Free Goods Determination

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Free Goods Determination
 
In many sectors of industry it is common to provide products free of charge, or not to charge the customer for some of the goods sold when a customer purchases certain goods.

            Two types of free goods exist in SAP. They are

  1. Inclusive free goods.
  2. Exclusive free goods.

Inclusive free goods agreement:

 The customer pays only for a part of the goods required. The rest of the goods are for free. This is called inclusive free goods which mean that part of the purchased quantity is designated as free and not billed. The unit of measure for the inclusive free goods is same as the purchased quantity.

e.g.:- of the ten bottles of wine ordered two are designated as free goods. If we order ten bottles of wine then ten bottles of wines are delivered to us as ordered but we are billed only for the eight bottles and two bottles are given as free. We have received inclusive free goods. 

Exclusive free goods agreement:

The customer pays for the goods ordered and receives some additional goods. This is known as exclusive free goods and means that free goods is granted for an additional quantity to that in the purchase order. More is delivered than was ordered and the additional quantity is not billed. The goods delivered as free do not have to be the same as the material ordered.

e.g.:- When four coffee machines are ordered, the vendor supplies a packet of coffee as free goods. Therefore, if we order four coffee machines, we receive a free packet of coffee. Condition Technique:


In SAP free goods are determined using the condition technique.  

condition table defines the combination of fields (the key) that identifies an individual condition record.

Path for condition table (T- Code V/N2): Img -> Sales And Distribution ->Basic Functionà Free Goods ->Condition Technique For Free Goodsà Maintain Condition Tables. 
condition record is how the system stores the specific condition data that you enter in the system as condition records. Path for Condition Records (T- Code VBN1): Display Img ->Sales and Distribution -> Basic Functionà Free Goods > Condition Technique for Free Goods > Free Goods Determination. 
The access sequence determines the sequence in which the condition records for a condition type are found and read. It contains the selected condition tables in the required order. The order in which the condition tables are placed in access sequence is important. Generally it is most specific to most generic.

Path for access sequence: Img -> Sales And Distribution  -> Basic Function ->  Free Goods -> Condition Technique For Free Goods Maintain Access Sequence.

After creating the access sequence, it is assigned to a condition type.

condition type is a representation in the system of some aspect of your daily pricing activities. The Standard condition type used in Free Goods Determination is NA00.
The path for the condition type: Img -> Sales And Distribution -> Basic Function -> Free Goods  Condition Technique For Free Goods -> Maintain Condition Types. 

Pricing in free goods:

            The pricing procedure for the free goods should contain the condition type R100 which is the free goods condition type. This condition type in the pricing procedure has requirement as 55 and base type 28.

55 means only if the item is Free Goods then only value of R100 to be used in Calculation. Value = Controlled by ALT Condition Base Value 28 which states that discount should be 100%.

Path for pricing: Img -> Sales And Distribution -> Basic Function -> Free Goods -> Condition Technique For Free Goods -> Maintain Pricing Procedure. 

Activating free goods determination:
            In activating free goods determination the Pricing procedure is assigned to the combination of the Sales Area, the Customer Pricing Procedure and the Document Pricing Procedure.
Path for activating free goods determination: Display Img ->Sales And Distribution àBasic Function -> Free Goods -> Condition Technique For Free Goods -> Activate free goods determination.     

Maintaining free goods:

Path for maintaining the free goods is (T-Code VBN1)

SAP Easy Access Logistic -> Sales and Distribution -> Master Data -> Conditions -> Free Goods -> Create.

Enter the discount type as NA00 and to give inclusive free goods enter Inclusive in Free Goods view.

Some of the important fields on screen (free goods inclusive).

            Min 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 
e.g.: let us assume min qty is maintained as 1000 and from value is 100 and are free goods value is 10.

If the customer places the order for 1200, since the ordered qty is more than the min qty (1000) the customer will get 10 qty as free for every 100 qty. i.e. the customer will receive 120 qty as free and is billed only for 1080 qty. 
            Calculation rule: This Rule Tell that on what basis the amount of free goods which are to be given to the customer. The Calculation Rule can be any of the following

1. Proportional

2. Unit Reference

3. Whole Unit

Free Goods Category: This tell that whether the free goods is Inclusive or Exclusive  
Free Goods Delivery Control: This Controls the delivery of free Goods. This tells that whether the free goods are delivered in conjunction with the main Item or are delivered alone.

If we want to 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. 
In the exclusive free goods determination only one field differs from the Inclusive free Goods Determination and that is Additional Material for free Goods: It is the material which is different from the original material and is given as a free good  E.g. A customer buys 100 books and gets a pencil box free.   
Free goods have the following limitations:

1.      Free goods can only be supported on a 1:1 ratio. This means that an order item can lead to a free goods item. Agreements in the following form are not supported: ‘With material 1, material 2 and material 3 are free of charge’ or ‘If material 1 and material 2 are ordered at the same time, then material 3 is free of charge’.

2.      Free goods are not supported in combinations with material structures (for example, product selection, BOM, variants with BOM explosion).

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

4.      Free goods are not supported for deliveries without reference to a sales order.

5.      Free goods cannot be used in make-to-order production, third-party order processing and scheduling agreements.

6.      If you defined a free goods for variants in a generic article (only SAP Retail), you can only process the variants in the purchase order and goods receipt individually (as single articles). In other words, you cannot process them using the generic article matrix

One Response to “Free Goods Determination”

  1. Manjunath says:

    Hi,
    The detail explanation about Configuring SAP-SD Free goods is really useful, please accept my complements

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