SAP Agricultural Contract

Management
March 2012 - Marcos Rahmeier – SAP Custom Development
Legal Disclaimer
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© 2012 SAP AG. All rights reserved. 2

The Key Business Challenges –
What does this mean for your business?

How do I establish pricing at different times during execution?

How do I establish pricing for partial quantities and with multiple components?
How do I capture specific contract terms for quality, optionalities, tolerances?
How do I assign deliveries to contracts and change these assignments?
How do I distribute pricing to deliveries?
How do I adjustment contract fulfillment based on changing commodity
quality/weight information?
How do I recover expenses for the trade with the counterparty?
How do I generate the required SAP documents?

© 2012 SAP AG. All rights reserved. 3

Focus of the SAP’s Agri-Solution

Marketing / Producer
SAP Agriculture Contract Management Management

Farm Operations Agri-Contract

Origination
Management Management

Food Products and

Semi-Food Products

Agri-Commodities such as Beverages

All kinds of Agri-Products
such like peaches, tomatoes, etc. Corn, Wheat, other Cereals, Rice, Industrial Products from Food
and kinds of Agri Commodities Soybeans, Coffee, Cocoa, Sugar, Ingredients
Cotton.
Clothing
Potatoes, Vegetables, Nuts, Fruits,
Citrus Fruits Animal Nutrition

Cattle, hogs, poultry, eggs Energy

Seeds, Fertilizer and Bio-
Technology products

© 2012 SAP AG. All rights reserved. 4

Agri Solution Scope: New Process Building Blocks

The Agri-Solution introduces new main “process building blocks” for

Contract capture and maintenance (including integration with SAP solutions
managing logistics and call-off)
Load Data capture, Evaluation of Contract Terms against Load Data capture
and Contract Application
Contract Settlement

© 2012 SAP AG. All rights reserved. 5

Agricultural Commodity Sales & Purchasing
End to End Process Flow

SAP’s Agricultural Contract Management application shall enable companies to capture

commodity contracts with partial or no pricing, specific terms for quality, tolerances and
optionalities, and consider these terms for logistics execution and settlement.

1 2 3 4 5 6 Update
Capture Create Load Data,
Plan Apply Load Settle
Contract Call-Off Settle,
Close
Create Monitor in- Create call-off Capture Determine Trigger quantity
quantity or car transit order with information for settlement amt and quality
lot contract for inventory reference to load based on updates to load
a period of contract available information
time Conduct (optional) Determine pricing, quality
inventory true- material info, weights Generate
Define quality, ups with 3PT, Validate against additional ABDs
optionality, if used available Trigger Group based on final
and tolerance quantity and generation of settlements information and
terms Create contract terms follow on pricing; settle
nomination documents Generate
Establish price (optional) Price not Agency Billing Recognize
(optional) required to be Validate load Documents Revenue
established against contract
Define terms for Settle with Close contract
expenses quality, counterparty line item and
optionality, and via standard contract
tolerance SD/MM billing
and invoicing

© 2012 SAP AG. All rights reserved. 6

Agri-Solution: Processes Summary

The Agri-FBS is supporting the following processes for Agri-Commodities

Regular Purchase and Sales Contracts
Spot Purchase and Spot Sales Contracts
Inter-Company
Intra-Company
Back-To-Back processes
Reversals / Returns
Washouts and Strings
Recording and tracking of unapplied tickets (warehouse receipt / proof of obligation)

© 2012 SAP AG. All rights reserved. 7

Agri-Solution Scope: Purchase / Sales Contract

Ag Business Partner

Service
Contract(s)

Service
Contract
Ag Company Invoice(s) Ag Customer
Contract

Invoice(s)

Ag Company’s
Warehouse Ag Customer’s
Warehouse

Weights
Weights
and
and
Analysis
Analysis

Ticket Ticket

© 2012 SAP AG. All rights reserved. 8

Agri-Solution Scope: Spot Purchase / Spot Sales

Ag Business Partner

Service
Contract(s)

Service
Contract
Ag Company Invoice(s) Spot Contract Farmer F
after delivery
by the farmer

Invoice

Ag Company’s
Elevator

Weights
and
Analysis
Ticket

© 2012 SAP AG. All rights reserved. 9

Agri Solution Scope: Intercompany

Headquarter in Illinois

Company A in US Company A in China

Contract

Invoice

Plant in Illinois Plant in Bejing

Commodities intransit

© 2012 SAP AG. All rights reserved. 10

Back to Back Processes

External Sale
Customer 1
External Purchase

Multiple

Inter-company
Sales

Vendor A Internal
Purchase(s) Internal Company as
Intermediary customer

Use of Nominations enables linking of purchases and sales

© 2012 SAP AG. All rights reserved. 11

Agri-Solution Scope: Intra-Company

Headquarter in Illinois

Company A in US Company A in US
Profit Center 1 Profit Center 2
Contract or
Sales Order

Plant in Illinois Plant in Iowa

Commodities being transported

© 2012 SAP AG. All rights reserved. 12

Agri-Solution Scope: Reversals / Returns

The Agri-Solutions provides the means to reverse

the documents if necessary.
Validations will be performed to ensure that the data
and process stay consistent.
These validations will be performed prior to the
reversal of a document (application document,
settlement document,…).
If the validation is successful the documents can be
reversed.
If a validation is not successful then the reversal
“errors-out” and a user has to assess the situation
why the reversal is not possible. The user will be
guided through the error-code in order to take the
right next steps.

© 2012 SAP AG. All rights reserved. 13

Agri-Solution Scope: Washouts and Strings

Washout:
This process occurs where two trading parties in contract mutually agree to no physical
movement of the goods, resulting in the off-set of purchasing and sales obligations with the
same terms (commodity, quantity, quality, time of shipment, fob / delivery point) on both sides.

String
Is a trading scenario where the physical shipment flows through multiple business partners.
The final party at the end of string (who is physically taking the goods) has an interest in obtaining
the documents quickly; therefore this party manually researches the string and prices, and
proposes a net settlement value for all parties involved. If the parties are in a string and the
counterparties agree to settle with their original counterparty it would just be part of standard
settlement (purchase and sell).

© 2012 SAP AG. All rights reserved. 14

Agri-Solution Scope:
Recording and tracking of Unapplied tickets and
Commingled Stock
Contract 1 Contract 2 Spot Contract for
of Farmer Frank of Farmer Frank Farmer Frank?

Ticket Summary
of all
Warehouse
Receipts by
Farmer

Unapplied quantities need to be recorded and tracked as warehouse receipts and obligations
to the farmer.

© 2012 SAP AG. All rights reserved. 15

ACM – Functional Scope
Functionality
Master Data for DPQS and Material
Schedule
Master Data for Tolerances
Optionalities
Material Determination
Commodity Contract Maintenance
Contract Closure / Underfill / Overfill
Trade Amendments
© 2012 SAP AG. All rights reserved.
Description
New Master Data providing the capabilities to define qualtity schedules.
These quality schedules will be linked to the contract during contact
capture.
New Master Data providing the capabilities to define quantity schedules.
These quantity schedules will be linked to the contract during contact
capture.
New functionality to define optionalities which can be "declared" before
and during contract execution.
New functionality to define generic material on a "header level" with
specific materials and their characteristics underneath. These Material
Schedules will be in particular assess/executed during contract application
Capturing of contracts with all specfics to Agricultural Commodity
Contracts and Contracts for Grower Origination - Discounts, Premuims and
Quality Schedules, Quantity Tolerances Schedules (Volume/Value),
Optionalities, Material Schedules; supporting also fully and partially priced
scenarios with flexible pricing mechansims throughout the entire lifecycle
of a deal including provisional pricing during various events of a deal
lifecycle (credit limit checks)
Features and functionalities for explict contract closure, under- and overfill
functionalties during contract execution and follow-up activities
Various functionalities to allow for trade amendments (shorten,extending
time periods, extending/reducing quantities,…etc.)
16
ACM Functional Scope - continued

Functionality Description
Contract Application Applying one or mulitple loads (tickets) to one or multiple contracts;
capturing mulitiple sets of quality information for the same load if
necessary; Evaluation qualities, optionalitis and quanties of load(s) with
regards to discounts or premiums to be applied for load(s);
manual/automated assignment of pricing lots to loads applied to contract;
adjustment of contract quantities and inventories based on the DOT
evaluation results (to allow also for MTM valuation)
Non-Standard Settlement Capabilties to handle washouts, strings and circles
Settlement Provisional and final settlement calculations with multiple provisional
settlements possible; expense recovery functionality (if expense is
recoverable); cross settlements between contracts including pre-payments,
downpayment, deferred payments; manual and automated settlement
process; functionality allows for seggregation of duties (create, approve,
release); integration into FI
Revenue Recognition functionality to determine when the revenue can be recognized (FI
postings)
Collects movement and inventory information for end of day true up to
Inventory True-Up update 3rd party trading system

© 2012 SAP AG. All rights reserved. 17

Agri-Solution Scope – New Master Data

The Agri-Solution is providing new Master Data for

Discounts and Premiums for Quality Schedules (DPQS) - tiered
Tolerance Schedules for Quantities (Value an Volume) - tiered
Material Schedules (Material Groups)
Optionalities

Material Quantity DPQS Optionalities

Schedule Tolerances

List of materials Per Delivery Definition of Mode of Transport

which are quality ranges Means of Transport
Per Delivery Period Load Location
acceptable for per criteria
evaluation during Per Contract Discharge Location
Governing weights Load Rate
contract application
Definition of over- and grades Discharge Rate
and under-fills Delivery Period
Inco-terms

© 2012 SAP AG. All rights reserved. 18

Agri-Solution Scope:
Contract Capture with Pricing and Expense Management
Quantity Material
DPQS Tolerances Schedule Optionalities

Service
Contract(s)
for Expense
Capturing

Contract

Component Pricing
(Futures, Basis)
partially priced contracts
(No Price Established, No
Basis established, No
Futures established)
Capturing of
Planned Pricing can happen at any
Expenses given time before final
(including settlement
auto-accruals
capabilities)

Contract Closure Tolerances (Residual Quantities)

© 2012 SAP AG. All rights reserved. 19

Agri-Solution Scope: Contract Maintenance

Contract Maintenance includes:

Pricing of price components (partial pricing)
Trade amendments
• shorten or extending time periods
• adding/changing delivery periods
• adding/changing optionality declarations,
•extending/reducing quantities
The system will perform certain mandatory validations and return
if amendments are allowed and can be performed.
Custom validations can be introduced, too.
Contract

© 2012 SAP AG. All rights reserved. 20

Agri-Solution Scope:
Load Capture Functionality

The Load Data Capture provides the ability to manually enter data for the load
into the system through fast entry screen as well as allows to utilize the load
information from any external source (e.g. weighing bridge)

As part of the Load Data Entry there are means provided to manually
enter quality characteristics data

Each load can be uniquely identified in the system.

The fields to be captured can be extended to include customer specific details to

be captured for the load.

All subsequently generated system documents will reference the Load Data
entered

© 2012 SAP AG. All rights reserved. 21

Agri-Solution Scope:
Contract Application Functionality

The application document is an SAP document that will be created after post good
receipt / post goods issue.

The main purpose is to facilitate the contract application and settlement process
enabling functionalities like the application of discount premium quality schedules,
evaluation of tolerances, evaluation of optionalities.

The Application Document is linked to the Quality-Repository in which all the

receive / assessed quality information will be stored.

The application process links the application document to the pricing contract.

Ticket
=
Load Data
Contract
Quality
Repository

© 2012 SAP AG. All rights reserved. 22

Agri- Solution Scope:
Settlement Functionality

Settlement is a billing pre-processor that consolidates multiple transactions against

one or more contracts, and uses schedules and other terms specified on the contract
to calculate/determine an adjusted price that is used to issue payment or perform
customer billing.

There are 3 different settlement types:

Provisional Settlements
Financial settlement of a load or unit using a provisional price or using estimated weights
and grades, with invoicing adjustments occurring after actual weights and grades are received.
It is possible to have several “provisional” settlements per shipment.

Final Settlements
Financial settlement of a load or unit using an established price and actual weights
and grades.

Adjustment Settlements
Adjustment settlement can be created for a settlement document after the final
settlement document has been released for invoicing.

© 2012 SAP AG. All rights reserved. 23

Agri-Solution Scope:
Purchase Realization / Revenue Recognition

Once the stars align, Purchase Realization or Revenue Recognition may occur.

Title Transfer Governing Weights / Final Price Final Settlement

? Governing Grades ? ?
?

All 4 stars represent events in the life cycle of a contract. When ever one of these events is successfully
completed then an entry/update will be made in the so called Event Registry. An Event Monitor is
“watching” for the completion of events. Once all events are successfully completed (…all stars align)
then the Purchase will be realized or the Revenue will be recognized through the respective account
postings.

© 2012 SAP AG. All rights reserved. 24

Inventory True Up

Relevant if using a 3rd party trading system

Collects movement and inventory information for end of day true up
Provides exits for valuation steps or custom movement evaluation

© 2012 SAP AG. All rights reserved. 25

Contract Closure

Residual Quantity Customizing

Status setting for line item and pricing TC (custom)
Unavailability for application/call off

Contracts is to a large part fulfilled.

Only a small portion amount is still open.
This functionality allows to close it and
not consider it for further contract application

Contracted amount: 500,000 tons

Delivered amount: 499,000 tons
Residual quantity: 1,000 tons

Contract

© 2012 SAP AG. All rights reserved. 26

SAP Agricultural Contract
Management
March 2012 - Marcos Rahmeier – SAP Custom Development
Your Contacts

Dirk Wagener Cláudio Lot

SAP Custom Development Latin America Industry Principal - Agribusiness
SAP Labs Latin America SAP Labs Latin America
M +55 51 81846658 M +55 11 86077950
dirk.wagener@sap.com Claudio.lot@sap.com
Your Contacts

Simone Pietroniro Mauricio Teixeira

Localization Product Manager Brazil
Globalization Services
SAP Brazil
F+55 11 5503-2306
simone.pietroniro@sap.com
Localization Product Manager Brazil
Globalization Services
SAP Labs Latin America
F+55 51 3018-1525
mauricio.teixeira@sap.com