ACM.pdf

SAP Agricultural Contract ManagementMarch 2012 - Marcos Rahmeier – SAP Custom Development

© 2012 SAP AG. All rights reserved. 2

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The Key Business Challenges –What does this mean for your business?

How do I establish pricing at different times during execution?

How do I establish pricing for partial quantities and with multiple components?

How do I capture specific contract terms for quality, optionalities, tolerances?

How do I assign deliveries to contracts and change these assignments?

How do I distribute pricing to deliveries?

How do I adjustment contract fulfillment based on changing commodity quality/weight information?

How do I recover expenses for the trade with the counterparty?

How do I generate the required SAP documents?


Agri-ContractManagement OriginationFarm Operations

Management

SAP Agriculture Contract Management

Focus of the SAP’s Agri-Solution

Marketing / ProducerManagement

Food Products and Semi-Food Products

Beverages

Industrial Products from FoodIngredients

Clothing

Animal Nutrition

Energy

Seeds, Fertilizer and Bio-Technology products

Agri-Commodities such asCorn, Wheat, other Cereals, Rice,Soybeans, Coffee, Cocoa, Sugar,Cotton.

Potatoes, Vegetables, Nuts, Fruits,Citrus Fruits

Cattle, hogs, poultry, eggs

All kinds of Agri-Productssuch like peaches, tomatoes, etc.and kinds of Agri Commodities


Agri Solution Scope: New Process Building Blocks

The Agri-Solution introduces new main “process building blocks” for

Contract capture and maintenance (including integration with SAP solutions managing logistics and call-off)

Load Data capture, Evaluation of Contract Terms against Load Data captureand Contract Application

Contract Settlement


Agricultural Commodity Sales & Purchasing End to End Process Flow

Create quantity or car lot contract for a period of time

Define quality, optionality, and tolerance terms

Establish price (optional)

Define expenses

Capture Contract

1Create Call-Off

Create call-off order with reference to contract (optional)

Validate against available quantity and contract terms

Price not required to be established

Plan

3Apply Load

Capture information for load

Determine material

Trigger generation of follow on documents

Validate load against contract terms for quality, optionality, and tolerance

4Settle

Determine settlement amt based on available pricing, quality info, weights

Group settlements

Generate Agency Billing Documents

Settle with counterparty via standard SD/MM billing and invoicing

5 Update Load Data,

Settle,Close

Trigger quantity and quality updates to load information

Generate additional ABDs based on final information and pricing; settle

Recognize Revenue

Close contract line item and contract

6

SAP’s Agricultural Contract Management application shall enable companies to capture commodity contracts with partial or no pricing, specific terms for quality, tolerances and optionalities, and consider these terms for logistics execution and settlement.

Monitor in-transit inventory

Conduct inventory true-ups with 3PT, if used

Create nomination (optional)

2


Agri-Solution: Processes Summary

The Agri-FBS is supporting the following processes for Agri-Commodities

Regular Purchase and Sales Contracts

Spot Purchase and Spot Sales Contracts

Inter-Company

Intra-Company

Back-To-Back processes

Reversals / Returns

Washouts and Strings

Recording and tracking of unapplied tickets (warehouse receipt / proof of obligation)


Agri-Solution Scope: Purchase / Sales Contract

Ag Company Ag Customer

Invoice(s)

Contract

Ag Business Partner

Service Contract(s)

Ag Company’sWarehouse Ag Customer’s

Warehouse

Service ContractInvoice(s)

Weightsand

Analysis

Weightsand

Analysis

Ticket Ticket


Agri-Solution Scope: Spot Purchase / Spot Sales

Ag Company Farmer F

Invoice

Spot Contractafter deliveryby the farmer

Ag Business Partner

Service Contract(s)

Ag Company’sElevator

Service ContractInvoice(s)

Weightsand

Analysis

Ticket


Agri Solution Scope: Intercompany

Company A in US

Commodities intransit

Plant in Illinois Plant in Bejing

Headquarter in Illinois

Company A in China

Invoice

Contract


Back to Back Processes

Use of Nominations enables linking of purchases and sales

Internal Intermediary

Vendor A Internal Company as

customer

Customer 1

Exte

rnal

Pur

chas

e

Inte

r-co

mpa

nyEx

tern

al S

ale

Purchase(s)

MultipleSales


Agri-Solution Scope: Intra-Company

Company A in USProfit Center 1

Commodities being transported

Plant in Illinois Plant in Iowa

Headquarter in Illinois

Company A in USProfit Center 2

Contract or Sales Order


Agri-Solution Scope: Reversals / Returns

The Agri-Solutions provides the means to reversethe documents if necessary. Validations will be performed to ensure that the dataand process stay consistent.

These validations will be performed prior to thereversal of a document (application document, settlement document,…). If the validation is successful the documents can bereversed.If a validation is not successful then the reversal “errors-out” and a user has to assess the situationwhy the reversal is not possible. The user will beguided through the error-code in order to take the right next steps.


Agri-Solution Scope: Washouts and Strings

Washout: This process occurs where two trading parties in contract mutually agree to no physical movement of the goods, resulting in the off-set of purchasing and sales obligations with the same terms (commodity, quantity, quality, time of shipment, fob / delivery point) on both sides.

String Is a trading scenario where the physical shipment flows through multiple business partners. The final party at the end of string (who is physically taking the goods) has an interest in obtaining the documents quickly; therefore this party manually researches the string and prices, and proposes a net settlement value for all parties involved. If the parties are in a string and the counterparties agree to settle with their original counterparty it would just be part of standard settlement (purchase and sell).


Agri-Solution Scope:Recording and tracking of Unapplied tickets and Commingled Stock

Contract 1of Farmer Frank

Contract 2of Farmer Frank

Spot Contract forFarmer Frank?

Ticket Summaryof all

Warehouse Receipts by

Farmer

Unapplied quantities need to be recorded and tracked as warehouse receipts and obligations to the farmer.


ACM – Functional Scope

Functionality DescriptionMaster Data for DPQS and Material Schedule

New Master Data providing the capabilities to define qualtity schedules. These quality schedules will be linked to the contract during contact capture.

Master Data for Tolerances New Master Data providing the capabilities to define quantity schedules. These quantity schedules will be linked to the contract during contact capture.

Optionalities New functionality to define optionalities which can be "declared" before and during contract execution.

Material Determination New functionality to define generic material on a "header level" with specific materials and their characteristics underneath. These Material Schedules will be in particular assess/executed during contract application

Commodity Contract Maintenance Capturing of contracts with all specfics to Agricultural Commodity Contracts and Contracts for Grower Origination - Discounts, Premuims and Quality Schedules, Quantity Tolerances Schedules (Volume/Value), Optionalities, Material Schedules; supporting also fully and partially priced scenarios with flexible pricing mechansims throughout the entire lifecycle of a deal including provisional pricing during various events of a deal lifecycle (credit limit checks)

Contract Closure / Underfill / Overfill Features and functionalities for explict contract closure, under- and overfill functionalties during contract execution and follow-up activities

Trade Amendments Various functionalities to allow for trade amendments (shorten,extending time periods, extending/reducing quantities,…etc.)


ACM Functional Scope - continued

Functionality DescriptionContract Application Applying one or mulitple loads (tickets) to one or multiple contracts;

capturing mulitiple sets of quality information for the same load if necessary; Evaluation qualities, optionalitis and quanties of load(s) with regards to discounts or premiums to be applied for load(s); manual/automated assignment of pricing lots to loads applied to contract; adjustment of contract quantities and inventories based on the DOT evaluation results (to allow also for MTM valuation)

Non-Standard Settlement Capabilties to handle washouts, strings and circlesSettlement Provisional and final settlement calculations with multiple provisional

settlements possible; expense recovery functionality (if expense is recoverable); cross settlements between contracts including pre-payments, downpayment, deferred payments; manual and automated settlement process; functionality allows for seggregation of duties (create, approve, release); integration into FI

Revenue Recognition functionality to determine when the revenue can be recognized (FI postings)

Inventory True-UpCollects movement and inventory information for end of day true up to update 3rd party trading system


Agri-Solution Scope – New Master Data

The Agri-Solution is providing new Master Data for

Discounts and Premiums for Quality Schedules (DPQS) - tiered

Tolerance Schedules for Quantities (Value an Volume) - tiered

Material Schedules (Material Groups)

Optionalities

DPQSQuantity Tolerances

Per Delivery

Per Delivery Period

Per Contract

Definition of over-and under-fills

Definition of quality ranges per criteria

Governing weightsand grades

MaterialSchedule

Optionalities

Mode of TransportMeans of TransportLoad LocationDischarge LocationLoad RateDischarge RateDelivery PeriodInco-terms

List of materials which are acceptable for evaluation duringcontract application


Agri-Solution Scope:Contract Capture with Pricing and Expense Management

DPQSQuantity

TolerancesMaterialSchedule Optionalities

Contract

Service Contract(s)for ExpenseCapturing

Capturing of Planned

Expenses(including

auto-accruals capabilities)

Component Pricing (Futures, Basis)

partially priced contracts(No Price Established, No

Basis established, No Futures established)

Pricing can happen at any given time before final

settlement

Contract Closure Tolerances (Residual Quantities)


Agri-Solution Scope: Contract Maintenance

Contract

Contract Maintenance includes:

Pricing of price components (partial pricing)

Trade amendments

• shorten or extending time periods

• adding/changing delivery periods

• adding/changing optionality declarations,

•extending/reducing quantities

The system will perform certain mandatory validations and return if amendments are allowed and can be performed.Custom validations can be introduced, too.


Agri-Solution Scope:Load Capture Functionality

The Load Data Capture provides the ability to manually enter data for the load into the system through fast entry screen as well as allows to utilize the load information from any external source (e.g. weighing bridge)

As part of the Load Data Entry there are means provided to manually enter quality characteristics data

Each load can be uniquely identified in the system.

The fields to be captured can be extended to include customer specific details to be captured for the load.

All subsequently generated system documents will reference the Load Data entered


Agri-Solution Scope:Contract Application Functionality

The application document is an SAP document that will be created after post good receipt / post goods issue.

The main purpose is to facilitate the contract application and settlement processenabling functionalities like the application of discount premium quality schedules, evaluation of tolerances, evaluation of optionalities.

The Application Document is linked to the Quality-Repository in which all the receive / assessed quality information will be stored.

The application process links the application document to the pricing contract.

Ticket

=Load Data

ContractQuality

Repository


Agri- Solution Scope:Settlement Functionality

Settlement is a billing pre-processor that consolidates multiple transactions against one or more contracts, and uses schedules and other terms specified on the contractto calculate/determine an adjusted price that is used to issue payment or performcustomer billing.

There are 3 different settlement types:Provisional SettlementsFinancial settlement of a load or unit using a provisional price or using estimated weights and grades, with invoicing adjustments occurring after actual weights and grades are received. It is possible to have several “provisional” settlements per shipment.

Final SettlementsFinancial settlement of a load or unit using an established price and actual weightsand grades.

Adjustment SettlementsAdjustment settlement can be created for a settlement document after the finalsettlement document has been released for invoicing.


Agri-Solution Scope:Purchase Realization / Revenue Recognition

Title Transfer?

Governing Weights /Governing Grades

?

Final Price?

Final Settlement?

All 4 stars represent events in the life cycle of a contract. When ever one of these events is successfullycompleted then an entry/update will be made in the so called Event Registry. An Event Monitor is “watching” for the completion of events. Once all events are successfully completed (…all stars align) then the Purchase will be realized or the Revenue will be recognized through the respective account postings.

Once the stars align, Purchase Realization or Revenue Recognition may occur.


Inventory True Up

Relevant if using a 3rd party trading system

Collects movement and inventory information for end of day true up

Provides exits for valuation steps or custom movement evaluation


Contract Closure

Residual Quantity Customizing

Status setting for line item and pricing TC (custom)

Unavailability for application/call off

Contract

Contracts is to a large part fulfilled.

Only a small portion amount is still open.

This functionality allows to close it andnot consider it for further contract application

Contracted amount: 500,000 tons

Delivered amount: 499,000 tons

Residual quantity: 1,000 tons

SAP Agricultural Contract ManagementMarch 2012 - Marcos Rahmeier – SAP Custom Development

Your Contacts

Dirk WagenerSAP Custom Development Latin AmericaSAP Labs Latin AmericaM +55 51 [email protected]

Cláudio LotIndustry Principal - AgribusinessSAP Labs Latin AmericaM +55 11 [email protected]

Your Contacts

Simone PietroniroLocalization Product Manager BrazilGlobalization ServicesSAP BrazilF+55 11 [email protected]

Mauricio TeixeiraLocalization Product Manager BrazilGlobalization ServicesSAP Labs Latin America F+55 51 [email protected]

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