Cross Company Logistics and Actual Costing

Dr. Ralf Humbert Development Architect Material Ledger SAP

Disclaimer

This presentation outlines our general product direction and should not be relied on in making a purchase decision. This presentation is not subject to your license agreement or any other agreement with SAP. SAP has no obligation to pursue any course of business outlined in this presentation or to develop or release any functionality mentioned in this presentation. This presentation and SAP's strategy and possible future developments are subject to change and may be changed by SAP at any time for any reason without notice. This document is provided without a warranty of any kind, either express or implied, including but not limited to, the implied warranties of merchantability, fitness for a particular purpose, or non-infringement. SAP assumes no responsibility for errors or omissions in this document, except if such damages were caused by SAP intentionally or grossly negligent.

SAP 2007 / Page 2 2008

Introducing a Valuated Stock in Transit

SAP 2007 / Page 3

Issue 1: Intercompany Stock Transfers within the Group

Group Stock Dec. 15th 2.000.000 Dec 16th 1.900.000 !!! Feb 5th 2.000.000 (+Transfer Profit)

Company A

Company B

Shipping
Dec. 16th, 100.000 Stock at Company A Dec 15th 1.000.000 Dec 16th 900.000

Goods Receipt
Feb. 5th, 100.000 (+ Transf. Profit) Stock at Company B Dec 15th 1.000.000 Feb 5th 1.100.000 (+TP)

During the Transport Stock disappears from the Books!

SAP 2007 / Page 4

Usage of valuated Stock-In-Transit

SAP 2007 / Page 5

Goods Movements

Process variants using stock in transit

Sender Company Code

Billing Document

Purchase Order

Receiver Company Code In transit In plant

In plant

In transit
645 / 101

1 2 3 4

Senders Free Stock

Senders Free Stock Senders Free Stock Senders Free Stock 681 Senders SIT Senders SIT

Receiverss Free Stock

Receiverss Free Stock Receiverss SIT Receivers SIT 109 Receiverss Free Stock Receiverss Free Stock

685 / 101

681

685 / 107T

683 / 107 T

109

Corresponding t-codes to movement types: VL02N

SAP 2007 / Page 6

VLPOD

MIGO

Goods Movements
Returns

Sender Company Code

Billing Document

Purchase Order

Receiver Company Code In transit In plant

In plant

In transit

r1
r2 r3 r4

Senders Free Stock

Senders Free Stock Senders Free Stock Senders Free Stock Senders SIT Senders SIT Senders SIT Receiverss SIT Receiverss SIT

Receiverss Free Stock

Receiverss Free Stock Receiverss Free Stock Receiverss Free Stock

SAP 2007 / Page 7

Solution Properties

Valuated Stock in Transit The Solution will have the following properties:

Stock in Transit (SIT) will be valuated SIT valuation will be stable and separated from the free stock SIT stocks postings can be on separate G/L accounts New Movement types for transfers between free stock and SIT and between SITs Ownership transfer may be triggered by proof of delivery Returns out of SIT will be posted with the original material value Usage of SIT configured by STO order line item type, material, supplier

Solution will support:

Handling Units
Batches Sales order Assignments Actual costing Parallel valuation, e.g. group valuation with transfer prices Profit center accounting

SAP 2007 / Page 8

Basics of Actual Costing

SAP 2007 / Page 9

Issue 2 Cross-Company Actual Costing

Actual costing provides no visibility into cost structure after inter-company sales

2
Group
Company 1
Costs Raw Mat. 20 Energy 25 Labour 15 Production 40

The enhanced Solution shall keep the cost transparency through intercompany sales and add freight costs and intercompany profits to the costs from the selling company code from a group point of view

Company 2
Costs Raw Mat. 100 Energy 0 Labour 0 Production 0

Sales process

A solution to issue 1 is precondition to solve issue 2 in standard

SAP 2007 / Page 10

Reasons for Usage of Material Ledger

Actual Costing
Multi-level Periodic Material Prices

Transparency
of Value Chain

Material Ledger
Inventory Valuation

Parallel Currencies
Valuation with Historic Exchange Rates

Parallel Valuation
Transfer prices

Group
SAP 2007 / Page 11

Legal Profit Center

Actual Costing

Collection of Values into price determination scheme

Material Movements Purchasing Invoices Production order settlements Debits/Credit

Quantity Beginning Inventory Value Value Variances Price

Building the Quantity Structure

Receipts
Cumulative Inventory Consumption Beginning Inventory + Receipts

Ending Inventory
SAP 2007 / Page 12

Cumulative Inventory - Consumption

Goods Issue to Production Activities to Production Goods receipt from Production Stock Transfers Sales

Multilevel Price Determination

Production

D D

Roll-up price differences D from raw materials to finished materials

Production

External Procurement

D D

External Procurement

SAP 2007 / Page 13

Actual Cost Component Split Profitability Analysis

Production

Overhead Process Labor Material

D
Production

D
D

Overhead Process Labor Material

D DExternal Procurement D

External Procurement

SAP 2007 / Page 14

Profitability Analysis based on Actual Costs

Actual Values in Profitability Analysis Contribution Margin Accounting

Cost of Sales Split into Cost Components Plan/Actual Variance Analysis
Sales Quantity: Revenues: Plan Raw Materials Labor variable Machine variable Logistic Processes Material Overheads Contribution Margin I Labor fix Machine fix 50,000 4,000 4,000 10,000 5,000 27,000 10,000 7,000 Actual 45,000 5,000 4,500 7,000 5,500 33,000 10,000 7,000 1,000 pc 100,000 US$ Var. Abs. 10 % - 25 % - 13 % 30 % - 10 % 22 % 0% 0% 5,000 -1,000 - 500 3,000 - 500 6,000 0 0

Var. %

Contribution Margin II

10,000

16,000

6,000

60 %

SAP 2007 / Page 15

Product Cost Controlling Through a Period

Cost Planning
Evaluating master data

Production
Recording logistical information for controlling:

Actual Costing
Recalculating the value flow using

Profitability Analysis
Reporting Costs and Contribution Margins

Bill of materials Routing Planned prices

Consumptions Yield & scrap

Planned activities Planned yield

Purchasing & supplier invoices Activities & time recording

Actual quantity structure Actual activity recording Multi-level value flow Actual raw material prices

Production costs Sales Revenues

Dimensions

Regions Channels Customers

SAP 2007 / Page 16

Screenshots
periodic costs

SAP 2007 / Page 17

Valuated Quantity Structure

SAP 2007 / Page 18

Profitability Analysis

SAP 2007 / Page 19

Enhancement for Cross-Company Actual Costing

SAP 2007 / Page 20

Typical Sales Process in a Global Group

Several group internal sales processes before a product reaches a customer

Group Marketing Regional Sales Org
Costs Raw Mat. Energy Labour Production Maintenance Freight Marketing Duties Intercompany profit Sales Costs

Plant

Customer

Costs Raw Mat. Energy Labour Production Maintenance Freight Marketing Duties Intercompany profit Sales Costs

Costs Raw Mat. Energy Labour Production Maintenance Freight Marketing Duties Intercompany profit Sales Costs

Revenues Costs Raw Mat. Energy Labour Production Maintenance Freight Marketing Duties Intercompany profit Sales Costs Profit

In SAP standard an internal sales process cuts the value flow for actal costs. Costs will only be transparent for the last step in the chain. Costs from previous steps will appear as raw material costs only
SAP 2007 / Page 21

Sales Process

with enhanced Cross-Company Actual Costing

2 group internal sales processes before a product reaches a customer

Group Marketing Regional Sales Org
Costs Raw Mat. Energy Labour Production Maintenance Freight Marketing Duties Intercompany profit Plant Sales Costs Intercompany profit Marketing

Plant

Customer

Costs Raw Mat. Energy Labour Production Maintenance Freight Marketing Duties Intercompany profit Sales Costs

Costs Raw Mat. Energy Labour Production Maintenance Freight Marketing Duties Intercompany profit Plant Sales Costs

Revenues Costs
Energy Labour Production Maintenance Freight Marketing Duties Intercompany profit Plant Sales Costs Intercompany profit Marketing

Profit

With the enhancement the profitability will make cost and profit contributions from the whole chain transparent. Actual costs of the month in mine, marketing and sales will be compared with actual revenues
SAP 2007 / Page 22

Issue 2 Cross-Company Actual Costing

Actual costing provides no visibility into cost structure after inter-company sales

The enhanced Solution shall keep the cost transparency through intercompany sales and add freight costs and intercompany profits to the costs from the selling company code from a group point of view

Group
Company 1
Costs Raw Mat. 20 Energy 25 Labour 15 Production 40

Company 2
Costs Raw Mat. 100 Energy 0 Labour 0 Production 0

Sales process

A solution to issue 1 is precondition to solve issue 2 in standard

SAP 2007 / Page 23

SAP solution multiple steps

Invoice 1100,Production
legal Total cost Materials Labor Overhead Freight 1000 500 400 100 group 1000 500 400 100 Total cost Materials Labor Overhead Freight

Invoice 1300,Trader
legal group 1100 500 400 100 100 1200 1100 0 0 100

Regional sales
legal group 1150 500 400 100 150 Total cost Materials Labor Overhead Freight 1350 1000 0 0 50

Sold to

Sold to

Shipper

Freight invoice 100,-

Freight invoice 50,-

SAP 2007 / Page 24

Properties of the Solution Cross-Company actual Costing

The Solution will have the following properties:
-

Cross-Company Sales Process is a multi-level process. Actual costs will be transmitted at following events
-

Goods receipt Invoice receipt

Period end closing

As part of the cost component split intercompany profits will be shown at receiver by comparison of invoiced price with actual cost at sender Configuration to define cost components as inter-company profits Legal valuation will include intercompany profits, group valuation will exclude these

Freight costs and other delivery costs will be added to actual costs
Mixed scenarios of (internal) procurement, own production and further process steps will be supported

SAP 2007 / Page 25

Thank you!

SAP 2007 / Page 26