Intercompany

Processes –
Future Direction

FI End User Conference

Loren Schmidt
 New Master Data approach – “T” numbers

Why change now?

– Prior design was based only on valid financial / ITS unit codes
• P = Factory, S = Sales Operation, C = Corporate or Credit

- Automation of plant-to-plant material movements

• Requires a 1-to-1 assignment of plant to a customer/vendor #
• Single Company Code with Multiple Plants
• Separates “logistics” requirements at the plant level from “financial”
requirements at the company code level

2 | Document Title | Date

 New Master Data approach – “T” numbers

New numbering design

– 99999T* to be used for plant-level business partner

• Sold-to/Ship-to on Sales side, Vendor/Order Address on Purchasing side
– 99999E* to be used an exception when “T” number can not be technically used (e.g.
experimental parts process; Material Master number must be the same when plant is
assigned to the 99999* record)
– Existing 99999* numbers used to represent company codes
• Use Partner Functions in SD & MM to direct financial flow
• Must be Bill-to/Payer on Sales side, Invoice Presented By on Purchasing
• Longer-Term Potential to replace with 99999F* as we review financial interfaces

Transition
– Lengthy and confusing due to existing documents already in place
– New relationships trying to use “T” numbering; old relationships will need conversion
projects with SD/MM.

Link: New Intercompany Numbering Documentation

3 | Document Title | Date

 Intercompany Process Improvements

Background Definition – What is “intercompany” activity

– Interunit transactions comprised of three sub-processes:

• Billing – the charge of an individual transaction from one Deere unit to

another. This includes intercompany material movements and chargeouts
for services. The billing transaction results in an AR entry on one unit and
an AP entry on the other.

• Reconciliation – ensuring that matching transactions were recorded on

each of the two units’ ledgers.

• Clearing – technically marking the individual AR and AP line items as

complete and no longer open. This could occur through cash payment or
netting to a long-term intercompany account.

4 | Document Title | Date

 Intercompany Process Improvements

Business Case for Change

– EASSI
• Eliminate unnecessary processing steps or legacy systems; such as
manual reconciliations, ITS legacy system.
• Automate ongoing required processing steps; such as manual billing,
manual reconciliation, manual wire transfers for cash settlement.
• Simplify the processes.
• Standardize the process to reduce costs across global business and IT
communities.
• Integrate the processing with triggering events; such as SAP integration
between the logistics modules and FICO.

5 | Document Title | Date

 Intercompany Process Improvements

Business Case for Change

– Enterprise Level Projects & Global Growth
• Global Growth & ongoing unit implementations
• Inter-unit OFP Buy/Sell SAP-to-SAP (CWIS Replacement)
• Global Order Management (COMAR replacement)
• NextGen (Parts/DNS replacement)
• Hyperion replacement (BPC) and trading partner requirements
• Unit 90 implementation
• Worldwide Logistics implementation
• Treasury desktop implementation
• ITS decommissioning

6 | Document Title | Date

 Intercompany Process Improvements

As-Is Summary
– Billing
• SAP Standard processes in use:
– Cross-Company Code Stock Transport
– Intra-company stock transports (plant to plant) – no billing doc created.
– Pay on Behalf
– IDOC (SAP-to-SAP EDI)
– Head Office
– Alternate Payee
– Payer / Invoice Presented By partner functions
– RG00 > 1800 Delivery-Related Billing (Cross Company Code Sales Process)
– Cross Company Code GL postings – units on SAP landscape (CF00 to 7Q00)

7 | Document Title | Date

 Intercompany Process Improvements

As-Is Summary
– Billing (cont.)

• SAP Standard process available; but, used only for Wind Energy:
– Cross-company code CO settlements

• Custom processes in use:

– ITS, frequently in an aggregation process
– General Debit / Credit through FI invoicing (uses ITS hub)
– GLSU for cost center reclassification within same company code (Intra-company)
– Branch Third Party
– Manual invoicing
– Formal loan documents with manual entry

8 | Document Title | Date

 Intercompany Process Improvements

As-Is Summary
– Reconciliation – all custom processes
• Euro Netting Recon - Line by Line automated matching within Ag Europe
• Web statements
• GLSS Manual & Macro processes

9 | Document Title | Date

 Intercompany Process Improvements

As-Is Summary
– Clearing – all custom processes, except cash payment
• Euro Netting
• ZFITS* tran codes – aggregation and clearing through ITS
• Branch Third Party
• Cash payment

10 | Document Title | Date

 Intercompany Process Improvements

Scenario factors to Consider:

Geographic Country Specific

Type of Product Landscape Relationship Legal Relationship SBU Relationship? Relationship Relationship?
Same legal entity, same Same Region, Same
Whole Goods SAP>SAP, same landscape company code Same SBU Country Brazil invoicing rules
Same legal entity, different Same Region,
Attachment SAP>SAP, different landscape company code Different SBU Different Country India invoicing rules
Components SAP > non-SAP Different legal entity Equipment to JDF Different Region China Golden Tax
Parts non-SAP > SAP Company owned customers
Services-Scheduled non-SAP > non-SAP Unconsolidated Subs
Services/Miscellaneous
Services:Driver Based
(e.g. % of Sales)
JDF Receivables

11 | Document Title | Date

 Intercompany Process Improvements

Legal or Business Factors to Consider:

– Billing:
• Invoicing requirements by country
• In-Transit Inventory (new SAP solution in Enhancement Pack 5)
• Material Variance
• Trading partner for consolidations & reporting
• Multi-currency?

– Clearing:
• Cash movement required?
• Standardize Netting Processes?

– Other:
• Unit Code structure? – ability to move beyond two positions?
• Canada Inventory consignment? (Requirement or process or both?)
• Joint Ventures included? (Deere-Hitachi, Bell)

12 | Document Title | Date

 Intercompany Process Improvements

Potential Future Options

–Billing

• SAP Standard processes:

– Enable process owners to choose best method to post AR & AP
line items
• Increase use of Cross-Company Code Stock Transports within landscape
• Leverage Cross-Company Code Sales Order Process within landscape
• Increase cross-landscape IDOC billings by shipment (stop aggregated billing)
• Review feasibility of cross-company code CO settlements (security concerns)

• Custom Solutions:
– Non-SAP business partners
– Miscellaneous Ad-Hoc Transactions

13 | Document Title | Date

 Intercompany Process Improvements

Potential Future Options

–Reconciliation

• SAP Intercompany Reconciliation (within SAP GUI)

– FBICR3 - Standard SAP transaction to reconcile across systems.

• SAP Intercompany Reconciliation (SAP web-based tool)

– Can bring in data from non-SAP units

• Business Warehouse

• Cross-landscape reporting via RFC (remote function call – retrieve/report

from other SAP systems)
– This is currently in place in Ag Europe as custom solution

• Blackline

14 | Document Title | Date

 Intercompany Process Improvements

Potential Future Options

–Clearing
• In House Cash (payment processing center)
– Each unit has “virtual bank account” (think Net Account)
– AP Payment Instructions sent from Unit to In House Cash
– In House Cash arranges cash movement or posts entries to “virtual bank account”
– In House sends Electronic Bank Statements to both parties to use in clearing
individual line items.

– In House Cash also can act as “Pay On Behalf”

• Potential long-term replacement to our custom Global Cash Management solution.

15 | Document Title | Date

 Intercompany Process Improvements

Current Activities:

– Meeting with GLSS in two weeks for strategic alignment

• If accepted, would include in several charters for cross-company code
billings

– Completing setup and testing for standard cross-landscape

reconciliation transaction

16 | Document Title | Date