Grower Contract Management (GCM) - Overview
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 or deductions have been made to the base price. Both the base price and the bases for additions or 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.
Purpose
This document describes 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:
- GCM module settings and configuration pre-requisites
- Agreement level configuration and capability
- Calculation level setup and configuration
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Supported settlement calculations, incorporating:
- Pre-requisite configuration
- Inputs
- Outputs
- Settlement process for a grower agreement including GCM specific processes, and procedures.
GCM company / division setup
To activate the full functionality of the GCM module, 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, parameter 407-'Quality Management' must also be set to Quality Management System (QMS).
Parameter 065 - 'Create accounting entries at goods receipt' should be 1 or 2 on 'Settings - Cost Accounting' (CAS900/H). Parameter 'Transfer to auto-generated invoice' should be set to 0 in 'Purchase Agreement. Open for Self-Billing' (PPS112). This is to ensure that all charges have been calculated and accounted before the 'Self-billing invoice' or 'Request for supplier invoice' is generated.
The functionality described in this document is only active if this GCM module is activated:- Differentiation of GCM agreements
- Costing model for purchase agreements
- Block settlement
- Settlement Printing Model
- Recalculate settlement for a grower agreement
- Override VAT on a grower agreement
Differentiation of GCM agreements
To ensure that the required business rules, processing, and workflow specific to the GCM module is enforced, the agreements used by the GCM module are categorized as 'Grower Agreements' and set up with invoice type 'Self Billing' or 'Request for Supplier Invoice' in 'Purchase Agreement Type. Open' (PPS110).
Support for agreement process tracking
In addition to the standard set of statuses available to procurement and because of the complexities involved in the settlement process, you must determine the current status of the grower agreement and the number of additional statuses utilized. Some of the statuses are available as user-defined status fields and enable the user to modify the state change to suit the needs of their own process. These agreement settings can be viewed and managed from 'Purchase Agreement. Open' (PPS100).
Specification of product location as part of agreement
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 on '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. Open' (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 become one of the selection criteria when a purchase order is connected to an agreement.
Specification of user defined information for agreements
To facilitate customization specific to business requirements, a number of custom fields can be associated with an item and a supplier; and 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.
Costing model for grower agreement
To help with the complex settlement calculations often required for Grower Agreements, the costing model is associated directly with the agreement line in (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 (CMS016) and (CMS017).
See Purchase Order.
Base origin for grower agreement
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 (PPS101) or through a customer order created by the batch order entry API and connected to the agreement through the OIS100MI/AddBatchLnInfo.
Define attribute
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.
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Define deductions and additions
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.
Configure formula for grower agreement
Formula functionality in 'Formula. Open' (CRS570) can be used to cater for the complex settlement calculations often required for Grower Agreements in these ways:
- The result of a matrix table look up can be re-used as one of the factors in a formula
- Custom fields defined for a supplier or item can be used as part of a formula
- The difference between a date range as a number of days can be used in a formula against an applicable factor type
- The delivered quantity and weight can be used as base for calculation of various other weight values
See .
Configure pricing model for grower agreement
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 these ways:
- Configurable custom columns can be used to customize the pricing model in a way that satisfies the needs of the settlement process
- Formula can be used to calculate the amount the grower will be paid
- Formula can be used to calculate the costing quantity
- A number of different cost operators can be used to define the required costing calculation
See .
Override VAT on a grower agreement
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 (CMS016) and a costing model is specified at line level on an agreement specified as type Grower Agreement in (PPS110), the VAT code that would usually be retrieved from 'Costing Element. Open' (PPS280) is overridden based on an alternate costing model specified in 'VAT Exception. Open' (TXS020).
Register quality tests against a grower agreement
Quality Management System (QMS) based Quality Inspection (QI) specifications can be associated with Grower Agreements at line level in (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.
See .
Fulfillment of agreement header and line
Where the parameter 'Auto fulfillment' is selected in (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.
You can also 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 on panels B and E of (PPS101).
Block settlement
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.
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Settlement printing model
The Settlement Printing model, managed in 'Settlement Printing Model. Open' (PPS385), has two purposes:
- To ensure that the attribute values are displayed to the user in a logical order.
- To control what attributes and quality results are printed on the settlement document and in what order.
The setting is done per purchase costing model, allowing a different outcome for each model.
See Settlement Printing Model.
See Settlement Document.
Create settlement for a grower agreement
When all required information concerning the goods receipt is in place, the status in 'PO Line. Display Received to Self-Bill' (PPS118) is set to 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 (APS450) if the invoice type is 'Self Billing' on the connected agreement in (PPS110). To create the actual settlement, the proposal must be verified, printed, and transferred to AP (Accounts Payable). All steps can be done through related options or actions.
The proposal is created with 'Invoice batch type' = 15 (Supplier Invoice Request) in (APS450) if the invoice type is 'Request for Supplier Invoice' on the connected agreement in (PPS110). After the supplier invoice request is printed, the expectation is that the settlement has been agreed with the supplier and no more changes will be done. The supplier then sends an invoice.
If the settlement must be changed, the supplier invoice request must be reset to status 'New' in (APS450), and then deleted. This will reset the status in (PPS118) to enable changes. A new supplier invoice request will be transferred to (APS450) once (PPS116) has been generated.
Recalculate settlement for a grower agreement
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)', while 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).
Goods receipt date is always used to recalculate attributes and charges.
Deduct customer order invoices during grower agreement settlement
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 canceled after they are invoiced by changing this payment method.
See Deduct Customer Order Invoices during Grower Agreement Settlement.
Process control for settlement in PPS118
To support the process of settlement and ensure that the required information is available, a number of related options are available in (PPS118).
Settlement process for a grower agreement
