PUBLIC

Author: Sai Kasturi, SAP

S/4HANA Cloud Competence Center

Product Hierarchy Pricing with Batch ManagementSAP S/4HANA Cloud

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► Introduction to Product Hierarchy

► Product Hierarchy with Batch Management

► Product Hierarchy – Business Case

► Steps for System Setup (Apps & Config Steps)

❖ Product Hierarchy Setup

❖ Pricing setup for batches

Content

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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 is supported in the following areas in Sales

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.

Please note that this blog will only cover the delta

settings necessary to run the product hierarchy with

batch management in Sales document.

Please refer to my previous blog “Product Hierarchy

in Sales, Billing & Analytics” for details on product

hierarchy and pricing setup.

Access Link:

Product Hierarchy in Sales, Billing & Analytics

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Product Hierarchy with Batch Management

► In the logistics process, that is from procurement to sales, many

organizations use batch management for managing their inventory.

► You can use batch determination for all types of goods movements from

warehouse, to find batches that meet defined customer specifications.

► Batch determination can be triggered at two points in the Sales process

i.e. either when the sales order is entered, or when the delivery is created.

► You can use batch determination in Sales in the following areas:

❖ Sales quotation

❖ Quantity contract

❖ Sales order (or scheduling agreement)

❖ Delivery

► In context with Product Hierarchy in Sales, Batch determination in a Sales

order can be used to apply specific price calculations based on a batch.

► Batch determination can be either be triggered manually or through an

automatic determination process, using batch search strategy. For each

search strategy you can specify the conditions under which batch

determination is to be triggered and the search criteria that should be

used.

❖ Example: Batch determination in a Sales order is triggered if

customer A orders material B, assuming that this customer only

accepts batches with particular specifications.

❖ You use your batch determination (manual or automatic) in Sales

order to look for these particular specifications and apply specific

surcharge (premium) for this customer in pricing.

❖ To demonstrate the price calculation based on batch, I will use an

example with manual batch determination in this blog.

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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

► ZPH2 (Root → Leaf) – Custom

► ZPH2 – Level 3 (refer to slide 14)

▪ Clothing – 7%

▪ 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 (premium) Calculation

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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 Batches

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

Please refer to my earlier blog for product hierarchy setup

Access Link:

Product Hierarchy in Sales, Billing & Analytics

Pricing Setup for Batches

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

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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 – ZPH2, refer to slide 16 for pricing configuration).

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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 ZPH2 by copying DPH1 and change the direction & distance like below

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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 ZPH2.

► Assign the access sequence ZPH2 (created in previous step) to condition type ZPH2.

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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 ZPH2 (step 197) to the pricing procedure.

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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.

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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 for the specific batch of the material entered.

❖ If you maintain condition records for condition type ZPH2, then the sales order determines surcharge on product hierarchy node Level 3 based on the

distance maintained in the access sequence configuration.

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Product Hierarchy batch determination in Sales Order (manual)

► Material batch and its corresponding pricing structure are determined in Sales order.

► When a sales order is initially created, the product hierarchy for batch determination purpose remains unfilled. Once the batch is manually triggered as shown below,

PH for batch is updated in Sales B tab of sales order item

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Batch determination – Impact on Pricing

► Pricing in sales order has to be updated (re-triggered) after the batch determination is triggered in Sales order. Initially, when pricing is calculated before batch

determination, condition type ZPH2 (related to product hierarchy batch determination) is not determined in conditions.

► ZPH2 will only appear once new pricing is carried out as shown below.

Thank you.