Free Goods Concept In SAP SD

Free Goods Concept In SAP SD

Sep, 2013
Purpose of Free Goods
Free Goods is a type of quantity discount in SAP which encourages the customers to order
greater quantities. It can also be used as an incentive to make the customer order in
multiples of a quantity convenient for the business to deliver. The Free Goods business
practice is prevalent in many industries be it manufacturing or service oriented.

Types of Free Goods
There are two types of free goods.
Inclusive Free Goods

In this type, the customer pays only for a part of the goods ordered. The customer
gets the rest for free. For example, a customer orders 10 pens, but has to pay for
only eight. The customer takes delivery of all the 10 pens, but is not billed for two of
them. The customer has received two inclusive free goods.

Order quantity = 10 pens
Qty. received = 10 pens
Free Goods = 2 pens
Invoiced for = 8 pens

Exclusive Free Goods

In this type, the customer pays orders and pays for a particular quantity but receives
additional goods for free. Hence, more is delivered than what was ordered and the
customer is not invoiced for the extra quantity delivered. The extra goods may or
may not be in the same category as the goods ordered. For example, a spare parts
dealer orders 100 headlight bulbs and takes delivery of those 100 headlight bulbs
and gets an additional 5 motorbike horns.

Order quantity = 100 headlight bulbs
Qty. received = 105 (100 headlight bulbs + 5 motorbike horns)
Free Goods = 5 motorbike horns
Invoiced for = 100 headlight bulbs




Free Goods in SAP Sales & Distribution
The manifestation of free goods in an order is shown below. The examples used correspond
to the ones used above for inclusive and exclusive free goods.
1. Inclusive Free Goods.

Ite
m
Material Order
Qty
UoM Descriptio
n
Storage
Location
Item
Category
Plant Higher
Level
Item
10 12345 8 PC Pen 0001 TAN 100
0
0
20 12345 2 PC Pen 0001 TANN 100
0
10

As you can see, the total order quantity is 10, but the two lines differ from each
other by the Item Category. TAN is the standard item category in SAP, and TANN is
set as the standard item category for free goods. If you see the Higher Level Item
column, you can see that item 20 has the higher level item as 10, indicating that this
is referenced from item 10.

2. Exclusive Free Goods

Item Material Order
Quantity
UoM Description Storage
Location
Item
Category
Plant Higher
Level
Item
10 12345 100 PC Headlight
Bulb
0001 TAN 2000 0
20 56789 5 PC Motorbike
Horn
0002 TANN 2000 10

In this case, you can see that although the total order quantity is 100, the amount
delivered to the customer is 105. As in the above example, this also has an item
category TANN. Notably, the plant from which the goods are delivered is the same,
but the storage locations are different because the items are different.
Level of definition of master records for Free Goods:
The requirements for free goods determination can be set at many levels. In the standard
system, they can be set at,
Material level
Customer/ material level
Price list category/ currency/ material level
Customer hierarchy/ material level




Free Goods process in the sales order
Free goods maintenance using the condition technique
This can be done in the following steps.
Step1:
The first step is to Create Free Goods Determination.
In SPRO, you need to go to the following path.

Here, you will have to first maintain the number range for free goods that you will use in
the system. You specify the From range to the To range and give a two character
identifier to represent this range.
Step2:
You maintain the field catalog for free goods condition technique.


Here you specify all the fields that will exist in the condition tables that you will create in the
coming steps. Usually fields like Customer, Sales Organization, Distribution Channel,
Material, Price group are necessarily maintained.
Step 3:

Here you will be asked to create a condition table. The condition table you create will
practically be a collection of column headings that you will be choosing from the field
catalog you defined in Step 3. You will also name your table according to the fields it uses
so that it is easier to read and understand the fields that it contains. Also, in the Technical

View, you can select whether you want the field in the header or in the item indicated by
the Footer field checkbox.
Step 4:

Here you area asked to create Access Sequences relevant for Free Goods. The usage will be
N, the Free Goods category, and the Application will be V to represent Sales/Distribution.
The standard access sequence for free goods determination is NA00.
Step 5:


Next step is to assign the condition types to the access sequences. The standard condition
type for free goods is R100. This condition type in the pricing procedure has requirement as
55 and base type 28. Base Value 28 states that discount should be 100%. These condition
types will be responsible for applying the 100% discount that will implement the concept of
giving goods away for free. A condition type will be populated in the document pricing if one
of the access sequences returns gives a hit.
Step 6:

This will show you a list of all pricing procedures relevant for free goods in SD. Here, the
pricing procedure relevant for free goods will have all the condition types that it will
implement in case it is determined in a sales document.
Step 7:


The last and the most important step is to activate free goods determination. Here, a
combination of sales area, document pricing procedure and customer pricing procedure is
assigned to the pricing procedure.
Using Standard Pricing Procedure RVA001 directly
Alternately, you could use the condition type R100 in the standard pricing procedure
RVA001.
This is generally at line 801. As mentioned before, this condition type in the pricing
procedure has requirement as 55 and base type 28. Base Value 28 states that discount
should be 100%.



Maintaining Free Goods using VBN1
You could either visit SAP Easy Access Logistic -> Sales and Distribution -> Master Data ->
Conditions -> Free Goods -> Create or go to tcode VBN1.
Now, enter the discount type as NA00 and to give inclusive free goods enter Inclusive in
Free Goods view.

Some of the important fields on this screen relevant for inclusive free goods are,
Minimum Qty.: This is the minimum Quantity which should be ordered so that the
order is eligible for free goods.

From: From give the quantity after which the free goods will be given.


Are free goods: This number shows the number of quantity which should be given as
free goods to the customer. For example, let us assume that the minimum quantity was
maintained as 100, From value was 50 and free goods value is 10. Now, if the
customer places an order of 120, since the order qty. is greater than 100, he is eligible
for receipt of free goods. From value is 50, this means for every qty. bought by an
eligible customer he gets 10 quantity as free goods. Hence, finally the customer receives
120 qty. in total, out of which 20 qty. is free, and hence is billed for only 100 qty.

Calculation Rule: This rule tells on what basis the amount of free goods are to be
given to the customer. The Calculation Rule can be any of the following. To explain each
of these, consider this example. Company advertises a discount of Buy 100, get 20
free. There are 3 types of standard calculation rules.
o Prorata basis: If the customer orders 162 items, the system should grant that
customer 32 items for free, i.e. 162*(20/100)
o Unit reference: Again, if the customer orders 162 items, then s/he will be
granted 20 items free, i.e. 100*(20/100). S/he goes unrewarded for the 62 items
over 100.
o Whole unit: The customer orders 162 items. According to this, customer gets a
discount only if s/he orders in multiples of 100. Since 162 is not a multiple of
100, the customer does not get a discount.


Free goods category: This field indicates whether the free goods are inclusive of
exclusive. If you want the inclusive free goods to be displayed without new item
generation in the sales order then select 3 in the free goods category. In free goods
master data maintenance, this new free goods type is dealt with in the same way as the
inclusive free goods procedure except that in sale order no sub item is created.
Condition type NRAB is included in the pricing procedure to provide 100% Discount for
Inclusive free goods without item generation of having condition base value 29 and
requirement 59.

Free goods delivery control: This determines whether the free goods determined are
meant to be delivered in conjunction with the main item or are delivered alone.


Additional Material for free Goods: This implements exclusive free goods. It is the
material which is different from the original material and is given as a free good.


Other important points to remember:
1. As seen above, there is an extra item in the item level with a standard TANN item
category. But this is not always the case. A free good can also be a main item. If you
want to enter a free goods item as a main item, change the proposed main item type
TAN to TANN.

2. If you enter a sub-item in a sales order, SAP automatically treats it as a free good,
provided the material has an item category group NORM and item category TANN. To
enter a free good as a sub-item, proceed as follows:
1. Enter the material number of the free goods directly under the higher-level
item.
2. In the second entry line, in the HgLvIt field (higher-level item), enter the item
number of the higher-level item
3. Choose Enter. Various dialog boxes requesting header data can appear at this
point. This occurs if, for example, you have defined several ship-to parties or
unloading points in the customer master record of the sold-to party. If an
availability check determines that stocks are insufficient, the system displays
a screen containing delivery proposals.
4. After you have provided all the necessary information, the overview screen
reappears. In the standard version of the SAP System, the system
automatically assigns the item category TANN to the free goods item.

3. You can also enter free goods in a sales order change mode at a later point. The
change function enables you to enter an item number that the system will
automatically insert directly below the higher-level item.


4. When creating the sales order, the free goods can be populated automatically or
manually. If you want to enter free goods manually, the items with a free goods item
category TANN are taken as free goods when entered manually in the standard SAP
system. In both the cases automatic and manual, only if the items are relevant for
delivery they are copied onto the delivery document.

5. The free goods can be copied to the billing document also. You can have free goods
in the billing item level as free-of-charge items.


Limitations of SAP in Free Goods
1. Free Goods are currently supported on a 1:1 basis. This means that you cannot
provide discounts like Buy 1, get 2. or Buy 1, get 3. But you can definitely do,
Buy 4 and get 4. Also the monetary value or price of the free goods item can be
more than that of the main item.

2. Free Goods are not currently supported in combination with material structures (e.g.
product selection, bills of material, variants with BOM explosion).

3. Free Goods are currently only supported for sales orders with document category C
(not for quotations, for example).

4. Free goods are currently supported for deliveries, but not for those without reference
to a sales order.

5. Free goods are not currently supported for make-to-order production, third-party
order processing and scheduling agreements.

6. Not all sales orders support free goods. Only SD Document Category C supports
free goods.