Cost Distribution Management

Freight costs are an important part of financial reporting in your businesses. You need the ability to allocate freight costs at charge element level across a number of charge sources to manage the following business processes:

Freight costs
Material valuations
Profitability of customers, products, and lines of business
Customer billing for logistics service providers (LSPs)

As an LSP, you can use cost distribution to meet the following business needs:

Manage and assess the cost of executing freight orders, including an analysis of the following elements:
- Your own company resources
- Subcontracted costs such as the cost of resources and base freight
Create customer settlements based on distributed internal and subcontracted costs
Use distributed costs from a freight order for the following activities:
- Customer billing for LSPs
- Profitability analysis of forwarding orders

As a shipper, freight costs cover the following stock movements:

Inbound

Purchases
Sales returns
Intercompany or intracompany stock transfers

Outbound

Customer sales
Purchase returns
Intercompany or intracompany stock transfers

As an LSP, you can use the freight cost from external sources, such as a freight order, freight booking, or service order, and internal costs, such as the cost of providing internal resources such as trucks and trailers, as a basis for creating settlement documents. You can base settlement documents on costs as follows:

Use the distributed cost as a basis of settling with your customers. For more information, see Cost Pull.
Use a mixture of distributed cost, such as the cost of providing internal resources, and rate tables to settle with your customers. For more information about rate tables, see Standard Charge Calculation.
Use the distributed cost, or a mixture of the distributed cost and rate tables, to create internal settlements between your internal companies. For example, you can create an internal settlement based on the distributed cost, between the purchase organization in the freight order or freight booking that provided the freight service, and the sales organization in the forwarding order. For more information, see Internal Settlement Management.
Use the distributed cost for a profitability analysis of your forwarding orders. For more information, see Profitability Analysis.

The system uses the freight charges in the freight order, freight booking, service order, and freight settlement document as the basis for distributing freight costs from external sources, such as carriers or LSPs.

The system uses the internal freight charges that you incur when you use internal resources as a basis for distributing internal costs. The system calculates internal freight charges in the freight order.

You can only distribute costs in a freight document where you have a logistics item that comes from an ERP item or a forwarding order.

Prerequisites

For both shippers and LSPs, you have specified the cost distribution settings in Customizing for Transportation Management under Basic Functions Cost Distribution .
For both shippers and LSPs, you have used the following settings to assign the distribution profile to the relevant organization:
1. Assigned the distribution profile to the relevant charges profile in Customizing for Transportation Management under Basic Functions Charge Calculation Basic Settings Define Charges Profiles
2. Assigned the charges profile to the relevant purchasing organization in Customizing for Transportation Management under Master Data Organizational Management Organizational Model Change Organizational Model . You assign the charges profile on the Org. Data (Organization Data) tab page of the relevant purchasing organization.
For LSPs who want to use the freight cost in a freight document for internal settlement, you must enable freight document for cost distribution.
For more information, see the following Customizing activities:
- For freight orders, see Customizing for Transportation Management under Freight Order Management Freight Order Define Freight Order Types .
- For freight bookings, see Customizing for Transportation Management under Freight Order Management Freight Bookings Define Freight Booking Types .
- For service orders, see Customizing for Transportation Management under Freight Order Management Service Order Define Service Order Types .
For shippers who want to transfer the freight cost at ERP item level, you must enable the freight settlement document for cost distribution. For more information, see Customizing for Transportation Management under Settlement Freight Settlement Define Freight Settlement Document Types .

Note
You cannot enable internal cost distribution for a freight booking. You can use an internal resource such as a truck or a trailer to execute a freight order. You can distribute costs for an internal resource in a freight order.

End of the note.

Features

Method, Rule, and Level

You can view the results of a cost distribution on the user interface (UI). You can only change the distribution settings in Customizing. The following are the main cost distribution features:

Distribution method
The system distributes costs in a direct or hierarchical distribution. In a direct distribution, the system distributes costs according to the attributes you specify in the distribution rule and distribution level without reference to where in the item hierarchy you package a product. In a hierarchical distribution, the system uses a step-by-step approach to take each level of the packaging hierarchy into account in the distribution.
Distribution rule
The system uses criteria such as gross weight, net weight, gross volume, and distance times gross weight to perform a cost distribution.
Distribution level
The system uses a target level of forwarding orders or ERP items in a distribution.

Service Orders

You can distribute costs in a service order to allocate the cost of the service order to the underlying distribution item.

More Information

Topic	Link
Use cost distribution for shippers, including individual prerequisites	Cost Distribution for Shippers
Use cost distribution for LSPs, including individual prerequisites	Cost Distribution for LSPs
Use cost distribution in service orders for both shippers and LSPs, including prerequisites and business case examples	Cost Distribution in Service Orders for Shippers and LSPs
Use of cost distribution in a group logistics scenario	Group Logistics Company Process
Role and structure of freight orders	Freight Order
Transfer distributed costs from the freight side to the forwarding side, and use the costs as a basis for settling with a customer or an internal organization.	Cost Pull
Create and edit a service order; structure of a service order	Service Order
Define service order types	Creation and Editing of Service Orders
Include service items in a freight document	Service Items