2. Right Solution, Right Time, Right Price Pricing / Discount Conditions

3. Business Process Workshop The objectives of the Pricing and Discount workshop is to: Provide an overview of the Pricing and Discount Condition Business Processes Demonstrate how SAP will be used to manage these processes. 1

4. Agenda Topics: I.Overview II.Pricing Conditions III.Discount Conditions IV.Manual Conditions V.Reporting VI.References 2

5. I. Pricing and Discount Conditions - Overview 3

6. Pricing is a broad term to describe the calculation of prices and costs. Conditions represent a set of circumstances that apply when a price is calculated. The variable factors here – the customer, the material, the quantity, and the date – determine the final price the customer gets. The information about each of these can be stored in the system as master data. This master data is stored in the form of condition records. 4

7. Condition Records Condition records allow you to store and retrieve pricing data in the system. All the pricing elements of daily business – the prices, discounts, freight charges, commissions, etc – that you want to use must be stored in the system as condition records. You can define as many condition records as you want for the different pricing elements for any validity period. These records are stored in SAP as master data and are retrieved when processing a sales document. Master Data is centrally stored (shared across application modules) and processed to eliminate data redundancy. These three master data records are critical to sales order processing: Customer Master Material Master Pricing/Discount Conditions All pricing and discount condition records will have validity dates. All validity dates will default from today’s date to 12/31/9999. (Note: This process is under review and may change after implementation). 5

8. Condition Types Pricing is carried out automatically based on predefined prices, discounts, and surcharges. Prices can be manually overridden on the sales order (when applicable). Conditions Price List Material Price Customer/Material Price List Material Price Customer/Material Prices Customer/Material Pricing Group 3 rd Party Commissions (Statistical) Sales Area/Material Price Group Customer/Material Pricing Group 3 rd Party Commissions (Statistical) Sales Area/Material Price Group Discounts/surcharges 6

9. Condition Types Some definitions to get us started….. Prices are the base from which the net price is calculated. Discounts are the reductions that can be applied to your price. Surcharges are additional prices added to your final price. Statistical conditions are used to track pricing within a sales document without affecting the net price of the order or sales document. 7

10. Creating Price/Discount Conditions Since condition records are considered master data, that is where you’ll find it in SAP. Most condition records are created by following the menu path: Logistics Master Data Conditions There are two places in master data where condition records can be created, changed and displayed. 18

11. Pricing and Discount conditions can be created, changed and displayed in SAP in two different modules: VK31 Logistics Master Data Conditions Create VK11 Logistics Master Data Conditions Select using condition type Create 9

12. Today’s Presentation will primarily use VK11. VK11 Logistics Master Data Conditions Select using condition type Create 10

13. Pricing and Discount conditions are organized into a sequence called a pricing procedure. During sales order processing, the pricing procedure determines the kinds of pricing elements you can use and in which sequence they are processed to arrive at a final price. The sequence of Yaskawa’s standard pricing procedure follow in this order: Material Price (PR00 or PRRP) Customer/Material Price Price List Type Material Customer/Material Price Group Discount (K030) Sales Area/Material Price Group Discount (Z030) Manual Discounts (PN00, RA00) Commissions Accrual (ZCOM) Manual Freight Conditions (ZPPA, ZCOD) Sales Taxes (XR1-4) Determining Price through the Pricing Procedure 11

14. Determining Price through the Pricing Procedure In SAP, the system checks for the most specific condition record first (customer/material price). After this process, other discounts can be applied to the sales document. The system looks for the most specific pricing element (such as customer/material price of PR00) and works downward to the most general (customer/material price group discount K030). Then manual conditions can be added such as RA00, freight, taxes, etc. 12

15. Exclusion Indicator The system can exclude condition types and records so that they are not taken into account during pricing in sales documents. If a condition record has exclusion marked, no additional pricing or discount conditions will be applied to calculate the final price. Here the customer has a customer/material price for the item. Since the exclusion indicator is marked, once the system reaches this price, it will stop looking for additional PR00 conditions to apply to this material. Additional manual discounts can still be taken off of this designated, “net” price. 13

16. II. Pricing Conditions 14

17. Pricing Condition Record Condition Type: PR00 Condition types determines selling price of materials Automatically copied into Sales Order. Mandatory condition that must be established to Process sales documents. Pricing Master Records are located in condition types in Sales and Distribution. Material Price (known as List Price in BOSS) is no longer maintained in the Material Master Record. Without this condition, an error will occur in your sales document and require to be established before proceeding. 15

18. There are 3 types of scenarios (key combination) that fall under PR00: Customer/Material Price Price List Type Material Price Pricing Condition PR00 16

19. Condition where a specific material price is designated for a specific customer. Also known as a “Net” price. The customer will receive this pricing whenever the material is ordered. Validity dates can be added to the pricing so it can be reviewed monthly, annually, etc. Customer/Material Price (PR00) 17

20. Customer/Material Price (PR00) This condition can be used when a specific price has been designated for a specific material. Sales organization and distribution channel must be specified for this condition. Before creating this type of condition, check the customer master to verify the distribution channel the customer belongs to. 18

21. Creating Customer/Material Price (PR00) Enter PR00 as the condition type and hit enter. In the key combination, click on the Customer/Material button. Click on the green arrow to proceed. Initial Screen 19

22. Creating Customer/Material Price (PR00) Enter 0010 in Sales Organization. Enter the appropriate distribution channel. Use the match code button to search from a list. Enter the customer number. Use the match code button to search from a list. 20

23. Creating Customer/Material Price (PR00) Enter the material number. Use the match code button to search from a list. Hit the Tab button. Enter the rate or price for the material. Hit enter. Enter validity dates and check the exclusion indicator box with an X. Exclusion Indicator 21

24. Creating Customer/Material Price (PR00) The exclusion indicator prevent further customer discounts to be taken on the actual material price. However, manual discounts such as RA00 and PN00 can override the PR00 Customer/Material Price. (More discussion on this later). Once these steps are followed, you can click the orange disk icon to save your condition. 22

25. Condition where multiple customers share the same designated price for a specific material or several materials. All customers need to have the same price list type designated on their customer master record to receive this pricing. Price List Type (PR00) 23

26. Price List Type (PR00) The customer master designates that the customer will receive the price list type condition. This is designated at the “price list type” field on the customer master by “01”. It can be deactivated on sales orders and line items. 24

27. Price List Type (PR00) Currently, we have one scenario within where this is condition is used: Honda. Affiliates of Honda can order material from at the price we sell to Honda, provided they have the price list designated on their customer master. 25

28. Price List Type (PR00) Affiliates of Honda can order material from at the price we sell to Honda, provided they have the price list designated on their customer master. In this example, there are several materials in this one price list. 26

29. Condition where a specific material price is designated regardless of which customers order the material. In BOSS, it is a list price. The standard price of a material is no longer attached to the Material Master as in BOSS. Material Price (PR00) 27

30. Material Price (PR00) To create a material price, the Sales organization and Distribution Channel must be specified. All materials will have a material price in both distribution channels. In the example below, the material price for the material SGDH-01AE is $996 in the Direct distribution channel. The same record should be input for the distribution channel 20 (Distribution). 28

31. Creating Material Price (PR00) Enter PR00 as the condition type and hit enter. In the key combination, click on the Material button. Click on the green arrow or hit enter to proceed. Initial Screen 29

32. Creating a Material Price (PR00) Enter 0010 for sales organization. Then enter the distribution channel. NOTE: Material prices should be setup in BOTH distribution channels. Enter the material number. Use the match code button to search from a list. Enter the desired rate. Enter validity dates and check the exclusion indicator box with an X. 30

33. Creating Material Price (PR00) Once these steps are followed, you can click the orange disk icon to save your condition. 31

34. The price condition PRRP is used during repair/customer property situations where the material comes back to as customer property. In the BOSS system, this was the List 9 price. Note: Exchange items will use the PR00 condition. These items are indicated by a # sign at the end of the material number. Example, SDGB-10ADG-P#. In this condition, the exclusion indicator automatically defaults indicating no further discounts are applicable. All other service pricing is established with the PR00 condition. Pricing Condition PRRP 32

35. Pricing Condition Record Condition Type: PRRP Condition types determines selling price of materials Automatically copied into Sales Order Pricing Master Records are located in condition types in Sales and Distribution. Material Price (known as List Price in BOSS) is no longer maintained in the Material Master Record. 33

36. There are 3 types of scenarios (key combination) that fall under PRRP: Pricing Condition PRRP Customer/Material with release status Price list type with release status Material with release status NOTE: is currently on using the Material with release status. This price condition is very similar to PR00. Like PR00, the material price with release status should always be setup in BOTH distribution channels. However, PRRP can be entered manually. The order situation will determine which scenario should be used. 34

37. Review Questions What 3 scenarios does PR00 include? In the SAP pricing procedure, the system looks first at the most ______________ pricing element. Where must PR00 Price List type be specified to establish this pricing element? When setting up material prices, what distribution channel should they be established for? 35

38. Pricing Hands-On Pricing Exercise

39. III. Discount Conditions 37

40. In BOSS, we used multipliers to establish pricing for our customers. In SAP, we will use discounts. The two types of discounts we will be using are: Customer/Material Price Group (K030) Sales Area/Material Price Group (Z030) Typically, these discount conditions are always applied to the material price in PR00. However, in certain situations, discounts can be excluded from the material price PR00 also. For example, in an exchange situation with a customer who has a K030 customer discount. Their discount shouldn’t be applied in the return order. Discount/Surcharge Conditions 38

41. Customer/Material Price Group Discount Condition Record Condition Type: K030 Condition type determines net discount to the customer based on specific material groups. Automatically copied into Sales Order Currently many customers receive multipliers based on pricing groups designated on the item. Instead of using multipliers, we will use discounts in SAP. Example:. 39

42. Customer/Material Price Group Discount (K030) Material master record must have a material price group specified. All discounts are applicable to all materials with the designated material price group. This discount condition type will be used instead of a straight customer discount as had been used in BOSS. 40

43. Customer/Material Price Group Discount (K030) Here on the material master for a P5 inverter, the material pricing group is designated on the Sales Org. 2 tab. 41

44. Customer/Material Price Group Discount (K030) Current Material Price Groups in SAP are: Material Pricing Groups are maintained by Product Management. If you need one created, see the appropriate product manager. 42

45. Sales Area/Material Price Group Discount Condition Condition Type: Z030 Discount that applies to a whole sales area for specific Material groups. Automatically copied into Sales Order Example: All customers within the Columbus division receive a 20% discount on the material price group G5 inverters. 45

46. Sales Area/Material Price Group Discount (Z030) Material master record must have a material price group specified. Discount is given from the material price group in the material master and the material price (PR00) designated. In this example, all materials with the G5 material price group designated on the material master will receive the 20% discount. 46

47. 3 rd Party Commission Condition Condition Type: ZCOM Condition type where a percentage of sales in commission is paid to a 3 rd party Vendor or partner. Statistical condition that does not affect the net total price of a sales order but is recorded for accruing and paying commission. Example: Regan Controls receives a 7% commission from all orders received from Esab. In the customer master record for Esab, outside commission is established. 49

48. 3 rd Party Commissions Discount The pricing condition record “price group” designates that commission is paid on their sales orders to another party. This is designated at the “price group” field on the customer master by “01”. It can be deactivated on sales orders and line items. (ZCOM) 50

49. 3 rd Party Commissions Discount The commissionable amount for a sales order can be seen in the header and line conditions of the sales order or document.. In this example, the commission is 7% of $52935.35. It is not a part of the net total price of the sales order. (ZCOM) 51

50. Creating with Reference New condition records can be created with reference to existing condition records. During the process, changes can be made to the rate, validity period and additional sales data for the newly created record. When creating a condition with reference, the previous condition represents the information for the condition to be copied. In VK14, Create with Template, you are able to view and edit a copy of the pricing condition created in VK11. Once this copy had been edited and saved in VK14, it overrides previous price condition records. Create with Template should be used to change an existing pricing record’s validity dates or Rate, so that a historical record of the changes to the pricing record is saved. 56

51. Creating with Reference In this example, MagneTek is receiving a PC3 discount of 73.1%. For a short promotion MagneTek receives a 75% discount. We need to create this condition with reference to the previous. In VK14, we enter the pertinent information: Sales Org, Dist. Channel, Customer, and Material Group. And then hit the execute button. 57

52. Creating with Reference Then we change our rate to 75% and adjust the validity dates. Hit enter. Then click on the save icon to save the condition. Looking at the Pricing report for this condition, we can see the condition we created. Once this expires, the original condition will resume. 58

53. Review Questions What are the 2 types of discount conditions will use? In order to use the K030 Customer/Material Price Group, what must be established on the material master? Does the ZCOM 3 rd Party Commission condition affects the net total Price of a sales order? 59

54. IV. Manual Conditions 61

55. Manual pricing/discount conditions are conditions that are NOT established in pricing master records. They are condition types that are applied on a sales order, quote, contract or scheduling agreement at the time it is created. The different types of manual conditions are: % Discount from Net (RA00) Price Net (PN00) Freight Charges(ZCOD and ZPPA) Tax Conditions (XR1-XR4) Manual Conditions 62

56. % Discount from Net Manual Condition Record Condition Type: RA00 Percentage discount given on sales documents in addition to pricing/discount conditions already given. Manually entered on sales documents such as orders, Quotations, etc. It can be entered either on the header or at the line item. Example: It’s our fiscal r end and we are giving MagneTek a 3% discount on sales orders received in Feb. to ship in Feb. This is in addition to any other discounts which may already apply to MagneTek (example: Customer/Material Pricing group discount). The approver of this change in pricing should be noted on the sales document header text notes. 63

57. % Discount from Net (RA00) This is a percentage discount taken from the total net price of a sales document. It is a discount added in addition to all other pricing/discount conditions that may be present. It is manually entered on the sales document. 64

58. Creating % Discount from Net (RA00) Condition In VA01, a standard sales order is created. The required information is entered (i.e. Customer number, purchase order number, material number, etc). 65

59. Creating % Discount from Net (RA00) Condition Using the menu path Goto, Header, Conditions, we can add the RA00 condition to the sales order. 66

60. Creating % Discount from Net (RA00) Condition Scroll to an open line and enter RA00 in the column marked CnTy (Condition Type). Then in the rate column, enter the additional percent discount that is being given in this situation. Hit enter. 67

61. Creating % Discount from Net (RA00) Condition The discount condition RA00 is applied to the order. You can see that it is given after the K030 discount the customer already received. 68

62. Creating % Discount from Net (RA00) Condition Last step is to add text to the order header using the path Goto, Header, Texts. Header text note should include who approved the pricing. 69

63. Price Net Manual Condition Record Condition Type: PN00 Net price condition that overrides all other pricing on a line item already established in the sales order. Manually entered on sales document lines and not the sales document header. Example: On a quotation to MagneTek for a special project, a different material net price on PCM20P4D8 is quoted to the customer other than their standard pricing. The approver of this change in pricing should be noted on the sales document text notes. 70

64. Price Net (PN00) A net price established that overrides all other pricing on a material. It is manually entered on the sales document line (material line). In this example, it overrides the PR00 price and the RA00 5% percent discount. Note: Special pricing for customers should typically be done through quotations. 71

65. Using Manual Conditions See your departmental policy for the appropriate approval level. Manual conditions such as PN00 and RA00 are intended for one time pricing situations. Customers who consistently have the same special pricing should have quotations which may be referenced when creating the sales order. When special pricing is given on a quotation, sales order, contract, etc, a text memo is required on the sales document signifying the approver of the special pricing. 77

66. Freight Prepaid and Add Manual Condition Record Condition Type: ZPPA Freight charge condition used on Prepaid shipments. Manually entered at the time of delivery. Example: Fryer Machine is shipping a rush order to their office via UPS Ground. Their incoterms are FOB. The freight charges for the delivery are entered on the sales order with ZPPA freight condition. 78

67. Freight Prepaid and Add (ZPPA) Once a delivery is created on a sales document,Warehouse Management will add freight charges to the delivery in a two step process. 79

68. The incoterms description on the customer master can default to PPA shipments. Freight Prepaid and Add (ZPPA) 80

69. On the sales order, the incoterms description will show as PPA. Freight Prepaid and Add (ZPPA) 81

70. After an order has a delivery created, Warehouse Management will change the outbound delivery to add the freight condition. The material “Freight” is added as a line to the delivery. Freight Prepaid and Add (ZPPA) 82

71. The quantity is entered as 1. The line is highlighted. Then by following the path: Goto, Item, Conditions, we can add the freight condition and charge. Freight Prepaid and Add (ZPPA) 83

72. ZPPA is entered as the condition type. The freight charges are entered in the rate field. The delivery is saved. Freight Prepaid and Add (ZPPA) 84

73. Freight Cash On Delivery Manual Condition Record Condition Type: ZCOD Freight charge condition used on COD shipments. Manually entered at the time of delivery. Example: Defiance is shipping a rush order to their office via UPS Ground. Their incoterms are FOB. The freight charges for the delivery are entered on the sales order with ZCOD freight condition. 85

74. Tax Condition Records Condition Type: XR1, XR2, XR3, and XR4. Tax condition used on applicable situations. Automatically entered at the time of delivery if customer is deemed taxable in the customer master. Example: MagneTek request that a purchase order be shipped to their customer in Texas who is taxable. 92

75. Tax Conditions (XR1 to XR4) Tax jurisdiction is maintained on the customer master data record. If there the customer is taxable, certain tax conditions will be applied to their sales orders. Finance uses a software package called Vertex to determine the applicability of taxes on each order. The types of tax conditions we will utilize are: State Tax (XR1) County Tax (XR2) City Tax (XR3) District Tax (XR4) These tax conditions populate into sales documents at the time the document is created. 93

76. Tax Conditions (XR1 to XR4) During the customer setup in XD01, customers are issued a tax jurisdiction code by Vertex using the following information: Zip Code County or District City State This code is issued regardless of whether the customer is taxable. 94

77. Tax Conditions (XR1 to XR4) During the initial customer setup process, all customers will be considered taxable. If the customer has and submits to a exemption certificate, their Vertex record will reflect their exempt status. Note: does not collect taxes in every state. Check with Finance for a listing. 95

78. Tax Conditions (XR1 to XR4) When sales documents are processed, the tax condition are automatically calculated in the sales order. 96

79. Pricing and Discount conditions are organized into a sequence called a pricing procedure. During sales order processing, the pricing procedure determines the kinds of pricing elements you can use and in which sequence they are processed to arrive at a final price. The sequence of Yaskawa’s standard pricing procedure follow in this order: Material Price (PR00 or PRRP) Customer/Material Price Price List Type Material Customer/Material Price Group Discount (K030) Sales Area/Material Price Group Discount (Z030) Manual Discounts (PN00, RA00) Commissions Accrual (ZCOM) Manual Freight Conditions (ZPPA, ZCOD) Sales Taxes (XR1-4) Determining Price through the Pricing Procedure 97

80. Determining Price through the Pricing Procedure In SAP, the system checks for the most specific condition record first (customer/material price). After this process, other discounts can be applied to the sales document. The system looks for the most specific pricing element (such as customer/material price of PR00) and works downward to the most general (customer discount K007). Then manual conditions can be added such as RA00, freight, taxes, etc. 98

81. Review Questions When using manual conditions such as RA00 and PN00, what is mandatory on the sales document? When are the freight conditions ZPPA and ZCOD added? What determines the tax conditions and where is it maintained? Where is the condition PN00 applied? What 2 steps does Warehouse management do to add freight charges to a outbound delivery? 99

82. V. Reporting 100

83. Pricing Reports Pricing reports can be run in V/LD. They are standard reports by price or discount condition that can be customized by customer. Follow the menu path: Logistics Master Data Information System Conditions & Pricing 101

84. Running Price Reports in V/LD In the initial screen, the report number is entered. Use the match code button to search by a list. Once you have selected a report, click the execute button. Execute Button 102

85. Running Price Reports in V/LD Depending on the pricing report selected, any number of fields may be required or used to create the pricing report. The match code buttons can be used to search from a list. Once you have entered the desired criteria for your report, click the execute button. 103

86. Running Price Reports in V/LD Your report will displayed. To print the report, hit the printer icon at the top of the screen. 104

87. There are many standard reports that can be utilized in SAP. With specific criteria, reports can be executed to enable you to view various pricing information. Below is a table of the most common reports available to. Pricing Reports in V/LD 105

88. VI. References 111

89. PR00 Price Conditions Quick Reference Table 113

90. Discounts and Manual Conditions Quick Reference Table 114