Subcontracting depot repair for intercompany trade - process and setup

Operations or activities are carried out by one financial entity on behalf of another financial entity and costs are incurred, for example, material or labor, for these operations or activities.

Work center WCA1 and Service Department SDA2 are entities of organization A. Work center WCA1 belongs to financial company FA1 and Service Department SDA2 belongs to financial company FA2. Both financial companies are also part of organization A.

To fulfill a maintenance sales order for an external customer, Service Department SDA2 instructs Work center WCA1 to carry out some repairs for item R1 on behalf of the external customer. SDA2 invoices the external customer. As compensation for the costs incurred, WCA1 invoices SDA2 for materials and labor at actual costs.

Business process

This scenario applies to maintenance sales orders, and uses a parent and one or more child intercompany trade orders. On the parent order, WCA1 is the selling entity and SDA2 is the buying entity. The parent order also displays the main item, the overall price origin, and the total cost of goods sold (COGS) and revenues of the child orders.

A child intercompany trade order displays a repair item, labor costs, or hours booked by a service engineer. If different items are used to repair a main item, a child order is created for each repair item.

Multiple issues for the same repair item can be combined in one child order. Labor bookings from different engineers can be combined in a child order if these attributes match:

• Work Order
• Labor Line
• Activity Line
• Reference Activity
• Task
• Cost Component
• Labor Type Cost
• Labor Rate Code

The related work order displays the responsible work center and overall information such as the item to be repaired. The work order is linked to various resource lines such as material resource lines, or hours accounting lines.

When the related work order is saved, the parent intercompany trade order is created. The child intercompany trade orders are created when the work order lines are saved.

The transaction lines are created when the related work order is closed. To close the work order, the selling and buying parts of the parent and child intercompany trade orders must be approved.

Child orders in subcontracting depot repair scenario

In subcontracting depot repair scenarios with price origin time and material, the items - materials - used to repair the main item can be invoiced by the work center to the service department. This is displayed on child intercompany trade orders. For these child orders, the scenario is Internal Material Delivery.

Supported price origins

• Time and Material
• Commercial Price

For the subscenarios Labor and Internal Material Delivery, the price origins are:

Supported price origins

• Cost-Plus
• Commercial Price

For the subscenario Other, the price origins are:

Supported price origins

• Cost-Plus
• Zero Price

Setup

1. Work center WCA1 and Service Department SDA2 are both defined as entities of organization A.

2. In the Intercompany Trade Agreement (tcitr1600m000) session, intercompany trade agreement SDR-A1 is set up with these settings:

   • Intercompany trade scenario Subcontracting Depot Repair.
   • Price origin Time and Material

3. To invoice labor and expenses, in the Intercompany Trade Agreement - Transfer Pricing Rules (tcitr1605m000) session, the Labor subscenario is selected.

4. For subscenario Labor, price origin Cost-Plus is selected in the Intercompany Trade Agreement - Time and Material (tcitr1610m000) session.

5. In the Intercompany Trade Relationship (tcitr2600m000) session, intercompany trade relationship A1 is defined:

   • From Entity WCA1 To Entity SDA2.

     To cover a wider range of entities, you can define a trade relationship from and to the enterprise units or financial companies to which the entities WCA1 and SDA2 belong.

   • On the Agreements tab, intercompany trade scenario Subcontracting Depot Repair and intercompany trade agreement SDR-A1 is selected.