Dear all S/4 HANA experts,

In this blog, I am going to explain about the Drop shipment or Third-Party Order process in S/4 HANA Project system.  I believe, many of you aware about this solution as exist since R/3 S/4 HANA. When I searched about the end-to-end solution for Drop shipment or Third-Party Order process in S/4 HANA Project system in forums, blogs and help.sap.com. I found there are many blogs, Q&A in forums and besides it is very well explained in help.sap.com also for Third-Party Order Process/Drop Shipment Process using SAP Sales & Distribution module. But I could not find the same process addressed using S/4 HANA project system. I hope this blog will help to understand the S/4 HANA Project System based solution for Third-Party order/Drop Shipment Process.

What is Third-Party/Drop shipment order in Project?

In projects especially the projects which is at different place from the company’s warehouse or Storage location, many times we might see that the Project Manager want the vendor to deliver the Parts/Material required for the project at Project site instead of delivering it to the Company’s warehouse or Storage location. This will reduce the shipment time to send the Parts/Material to Project site and it also reduces the logistics cost to the project.

Below are the two different variations in the Third-party processing/Drop shipment in project scenario.

Scenario 1: Vendor delivers the Parts/Material required for a project at the Job/Customer site, but the inventory liabilities is with Project. (Project Stock at Job/Customer site).

Below is the step-by-step solution for the Third Party/Drop shipment process in S/4 HANA Project System for the above-mentioned scenario.

1. Create Project Structure with WBS, Network Header and Network Activity using the project profile configured as either “Valuated Project Stock” or “Non-Valuated Project Stock”.
2. Add Part/Material to the Network Activity. While you add the Part/Material, select Item category as “L” (Stock Item) and Procurement Indicator as “PFS” (Third Party Order). As soon as you select the Procurement Indicator as “PFS” (Third Party Order), system will prompt a window to enter the delivery address by entering the Customer number (Sold to Party or Ship to Party) or Address number.
3. Execute the Project Structure Overview report to display the Material Price from Material Master as Plan cost against the WBS associated to the Network activity of Material Component.
4. Release the Component which created 3^rd Party Purchase Requisition immediately.
5. Execute the Project Structure Overview report to display the Material Price from 3^rd Party Purchase Requisition as Commitment cost against the WBS associated to the Network activity of Material Component.
6. Navigate to the detail of 3^rd Purchase Requisition and validate the following:
   1. Delivery address is copied from the address mentioned while add Part/Material in the project.
   2. Item category as “S” (Third Party)
   3. Account Assignment Category as “Q” (Project Make to Order)
7. Convert the 3^rd Party Purchase Requisition to 3^rd Party Purchase Order.
8. Execute the Project Structure Overview report to display the Material Price from 3^rd Party Purchase Order as Commitment cost against the WBS associated to the Network activity of Material Component.
9. Release 3^rd Party Purchase Order as applicable
10. Perform Good Receipt
11. Execute the Project Structure Overview report to display the Material Price from 3^rd Party Purchase Order as Actual cost against the WBS associated to the Network activity of Material Component.
12. Execute the Project Stock Overview report to display the received material a]is posted to Project stock against the WBS associated to the Network activity of Material Component.

          Note:

1. 1. If the project profile is configured as Valuated Project Stock, then you see the Goods Receipt Quantity & Cost of the Material in the Project Stock Overview report.
   2. If the project profile is configured as Non-Valuated Project Stock, then you see the Goods Receipt Quantity but not the Cost of the Material in the Project Stock Overview report.

13. Perform Invoice Receipt

Scenario 2: Vendor delivers the Parts/Material required for a project at the Job/Customer site, but the inventory liabilities is with customer. (No Project Stock at Job/Customer site)

Below is the step-by-step solution for the Third Party/Drop shipment process in S/4 HANA Project System for the above-mentioned scenario.

1. Create Project Structure with WBS, Network Header and Network Activity using the project profile configured as either “Valuated Project Stock” or “Non-Valuated Project Stock” or “No Stock”.
2. Add Part/Material to the Network Activity. While you add the Part/Material, select Item category as “N” (Non-Stock Item) and Procurement Indicator as “PFS” (Third Party Order). As soon as you select the Procurement Indicator as “PFS” (Third Party Order), system will prompt a window to enter the delivery address by entering the Customer number (Sold to Party or Ship to Party) or Address number.
3. Execute the Project Structure Overview report to display the Material Price from Material Master as Plan cost against the Network Activity.
4. Release the Component which created 3^rd Party Purchase Requisition immediately.
5. Execute the Project Structure Overview report to display the Material Price from 3^rd Party Purchase Requisition as Commitment cost against the Network Activity.
6. Navigate to the detail of 3^rd Purchase Requisition and validate the following:
   1. Delivery address is copied from the address mentioned while add Part/Material in the project.
   2. Item category as “S” (Third Party)
   3. Account Assignment Category as “N” (Network)
7. Convert the 3^rd Party Purchase Requisition to 3^rd Party Purchase Order.
8. Execute the Project Structure Overview report to display the Material Price from 3^rd Party Purchase Order as Commitment cost against the Network Activity.
9. Release 3^rd Party Purchase Order as applicable
10. Perform Good Receipt
11. Execute the Project Structure Overview report to display the Material Price from 3^rd Party Purchase Order as Actual cost against the Network Activity.
12. Execute the Project Stock Overview report to validate that the received material is not posted to Project stock against the WBS associated to the Network activity of Material Component.
13. Perform Invoice Receipt

In my next blog, I will explain about the pre-requisite configuration set up and the S/4 HANA screen shot for each step mentioned in the above two Third-Party/Drop shipment order in Project scenario.

Stay tuned!!!!

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