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Free Goods Determination

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 fr ee 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.

A 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 Function Free Goods ->Condition Technique For Free Goods
Maintain Condition Tables.
A 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 Function -> 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.

A 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.
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Path for pricing:

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

Activating fr ee goods det ermination:

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 -> Basic 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

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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 proc essing 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

Pricing in free goods:

The pricing procedure for the free goods should contain the condition type R100 which is the free goods condition type,
whenever exclusive free goods scenario exist. 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%.

The pricing procedure for the free goods should contain the condition type NRAB which is the free goods condition type,
whenever inclusive free goods scenario exist. This condition type in the pricing procedure has requirement as 59 and base
type 29.
free goods without item generation where we use NRAB condition. to use this you need to add NRAB condition type to your pricing
procedure. You can setup NRAB this way.

It does not determine a discount from a condition record. It uses condition basis formula 029 in the pricing procedure to determine a
discount from the free goods factor.
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The condition receives the new pricing requirement 059 in the pricing procedure. This requirement checks whether free goods have
already been determined.

The condition type receives condition category f. This condition category ensures that the condition is re-determined every time the
quantity is changed, since this can also mean a change to the free goods quantity.

In both the cases we need to maintain NA00 condition for free goods (Inclusive or exclusive)
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.

Inclusive screen.

Exclusive screen

Read below its very important for free goods implementations

FREE GOODS:

It can be configure in SAP by following two methods

A) Manually B) Automatically

A) Manually:

By specifying higher level item category for a line item, we can determine free goods as a free of charge items during sale order
processing.

B) Automatically:

System proposes free of goods items automatically in the sale order. In automatic free goods configuration system follows two
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a) Exclusive b) Inclusive

Exclusive:

System configures free goods in exclusive option by free goods quantity is going to be excluded in order quantity ex: 10 items,
line item is free, then system configures free goods as a “ten plus one”.

Inclusive:

System configures free goods in inclusive option by free goods quantity is going to be included in order quantity ex: for 10
items, one item is free, and then system configures free goods as “Nine plus one”

Note: In exclusive method, other items can be given as a free of charge items for order item

Configuration steps:

Inclusive:

SAP follows condition techniques to configure free goods automatically

Maintain pricing procedure:

IMG  SD  Basic functions  Free goods  Condition technique for free goods 
maintain pricing procedure

Choose standard pricing procedure “NA0001”- free goods (SD) and click on copy as button and re-name it.
Condition type – NA00; access sequence -- NA00

Step 2: Activate free goods determination:

IMG  SD  Basic functions  Free goods  Condition technique for free goods 
Activate free goods determination

Go to new entries and specify our sales area, specify document PP- as A, customer PP as ‘one’ and assign free goods
procedure ex: NA0001.

Step 3: control free goods pricing:

Control pricing for free goods item category

Choose item category “TAN” and specify the pricing as a “X” (pricing standard)
Choose item category “TANN” and specify the pricing as “B” (100% discount)

Step 4: Maintain condition type for 100 % discount:

Choose condition type R100 – (100% discount)

Step 5: Maintain pricing procedure for pricing:

Choose our PP from position button , select it and click on control data icon and include condition type “R100” between steps of
discounts & specify requirement = 5 and specify item no: 28 as a 100% discount in alternative formula for condition base value
(AltcBV)

The requirement = 55 can be assign to condition type R100. If the user wants to look both
Revenues and sales deductions for the free item since the product that we are going to give as a free of charge item can be
sold separately in same sales order the item category of free goods (TANN) has the pricing value as a “B” then the system
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of charge item). Sometimes the same item is going to be given as a normal item, then system calculate price for normal item,
system item ( free of charge item ) so here to perform this calculation we have to assign requirement = 55 for condition type
“R100”

Alternative Condition Base Value = (100% discount)

Condition type R100 should be taken as “0” value the formula 28 calculate condition type R100 values as a “0”

Set Transfer of cost to maintain (copy and control)

IMG  SD  Basic functions  Free goods  Control free goods pricing  Set transfer
of cost to maintain (copy control)

Copy control is a concept by which the system copies the data from source document to target document.

Choose billing type as F2 and delivery document type “LF”,

Select it & click on item icon & choose item category TAN, click on details icon and

Click on display-change icon and choose item category “TAN” again select it & click on details icon and check cumulate cost.

Cumulate cost controls whether the cost value (VPRS) is to be copied from relevant for sub-item into main items sub-item cost
are not relevant for billing. Save & exit

Maintain copying control:

IMG -> SD -> Basic functions -> Free goods -> Control free goods pricing -> Maintain copy control

We maintain copying control at item level category for free goods. In this field, we can control whether the free goods should
also be transferred when we copy from one document to another document.

Choose source document type as a “QT” & target document type as a “OR” &
Select it & click on item control button under dialogue structure

Choose AGN item category from position button & click on display or change button, again click on AGN & click on details icon
and

Checks re-explode structure/ free goods (this indicator controls whether the free goods are coped from source document to
target documents or determined again.)
Save and exit.

Maintain condition records for free goods:

Logistics-> SD -> Master data -> Conditions -> Free goods—VBN1 (create)

--Specify condition type NA00 & specify sales org. distribution channel, customer number, valid periods and
--Chose option as inclusive.
--Specify the material number and
--Specify the minimum order quantity,
--Specify the quantity from which the free goods should be applied
--Specify the unit of measure and
--Specify free goods (are free goods) as a one.
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Calculation procedure:

We can specify the routines for calculation procedure as a ‘A’- (1- pro- rata- proportionate)

A) Pro-rata:
Ex: if the customer places order for 100 cases of material “A”, that customer receives “20” cases of same material is free. That
is the business can say that buy 100 and get 20.

If customer orders for 162 cases, then the system automatically calculate 32 cases as a free of cost. 162 *20/100 = 32.

“B”- Unit of reference:

When customer order for 100 cases of material A , then the customer receives additional 20 cases of A as a free of goods items
that is the business can sign that buy 100 and get 20 free, by inventing 20 free for every full of 100 cases.

If the customer places order for 162, then system automatically grants only 20 cases.

Formula: 100*20/100 = 20

“C”- Whole Units:

When customer places order for 100 cases of material of A, then customer receives additional 20 cases of material A that is
business can say that buy 100 and get 20 free of charge items.

If customer order for increment of 100 that is ex: for 152 items, he get only 20 . If place the order 200 items, the he gets 40 that
inclusive.

Condition records for exclusive:

--Specify the discount type NA001 &

--Click on exclusive option and

--specify the sales organization, distribution channel, customer number, validity periods and materials, minimum quantity, order
quantity, unit of measure, and calculation procedure, free goods and

--Specify additional material free goods (if other goods are going to be given as free of charge item) save it and exit.

--Go to VA01 and raise the sales order for inclusive and exclusive and see the free goods effects

Condition Type: ‘NRAB’ free goods; requiremet-59; AltCBV-29(only for inclusive)

When the customer doesn’t want physically fee goods and the free goods price should be deducted from total price ten we can
use condition type NRAB, which hides free goods line item in the sales document

Settings:
Pricing for inclusive free goods w/o item generation
--Choose our pricing procedure

Include condition type ‘NRAB’ with requirement – ‘59’ and alternative formula for condition base value- ‘29’ between discount
condition steps.
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with Inclusive method and make sure that ‘free goods’ category should
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--save it

--Go to VA01, raise the sales order and check ‘NRAB’ condition type effect.

Requirement 59:
We have to assign requirement 59 to the condition type NRAB. If the customer buys 100 cases of product “A” then we receives
10 cases of product free.
If the user would not like the additional like items in the sales order for free goods rather than he discount of 10 cases be
represented in the same line item as the other 90 cases. If the free goods discount should not applied as credit for return that
doesn’t make reference previous discounts.

Alt formula for condition base value-29:

The condition type NRAB is to be assigned with 29 formulas to support inclusive free goods agreements where the user would
have to apply the discount to the order item rather than having a sub-item generated for the free quality. Ex: the customer
having a free sub-item generated by the system to represent the 10 free cases. The user could like to have a discount applied
to the 100 cases like item equal to the value of the 10 cases.

Note: Free goods can only be configuring on only document type “C” that means. We can’t configure free goods
inquiries in quotations.