SAP

Punch & Bend Raw Material Pricing

 High Level Business Requirements

1. Import/Maintain Metal rates from Market Exchanges on a

Daily/Weekly/Monthly or quarterly based
2. Final Purchasing Price need to include both Fixed and Variable
Purchasing Price Components
3. Variable Purchasing Price is calculated by multiplying Weight with
Market Index Rate
4. Need ability to do Retro Price Adjustments on a quarterly or monthly
basis
5. Procurement Controlling is unable to forecast for raw material trends
without a defined function in place
 Potential Options Available

1. Commodity Pricing-Treasury Module

2. NF Metals
3. Standard SAP Solution with Pricing Routines, Enhancement and Reports
 Commodity price by using SAP Treasury management
Pricing for commodities is based on agreed complex pricing rules rather than on fixed prices or
amounts. These complex rules determine how price quotations and exchange rates are used to
calculate the price of the document.

• Commodity pricing contains different methods for determining price quotations, such as fixed price
quotations, price quotations for a fixed day, or average price quotations.

• It supports the Commodity related Trade and Risk Management. Due to market Complexity and
High Volatility in commodity market, it is important to Hedge the commodities. This Module of SAP
is fully integrated with Cash Management, Treasury and Risk Management, Bank Communication
management and Logistics Modules to provide the best approach of It supports the Commodity
related Trade and Risk Management.

• The business information about how commodities can be priced is captured using formulas, known
as commodity pricing formulas (CPE formulas). The price quotations are stored as master data and
are used to evaluate these CPE formulas.

• You can use the following functions in MM purchasing documents. For each document, the system
saves either a document-specific CPE formula or a reference to a CPE formula in Customizing. If
the document allows processing pricing conditions, you can edit both variants of the CPE formula in
the document.

• Each CPE formula refers to a different condition type. The condition type must contain the
calculation type Q.

• Within each document, there are default formulas at header level that are not valuated, and
formulas at item level that are valuated.
 Commodity price by using SAP Treasury management
Pre-Requisites:

Pros:
• Commodity pricing for the entire purchasing process, from the purchase order
all the way to logistics invoice verification.
• The system supports the following document categories in MM: Purchase
orders, Contracts, Scheduling agreement, Goods receipts via purchase order
history, Logistics invoice verification

Cons:
• Complex pricing rules play an important role when business sell commodities
(raw materials traded on the stock market)

• Need to activate complex Treasury and Risk management business function

and required huge configuration, need to buy license from SAP for Treasury
Management

• Complicated and require extensive configuration and testing

 Commodity Pricing by SAP NF Metals

1. Need to Install/Activate DIMP Solution

2. Configure/Define NF Keys for each metal type and assign these NF keys to
Materials
3. Maintain Metal/Metal weights in material masters
4. Different weights can be maintained for Sales, Purchasing and for manufacturing
5. Assign Market Exchange to the vendor
6. Configuration set up for pricing procedures, condition types, routines, formula and,
enhancements etc.
7. There are several different rate determination methods available for non-ferrous
metals, for example, fixed rates, key date rates, average rates and pricing
arrangements. The prices are determined by Metal Exchanges
8. Pricing is controlled using rate determination keys. The system uses the keys to
find the appropriate rate determination routine and specific details on settlement.
The rate determination routine controls pricing and settlement of purchase orders
9. Custom Reports needed to meet business Requirements
 Commodity Pricing by SAP NF Metals

Pre-Requisites:

Business function set DIMP for Mill Products need to be activated via Switch
Framework Customizing (SFW5)
 Commodity Pricing by SAP NF Metals

Pros

• SAP Standard Solution for the Metal Pricing

• Standardised solution for Sales and Purchasing-Similar Concepts
• Very Robust and supports multiple commodity types and Exchanges
• SAP Support and continuous development for future upgrades
• NF Functionality and Screens integrated with and accessible from Standard SAP
transactions such as materials/vendors etc.

Cons

• One Vendor can only be tied to one market index per purchasing organization
• Lack of analysis tools for rate history in the standard NF solution
• Not sure whether this is integrated with SAP Treasury module
• Need to see how this solution works for Purchasing Scheduling Agreements
 Standard SAP with Routines, Enhancements and Reports

1. Metal weight will be stored in Material Master with additional UOM. This is
Mandatory
2. Define New Purchasing Procedures, Schemas, Condition tables and access
sequences
3. Define Pricing routines, user-exits and calculation formulas etc. as necessary
4. Fixed component of Purchasing Price is stored in Pricing Schema as a pricing
condition
5. Market Rate can be stored as a condition record at the vendor and Market Index
level (I.E Condition Group)
6. Market Rates can be uploaded (Custom) or manually maintained
7. Variable Purchasing Price will be the multiplication of metal weight and Market
Rate. Each of these will be a separate condition
8. Configure and Activate Retro Adjustments functionality
Pre-Requisites:
1. Business must register with commodity exchange to receive file daily for the
commodities (If manual maintenance is not an option)
2. Required an Interface to pick up file and upload in SAP (If manual maintenance is
not an option)
 Standard SAP with Routines, Enhancements and Reports

Pros

• Flexibility due to Custom configuration

• No need to install any additional modules/components of SAP.

Cons

• Additional set up is needed for base variable rate for standard cost
• Limited Integration with Treasury module
• Separate solution for sales is needed
 Questions?

1. How many metals are in the scope for the phase 1?

2. What will be the base rate for per unit of weight for long term agreement?
3. How many market rates in play?
4. Is one vendor tied to one Market Index only?
5. Does the rate need to be variable on a daily/weekly/monthly basis?
6. Can one component contain more than one metal?
7. Can one vendor supply more than one metal type component?
8. How long is the validity of the contracts and when are they released?
9. Is the price determined based on the date of departure or date of Arrival?
10. Is there a different rate which is independent of Market rate considered for
standard cost calculations for consistency? This may be needed if there are
multiple market indexes which need to be standard?
 Option-2 POC

Objective: Demonstrate that Custom Solution option-2 in the proposal

Following activities are included:

1. Create a custom table to store commodity Prices:

a. Exchange Type, Commodity, Date, Time, Currency, Price, Unit

2. Create a Custom table to Store base price and average price

a. Commodity, Exchange, Price Type, price, Currency, Per unit, Base Unit, From date and To date

3. Weight updates (Maintain the commodity weights in Material Master)

4. Assign exchanges to Vendor (Custom Table and Manual Maintenance)

5. Pricing Procedure Modification and Condition Record Update

6. Develop Price Fluctuation report to Show Qty Received, Calculate Weight Received and Total Debit/Credit
amount

Global Enterprise Tech Resources, Inc.

 Option-2 POC

7. Create Scheduling Agreement for Vendor assigned with Exchange

8. Testing the Scenario

Total Duration: 130 Hrs

Assumptions

Reports (Base Price Report, Average Price Calculation report) not included
Upload programs not included
Create Debit/Credit Memo not Included
Documentation: Functional and Technical Specifications not Included
Unit Testing and Integration testing
User manual preparation and Training
Thank You