What is SAP Sales and Distribution (SAP SD)?
SAP Sales and Distribution (SAP SD) is a software module within the SAP ERP (Enterprise Resource Planning) system that is designed to manage the sales and distribution processes of an organization. SAP SD is one of the core modules of the SAP ERP system and is used by companies to manage their sales operations, including sales order processing, pricing, shipping, billing, and credit management.
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A fast and reliable distribution network is of paramount importance for a successful business as it enables customers to avail products and services as and when required. Moreover, it helps organisations to explore new geographical areas, thereby creating awareness among prospects.
A sales and distribution network of an organisation comprises various parties, such as wholesalers, retailers, distributors and commission agents. The sales and distribution module of an ERP system streamlines the sales and distribution activities of an organisation.
To understand the sales and distribution module of an ERP system, let us first discuss the sales and distribution process of organisations.
The sales and distribution process involves the following steps:
- Pre-sales: Before any sales take place, there are certain activities that must be carried out by an organisation to attract customers; for example, arranging product demos to invite buying enquiries.
- Sales order processing: After a customer is satisfied by enquiring about the product, he/she may place an order to buy that product. Various mediums can be used by customers for placing their orders. For example, customers nowadays feel comfortable in buying products online as it saves time and efforts.
- Shipping: The next step in the sales and distribution process is to make products available to customers by drafting delivery schedules, transporting goods, tracking transit details, etc.
- Invoicing: This is the last step in the process of sales and distribution. After a product is received by a customer, an invoice is generated and handed over to the customer and the payment is collected.
The sales and distribution module of an ERP system enables an organisation in performing the following functions:
- Formulating an effective logistics plan for Just-in-Time (JIT) deliveries
- Processing sales and purchase orders
- Offering a faster response to customers’ queries
- Monitoring sales transactions
- Ensuring resource availability at all times
- Maintaining timely delivery performance
- Estimating pricing and taxes related to product delivery
- Checking credit limits and generating work orders and invoices
Sub-Modules of Sales and Distribution Module
Sales is considered to be a comprehensive function of an organisation as it comprises various activities such as shipping, invoicing and order tracking. The sales and distribution module of an ERP system allows organisations to carry out such activities with the help of various sub-modules. Figure 7.1 depicts sales and distribution sub-modules:
Let us now discuss these sub-modules in detail in the next sections.
- Master Data Management
- Order Management
- Warehouse Management
- Shipping and Transportation
- Billing and Sales Support
- Foreign Trade
Master Data Management
As mentioned earlier, there are various modules used in an ERP system, such as procurement, logistics and manufacturing. These modules require the sharing of reference data to perform all activities efficiently. This reference data is known as master data in an ERP system.
Master data is required by organisations to coordinate various activities in the value chain. Any error in the master data can result in failed business transactions and inconsistent reporting. Therefore, organisations must maintain consistent master data to offer reliable information whenever required.
The master data management module enables an organisation to maintain its master data in such a way that it can be easily accessed by authorised personnel. In sales and distribution, the master data management module is used to maintain data linked to customers, products, sales orders, suppliers, etc.
Therefore, a need arises to develop accurate and consistent master data to maintain authenticity and security. For this, generally, a provision is defined to allow only authorised personnel to make changes in the data.
In an organisation, various types of orders are placed such as purchase order and sales order. Usually, these orders are generated in bulk. In such a case, there are major chances of mistakes taking place, which may further lead to delays in product delivery and customer dissatisfaction.
Thus, these orders need to be efficiently managed by an organisation. To do so, most organisations use the order management module.
This module can be of two types, which are as follows:
- Sales order management: This module enables organisations to carry out their sales operations effectively. Further, it helps organisations to manage their sales orders, contracts, customer discounts, etc. This module also ensures timely product delivery to customers.
- Purchase order management: This module enables organisations to carry out essential operations like on-time purchase requisition, contract management, vendor selection and management, etc. Further, this module helps an organisation in managing vendor activities and purchase orders.
Warehousing refers to a process of storing goods on a large scale in an organised manner such that they are easily available whenever required. It involves holding and preserving products that are to be dispatched to resellers or consumers.
It enables an organisation in carrying out uninterrupted production activities and selling goods as and when there is adequate demand.
Therefore, organisations must follow a step-by-step approach to manage each aspect of warehousing. Some of the important aspects that must be covered under warehouse management are:
- Receipt and issue of supplies
- Quality control or verification
- Good storage
- Control of stock
- Documentation flow
- Management of rejected material
- Management of unwanted material or scrap
The warehouse management module provides updated information about an organisation’s inventory levels.
Further, it offers tools to manage day-to-day warehouse activities and integrate the warehouse functions of an organisation with its different departments.
Some of the important functions that are performed with the warehouse management module are as follows:
- Inventory planning: It enables an organisation to plan its inventory requirements by making accurate forecasts of market trends and adjusting reordering points, safety stock, lead-times, service levels, etc.
- Inventory reporting: It helps to track inventory maintained at multiple locations. Moreover, it enables organisations to estimate and communicate accurate product delivery dates to customers.
- Inventory analysis: It allows organisations to estimate optimum inventory levels, thereby preventing situations like overstock and stock outs.
Shipping and Transportation
Shipping and transportation forms an essential component of an organisation’s supply chain by ensuring the availability of products in the market.
An effective shipping and transportation function enables organisations to deliver products and receive raw materials on time. Hence, organisations require the shipping and transportation module to design an effective plan for moving products from one place to another.
This module allows an organisation to carry out its shipping and transportation activities effectively. Besides, the module also helps an organisation to:
- Provide exact delivery dates to customers
- Plan and monitor work lists for shipping operations
- Ensure material availability
- Process outstanding orders
- Aid effective shipping and transportation planning
- Estimate foreign trade requirements
- Update data associated with the arrival of materials and delivery of products
Billing and Sales Support
The billing and sales support module allows organisations to carry out billing functions like invoice generation, termination of billing transactions, transfer of billing data to accounting department, etc.
In a general transaction cycle, an invoice is generated after the completion of the sales and contract process. The invoicing process generally comprises the following steps:
- At first, an order for a product is placed by a customer.
- After order placement, the order is processed by locating the product in the available inventory or manufacturing the product on demand to make it available to the customer.
- Further, the product is moved from the manufacturer’s site or warehouse to the customer’s site.
- After delivering the product to a customer, the bill/invoice is given to the customer and the payment is received from him/her
The invoicing process mentioned above is also known as the purchaseto-pay process from the perspective of a buyer and order-to-cash from the perspective of a seller. The billing and sales support module helps in the invoice generation process of an organisation.
Besides, this module records and administers orders received from customers. It also allows an organisation to deliver products to customers on time.
With an increase in cross-border trade, there has been a significant growth in competition in international markets. In addition, low entry barriers have increased difficulties for organisations to sustain their position in the global market.
The foreign trade sub-module of an ERP system helps to automate and optimise overall operations related to import and export activities. The ERP foreign trade sub-module also provides the following financial and operational benefits to organisations:
- Enhanced decision-making process
- Increased global competitive power
- Minimised operational costs
The ERP foreign trade sub-module enables an organisation to meet the changing needs of foreign trade. Besides, some of the key functions of the foreign trade module are:
- Handling import and export activities
- Fulfilling foreign trade license requirements
- Automating the foreign trade reporting system
- Providing updated data associated with foreign trade activities