Companies buying crops, livestock or aqua culture from their suppliers often do this based on an agreement stating what to deliver, how much to deliver, what quality, where to deliver from and how the settlement for the delivery will be calculated against a complex pricing model.
The final settlement with the grower is a self-billing process where the receiver calculates what to pay the supplier. A settlement document is produced listing the details of what has been delivered and what additions and/or deductions have been made to the base price. Both the base price and the bases for additions/deductions are often changed after an initial settlement and payment, and this requires the settlement to be re-calculated a number of times, and the difference to be paid or claimed.
The GCM module supports this process by leveraging procurement functionality that has been tailored specifically to the needs of the industry and the settlement process.
The purpose of this document is to describe how the GCM module is used to manage the settlement process of those companies engaged in the purchase of crops, livestock, or aqua culture and covers the following:
To activate the full functionality of the GCM module the parameter 409 Grower Contract Management must be selected in 'Company. Connect Division' (MNS100/K) for the required company and division.
To get the full benefit from the GCM module the parameter '407 Quality Management' should also be set to 'Quality management system' (QMS).
The functionality, described in this document, is only active if this GCM module is activated:
To ensure that the required business rules, processing and workflow specific to the GCM module is enforced, those agreements used by the GCM module are categorized as 'Grower Agreements' and set up with invoice type 'Self Billing' in 'Purchase Agreement Type. Open' (PPS110).
In addition to the standard set of status's available to procurement, due to the complexities involved in the settlement process, and the importance of knowing the current status of the grower agreement, a number of additional status's are utilized. Some of the statuses are available as user defined status fields and allow the user to tailor the state change specifically to the needs of their own process. These agreement settings can be viewed and managed from 'Purchase Agreement. Open' (PPS100).
To ensure complete traceability of the farmed product, the originating physical location of the product is categorized as a supplier level address type. Specifically, address type 04 is used to define this 'Origin Address', which is connected to purchase order proposals and purchase order lines according to the selections made in 'Supplier Address Sel Table. Open' (PPS036), accessed through related option 11 in 'Available Object Ctrl Parameters. Open' (CMS016).
The Origin address can be manually changed in the E panel of 'Planned Purchase Order. Open' (PPS171/E). For a purchase order line the Origin address can be changed in the E panel of 'Purchase order. Open Lines (PPS201/E). The change can be done if the status of the line has not reached 31.
If more than one Origin address per supplier exists, control table records need to be created for Supplier Address (SAORAD) in 'Generic Object Control Table' (CMS017). Selection rules must also be defined in 'Supplier Address Sel Table' (PPS036).
Where there is only one origin address specified for a supplier, the origin address is automatically retrieved.
Origin address can be included in the Group ID for purchase agreements and thereby be one of the selection criteria when a purchase order is connected to an agreement.
To facilitate customization specific to business requirements, a number of custom fields can be associated with an item and a supplier and also the grower agreement header and line.
When a purchase agreement is created for a supplier the custom fields are copied from the supplier to the agreement header. The custom fields copied to the header are local to the header and can be maintained using related option 16 in 'Purchase Agreement. Open' (PPS100).
When a line is added to a purchase agreement the custom fields are copied from the item to the agreement line. The custom fields copied to the line are local to the line and can be maintained using related option 13 in 'Purchase Agreement. Open Lines' (PPS101). Custom fields will be copied only if item number is selected in the Purchase Agreement Selection Field.
These custom fields are also available for use in the purchase costing model and formulas.
See Custom Fields.
To help with the complex settlement calculations often required for Grower Agreements, the costing model is associated directly with the agreement line in 'Purchase Agreement. Open Lines' (PPS101). It is then carried forward to the purchase order and eventually used for the price calculation in the settlement process.
To enable this association, control table records must to be created for program 'Costing model selection table' (PPS038) using programs 'Available Object Ctrl Parameters. Open' (CMS016) and 'Generic Object Control Table' (CMS017).
See Purchase Order.
To ensure that the seeds, purchased by the grower to grow a product such as wheat or corn (the base origin), can be traced back to their origin, and also to ensure that all parties involved in the agreement such as the processor, government and the eventual customer, have visibility of this, the base origin must be associated with the grower agreement at line level.
The base origin can either be associated with the agreement line manually in 'Purchase Agreement. Open Line' (PPS101) or through a customer order created by the batch order entry API and connected to the agreement through the OIS100MI/AddBatchLnInfo.
A number of weight columns are required for price calculations in a grower settlement. Examples are dry weight, net weight and weight per volume. The calculation of these weights needs to be configurable and recalculated each time the base values are changed (or value requested). The values are not open for manual maintenance. A parameter for dynamic calculation of attribute values is available to support this. The value to calculate is defined in the program for default attribute values. In addition to the dynamic calculation, new data fields have been made available.
Several of the settlement calculations supported by the GCM module are derived from matrix based additions, deductions and selection values that can be defined in 'Selection Matrix. Open' (PDS090). For example, if a results value is within a pre-defined range, an amount to add or subtract can be specified based on the terms and conditions agreed at the outset of the agreement.
Formula functionality in 'Formula. Open' (CRS570) can be used to cater for the complex settlement calculations often required for Grower Agreements in the following ways:
See Create Formula.
Pricing functionality in 'Costing Element. Open' (PPS280/E) can also be used to configure the pricing model to the specific needs of the settlement process in the following ways:
In support of cases where the eventual consumer of grower and commodity produce may differ, and the resulting requirement for VAT variation, flexibility to override the fixed VAT code on Purchase costing elements is available.
Where object control parameters are configured for VAT override in 'Available Object Ctrl Parameters. Open' (CMS016), and a Costing Model is specified at line level on an agreement specified as type Grower Agreement in 'Purchase Agreement Type. Open' (PPS110), the VAT code that would normally be retrieved from 'Costing Element. Open' (PPS280) is overridden based on an alternate costing model specified in 'VAT Exception. Open' (PPS280).
Quality Management System (QMS) based Quality Inspection (QI) specifications can be associated with Grower Agreements at line level in 'Purchase Agreement. Open Lines' (PPS101) as a means to ensuring that all required tests are executed during the growing period at the area of origin, and connected with the agreement line.
Where the parameter 'Auto fulfillment' is selected in 'Purchase Agreement Type. Open' (PPS110), if the quantity received during goods receipt is greater than or equal to the agreed quantity, the status of the agreement line will be set to 80.
It is also possible to manually set this status to 80 (fulfilled) at agreement line level in 'Purchase Agreement. Open Lines' PPS101/E and at agreement level in 'Purchase Agreement. Open' (PPS100/E).
Following this, the accumulated received quantity will be displayed in 'Purchase Agreement. Open Lines' (PPS101), panel B and E.
To ensure that all required test results and information have been received prior to settlement of a grower agreement through the Quality Management System (QMS), it is possible to specify a result as mandatory and block the settlement process, either manually or automatically, until such times as all required information has been received and mandatory tests have passed.
See Block Settlement.
The Settlement Printing model, managed in 'Settlement Printing Model. Open' (PPS385), has two purposes:
The setting is done per purchase costing model, allowing a different outcome for each model.
See Settlement Document.
When all required information concerning the goods receipt is in place, the status in 'PO Line. Display Received to Self-Bill' (PPS118) is 20 and no manual block exists.
The receipt is ready to be transferred as a proposal in 'Supplier Invoice Batch. Open' (APS450). This is done in 'Suppl Inv Proposal. Generate for SB' (PPS116), where you can select what should be transferred.
The proposal is created with 'Invoice batch type' = 10 (Self-billing) in Supplier Invoice Batch. Open' (APS450). To create the actual settlement, the proposal should be verified, printed and finally transferred to AP (account payable). All steps can be done through related options or actions.
Because the set of charges that make up a settlement may change both before and after the first settlement has been processed, the settlement will be recalculated around the changes received, and the difference (positive or negative), in charges between the current and previous self-bill invoice, will be charged or credited to the customer, and printed on the final settlement document.
If all required pre-requisites have been met, and there is no settlement block in place, the settlement process will be called when a change is registered against one of its' base constituents, where a base constituent is either an attribute or costing element.
Attributes can be either be changed in 'Lot/Serial Number. Open/Connect to Item' (MMS235) or 'QI Request. Open' (QMS300)', whereas costing elements can be changed manually in 'Costing Element. Open' (PPS280).
For other changes to the base of the settlement such as changes to a matrix or costing element, a re-calculation can be triggered for selected deliveries in 'Recalculation selection' (PPS283).
Where a company is engaged in a grower agreement with a farmer, the company often sell goods or services related to the fulfillment of the agreement. The value of these good and services can be deducted from the amount owed to the farmer during the invoicing and settlement process, as opposed to billing for these separately. To distinguish these customer invoices from invoices for goods not related to an agreement a dedicated payment method indicating 'paid by settlement' is available. If necessary these amounts can also be reversed and cancelled after they are invoiced by changing this payment method.
To support the process of settlement and ensure that the required information is available, a number of related options are available in 'PO Lines. Display Received to Self-Bill' (PPS118):