SAP SD - Introduction

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SAP Sales and Distribution is one of the key components of SAP ERP system and is used to
manage shipping, billing, selling and transportation of products and services in an organization.

SAP Sales and Distribution module is a part of SAP Logistics module that manages customer
relationship starting from raising a quotation to sales order and billing of the product or service.
This module is closely integrated with other modules like SAP Material Management and PP.

Key Components in SAP SD

The key components in SAP Sales and Distribution module are −

Customer and Vendor Master Data

Sales Support
Shipping of Material
Sales Activities
Billing related
Transportation of products
Credit Management
Contract Handling and Management
Foreign Trade
Information System

SAP Sales and Distribution Cycle

SAP SD - Organizational Structure

SAP provides many components to complete SAP Sales and Distribution organizational structure
like Sales Areas, Distribution Channels, Divisions, etc. The SAP SD organization structure
majorly consists of two steps −

Creation of Organization elements in SAP system, and

second is to link each element as per requirement.

On top of this organization structure in the SD module, sales organization is at highest level and
is responsible for distribution of goods and services. SAP recommends to keep the number of
sales organization in an organizational structure to be minimum. This will help in making the
reporting process easy and ideally it should have a single sales organization.

The next level is distribution channel, which tells the medium by which the products and services
are distributed by an organization to its end users. Division in an organizational structure, which
represents a product or service line in a single organization.

A sales area is known as entity, which is required to process an order in a company. It comprises
of sales organization, distribution channel and a division.

In SAP SD organizational structure, each sales organization is assigned to a company code.

Then the distribution channel and divisions are assigned to sales organization and all of these
comprise to make a sales area.

In the first step of an SD organizational structure, sales organization is assigned to a company

code and then is to define a distribution channel and then division to a sales organization.

The following diagram shows the organizational structure of a Sales and Distribution module −

Material management
Material Management is one of the key modules in SAP ERP System and covers the day to day
business operations related to inventory and procurement. This module is closely integrated with
other modules of R/3 systems like Finance Accounting and Controlling, Sales and Distribution,
Quality Management, Product Planning.
Integration with Sales and Distribution SD Module
Consider an example of creating a sales order in SAP SD, it involves copying the details of items
from Material Management. Availability check of the item and price details are also taken from
MM, but this can be controlled in the SD module. To create inbound and outbound delivery of
goods for a sales order, shipping details, loading point etc. also comes from the Material Master.

The item that is placed using a Sales order must be extended to the sales area of an
organization to sales order/customer, otherwise it won’t be possible to transact with this material.
This confirms that there is a link between SAP SD and MM module, when a sales order is
created and fulfilled. Similarly, there are many other links between two modules.

Finance and Accounting

SAP FI stands for Financial Accounting and it is one of the important modules of SAP ERP. It is
used to store the financial data of an organization. SAP FI helps to analyze the financial
condition of a company in the market. It can integrate with other SAP modules like SD, PP, SAP
MM, SAP SCM etc.

For SAP FI-MM, use T-code: OBYC

In case of a standard sales order, you create an outbound goods delivery to the customer. Here
movement 601 takes place. This movement is configured in MM and movement of goods hit
some G/L account in FI. This shows the integration between SAP SD, FI and MM module.

Document Flow
This shows how a transaction in one system effects the details in other systems of an SAP
module.

Consider the following transaction −

For SAP FI-MM, use T-code: OBYC

Whenever there is a delivery created with reference to a sales order, goods movement takes
place in the system.

Example
In case of a standard sales order in the SD module, you create an outbound goods delivery to
the customer. Availability check and retail price of that product is checked in the MM module.
Here, movement 601 takes place. This movement is configured in the MM and movement of
goods hit some G/L account in FI. Every such movement of goods hits General Ledger account
in FI.
The accounts posting in FI is done with reference to the billing documents like credit and debit
note, invoice etc. created in SD and hence this is the link between SD and FI. This shows the
document flow between different modules.

Process Chain
SD module is closely integrated with other SAP modules. The following tables will give you a
brief idea on how SD is linked with other modules −

Sales Order
Link Points Module Involved

Availability Check MM

Credit Check FI

Costing CO/MM

Tax Determination FI

Transfer of Requirements PP/MM

Billing
Integration Point Module

Debit A/R FI/CO

Credit Revenue FI/CO

Updates G/l (Tax,discounts,surcharges,etc) FI/CO

Milestone Billing PS

Goods Delivery and Issue of goods

Integration Module

Availability Check MM

Credit Check FI

Reduces Stock MM

Reduces Inventory FI/CO

Reduces Eliminated PP/MM