We regularly need to explain the details of how freight billing options can be handled correctly in SAP. I’ll explain the 3 main options for domestic billing from a typical small parcel carrier first and then give you some examples.
The typical domestic parcel carriers support the following 3 options for billing freight charges on parcels.
Prepaid – Charges paid by the shipper.
Collect – Charges paid by the recipient.
Third party – Charges paid by a third party to party to the shipping transaction.
Seems pretty straightforward right? Ok not so fast, on a typical SAP sales order do you know how this relationship should be represented?
The simplest scenario is prepaid. In this scenario when you ship an order to a customer the shipper pays the freight, this is pretty straightforward. More then likely if you ask your warehouse to ship an order they will ship it using your own account, prepaid.
OK how about Collect? Collect is when your customer asks you to ship it to them and use their carrier account number , this can occur as many times a customer may have negotiated terms and rates that they want to benefit from. To be considered collect, the ship-to location is also the location that owns the account you submit to the carrier.
Ok I left the best for last and this is the tricky one that trips up many clients.
Third party Billing. The key to third party billing is to consider this from the view of the carrier not you the shipper. The carrier when given a shipment knows the shipper (you) and the consignee (Ship-to in SAP) so if I want to bill anyone other then one of these two parties it is considered a third party billing transaction. Note one scenario that is not always obvious, it is typical for a company to have a carrier account number for each of their locations. So in a routine order that is placed by a customer (Sold-to) that requests the order be shipped to their distribution center which maybe in a different state etc. (Ship-to) this maybe considered a third party transaction if the Sold-to uses their account for deliveries to their distribution center. This is because the ordering party is not party to the transaction from the carriers view (you rarely share the sold-to when processing a parcel package.
This should make it easy to understand when to use each but if you have questions feel free to drop us a note.
Phillip Avelar is a Managing partner at Advanced Solutions, based in Chicago. He works with SAP enterprises to optimize their supply chains, increase productivity and challenges the status quo. He shares his passion for solving customers problems in his blog posts, industry articles and conference talks.