Outline agreement

Two types- Contracts and Scheduling agreements

Scheduling agreement

 The Scheduling agreement contains fixed delivery dates and quantity and is
valid for a certain period of time.
 When you enter schedule line for the item in the scheduling agreement, the
system adds up the quantities that have already been entered and compare
them both the target quantity and the quantity already shipped. This give
you an overview of all the open quantity, if the quantity in schedule line
exceeds the target quantity, system issue a warning message.

Contracts

Two Types-Quantity contract and value contract

 The contract does not contain any schedule line, delivery quantities or
delivery date. It is valid for a certain period of time.
 Release orders are created with reference to a contract. Schedule lines are
created in the release order when it is placed. You can choose materials
directly or by exploding an assortment module (list of valid materials-
Master data for product).
 You can create release order in any currency and the total value is updated
in the currency of the contract.
 The value of release order is compared with value still open in the contract.
You can define how the system responds when this value is exceeded (sales
document type)
 A value contract defines that your customer agrees to purchase a fixed total
value (target amount) of goods and services during the defined period.
 You can have partner function AA as optional sold to party and AW as
optional ship to party in the standard system.
 You can maintain contract data at both header and item level in the sales
document.
 If you assign a contract profile to the sales document type, the system
automatically determine default values specific to the contract. These could
be:
o Rule for determining start and end of the contract
o Duration category
o Subsequent activities
o Cancellation procedure

Question:
What is meant by a Contract and Scheduling Agreement? What are the
differences between the two?

Answer:

Contract

Contract is the agreement made between the customer and company based on the
material, quantity and price over a period of time.

It can be used to facilitate the business for planning and guarantees the fixed price
agreement for the customer.

Scheduling agreement

Scheduling agreement is also an agreement with the customers, but it contains the
predefined delivery dates(schedule lines) and the quantities.

By shortly telling, it is an agreement about the schedule line quantities and dates.

Difference

Contract will not have any predefined delivery dates. First you need to create a
contract and with reference to that, you need to create lot of orders (i.e. Release
orders), based on that, every time you need to create delivery until the contract
expires.

In scheduling agreement, you need not create multiple orders, once the date is
reached, the materials are automatically delivered and billed.

This is the basic difference between those two.