SD Free goods in SAP SD

Implementation Options

In many sectors of industry it is common to provide products free of charge, or not to charge the customer for some of the goods sold when a customer purchases certain goods.

The following forms of free goods exist:

• Inclusive

The customer only pays for a part of the goods required. The rest of the goods are free. This is called Inclusive free goods and means that part of the purchase quantity is designated as free goods and is not billed.

The material supplied as free goods always has the same unit of measure as the purchased quantity.

Of ten bottles of wine, two are designated as free goods. If you order ten bottles, then ten are delivered but you are not billed for two of them. You have received inclusive free goods.

• Exclusive agreement,

The customer pays for the goods ordered and receives additional goods. This is known as exclusive free goods and means that free goods is granted for an additional quantity to that in the purchase order. More is delivered than was ordered and the additional quantity is not billed.

The goods delivered as free goods do not have to be the same as material ordered.

When four coffee machines are ordered, the vendor supplies a packet of coffee as free goods. Therefore, if you order four coffee machines, you receive a free packet of coffee.

Features

You create a free goods agreement in the same way as you do a condition. You can set the requirements governing when free goods are granted at as many levels as required, e.g. at customer/material level or customer hierarchy/material level. The standard system provides for customer/material level. The free goods agreement has a validity period. In the free goods agreement you can save different rules for determining the free goods quantity. You can determine a minimum amount for the sold material. The free goods only then apply from this minimum amount. The free goods quantity can be defined proportionally to the quantity of the material sold. Another rule defines the free goods quantity per full unit of the material sold. I.e., free goods might be granted only for a certain number of full pallets and not for partially loaded pallets.

Free goods processing is supported in the sales order for direct sales. When creating the sales order, the free goods items are created automatically according to free goods agreement. The free goods are represented as an item. The free goods item is a subitem of the originating item. The free goods items are relevant for delivery and are copied to the delivery. The free goods item can be copied to the billing document. It is possible to have the free goods in the invoice as free of charge items.

In the sales order and in the billing document, pricing can be carried out for a free goods item. An automatic discount of 100 percent at the end of pricing ensures that the item is free of charge. This facilitates representation in the statistics and in the Profit Analysis. The free goods can be represented there not only as manufacturing costs but also as a special type of sales deduction.

Constraints

Free goods is currently only supported on a 1:1 basis. This means that an order item can only be the source of one free goods item. This means that agreements involving relationships such as 'Buy material 1 and get material 2 and material 3 free of charge' or 'Order material 1 and material 2 together and get material 3 free of charge' are not supported.

Free goods is not currently supported in combination with material structures (e.g. product selection, bills of material, variants with BOM explosion).

Free goods is currently only supported for sales orders with document category C (not for quotations, for example).

Free goods is not currently supported for deliveries without reference to a sales order.

Free goods is not currently supported for make-to-order production, third-party order processing and scheduling agreements.

SD Maintaining Free Goods Master Data in SAP SD

Use

Free goods master data must be maintained before automatic free goods determination can be carried out. The condition technique is used for free goods in the same way as for pricing.

Features

The free goods master data has the following features:

• Free goods can be maintained as either inclusive or exclusive.

• You can set the requirements governing when free goods are granted at as many levels as required, e.g. at customer/material level or customer hierarchy/material level. Just as in pricing, condition tables are used for this which you can enhance according to your own requirements.

• You can specify a validity period for the free goods agreement.

• You can specify a minimum quantity for which free goods is to be granted.

• Stages can be defined with regards to the minimum quantities and their dependent free goods.

• For exclusive free goods, you can define a material other than the material sold to be granted as free goods.

• You can define different rules for determining the free goods quantity:

• proportional (rule 1)
• related to number of units (rule 2)
• only for whole units (rule 3)

You grant 10 pieces of a material as exclusive free goods for an order of 100 pieces.

A customer orders 150 pieces.

Depending on the rule used, the customer receives the following free goods quantity:

Calculation rule	Free goods quantity
Rule 1 Rule 2 Rule 3	15 pieces 10 pieces 0 pieces

• You can enhance the rules for determining the free goods quantity with your own routines (Transaction VOFM in menu point Formulas).

• Delivery controlling

For the delivery you can control whether the free goods are processed independently or whether they are only copied to the delivery for partial delivery or full delivery.

SD Maintaining Free Goods in SAP SD

1. In the
SD Master Data Screen select, Pricing ®Free goods ®Create.

You reach the data screen Create free goods determination.

2. Enter data for Sales organization, Distribution channel and Customer.

You maintain master data for inclusive and exclusive free goods in the same screen. In exclusive free goods, the additional free goods material field is also available for entry.

You can choose between exclusive and inclusive at any time.

If required, you can switch from a scale quantity for inclusive to exclusive free goods.

3. Now maintain the following data:

Field description

Contents

Material Minimum quantity From FGQ Free goods AQU Rule D Additional material

Material, for which free goods is to be granted Minimum quantity for which free goods can be granted Quantity of sales material Quantity unit of free goods material Quantity of free goods with reference to the quantity and quantity unit of the sales material Quantity unit of the free goods additional quantity Calculation rule Delivery controlling Additional material (only available for entry in exclusive free goods)

4. If you want to use a scale, select Scales. If you want to change the default validity period, select Validity periods.
5. Save the free goods.

Result

The system marks the free goods record as being either inclusive or exclusive.

The system automatically calculates the percentage amount of the free goods with regards to the quantity. If the sales material and the free goods use different units of measure, then this calculation is not carried out.

If you create a free goods record with a different material as the exclusive free goods material, then a bell icon appears at the end of the record in the inclusive free goods screen. Normally, when you display a list of free goods records, you can only see the exclusive free goods material if you go to double line display or if you go tot he exclusive free goods screen for the record. This icon indicates a different exclusive free goods material in the first list.

If you do not enter an exclusive free goods material, the system automatically uses the sales material.

You can also branch to free goods maintenance from the pricing conditions maintenance screen.

If possible, data from the condition record are proposed for the free goods (e.g. customer number, material number).

SD Free Goods in Sales and Distribution Processing in SAP SD

Use

If you grant free goods to a customer, you can implement automatic free goods determination. The system automatically create a free goods item in the sales order. The item is free of charge. For inclusive free goods, the main item is automatically reduced by the free goods quantity. For exclusive free goods, the quantity of the main item remains the same.

You grant 2 pieces of a material as free goods when the customer orders 100 pieces. For inclusive free goods, the two pieces are deducted from the quantity of the sales material and created as a separate free of charge item. For exclusive free goods, the customer receives two additional pieces as an additional free of charge item (see figure below).

Prerequisites

Customizing

Free goods determination requires Customizing settings in SD basic functions.

Master Data

Free goods determination requires that the free goods be maintained in the master data.

Features

Free goods determination in the customer order

The free goods records have a validity period. They are accessed using the pricing date.

The free goods item is determined automatically by the system, according to the data in the free goods record. In the standard system, item category TANN is set for free goods items.

You can also enter free goods manually by entering item category TANN as the item category in double line entry. In this case, however, the system will not access the master data and the control parameters contained therein.

The system informs you if an order does not reach the minimum quantity specified for free goods. In Customizing, you can make the system disregard this message or even set it as an error.(Select: Sales and Distribution -Sales - Sales documents - Define variable messages. This case concerns message V4 160).

You can view a free goods analysis carried out by the system. In the order, select: Environment - Analysis - Free goods - On. The system displays the key it uses to access the free goods master data. It also informs you if free goods is not possible (e.g. for product selection).

You can change the free goods quantity. The system issues an error message if the free goods quantity exceeds the quantity of the material ordered.

Other than the quantity, no other data is available for entry in the free goods item.

Subsequent changes to quantities or dates can be made to the main item. This means that free goods determination is carried out again. This means that manual changes to the free goods quantity are lost.

Free goods in the delivery

Free goods in the delivery

Free goods in the billing document

The free goods items are displayed as items free of charge.

Integration

Free goods in Controlling (CO-PA)

You have different options for transferring costs in Controlling (CO-PA). This is best explained using the following three examples:

1. Example 1:

Free goods is granted to promote the free material.

The free goods material is treated independently of the material ordered.

The cost value is taken as the cost of the free goods material.

Billing document in SD

Material	Quantity	Price	Discount	Cost price
Main item Free Goods	10 pieces 1 pieces	100 USD		40 USD 5 USD

Individual items in CO-PA

Material	Quantity	Sales revenue	Sales deduction	Costs
Main item Free Goods	10 pieces 1 pieces	100 USD		40 USD 5 USD

This example corresponds with the standard version.

Pricing is not activated for the free goods item category (TANN).

2. Example 2:

Free goods is granted to promote the free material.

The free goods material is treated independently of the material ordered.

The cost value and the sales deduction is taken as the cost of the free goods material.

Billing document in SD

Material	Quantity	Price	Discount	Cost price
Main item Free goods	10 pieces 1 piece	100 USD 20 USD	- 20 USD	40 USD 5 USD

Individual items in CO-PA

Material	Quantity	Sales revenue	Sales deduction	Costs
Main item Free goods	10 pieces 1 piece	100 USD 20 USD	- 20 USD	40 USD 5 USD

To implement this example, you must make the following settings in Customizing (for further information, see the IMG under: Sales and Distribution - Basic functions - Free goods):

You activate pricing for the free goods item category (TANN) using special setting ‘B’.

You defined a new condition type, which you set in the corresponding pricing procedure as a 100% discount.

You assign requirement 55 (free goods) to this condition type - which checks for indicator ‘B’ in pricing.

3. Example 3:

Free goods is granted to promote the material ordered.

The costs of the free goods are assigned to the material ordered.

Neither costs nor sales deductions are taken into account for the free goods.

Billing document in SD

Material	Quantity	Price	Discount	Cost price
Main item Free goods	10 pieces 1 piece	100 USD		45 USD (40 + 5)

Individual items in CO-PA

Material	Quantity	Sales revenue	Sales deduction	Costs
Main item Free goods	10 pieces 1 piece	100 USD		45 USD

You need to make the following settings in Customizing:

Deactivate pricing for item category TANN. This is the standard version setting.

At main item level in copy control for delivery to billing document, you activate transfer of the cost price from the sub-items to the main item (see the information in the IMG under: Sales and Distribution - Basic functions - Free goods).

Free goods in the Sales Information System

The three examples given in the previous section for CO-PA, are equally valid for the Sales Information System.

SD Inclusive Free Goods without Item Generation in SAP SD

Use

The free goods function was made available in two forms (inclusive and exclusive) at 4.0A.

When you are using the inclusive free goods function, the system creates two items after you enter the order quantity and release the data:

• The first item with the order quantity less the free goods quantity
• The second item as a free goods item with the free goods quantity

This solution has the following drawbacks:

• Customer requirements are not obvious.
• The function is not possible for structured materials.
• The availability check runs independently.
• The schedule lines are not correlated.
• You cannot view full delivery of the required quantity.
• Picking contains two independent items
• The items are viewed independently in Warehouse Management.
• Scale prices for the order quantity are only possible via group conditions.
• The document volume is increased.

The advantages of this solution are:

• The free goods quantity can be viewed at order entry.
• The free goods quantities can be used for statistical purposes.

Alternatively, as of 4.5A, you can create inclusive free goods without item generation.

Prerequisites

In the free goods master record in the Inclusive/Exclusive field, select free goods type 3 (inclusive free goods without item generation).

Features

In free goods master data maintenance, this new free goods type is dealt with in the same way as the inclusive free goods procedure described above.

In order processing, you can not create order subitems.

For pricing in the main item, you need to create a discount. The standard system provides pricing procedrue RVAA01 and condition type NRAB.

Condition type NRAV is set up as follows:

• It does not determine a discount from a condition record. It uses condition basis formula 029 in the pricing procedure to determine a discount from the free goods factor.
• The condition receives the new pricing requirement 059 in the pricing procedure. This requirement checks whether free goods have already been determined.
• The condition type receives condition category f. This condition category ensures that the condition is redetermined every time the quantity is changed, since this can also mean a change to the free goods quantity.

Example: Free goods assignment without item generation in an order item:

Condition type		Condition value:
PR00	10 pieces at 10 USD	100 USD
RA00	- 10 %	10 USD
Net 1	9 USD	90 USD
Free goods ß	3 pieces at 9 USD	27 USD
Net 2	6.30 for one piece	63 USD

• The free goods quantity is shown in printouts (e.g. for order confirmations or invoices).
• The free goods quantity can not be used in the Profitability Analysis or for statistical purposes.
• The free goods are generally treated proportionally during partial billing. There are no variants defined in the standard system, although you can create them by defining your own condition basis formulae (full discount in the first/last billing document, for example).
• The billing document does not create separate items. If you require this, you must use the procedure for inclusive free goods with item generation (see above).