SD contracts Types

Quantity Contract

A quantity contract is an agreement to supply a fixed quantity over a period of time. Since the customer promises to buy the fixed quantity of goods/services, they will get a discounted price.

The document type in SAP for quantity contract is QC. For example, in this example, the quantity contract is for quantity 100 of say material M-01. Release orders are orders created with reference to the contract to consume the quantities in the contract. So the first release order is for quantity 20 which consumes 20 % of the quantity in the contract. Similarly, the rest of the release orders consume the remaining quantity in the contract. Document flows should exist between the contract and the release order types. There are 2 primary reasons why quantity contracts are used.

1. When Quantity is Limited - When the production quantities are limited in numbers, then customers are allocated a specific quantity by time -period ( say a month, or a quarter ) . And customers cannot place ad-hoc orders, but have to first sign a contract for a fixed quantity and always order via release orders that specifically refer to the contract.
2. When Vendors want to Lock-in Customer quantities - Some times to give deep discounts, sales folks require that customers commit to buying a fixed quantity over a time-period. This satisfies the sales figures .

Service Contract

A service contract is normally created for service-oriented items - examples are annual service contracts, annual maintenance contracts.

For example, when you buy an internet connection from comcast, they are providing services to you for a fixed period - say 1 year or 6 months. And for providing those services, they charge you monthly. In this case, there are no release orders because in case of service since there are no logistics operations, directly the customers are invoiced with reference to the contract. In this case, the customer is charged $100 a month for 12 months with a total of $1200. The items in these types of contracts follow billing-plan. Repairs also follow service contract methodology.

Master Contract

A master contract is used when a particular type of contract is created regularly for a customer and you want all the header data to be consistent across all of the contracts. Normally, the header data of a sales document contains data from the Customer master.

For example, if a contract is created for a customer say 1400, key data like inco-terms, payment terms, delivery preferences, taxability etc flow from the customer master data for that sales area for customer 1400. However, if you consistently change the data in the contract to a fixed value, say the inco-terms should always be FOB Destination for all contracts, while regular sales order have CIP Philadelphia, you can create a master contract for customer 1400 and change the inco-terms in the master contract to FOB Destination. All subsequent contracts that refer to this master contract will have the inco terms as FOB Destination.

Value Contract

A value contract is very similar to a quantity contract - except that instead of a fixed quantity, the value of the contract is fixed ( ie the dollar amount of the contract is fixed ) while the materials that the customers procure could come from either a fixed basket of materials or a single material only.

For example, in the example shown above, the type of contract is a value contract for a specific material - 'WK2'. Essentially, this contract is limiting the value of the contract to a fixed dollar value and the customer can release multiple release-orders referring to the value contract for that specific material. If the customer wants to create contracts for specific value and not limit them to a particular material, then an assortment module can be used. The type of value contract that refers to an assortment module is 'WK1'.

An assortment module is a basket of materials ( a fixed set of materials ) without any specific quantities or prices. When some of the materials in the assortment module needs to be used in the value contract, the assortment module is searched for ( by name or number ) and the materials in the assortment module are selected and quantities specified. Price can be either manually specified or automatically done. We will discuss more on this during the configuration section.