Chapter 1: Introduction to the Order to Cash Cycle
The Order to Cash (O2C) cycle in SAP supports businesses involved in handling and receiving orders from customers, including planning and shipping items to customers and processing payments. In essence, the O2C process is the process of receiving and managing customer sales orders. In this chapter, we'll provide an overview of processing the O2C cycle in SAP and its integration with the SAP business suite, which includes SAP Customer Relationship Management (SAP CRM), SAP Advanced Planner and Optimizer (SAP APO), SAP Transportation Management System (SAP TMS), and SAP Logistics Execution System (SAP LES). In addition, we'll learn about how a business can integrate these systems when they're implementing the Order to Cash cycle with SAP. In this chapter, you will learn the benefits of running your Order to Cash cycle with CRM, APO, TMS, and LES. Later in this chapter, you'll find further information about the Order to Cash process flow and the user interface technologies that are used by SAP CRM and SAP TMS.
The following topics will be covered in this chapter:
- Understanding order to cash with CRM, APO, TMS, and LES
- Getting to know UI technologies
By the end of this chapter, you will understand the significance of integrating different SAP systems such as CRM, APO, TMS, and LES within the Order to Cash process. You will also learn about the UI technologies that are used in these systems.
Understanding order to cash with CRM, APO, TMS, and LES
The Order to Cash business process is important to any company when it comes to satisfying their customer needs. Order to Cash impacts the complete supply chain of the business if it's not run efficiently. Another impacted area is the cash flow; any delay in receiving payment from the customer can impact the cash flow of any business. Therefore, considering these factors, it is imperative to effectively and efficiently run this process by eliminating inefficiencies across the entire business.
Within SAP, you can implement the Order to Cash process within the Sales and Distribution (SD) module if your business doesn't require advanced features from SAP CRM, SAP APO, and SAP TMS. Running the Order to Cash cycle with these SAP business suites helps you leverage advanced features in each system. To implement these systems with the Order to Cash cycle, you should have a good understanding of how to integrate these systems. This section will provide you with an overview of each of these elements. You will discover and understand each element of this cycle in more detail as we move along with the chapters in this book.
Understanding sales
The Order to Cash cycle begins with a customer calling and placing an order. When it comes to the sales process, it is split into pre-sales activities and sales order processing. Pre-sales activities include generating and targeting leads, creating opportunities for these leads, and converting these leads into customers. Once the leads have been converted into customers, the sales representatives can create a contract or a quotation for them.
When a customer starts buying products, the customer service representative will initiate creating the sales order, that can reference quotation or a sales contract. All these pre-sales activities and sales order processes are executed in the SAP CRM environment. Chapter 7, Sales Document Processing in SAP CRM, will cover pre-sales activities such as quotation and sales contract processing, as well as sales order processing, its functionality, and how to set up its configuration.
Understanding order fulfillment
When placing a sales order, the system checks if the product that's been ordered is available and whether the company will be able to deliver the product based on the customer's delivery date. The sales order provides the request date, and the system runs a product availability check. Based on this product availability check, the system provides the best date for when the product can be delivered to the customer. This product availability check has various options that can be executed in SAP APO.
Chapter 8, Order Fulfillment with SAP APO, will look at the different product availability options, such as basic product availability checks and advanced product availability checks, in SAP APO.
Understanding transportation planning and shipment creation
Once the product availability check has been executed in SAP APO, the next step is to execute the transportation planning, carrier selection, and tendering process and initiate the shipment creation process. SAP provides an optimizer that helps evaluate various transportation constraints and resource capacities before providing optimal transportation dates.
Various activities of transportation planning including the carrier selection and tendering process, its functionality, and profile set up all are done in the SAP TMS system. Chapter 10, Transportation Planning and Freight Order Management in SAP TM, covers how to plan and create transportation and shipment creation triggers within SAP TMS.
Understanding shipping
Once transportation planning and shipment creation have been completed, shipping activities such as picking the product, packing it, loading it, and shipping it out from the warehouse are executed in SAP LES. As soon as the product is shipped out from the warehouse, the customer is notified that the product has been shipped and is provided with tracking information.
Chapter 11, Logistics Execution in SAP LES, covers key functions such as the stock pick and stock putaway strategies within SAP LES, including initiating freight settlement for the carrier invoicing in SAP TMS.
Understanding customer billing
As soon as the goods have been shipped out of the warehouse, the system generates a billing document. This billing document is sent to the customer to process the account receivables. Once the customer has paid for the goods they've ordered, the account receivables are updated, showing the payment that was received by the customer.
Chapter 12, Billing Processing in SAP ECC, covers the key billing functionality in SAP ECC, including understanding different billing document types, their functionality, and their configuration details.
Understanding the order to cash process flow
If you have a good understanding of how SAP business suites integrate, you can automate the Order to Cash process, which results in improved customer service and reduced errors. This leads to greater customer satisfaction and maximizing your profits.
The following diagram shows the Order to Cash cycle process flow with SAP CRM, SAP APO, SAP TMS, and SAP ECC:
Figure 1.1 – The Order to Cash process flow with SAP CRM, SAP APO, SAP TMS, and SAP ECC
The following steps are what happens in the Order to Cash process flow:
- The lead places an inquiry and shows interest in buying goo...
