Understanding Internal Freight Calculations
This section discusses:
Using deliveries with freight charges.
Freight charge methods, freight arbitration plans, and units of measure calculations.
Billing freight charges.
You can calculate internal freight during order entry by setting up arbitration plans and rules by:
Basing the freight charge calculations on four different freight methods: weight, volume, order quantity, or the value of the order.
Setting up and assigning a default value to the freight method for the order from the buying agreement, sold to customer, or order group.
The freight method can also appear by default from the selection on the Inventory business unit Shipping Options page.
To calculate internal freight charges at order entry, deliveries must be created. Deliveries enable you to group order schedules logically with the same shipping information so that freight charges can be calculated accurately. You can have multiple freight methods such as weight, volume, value, and quantity for each sales order, but each delivery can have only one freight method. The system automatically manages the deliveries for you on the sales order.
Note: In PeopleSoft Order Management, you must have one freight charge method for each delivery, but you can have multiple deliveries for each sales order. At shipment in PeopleSoft Inventory, there can be only one freight charge method per sales order within a single shipment.
If a schedule qualifies to become part of an existing delivery, the system verifies that the freight charge method on the new schedule matches the default value from the buying agreement, sold to customer, or order group:
If the freight charge method matches, the system adds the schedule to the delivery.
If the freight charge method does not match, the system automatically creates a new delivery for the schedule.
The freight charge method determines which value the system uses to find the appropriate freight breaks.
To calculate internal freight, the system evaluates the delivery as it is added to the order and determines the freight sets and resulting charges that apply to the delivery. To get the total freight charges for the delivery, the system adds up the freight charges on all freight breaks applied to the delivery. The system then adds up the sums of the delivery freight charges, to get the total freight charge for the order.
After calculating the freight charges, the delivery, delivery freight charges, and total order freight charges appear for the entire order. To change or override the total freight charge for the order or to not charge the customer freight for the order, you enter a different amount or zero for the freight charges on each delivery of the order on the Freight Charges page.
If you are using the single shipment option, freight can only be changed at the order header level. When the Populate Billing process (OM_BILL) is run, the freight amount is picked up and passed to PeopleSoft Billing on the first shipment of the order. In the case of multiple shipments for an order, the total freight amount is charged and billed on the first invoice. A flag is set on the Delivery table to indicate that freight has already been billed, so it will not be billed again with subsequent shipments for the order. If the seller pays for freight, no freight charges are passed to PeopleSoft Billing; however, the estimate for freight charges at order entry is still calculated and can be used for your own analysis.
Freight charges are passed to third-part suppliers. The suppliers determine if any tax is applicable to the freight charges.
If you are using credit card processing, the Order Repricing process reprices orders and includes the freight amount and the new price in the credit card amount stored at the order header level.
Freight calculations are based on four freight charge methods: order quantity, order value, shipping volume, and shipping weight. The method must take into account units of measure. When you select a method, the system performs the unit of measure conversion if the schedules in the delivery need to be converted to a common unit of measure.
Note: To ship certain items together on a single delivery, verify that you have a common unit of measure. If the system does not find a common unit of measure to convert to, it creates another delivery.
The same units of measure conversion for freight calculations applies to weight and volume pricing.
The freight arbitration plan defaults from the Inventory business unit to the delivery. The freight arbitration plan flags tell the system which delivery total values must be maintained in order to properly calculate freight. You can select one or more of these flags on the arbitration plan. These freight arbitration plan flags are:
Freight by Order Quantity
The system manages the total quantity of the delivery in the ordering unit of measure of the first line added to the delivery. If subsequent order schedules do not have conversion rates defined for the current delivery unit of measure, the system forces the new order schedule to a new delivery.
Freight by Order Value
The system manages the total value of the delivery in transaction currency.
Freight by Shipping Weight
The system manages the total weight of the delivery in the shipping weight unit of measure defined for the first item added to the delivery. If subsequent order schedules do not have conversion rates defined for the shipping weight unit of measure, the system forces the new order schedule to a new delivery.
Freight by Shipping Volume
The system manages the total volume of the delivery in the shipping volume unit of measure defined for the first item added to the delivery. If subsequent order schedules do not have conversion rates defined for the shipping volume unit of measure, the system forces the new order schedule to a new delivery.
Note: The freight arbitration plan freight-by flags should complement the freight charge method that defaults from the buying agreement, customer, or order group.
The freight arbitration plan freight-by flags can affect the number of deliveries created for the sales order if you have not defined all the required conversion rates.
Order Value
If you use order value as the freight charge method, the system calculates internal freight by summing the extended net prices of the order schedules for each delivery and checking against the order value freight breaks to see what freight charges to add to the order. The total order freight charge is the sum of the freight charges calculated for the order values of each delivery.
Order Quantity
If you use order quantity as the freight charge method, the system calculates internal freight by summing the quantities of the order schedules for each delivery and checking against the order quantity freight breaks to see what surcharges to add to the order. The total order freight charge is the sum of the freight calculated for each of the deliveries.
If the schedules have different units of measure, the order quantity freight charge method converts the units of measure on each schedule of the delivery to a common unit of measure. The common unit of measure is the default from the first schedule in the delivery.
If there is no conversion for the different ordering units of measure, a new delivery is created by the system. Set up unit of measure conversions on the Units of Measure page.
The example illustrates how the total order quantity is determined using a unit of measure conversion. In the example, six eaches makes up one case:
The delivery contains schedule 1 and schedule 2.
The schedule 1 quantity is one each.
The delivery quantity unit of measure is each.
The schedule 2 quantity is one case.
The ordering unit of measure for the item is eaches.
This each is converted to the standard unit of measure for the item, which is eaches. The schedule 2 case is converted to the standard unit of measure, which is six eaches. Total quantity is maintained on the delivery in the eaches' unit of measure.
The total order quantity for the delivery is seven eaches.
The example illustrates how the total order quantity is determined without using a unit of measure conversion:
The delivery contains schedule 1 and schedule 2.
The schedule 1 quantity is one each.
The delivery 1 quantity unit of measure is each.
The schedule 2 quantity is one case.
The delivery 2 quantity unit of measure is case.
Because there is not a converted unit of measure, there are two deliveries.
Volume or Weight
If you use shipping weight or volume as the freight charge method, the system calculates internal freight by assigning a shipping unit of measure to the delivery. The first schedule assigned to the delivery determines the shipping unit of measure for the delivery. The system finds the shipping unit of measure assigned to the inventory item for the inventory business unit.
If there are multiple shipping units of measure defined for the item or inventory business unit, the system selects the shipping unit of measure that is the same as the ordering unit of measure.
If there is no shipping unit of measure to match the ordering unit of measure, the system selects the first shipping unit of measure. Each shipping unit of measure is assigned a weight and volume unit of measure. These are the weight and volume units of measure assigned to the delivery.
The system then converts the order schedule quantity in the ordering unit of measure to the quantity in the shipping unit of measure on the delivery. Then the shipping weight and shipping volume of the order schedule are determined in the correct units of measure and are used to maintain the total shipping weight and volume for the delivery.
To meet PeopleSoft Inventory packing requirements, the system attempts to find the shipping weight and volume units of measure defined for the inventory business unit pick plan options. If these exist, the system assigns these weight and volume units of measure to the delivery.
If the PeopleSoft Inventory business unit weight or volume unit of measure is different from the delivery weight or volume unit of measure, the system checks to see if a conversion factor has been defined between the units of measure. If no conversion factor is defined, the weight or volume units of measure defined for the picking and packing options for the inventory business unit are not used.
When new schedules are added to the delivery, the system verifies that a conversion factor is defined for the weight and volume units of measure if the weight or volume units of measure are different between the new order schedule and the existing delivery. If no conversion rate is defined, the system forces the new order schedule to a new delivery with new weight and volume units of measure.
The shipping unit of measure, the shipping weight unit of measure, and the shipping volume unit of measure appear on the Inventory Definition - Business Unit Options: Delivery Management Definition page.
The example illustrates how the shipping weight is determined. Ensure that all of the schedules in the delivery can be converted to the same weight unit of measure that you want to use to calculate freight:
Four lines and schedules with the same shipping information.
The products on the first three schedules have weight measured in pounds.
The weight of the product on the last schedule is in ounces.
If there is a conversion rate to convert ounces to pounds, all four schedules can be on the same delivery for the freight calculation. If a schedule cannot be converted to a common unit of measure, a new delivery is created for the last schedule.
The internal freight charges that are passed to billing are either the amount estimated at order entry or at shipping time based on your selection on the customer Bill To Options page, which accesses the Bill To Details section of the Order Entry Form page by default. Internal freight charges can be calculated at order entry time and again at shipping time.
If you are using the order value freight charge method, you must select bill at order entry. Then the internal freight charges can be recalculated or overridden up until the time when the first line of the schedule has been shipped.
When calculating internal freight at shipping time, freight charges are captured in the base currency of the inventory business unit that is established on the Inventory Definition - Business Unit Definition page.
The freight terms designate who pays for the freight, either the buyer or seller. The default freight terms appear in the Ship To section of the Shipment Schedules page, but they can be overridden at the order header or schedule level.
The delivery Commit Freight for Billing flag must be set to Yes for OM_Bill to pass the freight charges to Billing. The Commit Freight for Billing flag on the delivery is used to indicate to the system that the freight amounts are ready to be billed and costed.
Note: For sales orders with freight charges, the freight amount for the total order will be calculated and shown on a separate line.