SAP Solution Brief SAP Global Trade Management SAP Agricultural Contract Management

Objectives

Solution

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Effectively Manage Agricultural Contracts and Settlements in Dynamic Markets

Benefits

Quick Facts

Objectives

Solution

Benefits

Quick Facts

Manage agricultural contracts over their entire lifecycle Manage agricultural contracts over their entire lifecycle

Demand for food is up. And your agricultural company must navigate decreasing supplies, increasing production costs, volatile currencies and markets, and palpable risk. To succeed, you need to manage and execute complex agricultural contracts – and be able to determine in real time your true position in terms of inventory, finance, and risk. This requires having up-to-date contract, inventory, financial, and risk-related data available in one solution that works for multiple commodity types, such as corn, wheat, rice, soybeans, coffee, cocoa, sugar, and cotton. By integrating data and processes for finance, inventory, and risk management with contract management, the SAP®

Agricultural Contract Management application enables your organization to embrace the digital economy. You can centrally manage and control all contracts with thousands of business partners for a wide range of commodities. Centralized data eliminates the need for data reconciliations; enables smooth, end-to-end processes; and provides real-time visibility into your current position on inventory and contracts.

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Objectives

Solution

Benefits

Quick Facts

Create and maintain contracts Create and maintain contracts Capture and apply loads Centrally manage settlements and revenue recognition Identify and efficiently handle exceptions Manage commingled stock Proactively manage risk

SAP Agricultural Contract Management helps you create contracts faster and track frequent contract changes. To increase the efficiency of the deal entry process, the application provides contract template functionality and enables you to make contract amendments and cancellations, as well as specify related expenses to be considered during the settlement process. The application supports the diverse scenarios used to contract for a wide range of commodities, including: • Regular purchase and sales contracts • Spot purchase contracts

• • • •

Back-to-back contracts Inter- and intracompany contracts Washouts Circles

In addition, because the application supports various business scenarios with agricultural-specific contract requirements, you can incorporate specific terms for quality, tolerances, optionalities, and expenses – both planned and unplanned. Moreover, you can create contracts for specific periods of time, fix prices with their components (such as basis and futures), and manage contracts with partial or no pricing.

You can establish pricing at different times during contract execution and address partial quantities.

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Objectives

Solution

Benefits

Quick Facts

Capture and apply loads Create and maintain contracts Capture and apply loads Centrally manage settlements and revenue recognition Identify and efficiently handle exceptions Manage commingled stock Proactively manage risk

With SAP Agricultural Contract Management, you have instant access to the latest information needed to optimally match contracts and loads. You can also choose to move data directly from your weigh-bridge system or collect it manually through a user interface. As load data is received, you can assign deliveries to multiple contracts and validate loads against available quantities, contract terms for qualities, optionalities, and tolerances. Configurable business rules automatically apply loads to contracts with available pricings. These rules – which are highly flexible

and set up by customer, material, and location – allow for the fully automated application, semiautomated application, or manual application of loads. Using the manual application work center, you can also split loads among many contracts, create spot contract requests, and manage decisions about specific applications of loads to contracts. At every step, SAP Agricultural Contract Management automatically creates relevant documents in the background, such as delivery documents and goods receipts. This eliminates massive amounts of manual work, as well as human error and delays.

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Objectives

Solution

Benefits

Quick Facts

Centrally manage settlements and revenue recognition Create and maintain contracts Capture and apply loads Centrally manage settlements and revenue recognition Identify and efficiently handle exceptions Manage commingled stock Proactively manage risk

SAP Agricultural Contract Management calculates the settlement amount of contracts based on evaluated quality information, weights, discounts or premiums for executed optionalities, quantity tolerances met, and available pricings. If all pricings are available, the quality and weight information is final, and all foreign exchanges rates (if applicable) are fixed, you can make settlements final. If not, settlements are provisional. After the application completes the settlement calcula-

tion, it transfers the amounts to sales and distribution for billing and to materials management for invoicing. Using the software’s settlement work center, you can also simulate settlements before finalizing them; review settlement logs to analyze settlement calculations; create, approve, and release settlements; and reset the status of settlements. Continued on next page

Simulate various settlement options so you can understand their business impact and make informed decisions.

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Objectives

Create and maintain contracts Capture and apply loads Centrally manage settlements and revenue recognition Identify and efficiently handle exceptions Manage commingled stock Proactively manage risk

Solution

Benefits

You can also automate settlements, as well as do the following: • Make several provisional settlements of a single load • Incorporate all expenses related to a deal into settlements, allowing you to recover expenses from counterparties by deducting them from the settlement amount • Make individual settlements and group settlements • Support automated returns and reversal postings

Quick Facts

• Enable system-supported event monitoring for events that must occur to trigger automatic, required postings for revenue recognition and purchase realization In addition, SAP Agricultural Contract Management supports adjustments of settlements while maintaining transparency and allowing you to measure individual deal performance.

Run provisional settlements until all criteria are met for final settlement.

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Objectives

Solution

Benefits

Quick Facts

Identify and efficiently handle exceptions Create and maintain contracts Capture and apply loads Centrally manage settlements and revenue recognition Identify and efficiently handle exceptions Manage commingled stock Proactively manage risk

SAP Agricultural Contract Management simplifies and accelerates the handling of exceptions with nonstandard settlement functionality that supports: • Washouts: Detect washouts early and settle them efficiently, as the software automatically calculates the amounts left to be settled before you go through a full invoice cycle • Circles: Handle circles as you handle washouts, detecting them before you complete a full invoice cycle and automatically calculating the amounts left to be settled

• Partial and full cancellations of contracts: Use the application to automatically check if there is equity due to either party (based on what is in the contract) and generate the correct invoice As exceptions are identified and handled within SAP Agricultural Contract Management, the software makes data updates across inventory, risk, finance, and contracts functionality.

You can always know where your business stands and can track and audit transactions and history with ease.

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Objectives

Solution

Benefits

Quick Facts

Manage commingled stock Create and maintain contracts Capture and apply loads Centrally manage settlements and revenue recognition Identify and efficiently handle exceptions Manage commingled stock Proactively manage risk

SAP Agricultural Contract Management provides comprehensive support for managing third-party stocks at your locations, as well as your own stocks at third-party locations and commingled-stock business scenarios. Using the application’s integrated functionality, you can: • Create storage programs and storage agreements for individual farmers (or a group of farmers) who are managing storage and handling fees • Track all deliveries into commingled stock with detailed quality information, as well as load-outs (including load-out matching), and purchases from commingled and instore transactions and in-store sales

• Calculate adjustments to storage quantity • Split a delivery into commingled stock among several counterparties at the time of load-data capture and application • Assign deliveries to commingled stock to storage agreements and capture information regarding what type of warehouse receipt (negotiable and nonnegotiable) is associated with the delivery • Handle the settlement of storage agreements based on inventory or at time of load out, as well as reverse transactions and building accruals of storage fees, so that financial and inventory records are instantly updated and reflective of loads received, sold, and delivered • Run detailed storage-history reports

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Objectives

Solution

Benefits

Quick Facts

Proactively manage risk Create and maintain contracts Capture and apply loads Centrally manage settlements and revenue recognition Identify and efficiently handle exceptions Manage commingled stock Proactively manage risk

Because contract management and risk management functions are natively integrated within SAP Agricultural Contract Management, you can determine exactly what your risk position is at all times and for every contract managed. The application supports pricing of futures and basis price components using actual market prices and automatically calculates prices using the built-in commodity-pricing engine. In addition, whenever a pricing or logistics event occurs during the lifecycle of a deal, SAP Agricultural Contract Management creates or updates risk exposure records.

The application continuously retrieves and captures these records in several position reports, including: • A price type report, which provides information about which quantities in contracts are only partially or are fully priced for the different price components of futures and basis • A slate report, which provides information in a clear and concise manner about the risk exposure with regard to futures risk • A premium report, which provides accurate information about your risk exposure with regard to basis risk

Run any report at any time to give you realtime insights to intelligently balance risks and make data-driven decisions for your business.

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Objectives

Benefits

Solution

Quick Facts

Realize the benefits Realize the benefits

With real-time native integration of inventory, finance, and risk in SAP Agricultural Contract Management, you gain unparalleled visibility, control, and efficiency across your entire business. Gone are the days of aggregating information and estimating business performance and risk. Now you can establish a single source of truth that is always kept up to date in the course of daily business. As a result, you always know what your position is for every contract at any point in time. In addition, you can manage and execute all soft-commodity contracts using a single, flexible, dynamic application, which makes it easier to make informed decisions that result in better overall business performance. You can

work more quickly and accurately by automating high-volume processing of transactions based on configurable business rules, enforcing consistent management by exception, and auto-generating supporting documents for every transaction. Together, these functionalities significantly reduce manual transactions and human errors and eliminate extensive consolidation efforts at month end. This saves you considerable time and effort while giving you instant access to complete information about individual deals – and your entire soft-commodity business.

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Objectives

Solution

Benefits

Quick Facts

Summary The SAP® Agricultural Contract Management application enables end-to-end processing and provides a single source of truth for handling diverse types of commodities contracts and business scenarios throughout their lifecycles. It supports agricultural-specific terms and conditions, market-based pricing, and processes to effectively manage third-party stocks, as well as real-time, native integration between finance, inventory, and risk management.

Solution •• Contract management across the entire lifecycle •• Support for agricultural contract terms and market-based pricing •• Automated contract application and settlement for standard and complex scenarios •• End-to-end management of third-party stock scenarios •• Real-time, native integration of contracts with inventory, finance, and risk management

Objectives •• Optimize agricultural contracts despite rapidly changing prices and regulations •• Enable integration of management processes to keep data in sync throughout the contract lifecycle •• Increase transparency into contract performance

Benefits •• Flexible, dynamic management of commodity contracts and commingled stock •• Increased efficiency using high-volume processing and management by exception •• Real-time visibility into contract performance, inventory, and risk Learn more To find out more, call your SAP representative today or visit us online.

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