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Charging delivery fees

Oct 26, 2017 at 02:51 PM

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Former Member

Hi,

It's a common practice to charge delivery fees in case of pharmacy wholesale distribution.It depends on the number of orders placed during the day before the cut off time period. It needs to be invoiced to customer either through invoicing process or through debit notes.

I wanted to understand what is the best practice for handling delivery fees in SAP. It cannot be in the sales order. Should it be put in the invoice directly or raising debit memo is the best option

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2 Answers

Jelena Perfiljeva
Oct 26, 2017 at 07:01 PM
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Best practice is definitely not to have a fee based on the number of orders. It just doesn't make any sense IMHO. I can understand if someone wants to charge a fee based on distance, urgency, weight or some kind of special handling (e.g. a gift wrap or uncommon size/shape). That is justified by additional handling or shipping cost. But number of orders... Why? What's the logic here? Would you charge a fee based on too few or too many orders? Neither makes sense, sorry.

I believe the best solution here would be to just sit down and evaluate your business process. How much revenue it actually brings vs. causing inconvenience to the customers and technical difficulties in SAP? How much revenue would change if you used a different process?

All other, more reasonable scenarios (like the ones mentioned above) for additional fees have already been covered on SCN, I believe. I'm afraid in this case you might be searching for a best practice solution to a bad practice process.

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Former Member

I do not think we should blindly say a bad practice process. There are cut off times suggested to customers for placing orders for timely delivery of goods to meet the promise delivery dates and also for efficient warehouse functioning. Since this involves extra effort, additional charges are applied for customers.

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If I am a customer and I wish a product or to be delivered sooner than usual, I would place an express order, for which I know that I need to pay more, but this has absolutely nothing to do with how many orders like mine you received during the day.

What Jelena was trying to point out is that lack of transparency in pricing is not a good practice - yes, the company may get a bit of money out of customers, but for most industries where competition is harsh, the damage to company's reputation will lead to more losses than gains.

I suppose that in some countries such approach may be considered illegal. You are better off with introducing some report, based which a subsequent analysis over longer period can be made to revise pricing and introduce fees that customers can easily see at the time they place an order.

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I'm not saying this "blindly". :) There were very specific reasons mentioned in my post.

Veselina got it right. The scenario you're mentioning does not have to involve "per order" charge. It's exactly how major online retailers operate. There is a specific cut-off time by which you can place an order and expect it to be shipped today. If you're late then either you'll get the order later or will need to pay extra for express delivery, as Veselina mentioned.

This has nothing to do with the number of orders, which was the original question. You might want to clarify what the business scenario is exactly. My answer was given based on the specific verbiage in the original question. What you're mentioning in the comment is not the same.

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Former Member

Apologies if my comments were contradicting. What i am looking for an industry standard of a good practice process, like the one Vaseline mentioned. Currently in the legacy there are scenarios, where based on the orders received during certain period of the day charged different rates, like 1st order high rate, second order no fees, third order low fees. I am looking for some basis to put forward and suggest, what is the best practice followed in general on handling delivery fees across wholesale and retail industries. I did not get any specific documents or details in the forum. Hence posted this question.

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Well, the best practice in any industry is transparent pricing at the time when the order is taken.

This is not only important for preserving good company reputation, but also for the credit department, the sales representatives and the logistics planners, because without knowing the exact price when an order is received you cannot evaluate correctly the credit risk and discuss with the client potential alternatives - e.g. if the end result from pricing means exceeding the credit limit one could suggest to the client that he pays all or a percentage of the total in advance. With non-transparent pricing you have to delay processing until you know the exact price, which to a large degree defeats the purpose of placing requests for express deliveries.

The reason why you probably would not find such best practices in written is that the business experts are expected to know what works well in their specific processes and what does not. This is not limited to a certain software. If the company is looking for ways to improve the current procedures I suppose that it makes sense to acquire the assistance of some business consulting company that will discuss the areas of improvement with the business process owners.

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Veselina Peykova

I agree with this approach what you suggested and it really needs improvement from a business process perspective rather than finding solution in SAP for a bad process. One last thing that came up while reviewing the solution is that, SAP provides an option to redetermine prices at the time of invoice creation. Will this not negate the whole purpose of having a non transparent pricing if SAP itself allows re determination at the time of invoice creation? one can redetermine prices and taxes at the time of invoice creation !! There must be a specific reason for this i am sure, but i am not able to relate it with an example !

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I agree completely with Veselina (not to be confused with Vaseline brand :) ). This seems to be a question of the business process improvement. What you're describing simply doesn't make a lot of sense from the customer point of view and I imagine would be difficult to implement well in SAP.

As Veselina noted, you won't find any official "best practices" online but the KISS principle usually works well. Also one doesn't have to look further than such market leader as Amazon for an example of sensible ordering and shipping policies.

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Former Member Oct 26, 2017 at 05:46 PM
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Hi,

Both options are OK. It all depends how the business wants the scenario mapped. Creating a debit memo increases the process.

Thanks.

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Former Member

Problem is the logic for calculation is complicated. Hence wondering if we need to disturb the standard invoice process v/s custom build solution.

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