Significance and scope of backorder processing

[Former Member]

Folks

I am trying to understand the Significance and scope of backorder processing.

Is backorder processing a standard process that is run in every company frequently or is there a special need that drives this process ?

Thanks

[Former Member · Accepted solution]

Hi Sree

In simple term Back order Processing is more of a manipulation.

The quantity already assured to other customers earlier are being manipulated/changed here.

Back order is created in two scenarios.

1. If the order quantity is not totally confirmed.

2. If the requested delivery date can not be kept.

I will give you a simple example.

Suppose ,you have a material M1.

Your sales closing is 30th Oct.

As of to-day your stock is 1000 units, out of which suppose 200,300 and 400 units are already assured/promised to customer A,B and C respectively.

You are not going to receive any stock before 1st Nov.

In this scenario, suppose one of the biggest institution (your most important customer) has palced an order for 400 units and to be delivered before 30th Oct.,whereas you have only 100 units left open with you.

You have been trying for this order since last few months as this business is very lucrative, every year grows by atleast 30%,payment is very good, profit is very good, it is a prestigious institute where all compititors are active.

If you will not serve this order, then in future you will loose the business permanently which you can not afford.

In this situation what you will do ?

Obviously, You will change the already promised quantity earlier to other customer and find out 500 units for this order, and this process is called Back Order Processing.

Back order processing is of 2 types.

1. Manually (Here ATP quantities are reassigned manually as for confirmation and manage the required stock for the important customer)

Here t.code CO06 is used.

2. Automatic or via Rescheduling ( Here system does automatically taking the "Delivery priority" from the customer master into consideration). Here t.code V_V2 is used.

[Lakshmipathi]

Dear Sree

As you may be aware, Backorder Processing can be run via two T.Codes, viz.co06 and v_v2. We can differentiate these two codes. If you run co06, it is possible to list sales orders for the desired material and edit it manually. This can also even out shortfalls by assigning ATP quantities or taking back quantities confirmed somewhere else and be assigned once again

On the other hand, if you run V_V2, as like co06, you cannot change the quantity. Based on the order creation date and delivery priority, stocks will be allocated automatically. If you want any sale orders not to be rescheduled again, then you can check the box "Fixed date and qty" at schedule line tab, so that those orders will not be considered. This check box will be useful in case of top priority customers to whom, despatches should be made as committed.

Coming to your question, to the best of my knowledge, from SD side, v_v2 will be accessed by more companies than co06 just bcoz you have to allocate the stocks manually.

thanks

G. Lakshmipathi

[Former Member]

Hello,

Backorder processing is a functionality in SAP where you can change the committments and over-ride the blockage of stocks

marked against sales documents/deliveries. For e.g. you receive an order from a very important customer for material "A" but the entire quantity of A is committed to another customer "B" via earlier sales orders and this is where BACKORDER processing helps you to change the committment and shift stock due for B to A. This is the benefit of this funtionality.

It significance & scope is that by allocating stock to your important customer you will not loose this customer & will remain with you for long time.

It is the standard process in SAP

This is run for the important customer may be the customer is giving you the business which will give you some good percentage of profit. May be the customer is purchasing you your product in bulk. This will depend on the requirement from business.

Regards,

Naveed Ansari.