Even a purchase order with a confirmation of order is a contract, as there is a written declaration of intent from both parties. For companies that already use SAP and have transitioned to or plan to transition to S/4HANA, it makes a lot of sense to manage and maintain additional contracts in the same system. In addition to framework contracts (value and quantity contracts as well as call-off orders) and delivery schedules, other legal contracts, such as confidentiality agreements, can also be managed with S/4HANA Contract Management & Assembly. With regard to reporting and notifications when contracts expire, SAP has also gained more functionality here.
FRAMEWORK CONTRACTS IN S/4HANA
Like regular purchase orders, framework contracts consist of header and item data. SAP distinguishes between quantity contract, value contract, and call-off order.
In a quantity contract, agreed-upon quantities, prices, and conditions for materials and services are defined for the respective supplier. This enables the purchaser to send multiple call-off orders to the supplier until the sum of the called-off values reaches the agreed-upon quantity limit in the framework contract. Especially in times when supply security is of paramount importance, this type of framework contract should be chosen.
Value contracts should be used when the total value of all contract call-offs is not to exceed a certain amount. The contract is considered fulfilled when a specified value is reached as a result of contract call-offs.
With the SAP GUI transaction ME21N, it is possible to easily create a call-off order as a purchase order with reference to a contract. With this transaction, the system will pull all the information from the contract after you have maintained the contract number in the framework contract field in the item data. The system expects input of quantities and delivery date. After the call-off order has been created, it is possible to edit or display it with transactions ME22N or ME23N.
CREATING AND MANAGING FRAMEWORK CONTRACTS
Framework contracts can be created either by manually entering all data or by referring to a purchase requisition (“PR”), a request for quotation (“RFQ”), or another framework contract. Transaction ME31K is used to create the framework contract, which can also be accessed through the SAP Fiori Launchpad. With the introduction of SAP Fiori Apps for SAP S/4HANA, the “Manage Purchasing Contracts” app can be used.
When changing individual fields of framework contracts, it makes a lot of sense to use the mass change function instead of manually changing each contract individually. With this app, it is also possible to export a list of framework contracts in table form.
REPORTING AND NOTIFICATIONS
In the area of contract management reporting, many new features have been achieved in S/4HANA. This is due in part to the so-called “in-memory” technology of SAP S/4HANA and to the SAP Fiori user interface (UI).
The following table provides an overview of the respective Fiori apps:
|Unused contracts||Displays the target and approved values for contracts that were not used in the last 365 days.||The output can be displayed in table or chart format by supplier, purchasing organization, purchaser group, etc.||Helps to avoid "invisible spending" (spending without benefit) in procurement and business units.||Drill-down to document level is possible.|
|Procurement volume not covered by frame contracts||Shows the procurement volume that is not covered by frame contracts.||The output can be displayed in table or chart format by supplier, purchasing organization, purchaser group, etc.||Closing gaps in contracts increases efficiency and reduces costs.||Analysis of trends by category or supplier is possible.|
|Contract leakage (contract compliance)||Shows the procurement volume of orders that do not refer to the existing frame contract, but could.||An output and drill down by supplier, purchasing organization, purchaser group is possible by clicking on the bar in the column chart and selecting the respective navigation option.||Increasing contract compliance increases efficiency and reduces costs.||List display of the documents that contribute to the output value.|
|Procurement contract positions by account assignment||Shows the contract positions grouped by cost center with filters for the procurement contract, cost center, order, PSP element, asset, etc.||By clicking on a cost center in the output result, details such as material, supplier, account assignment, net value, etc. can be viewed and analyzed.||Increases transparency, especially for cost center managers and project managers or project controllers.||Drill-down to the respective procurement document is possible.|
|Monitoring procurement contract positions||Initially shows a chart with the aggregated contract volume per material or merchandise group.||The total frame contract value and the called-off value are shown in two different bars in this chart. When clicking on a bar, the corresponding frame contract positions are displayed in a list.||Increases transparency and control options in procurement.||Filter option of contract positions by currency, frame contract, merchandise or material group, material, supplier, cost center, etc. Drill-down to document level is possible.|
|Contract expiration||Identifies frame contracts that expire at certain deadlines.||The app displays the expiring contract, target value, and approved value. The output can be displayed in table or chart format by supplier, purchaser group, purchasing organization, procurement category, or merchandise or material group.||Supports timely action by procurement when contracts expire (e.g. contract extension, renegotiation, new tendering).||Various filtering options, e.g. by frame contract, validity period, supplier, etc.|
FRAMEWORK AGREEMENTS IN S/4HANA
Delivery schedules are another form of framework agreements. As the name suggests, delivery schedules are used to procure a specific quantity according to a concrete plan within a certain period of time. The agreed-upon delivery schedules include quantities and delivery times. Conditions can be maintained at the header level, making them applicable to all items. Alternatively, conditions can be maintained separately at the item level. In addition, accounting information can also be stored in the items to ensure the controlling of these procurement documents.
ADVANTAGES OF DELIVERY SCHEDULES
The following advantages are associated with the use of delivery schedules in S/4HANA:
- A delivery schedule can replace a large number of individual purchase orders and releases
- Lead times, administrative efforts, and inventory levels can be reduced
- Production processes can be designed according to the “just-in-time” principle
- Better plannability and resource utilization of suppliers through lower delivery times with smaller quantities over a longer period of time
TYPES OF DELIVERY SCHEDULES
The different types of delivery schedules are determined by document types in customizing. The three standard document types are explained below.
DELIVERY SCHEDULE WITH CALL-OFF DOCUMENTATION
The document type LPA is used for this delivery schedule. In this case, the individual delivery schedule lines are considered internal when the delivery schedule is created and are not sent to the suppliers. This makes it easy to make changes, which leads to high flexibility. Only when a call-off is made from the delivery schedule are the information from the delivery schedule lines sent to the supplier. Two types of call-offs are available with this type of delivery schedule, LPA:
- Forecast delivery schedule (FRC)
- Just-in-time delivery schedule
DELIVERY SCHEDULE WITHOUT CALL-OFF DOCUMENTATION
The document type LP applies to this type of delivery schedule. The delivery schedule lines created are official and are sent to the supplier as soon as they are created. There is no call-off documentation in this case.
STOCK TRANSFER DELIVERY SCHEDULE
If material transfers between plants within a company occur frequently and regularly, it makes sense to create a stock transfer delivery schedule. The corresponding document type is LU, and the item category is U.
CREATING AND MANAGING DELIVERY SCHEDULES
Delivery schedules can be created manually or using other procurement documents as a template, such as purchase requisitions, inquiries, other delivery schedules, or contracts. The Fiori app “Manage Delivery Schedules” allows users to search and filter delivery schedules by purchasing organization, contract type, supplier, material, status, validity period, etc. It enables users to display, copy, edit, create, and delete delivery schedules. In addition, delivery schedule lines can be maintained here. The app also displays delivery schedules that will expire soon and allows the user to renew them with a simple click of a button.