Explain in detail the configuration steps involved in Customer Hierarchy and how can we validate the Customer Hierarchy in Sales Order Processing.

Follow the steps for customer hierarchy:

spro -> s&d -> master data -> business partner -> customer -> customer hierarchy.

(1) define hierarchy types (OVH1) (optional) (you can use the standard type A)
(2) set up partner determination for cust hierarchy 

a) Partner functions
1a     ku      1b       A (see the step 1)
1b     ku      1c       A
1c     ku      1d       A
1d     ku      --        A

b) A/C group functions assignment
sold to  a/c gr  1A, 1b, 1c, 1d
bill to     -do-   1A
ship to   -do-   1A
payer     -do-   1A

3) Assign a/c groups OVH2
standard a/c gr      your a/c gr( as example)
0012                    sold to
sold to                  ship to
ship to                  bill to 
(do it as per your requirement)

4) Assign sales areas. OVH3
New entries
higher level to lower level
(what ever the discounts you maintain for the higher level it will be passed to lower level)

5) Assign hierarchy types for pricing by sales document types OVH4

6) Create nodes  V-12  (condition record)
use the standard account group 0012(see the 3rd step)

7) Condition record for maintaining customers in hierarchy levels. 
VDH1N. use the standard type A and use the node number that you have created in above step.
click on create
Heir level customer node number
lower level customer XXXXXXXXXX ( from the sales area and a/c groups used above steps for assignments)

**First time using the node in the higher level is must
see the chart  0012-----
                      --------XXXXXXX
                       -------YYYYYYY
                      --------ZZZZZZZ
                              ---------kkkkkkk

All the  X  Y and Z customers are assigned  to node directly but customer k is assigned to cust Z meaning : the discount given to node 0012 will be passed on to all But cust k will only get the discount that assigned to cust z.

** Maintain hierarchy discount types HI01 or HI02 in pricing procedure.
** Maintain discount on the above condition types in VK11 by node or customer.

SAP SD Books :-
SAP Sales and Distribution, Interview Questions, Certification and Configuration Books

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SAP SD Pricing

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Billing / Shipping

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