricing procedure. 2019 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC12

Step 4: Set pricing procedure determination (Config Step: 101118) The pricing procedure determination depends on the sales area, sales document type (document pricing procedure) and customer pricing procedure. For this business example, copy the standard determination parameters “1010 – 10 – 00 – Y1 – 01” to create a custom entry “1010 – 10 – 00 – Y1 – Z1” Additionally, create a new Customer pricing procedure, which can be assigned tothe Business Partner (customer) for determining the custom pricing procedure(Z10101) created in previous step. 2019 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC13

Step 5: Create Pricing Condition Records for Product Hierarchy Pricing condition records will help to calculate the surcharge (based on percentage maintained) during sales order processing, on specific product hierarchynode for the specific batch of the material entered. If you maintain condition records for condition type ZPH2, then the sales order determines surcharge on product hierarchy node Level 3 based on thedistance maintained in the access sequence configuration. 2019 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC14

Product Hierarchy batch determination in Sales Order (manual) Material batch and its corresponding pricing structure are determined in Sales order. When a sales order is initially created, the product hierarchy for batch determination purpose remains unfilled. Once the batch is manually triggered as shown below,PH for batch is updated in Sales B tab of sales order item 2019 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC15

Batch determination – Impact on Pricing Pricing in sales order has to be updated (re-triggered) after the batch determination is triggered in Sales order. Initially, when pricing is calculated before batchdetermination, condition type ZPH2 (related to product hierarchy batch determination) is not determined in conditions. ZPH2 will only appear once new pricing is carried out as shown below. 2019 SAP SE or an SAP affiliate company. All rights reserved. ǀ PUBLIC16

Thank you.