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Author: Sai Kasturi, SAP

S/4HANA Cloud Competence Center

Product Hierarchy in Sales, Billing & AnalyticsSAP S/4HANA Cloud

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► Introduction to Product Hierarchy

► Product Hierarchy in Sales & Billing

► Product Hierarchy – Business Case

► Steps for System Setup (Apps & Config Steps)

❖ Product Hierarchy Setup

❖ Product Hierarchy Pricing Setup

► Product Hierarchy Sales Analytics

Content


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 can be used in

a) Pricing

b) Batch Determination

c) Analytics

Fashion Retailer

Men Women Kids

Clothing

Footwear

Sportswear

Accessories

Casual

Formal

Winter

Denim

T-Shirts

Shirts

Trousers

Shorts

Collar

Round Neck

Full Sleeve

Hoodies

Calvin Klein

Tommy

Hilfiger

Hugo Boss

Ralph

Lauren

Slim fit

Regular fit

Black

Yellow

White

Blue

Pro

du

ct C

od

es

Small

Medium

Large

X-Large

Root

Node

Leaf

Node

US Polo

Assn.

This blog provides an overview on Product Hierarchy

in context with Pricing and Sales Analytics.

Product Hierarchy for Batch Determination will be

covered in a subsequent blog.


Product Hierarchy in Sales & Billing

► With this feature, you can set up the system to use product hierarchies for

sales documents and billing documents.

► In the sales process, product hierarchies are often necessary and helpful

to organize materials or products along multiple levels, for uses such as

pricing or analytics.

► This feature allows the system to analyze data at a higher level, rather

than examining hundreds of materials or products individually.

► You can use product hierarchies for price determination in sales

documents and billing documents, if price calculations are set up to be

dependent on product hierarchy data.

► This feature also enables you to use the product hierarchy for batch

determination. When creating a Sales Order you can restrict the product

hierarchy related batch determination to condition records assigned to a

certain level of the product hierarchy. Conditions can be created for batch

determination in Sales.

Product Hierarchy in Sales Billing

► If you create a billing document from a preceding sales

document, the system copies the product hierarchy data directly

from the sales document.

► You can view the product hierarchy data for a specific billing

document in the item detail view within the Display Billing

Documents app and the Change Billing Documents app.


Product Hierarchy – Business Case

► Below is an example of Product Hierarchy applied to a Fashion Retailer

business.

► Pricing (surcharge) can be determined at any intermediate node level

based 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 the

root node equals the hierarchy identifier (ID) and the leaf node equals the

material or product master data.

Pricing calculation with surcharge based on product hierarchy.

Pricing Condition types:

► DPH1 (Leaf → Root) – Standard

► ZPH1 (Root → Leaf) – Custom

► ZPH1 – Level 3 (refer to slide 16)

▪ Clothing – 3%

▪ Footwear – 6%

▪ Sportswear – 8%

▪ Accessories – 4%

► DPH1 – Level 7 (refer to slide 16)

▪ Calvin Klein – 5%

▪ Tommy Hilfiger – 7%

▪ Hugo Boss – 3%

▪ Ralph Lauren – 6%

▪ US Polo Assn. – 2%

► For creating a business example in the system, above surcharge percentages

can be applied to Product Hierarchy Nodes.

► Please refer to pricing section of this document for more details on pricing

configuration.

Example: Surcharge Calculation


Steps for System Setup

1. Create Hierarchy Nodes: Configure Nodes for Product Hierarchies (Config Step: 103298)

2. Create Hierarchy: App – Manage Product Hierarchies

3. Assign Product Hierarchy to Sales Area: App – Manage Product Hierarchy Assignments

4. Assign Product Hierarchy to Products: Manage Product Hierarchies

5. Determination of Product Hierarchy in Sales Order: Define relevant date for product hierarchy determination (Config Step: 103303)

Product Hierarchy Setup

Pricing Setup for Product Hierarchy

1. 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

Product Hierarchy Setup

1. Create Hierarchy Nodes: Configure Nodes for Product Hierarchies (Config Step: 103298)

2. Create Hierarchy: App – Manage Product Hierarchies

3. Assign Product Hierarchy to Sales Area: App – Manage Product Hierarchy Assignments

4. Assign Product Hierarchy to Products: Manage Product Hierarchies

5. Determination of Product Hierarchy in Sales Order: Define relevant date for product hierarchy determination (Config Step: 103303)


Step 1: Configure Nodes for Product Hierarchies

► This config step allows to configure IDs for configuring product hierarchy in the

Manage Product Hierarchies Fiori app.

► In this step, you can structure products along multiple levels for pricing or analytical

purposes.

► Instead of analyzing sales data or doing price planning and maintenance for each

product individually, investigations or actions can be performed on a hierarchy node

level.

► Hierarchy nodes can be created for letters / numeric fields other than SAP reserved

ones.

❖ SAP reserved character fields - S, Q, R, X, P, Y

❖ SAP reserved numeric fields - 5, 6, 7, 8, 9, 0

Path: Manage your solution app → Configure your solution → Config Step: 103298


Step 2: Create Hierarchy: App – Manage Product Hierarchies

Key Features

► Create a new product hierarchy by selecting the Hierarchy type, Hierarchy ID and a description. Further, enter a valid-

from date and a valid-to date (optional) and enter a note for the hierarchy (optional). Then choose Create.

► Product Hierarchy Id can be an alphanumeric value of length 20 characters. This is the ID for the first level of the

hierarchy. This string of alphanumeric characters along with the timeframe defined for the validity of the hierarchy

determines the uniqueness of the product hierarchy.

► When creating a sub-node for a specific hierarchy, you can select the ID and an existing value from the available list

configured using the Configure Nodes for Product Hierarchies self-service configuration - Config Step: 103298.

► During the creation / change the product hierarchy will be in draft status (not available for production consumption). Once

the changes are complete, you must Activate the product hierarchy in order to use the it in transactions.

► When a product hierarchy is in Draft or In revision status, you can enable Simulate and Save the hierarchy to see how

the hierarchy is used for reporting or analytical purposes by consuming applications.

► Export product hierarchies to spreadsheets or import

them from spreadsheets.

► If a spreadsheet exceeds the size of 250 KB, the

application starts a back-end job to process the

importing of data. Please note that it could take a few

minutes to complete the job.

Export or Import Hierarchies


Step 3: Manage Product Hierarchy Assignments

► Manage Product Hierarchy assignment enables the system to determine an appropriate product hierarchy for

sales documents.

► In the business documents, you can use the product hierarchy for different purposes. It specifies the area for

which the product hierarchy is used in a business document.

❖ Purpose Batch Determination: Used for sales orders (code – 01)

❖ Purpose Sales: Used for sales documents and billing documents, for example for pricing (code – 02)

► You can create a new assignment between a product hierarchy and distribution chain. A distribution chain is

defined as the combination of a specific sales organization and distribution channel.

► You can use single values or an asterisk (*) wildcard for the fields Purpose, Sales Organization, and

Distribution Channel. Depending on the wildcard entry in one field, you may also have to enter the wildcard in

other fields. The following rules apply:

❖ If you enter the wildcard in the Purpose field, you must enter it also in the Sales Organization and the

Distribution Channel field.

❖ If you enter the wildcard in the Sales Organization field, you must enter the wildcard also in the

Distribution Channel field.

► Further, in case of existing assignments, you can change the validity period. For example, if the validity

period does not lie within one or more timeframes of the selected product hierarchy.


Step 4: Assign Product Hierarchy to Products

► In this step, add the products to product hierarchy node using the app – Manage Product Hierarchies.

► Ensure to have the products (material) master records in place to enable the assignment.

► Procedure –

❖ Edit the product hierarchy created in step 2 and add the products to the node.

❖ Activate the product hierarchy once all the products are added to the node.

❖ Additionally, you can also use the import excel functionality to upload multiple products at the same time.


Step 5: Define relevant date for Product Hierarchy Determination

► With this step (Config Step: 103303), you can define the date that the

system uses to determine the appropriate product hierarchy in a sales

document or billing document.

► To determine the product hierarchy for a sales document, the system

compares the dates in the Valid From/To field of the product hierarchy

to the relevant date in the document.

► You can define the relevant date to be either the document creation

date (that is, a stable date), or the pricing date (which you can change

in a sales document at the header or item level).

► You can configure the relevant date in the Manage Your Solution app, in

the Define Relevant Date for Product Hierarchy configuration step. You

define the relevant date for the combination of Sales purpose and a

distribution chain.

► For the Sales purpose, the system uses the pricing date as default.

Product Hierarchy Pricing Setup

1. 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)

Field Catalog (list of fields)

Condition Table

(contains fields)

Access Sequence

(sequence of condition tables)

► Access Sequence by definition is a search strategy used to find the appropriate value for

a 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 of

condition 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 – ZPH1, refer to slide 16 for pricing configuration).


Product Hierarchy – Price Determination (surcharge)

In a hierarchy, this field specifies the direction in which the

system searches through the nodes to find a relevant

condition record.

► For the search on a specific path between leaf node and

root node, you can select the following directions:

✓ Root to Leaf: The system starts from the root

node level (considered as hierarchy level number

1) and searches towards the leaf node level.

✓ Leaf to Root: The system starts from the leaf node

level and searches towards the root node level.

► Depending on the selected direction, the system

searches on the specific path through all nodes - but not

in the leaf node and root node - until it finds a valid sub-

node 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 condition

record is found.

► If you enter value “2“ in distance field, the system

searches for a relevant condition record in the second

node, leaving the root node or leaf node, based on

direction selected.

Direction of Hierarchy Evaluation

Create a new access sequence ZPH1 by copying DPH1 and change the direction & distance like below

https://my300187.s4hana.ondemand.com/sap(cz1TSUQlM2FBTk9OJTNhdmhzaHBlNGxjaV9FNExfMDAlM2FXRmNXVWNNcHZQZllpNGlvMzZ4UGgteFdBUk8tLVhta21OX1BBVGZELUFUVA==)/bc/gui/sap/its/webgui/109/data/F15A249C682FFD1D~5DF17456FC241842E10000000A772BA3/1/HTML000001.htm#sapevent2


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 are

stored 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 ZPH1.

► Assign the access sequence ZPH1 (created in previous step) to condition type ZPH1.


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 the

sales 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 pricing

procedure ‘Z10101’. Copy step 195 – DPH1 to add new condition type ZPH1 (step 197) to the pricing procedure.


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 to

the Business Partner (customer) for determining the custom pricing procedure

(Z10101) created in previous step.


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 hierarchy

node.

❖ If you maintain condition records for condition type DPH1, then the sales order determines surcharge on product hierarchy node Level 7.

❖ If you maintain condition records for condition type ZPH1, then the sales order determines surcharge on product hierarchy node Level 3.

Kindly note that the condition records should only be maintained for one condition type (DPH1 or ZPH1) in a single product hierarchy, considering the direction to

which you wish to apply the price determination i.e. Root → Leaf or Leaf → Root.


Product Hierarchy in Sales Order & Billing

► Product hierarchy and its corresponding pricing structure determined in Sales order is cascaded to Billing document.

Product Hierarchy Sales Analytics


Product Hierarchy – Sales Analytics

► In several sales analytical apps, you can analyze aggregated values and quantities according to product hierarchy levels. Please refer to the Scope Item - 1BS

(SAP Fiori Analytical Apps for Sales) for further details.

► Further, It is possible to drill down the analysis report by product and then select a relevant product hierarchy for which you wish to analyze the hierarchical data.

► I have provided a couple of examples for Incoming Sales orders and Sales volumes in the next slides. Similar details can be attained for two more Sales

analytics apps as mentioned below.

► You can analyze by product hierarchy in the following analytical apps:

❖ Incoming Sales Orders - Flexible Analysis

❖ Sales Volume - Flexible Analysis

❖ Sales Quotations - Flexible Analysis

❖ Customer Returns - Flexible Analysis


Product Hierarchy – Sales Analytics (1/3)

You can use this app to gain an understanding of the monthly sales volume. The app provides the following key figures:

► Net Value: The total net value of items in billing documents

► Sales Volume: The total invoiced sales achieved during a specified period. This is based on invoice items or debit memo items (debits) that have not been

canceled.

Sales Volume - Flexible Analysis

► Net Sales Volume: Sales volume minus credit

memos

► Net Profit Margin: Profit margin minus credit

memo profit margin

► Net Sales Cost: Costs of sales volume minus

costs of credit memos.



You can use this app to gain an understanding of the monthly rolling trend of incoming sales orders. The app provides the following

key figures:

► Net Value: Net value of sales order items

► Incoming Orders: Net value of sales order items that are billing or delivery relevant

Incoming Sales Orders - Flexible Analysis

► Incoming Orders Qty: Quantity of sales order

items that are billing or delivery relevant

► Incoming Items (No.): Number of sales order items

that are billing or delivery relevant

► Cumulative. Confirmed Qty: Sales order item

quantity that has been confirmed for shipping



With this app, you can analyze sales quotations based on flexible combinations

of dimensions. For example, you can get a monthly rolling trend of your

quotations and see to what extent they are being referenced by sales orders.

You can quickly identify the critical quotations that are close to expiring, have

expired, or are rejected.:

► Sales Quotations: Net value of sales quotations in display currency

► Quotation Item Qty: Quantity of sales quotation items

► Open Quotations: Net value of open quotation items in display currency.

Quotation items that are not referenced fully or rejected

► Number of Open Items: Number of open quotation items

► Expired Quotations: Net value of expired quotations in display currency.

Quotations of which the validity ends today or has ended before today

Sales Quotations - Flexible Analysis Customer Returns - Flexible Analysis

With this app, you can analyze the monthly rolling trend of your customer

returns based on flexible combinations of dimensions.

► Customer Returns: Net amount of customer return items that are relevant

for billing or delivery

► Return Item Qty: Quantity of customer return items that are relevant for

delivery or billing

► No. of Return Items: Number of customer return items that are relevant for

delivery or billing.

Thank you.