AC515

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AC515 Cost Object Controlling for

Sales Orders

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AC515 Cost Object Controlling for Sales Orders

AC515

Cost Object Controlling

for Sales Orders

Cost Object Controlling

for Sales Orders

R/3 System Release 4.6C December 2000 5004 3573

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Copyright

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Controlling

Cost Management and Controlling AC040 5 days Cost Center Accounting AC410 3 days

Product Cost Planning

AC505 4 days Profitability Analysis AC605 5 days Profit Center Accounting AC610 2 days Executive Information System (EIS) 1 -Reporting AC615 4.6B 2 days

Level 2

Level 3

Cost Center Accounting: Extended Functionality AC412 2 days

Activity Based Costing

AC420 2 days Cost Object Controlling for Products

AC510 3 days

Transfer Prices

AC650 2 days Executive Information System (EIS) - Setting up the System

AC620 4.6B 2 days Overhead Orders

AC415 2 days

Cost Object Controlling for Sales Orders

AC515 3 days Actual Costing / Material Ledger AC530 3 days Executive Information System (EIS) 3 -Business Planning AC625 4.6B 1 day Schedule Manager AC690 2 days

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SAP20 - SAP R/3 Overview (recommended)

AC040 - Cost Management and Controlling (recommended)

AC505 - Product Cost Planning

Basic knowledge and experience in cost accounting

Good working knowledge of Windows operating

environment

Course Prerequisites

User Note

The training course material is not intended for self-teaching programs. Only in combination with the explanations provided by the instructor will you receive all course material. Your material includes space for noting this additional information.

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Audience

Project team members responsible for implementing product

cost controlling related to sales orders

Accounting personnel responsible for planning, allocating,

and analyzing the cost of production processes related to

sales orders

Duration: 3 days

Target Group

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Course Overview

Course Goals

Course Objectives

Course Content

Course Overview Diagram

Main Business Scenario

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Course Goals

This course will enable you to:

Configure and operate Cost Object Controlling

by Sales Order

Acquire the knowledge you need to plan, post,

allocate, and analyze costs in several

Make-to-Order Scenarios

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Course Objectives

Distinguish between several Make-to-Order Scenarios

Describe and maintain Cost Object Controlling by

Sales Order master data and related information

Identify sources of Cost Object Controlling by Sales

Order postings and perform transaction processing

Discuss periodic processing options and

underlying configuration

Analyze cost information about sales orders

using reports

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Course Content

Unit 1

Introduction

Unit 2

Overview Product Cost

Controlling

Unit 3

Make-to-Order Scenarios

Unit 4

Make-to-Order without

Sales Order Controlling

Preface

Exercises

Solutions

Appendix

Unit 5

Make-to-Order with

Sales Order Controlling

Unit 6

Period-End Closing

Unit 7

Sales Order Controlling

without Manufacturing

Unit 8

Information System

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Course Overview Diagram

Introduction

Overview Product Cost Controlling

Make-to-Order Scenarios

Make-to-Order without Sales Order Controlling

Make-to-Order with Sales Order Controlling

Period-End Closing

Sales Order Controlling without Manufacturing

Information System

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Main Business Scenario

You are in the Cost Accounting department of the

IDES Group. IDES, with the help of external

consultants, has implemented the SAP R/3 System,

including Cost Object Controlling by Sales Order.

Initially, you are temporarily assigned to the project

team to review the customization of Cost Object

Controlling by Sales Order. You will not only verify

the configuration choices, but will also assist the

consultants in making changes and completing the

system set up.

Once the system is productive, you will be one of

the primary users of Cost Object Controlling by

Sales Order.

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Overview Product Cost Controlling

Integration of Product Cost Controlling

Benefits of Product Cost Controlling

Cost Object Controlling

by Order

by Period

by Sales Order

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Explain how product cost controlling relates to

other CO components

Explain how to use cost object controlling

Explain the differences between cost object

controlling

by order

by period

by sales order

Overview Product Cost Controlling: Objectives

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Course Overview

Introduction

Overview Product Cost Controlling

Make-to-Order Scenarios

Make-to-Order without Sales Order Controlling

Make-to-Order with Sales Order Controlling

Period-End Closing

Sales Order Controlling without Manufacturing

Information System

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Overview Product Cost Controlling:

Business Scenario

You are in the Cost Accounting department of the

IDES Group. IDES, with the help of external

consultants, has implemented the SAP R/3 System,

including Cost Object Controlling by Sales Order.

We are in the situation to analyze which business

processes in our plant will utilize Cost Object

Controlling.

We must analyze what production types are used

and what the main requirements in

Cost Object Controlling are.

Because of this, we must know what controlling

methods are supported by Cost Object Controlling

in the R/3 system.

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Roadmap: Overview Product Cost Controlling

Integration of Product Cost Controlling

Benefits of Product Cost Controlling

Cost Object Controlling

by Order by Period by Sales Order

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Profit Center

Enterprise

Controlling

Management

Consolidation

Business

Planning

EC

TR

TREASURY

Cash

Treasury

Fonds

CO

CONTROLLING

FI

FINANCIAL

ACCOUNTING

Investment and financing

G/L

Receivables/

Payables

Asset

Consolidation

Overhead

Product cost

Profitability

FI FI IM IM

EIS

Accounting Architecture

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P

rof

it

C

e

nt

e

r A

c

oun

ting

Product Cost

Controlling

Overhead Cost Controlling

CO OM CO

PA

Profitability Analysis

Are the responsibility areas working efficiently?

How high are the costs of organizational activities? Do they keep to their budgets? How can we optimize the internal processes?

How can we rein in our overhead?

EC-PCA CO PC CO CEL

What costs occur within our organization?

Cost Element Accounting

What are the

manufacturing

costs of a

product?

How profitable are individual

market segments?

How profitable

are individual

enterprise areas?

CO Components

How do we rein in our overhead costs? In many organizations, overhead costs have taken a huge upward jump, including costs which the organization cannot assign directly to either products or services. While production areas often display great progress in controlling costs and optimizing processes, overhead continues to display little cost transparency. Overviews and allocations of overhead costs are supported by the following three application components in Overhead Cost Controlling (CO-OM).

Are our responsibility areas actually working efficiently? Cost Center Accounting (CO-OM-CCA) examines where overhead costs arise within the organization. You can assign the costs from

organizational sub-areas to their exact causes, with a wide variety of allocation methods to choose from when allocating amounts and quantities. In particular, activity accounting permits allocation of a great many of those costs which would not be normally assigned to products.

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What costs occur within our organization? Cost Element Accounting (CO-OM-CEL) indicates which costs and revenues have occurred and is used for reconciliation of cost controlling with the Financial Accounting (FI) module.

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© SAP AG 1999 EC EC- -PCA PCA HR HR CO CO PC PC Production Order Process Overhead Order Material Valuation Cost Center Profitability Analysis Profitability Analysis P rof it C e nt e r A c c o u n ting Product Cost Controlling Overhead Cost Controlling Human Resources

Cost Element Accounting

CO CO OM OM CO CO PA PA Profitability segment

Financial

Accounting

Financial

Accounting

Asset WIP Revenue

FI

Stock

CO-Architecture: Quantities and Values

Material Labor OH Process

Procure Produce Move Stock Sell, Bill

This diagram illustrates the quantity and value flow. The quantity flow is triggered by processes in logistics

(procurement, production, stock movements , selling and billing) Product Cost Controlling is integrated through the processes in logistics.

it sets prices for material valuation

it provides cost component splits for valuation in Profitability Analysis

production cost centers and business processes allocate costs to cost objects (like production orders) in CO-PC

it calculates Work in Process

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Benefits of Product Cost Controlling

Integration of Product Cost Controlling

Benefits of Product Cost Controlling

Cost Object Controlling

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§

Product Cost Controlling - Benefits

Management Requirements

Support

cost reduction

concepts

Strategic

Decision Support

which products

where or how to produce

Operating

Decision Support

pricing of products effectiveness of manufacturing

§

Legal Requirements

Valuation of:

Raw Materials

Semi finished Goods Finished Goods

Work-in-Process

Reserves for Losses

Evaluate the effectiveness of your production system. - set meaningful standards to measure performance - use variance analysis to compare

- report by plant, product group, product or even order Strategic decisions

- (primary) cost component split, cost component splits by organizational unit - scrap costs, full integration of Activity Based Costing

Inventory valuation

- alternative valuations (legal, group, profit center) - three parallel currencies

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Product Cost Controlling - Components (I)

BOM Routing

Prices for Materials Prices for Activities Prices for Processes Overhead

Cost estimate: Standard costs Product Cost Planning

Value Structure Quantity Structure:

PP Master Data

Product Cost Planning refers to the creation of cost estimates for the production of goods or services. There is no reference to a production order (the cost estimate is independent of any given production order). If a quantity structure (bill of material and routing) is available in the PP (Production Planning) module of the R/3 system, you can create a cost estimate automatically using the PP data. If no quantity structure is available in R/3, the costing items can be entered manually by means of unit costing, or can be transferred automatically from a non-SAP system using batch input.

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Product Cost Controlling - Components (II)

BOM Routing

Value Structure Quantity Structure: PP Master Data Work in process Scrap Variances Settlement Planned costs, Actual costs Order Material $ Labor $ Overhead $ Process $ Total ... Final Costing Period-End Closing Preliminary Costing, Simultaneous Costing Cost Object Controlling

In Cost Object Controlling, the costs incurred in the production of a product or service are collected on a cost object (such as a production order). Which cost object is used depends on your controlling

requirements. It may be a sales order, a production order, a process order or a production cost collector. Cost Object Controlling is used to calculate work in process, scrap costs and variances at period close.

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Product Cost Controlling - Components (III)

Process Material Ledger Material movements Material Settlement: Actual Costs Value Structure Actual Costing / Material Ledger Quantity Structure: Material movements BOM Routing

Value Structure Quantity Structure: PP Master Data Work in process Scrap Variances Settlement Planned costs, Actual costs Order Material $ Labor $ Overhead $ Process $ Total ... Final Costing Period-End Closing Preliminary Costing, Simultaneous Costing Cost Object Controlling

Actual Costing is used to calculate actual product costs at period close. The result may be transferred to the material master as a weighted average price for the closed period. As of Release 4.5 the quantity structure is derived dynamically using the materials movements in the R/3 system. The values connected with these movements are collected in the Material Ledger. Single-level settlement functions to calculate the actual material costs at period close are available in Release 4.0A. Multi-level settlement functions are available in Release 4.5.

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Cost Object Controlling

Integration of Product Cost Controlling

Benefits of Product Cost Controlling

Cost Object Controlling

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What

actual costs

did we incur in our area in the

current period?

What costs were we expecting

based on the quantities manufactured

?

Are some product groups

performing significantly

better

than others?

What is causing these

variances

?

What are the

scrap costs

of our new line?

Did

continuous improvements

show cost effects?

What can Cost Object Controlling do for me?

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How does it work - Preliminary Costing ?

Material 4,000 Labor 2,500 Overhead 1,500 Process 1,000 Glass 1,500 Total 9,000

Cost Object

Name Cost Items

Name Cost Items Plan ActualPlan Actual

Plug 2,000

Cable 0,500

Product costing uses the data in Logistics to determine the material consumption (BOM) and the activities used (routing). This data forms the quantity structure.

Product costing valuates this quantity structure with the following information: prices for materials

prices for activities

overhead on the direct costs for these materials and activities overhead for sales and administration costs

processes by evaluating the process template

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How does it work - Simultaneous Costing?

Material 4,000 4,600 Labor 2,500 2,800 Overhead 1,500 Process 1,000 Glass 1,500 1,800 Total Costs 9,000 7,400

Cost Object

Name Cost Items

Plug 2,000 2,200 Cable 0,500 0,600

CONFIRMATION

GOODS ISSUE

EXTERNAL PROCUREMENT EXTERNAL ACTIVITIES

Resource

Allocation

The following business transactions result in actual costs: goods movements in Materials Management

invoice receipts in Financial Accounting confirmations in Production Planning

reposting and allocation of overhead in Cost Accounting

You can enter the material withdrawals, the confirmations and the goods receipts in separate transactions.

Otherwise you can use the control key of the operation to specify that a goods receipt is to be posted when the operation is confirmed (normally the last operation). You can assign materials that are to be backflushed to an operation and post a goods issue for these components when you create the

confirmation.

You can create the confirmation for each order or for each transaction. Confirmation at transaction level is recommended for the subsequent calculation of WIP and variances.

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How does it work - Period End Closing ?

Material 4,000 4,600 Labor 2,500 2,800 Overhead 1,500 1,600 Process 1,000 1,500 Glass 1,500 1,800 Total Costs 9,000 10,500

Cost Object

Name Cost Items

Plug 2,000 2,200 Cable 0,500 0,600

REVALUATION

PROCESS COSTS

Periodic Costs

OVERHEAD

%

_%

Period-end closing in Cost Object Controlling contains two new steps in Release 4.0. Process costs can be allocated via the process template.

Activities and processes which have been posted directly to the respective cost objects can be revaluated with actual activity prices.

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Settlement

Scrap,

Variances,

Target Costs

Work in Process

Overhead

Template Allocation

Revaluation

Periodic

Costs

Analyzing

Costs

FI/CO -Posting

How does it work - Period-End Closing?

Template Allocation includes process costs and activities.

Calculating work in process will calculate your WIP either at actual costs (when using full settlement) or at target costs (when using periodic settlement).

Variance calculation calculates not only variances, but also target scrap and target costs as the basis for the target/actual comparison and scrap variances.

Settlement is the last step in period-end closing in Cost Object Controlling.The necessary accounting documents are posted in Financial Accounting and in the Material-Ledger and data passed on to other components such as Profitability Analysis and Profit-Center Accounting.

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When to Use?

Very flexible production

environment

High set-up costs

Full cost tracability needed

Controlling by individual

production lots needed

Example: Order related

production

Product Controlling by Order

Work center 3

Work center 1

Work center 2

Lot Lot Lot

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Example: Cumulative Controlling per Process Order

Production

Order

Goods issues

Confirmations

Goods receipt

Debit: Material 1,200 $ Internal Act. 800 $ Overhead 200 $ Credit: 2,100 $

Production

Order

Goods issues

Confirmations

Goods receipt

Debit: Material 1,200 $ Internal Act. 800 $ Overhead 200 $ Credit: 2,100 $

Production

Order

Goods issues

Confirmations

Goods receipt

Debit: Material 1,200 $ Internal Act. 800 $ Overhead 200 $ Credit: 2,100 $ Material

PP

CO

-

-PC

PC

In this case the costs posted onto the process order via goods issues, confirmations and goods receipts are stored on a CO-object, which has a one-to-one relationship to the process order.

In this example process orders have the settlement type FULL.

As long the process order is not fully delivered or flagged technical complete the remaining order balance is treated as WIP. Otherwise the order balance shows up in variance calculation.

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Status Relevance in Product Controlling by Order

Order

Status

Partially-Released

or Released

Partially Delivered

Delivered or

Technically Completed

WIP at Actual

=

₌

-=

-PR

EL

R

EL

PD

LV

DL

V

TE

CO

Actual Costs Actual Costs Actual Costs WIP at Actual Variances Delivery Value Delivery Value

In the Product Cost by Order component, work in process is valuated at actual costs. The work in process is calculated as the difference between the debit and credit of an order as long as the order does not have the status DLV (delivered).

In the Product Cost by Order component, the variances are not calculated until the order has the status DLV (delivered). This means that when the order has this status, the system no longer interprets the difference between the debit and the credit as work in process but as a variance. In Product Cost by Order, orders never have work in process and variances at the same time.

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When to Use ?

High volume production

Stable and continuous

production

No individual lot oriented

controlling needed

Collecting costs on product

cost collectors

Example: Repetitive

production

Line

am am--120120 am am--200200 am

am--line1line1

am

am--110110 am-am-210210 am-am-220220 am

am--100100

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Example:

Periodic Controlling on Product Cost Collectors

Product Cost Collector

Debit:

Material

Interal Act.

Overhead

Credit:

1,200 $

800 $

200 $

2,100 $

Process

Order

Good issues

Confirmations

Goods receipt

Process

Order

Goods issues

Confirmations

Goods receipt

Process

Order

Goods issues

Confirmations

Goods receipt

PP-PI

CO

-

-PC

PC

Material

In this case the costs posted onto the process order via goods issues, confirmations and goods receipts are stored on a product cost collector. A product cost collector may exist per production version of a product and collects all costs, which are posted to the logistic object of the according production version. Product Cost Collectors always have the settlement type PER.

With period-end closing, Work in Process at Target Costs as well as Variances can be calculated on the product cost collector.

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Periodicity in Product Cost Controlling by Period

Period

-=

WIP at Target Actual Costs Variances Delivery Value WIP at Target Actual Costs Variances Delivery Value WIP at Target Actual Costs Variances Delivery Value

In Product Cost by Period the work in process is calculated at target costs. For repetitive manufacturing you must enter reporting point backflushes for the operation, and for manufacturing orders you must enter confirmations for the operation. Confirmed quantities that are not scrap are valuated in WIP calculation at target costs in accordance with the valuation variant for work in process and scrap defined in Customizing for Product Cost by Period.

In the Product Cost by Period component, variances are calculated by period. Variance calculation compares the confirmed actual values with the target values. The variances are determined as the difference between the actual costs, less the delivery values, less the WIP at target values.

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Product Controlling by Order vs. by Period

Lot-based

Product Controlling

Period-based

Product Controlling

Settlement Type

Work in Process

Variances

Settlement

Cost Object

FULL

PER

WIP calculated based

on Actual Costs

WIP calculated based

on Target Costs

Variances = Actual Costs

-Delivery Value

Variances = Actual Costs

-Delivery Value - WIP

Should be done

per period

Has to be done

per period

Production Order, Process Order

Functions

Production Order, Process, Order Product Cost Collector, Cost Object Hierarchy

Product Cost

by Order

Product Cost

by Period

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When to Use ?

Costs and revenues collected by

Sales Order irrespective of

manufacturing scenario

Collecting special sales costs on

sales orders

Tracking Funds committed

Calculating Work in Process and

Reserves with Results Analysis

Example: Controlling complex

Make-to-Order Production

M

Sales Order

Product Cost by Sales Order

The Product Cost by Sales Order component is recommended for complex make-to-order environments. You can use the Product Cost by Sales Order component in the following situations:

When you are manufacturing in-house with reference to a sales order.

When you are purchasing products with reference to a sales order and reselling them to your customers.

When you are providing services whose costs are assigned to a sales order. This component allows you to do the following:

Calculate and analyze planned costs and actual costs by sales order item

Calculate and analyze planned revenues and actual revenues by sales order item Calculate the value of your inventories of finished and unfinished products Create reserves automatically

Transfer data to Financial Accounting (FI) Transfer data to Profitability Analysis (CO-PA) Transfer data to Profit Center Accounting (EC-PCA)

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Controlling by Sales Order

Semi Semi--11--22 Semi Semi--22 Finish Finish Raw

Raw--11--11 Raw-Raw-22--11Raw-Raw-22--22 Semi

Semi--11

Raw

Raw--11--11 Raw-Raw-11--11

Make-to-Order-Production

Make-to-Stock-Production

Controlling by Order or by Period

Controlling by Sales Order vs.

Make-to-Order Production

M

Sales Order

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Overview Product Cost Controlling: Summary

Product Cost Controlling in the R/3 system is

located at the interface between Logistics and

Accounting.

The functions and cost objects of Product Cost

Controlling are designed to support a wide

variety of production types.

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Customer Order Management

Make to Order: Controlling Scenarios

Make-to-Order Scenarios: Unit Objectives

explain the process chain of a standard order

in customer order management

describe the main make-to-order scenarios

At the conclusion of this unit, you will be able to:

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Course Overview

Introduction

Overview Product Cost Controlling

Make-to-Order Scenarios

Make-to-Order without Sales Order Controlling

Make-to-Order with Sales Order Controlling

Period-End Closing

Sales Order Controlling without Manufacturing

Information System

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Make-to-Order Scenarios: Scenario

Your initial aim is to gain an understanding of the

process chain of a standard order in customer order

management.

You learn that the make-to-order manufacturing has

two main scenarios.

You learn what the main decisions from the

controlling perspective are.

(48)

Roadmap: Make-to-Order Scenarios

Customer Order Management

Make to Order: Controlling Scenarios

(49)

Customer Order Management

Pre-Sales Activities

Sales Order Processing

Inventory Sourcing Delivery Billing Payment Invoice Pre-Sales Activities

Sales Order Processing

Inventory Sourcing

Delivery Billing

Payment

Effective sales order processing ties all activity to customer demand in a series of tightly integrated processes. R/3 Sales and Distribution gives you precisely this kind of sales order processing using a series of linked documents to generate a workflow for sales and distribution. Sales and Distribution begins with pre-sales processing and ends with customer payment for goods received and services rendered. Sales Distribution represents each of these processes with electronic documents, each linked both to preceding and subsequent electronic documents.

The Customer Order Management cycle can begin with Pre-Sales Activities. For example: In response to a Request for Quotation (RFQ) from your customer, you create and send a quotation.

As part of Sales Order Processing, you create a sales document.

During Inventory Sourcing, R/3 determines the supplier of the inventory, based on data that you create and control. Is the supplier one of your plants? If so, which one? Is the supplier a third-party vendor? If so, which one?

As a part of Delivery, you create a delivery document. During Billing, you create a billing document.

(50)

Order Management: Pre-Sales Activities

Pre-Sales activities may include:

Mailing lists

Phone call records kept on the R/3 System

Inquiries

Quotations

Pre-Costing

necessary ?

Order cycles sometimes begin with a sales query such as an inquiry or request for quotation. Sales queries help you enter and store important, sales-related information you can use later during order processing.

Use this pre-sales information to plan sales strategies or help build a long-term relationship with the customer.

Using sales queries provide data that can have great value for you later, particularly when: tracking lost sales

recording pre-sales data to help negotiate large contracts

selling to large organizations that must require documentation of the entire process Any one of the activities listed above can begin the sales process.

(51)

Order Management: Sales Order Processing

Customers place orders with a customer service representative.

Standard orders normally contain:

Customer and material information

Pricing conditions for each item

Schedule lines and delivery information

Billing information

Costing information for

individual items

required ?

A sales order is an electronic document that captures and records your customer's request for goods or services.

The sales order contains all pertinent information to process the customer's request throughout the Customer Order Management cycle.

Sales and Distribution automatically proposes appropriate existing data from relevant master records in order to minimize errors and redundant effort in order processing.

You can enter a sales order with many items in a single screen, or place a complex order using an expanded order view.

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Order Management: Inventory Sourcing

Inventory Sourcing (Make/Buy) determines:

If the product is available (availability check)

How the product will be supplied:

From stock on hand

By replenishment activities

(production order, purchase order)

Make-to-order production

Shipped from an external supplier

Shipped from another warehouse

(53)

Delivery supports:

Creating delivery documents

Creating transfer orders (picking)

Packing (if required)

Goods issue

Order Management: Delivery

Creating the delivery document signals the start of all shipping activities for your sales order.

Creating a delivery document includes copying information from the sales order, such as the materials and the quantities, onto the delivery document.

The delivery document is the electronic means to help you manage all the activities of delivery processing, including efficiently picking product, packing, planning and monitoring shipments, preparing shipping papers, and posting goods issue.

Creating a transfer order includes copying information from the delivery document to the transfer order for processing within the warehouse.

The transfer order is essential for controlling the movement of goods within your warehouse. The transfer order is based on a simple principle: where are you taking goods from and where are you taking goods to, within your warehouse. There is a source location and a destination location for every transfer order.

When you post goods issue, you see the automatic update to the general ledger. R/3 affects the general ledger by debiting the Cost-of-Goods Sold account and crediting the Inventory account. Inventory, both stock counts and valuation, goes down; cost-of-goods sold goes up.

(54)

Billing supports:

Creating invoices for deliveries and services

Creating credit and debit memos on the basis of requests

Canceling business transactions

Transferring billing data to financial accounting

Invoice

Order Management: Billing

Creating a billing document includes copying information from the sales order and the delivery document onto the billing document.

The billing document serves several important functions:

The billing document is the electronic means to help you prepare invoices, which are considered output of Billing.

The billing document serves as a source to Financial Accounting (FI) to help you in the monitoring and management of customer payment.

When you create a billing document, you see the automatic update to the general ledger. R/3 affects the general ledger by debiting the customer's Accounts Receivable account and crediting the Revenue account.

(55)

Order Management: Payment

Final step of the COM cycle

Customer Payment includes:

Posting payments against invoices

Reconciling differences, if necessary

When you post a customer payment, you see the automatic update to the general ledger. R/3 affects the general ledger by debiting the Cash account and crediting the customer's Accounts Receivable account.

(56)

Business Process Summary

Picking Accounts Receivable Accounts Receivable Scheduling agreement Scheduling agreement Contract Invoice Invoice Order Contact Contact Inquiry Quotation

Delivery Goods Issue

Account Material Stock Account Shipment Pre-Sales Sales Order Processing Inventory Sourcing Delivery / Transportation Billing Customer payment / Financial Accounting M A T E R I A L S M A N A G E M E N T S A L E S I N F O R M A T I O N S Y S T E M

(57)

Make-to-Order Scenarios

Customer Order Management

Make to Order: Controlling

Scenarios

(58)

Controlling by Sales Order

M

Sales Order

Sales Order Item functions as Cost Object

Cost collecting by Sales Order Item

irrespective of manufacturing

scenario

Ability to assign revenues and costs

to sales order item

Ability to show commitments on

sales order items

Ability to calculate goods in transit

and reserves

(59)

Make-to-Order Production

A product and sub-assemblies are

individually manufactured for a particular

customer

Stocks are managed in individual

customer segments -

sales order stock

Quantities produced for a particular sales

order cannot then be used to cover

another sales orders demand

Components can be procured specially

for an individual sales order

A make-to-order product is planned as a requirement for production using the sales order item number. A separate segment is created in the planning run for this requirement. In the planning segment, the requirements and stocks of the sales order item are managed separately. Thus, various customer-specific variants of a product can be managed using only one material number.

Starting from the sales order, single-item planning can be carried out for any level of the BOM structure. Therefore, it is also possible to procure assemblies and components specifically for the sales order and manage this stock individually for the sales order. This is of particular importance if components can also be configured for the production of the individual customer product.

(60)

Relevant Decisions

Make-to-Order Production with

or without Sales Order Controlling?

Do you want to keep your

sales order stock valuated

or unvaluated ?

(61)

Without versus With Sales Order Controlling

CO CO PA PA

Scenario

Both scenarios

similar

to

make to stock production:

Production variances to Profitability Analysis Valuation of sold quantity with cost component split Sales order costing (necessary for variant production)

With

Sales Order

Controlling provides

additional

functions

Sales Order

Cost Estimate

Mat. Labor OH Process

A similar handling of make-to-order production in comparison with make-to-stock production is enabled with the new R3/4.0 functionality of valuated sales order stock.

This enables you

to calculate production variances of related production orders to settle these variances to Profitability Analysis

to provide a cost component split for Cost of Goods sold Moreover the sales order costing provides a basis for:

sales and pricing decisions planned costs

methods of results analysis (percentage of completion)

Sales order costing supports different cost component views, delivers a costed BOM structure, cost element, and cost itemization information.

(62)

Without Sales Order Controlling

When to Use ?

Production controlling

focused on product groups

High production volumes

Sales controlling similar to

make-to-stock

Examples:

Assemble to order

Make to order with

packaging variants

Use this option when your production controlling is strictly focused on products and not on the sales order itself.

This scenario fits perfectly to a make to stock environment and no additional period end closing activities have to be performed.

(63)

With Sales Order Controlling

Sales Order

Cost Estimate

Mat. Labor OH Process

When to Use ?

Complete Cost Overview

Estimated costs

Special sales costs Funds commitment Cost situation of related production orders

Results Analysis

Automatic creation of reserves

Control of Goods in Transit

Examples:

High Order Value

Complex MTO structures

Complete

Overview

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Sales Order Controlling is recommended if the following information is essential to your business: You high is my profit margin with this special sales order?

How can I control my special sales efforts?

How high is my fund commitment. Is this sales order performing well from costing point of view?

Where did late customer changes effect my production costs heavily? Moreover you can use results analysis to:

create reserves for expected losses automatically manually add reserves for foreseen risks

(64)

Valuated Sales Order Stock

Combined quantity and value flow

Simplified inventory processing

Assembly costs shown with multilevel

make-to-order production

Variances can be determined for these

production orders

Similar to make to stock production

Enable more controlling scenarios and

the first step in logical de-coupling of

CO-PC and PP.

Material movements are made via individual sales order stock.

In Release 3.0/3.1 this stock is not valuated In Release 4.0 you can choose whether you manage this stock as unvaluated or valuated sales order stock.

(65)

Combined Quantity and Value Flow for

Sales Order Stock

Material $ 100 Labor $ 200 Surcharge $ 150 Process $ 150 Total $ 600 SD Order 4815 SD Order 4815 10 Product-X 1 pc 10 Product-X 1 pc Production Order Production Order Material $ 110 Labor $ 180 Inv. Change $ 600 Material: Product-X Sales Order Stock

Item Quantity Value

4763 30 3 1,500.-4783 20 2 900.-4711 10 1

450.-4815 10 1

600.-Delivery

Sales Order Cost

Estimate

Material Management

Material: Product-X Sales Order: 4815/10 Debits: Credits:

Because the inventories assigned to sales orders and projects carry costs as well as quantities, goods movements for these inventories generate postings in Financial Accounting. The costs of the materials can be determined in a cost estimate for the sales order or production order. The inventory value can therefore be shown immediately in Financial Accounting - costing in the Controlling module is not necessary. The valuated goods movements result in debits and credits to the affected objects. The goods receipt is valuated using a predefined valuation strategy sequence.

The first goods receipt results in valuation on the basis of one of the subsequent strategies in the specified sequence. A standard price selected through one of the subsequent strategies is copied into strategy and serves as the valuation basis from this point onwards.

The system calculates the standard price on the basis of your customer exit COPCP002 Material valuation for valuated sales order stock.

The system calculates the standard price in a sales order cost estimate. This sales order cost estimate can be based on a unit cost estimate or on a product cost estimate.

The system determines the standard price using the production order cost estimate or the planned costs for the WBS element. If there are multiple production orders for the same sales order item, the system

(66)

Unvaluated Sales Order Stock

Cost Object Controlling by Sales Order is necessary !

The quantity flow is separated from the

value flow

The quantity flow (goods receipts, goods

issues) is made via individual customer

stock

The value flow is made via the sales

order item and all assigned orders.

Costs are not posted to the sales order

item until order settlement or until the

invoice is received for purchased goods

No variance calculation on assigned

production orders

(67)

Separated Quantity and Value Flow for

Sales Order Stock

Material Management

Material $ 110 Labor $ 180

Settlement $ 290

Material: Product-X Sales Order Stock

Item Quantity 4763 30 3 4783 20 2 4711 10 1 4815 10 1 Cost Object Sales Order 4815 / 10 Settlement $ 290 Debits SD Order 4815 SD Order 4815 10 Product-X 1 pc 10 Product-X 1 pc

Goods receipt

Production Order Debits: Credits: Material: Product-X Sales Order: 4815/10

(68)

Plants

Consistent

Cost Object Controlling

Approach for production

Order Related Production Process Industry

Stable and Continuous Production Make-to-order Production

Top-Down

Reporting Approach

Key Figures Aggregated Data Aggregation Levels

Lean

Scenarios

Product

Groups

Materials

Orders

(69)

Decision Table

Controlling by

Sales Order

Sales

Order Stock

Valuated

Unvaluated

Without

With

Not supported

X

SAP Recommendation

(70)

You understand the process chain of a standard order

in customer order management.

You know the main make-to-order scenarios.

In make-to-order environments, the product cost

controlling functionality varies, depending on whether

the sales order stock is valuated or unvaluated.

(71)

MTO without Sales Order Controlling: Contents

Quantity and Value Flow in a Make-to-Order

Scenario without Sales Order Controlling

Using Make-to-Order with Repetitive Manufacturing

to demonstrate the Scenario

(72)

Explain the quantity and value flow in a

Make-to-Order Scenario without Sales Order

Controlling

Explain the possibilities of lean controlling for

mass production with a product cost collector

Explain how to carry out the confirmation and

period closing in this scenario

Identify the necessary settings in customizing

At the conclusion of this unit, you will be able to:

MTO without Sales Order Controlling: Objectives

(73)

Course Overview

Introduction

Overview Product Cost Controlling

Make-to-Order Scenarios

Make-to-Order without Sales Order Controlling

Make-to-Order with Sales Order Controlling

Period-End Closing

Sales Order Controlling without Manufacturing

Information System

(74)

MTO without Sales Order Controlling:

Business Scenario

In your plant 1000, you trigger sales order

related repetitive manufacturing using a

single production line when a sales order is

received for the automobile T-FA00 (in

original IDES use am2-gt).

You must now maintain the necessary

master data in the R/3 system.

Then you have to carry out the necessary

postings in the R/3 system.

(75)

Roadmap: MTO without Sales Order Controlling

Overview Business Scenario

Master Data

Actual Postings

Period-End Closing

Customizing

(76)

MTO without Controlling by Sales Order

CO-Scenario

Sales order costing

(necessary for variant

production)

Production variances to

Profitability Analysis groups

Valuation of quantity sold with

cost component split

When to Use ?

Production controlling focused

on product groups

High production volumes

Sales controlling similar to

make-to-stock

Controlling by Sales Order Sales Order Stock Valuated Unvaluated Without With Not supported X X X

(77)

Repetitive Manufacturing (I)

Line am am--120120 am am--200200 am

am--line1line1

am

am--110110 am-am-210210 am-am-220220 am

am--100100

When to Use ?

High volume production

Stable and continuous

production

No individual lot oriented

controlling needed

Repetitive manufacturing

In repetitive manufacturing, the same product is usually produced over a longer period of time on one production line. Instead of being manufactured in restricted production lots, a total quantity of the product is manufactured over a specific period of time, with a specific production rate per partial period. Products generally go through production in a relatively steady flow. Semi-finished products are often processed further directly, without being placed in interim storage.

(78)

Repetitive Manufacturing (II)

Production Line

Make-to-Order

Make-to-Stock

Sales Order SD SD Demand Management

Production Line

Make-to-stock repetitive manufacturing: one alternative is to use repetitive manufacturing in make-to-stock production. This means that you produce products with no direct reference to sales orders.

Depending on your production strategy, you can settle planned independent requirements from Demand Management against sales orders.

The same product is produced repeatedly over a substantial period of time. Instead of being

manufactured in restricted production lots, a total quantity of the product is manufactured over a specific period of time, with a specific production rate per partial period. Products go through production in a relatively steady flow. Sales orders are delivered from stock.

Order-oriented repetitive manufacturing: the other alternative is to use repetitive manufacturing for order-oriented production. Sales orders can be processed separately and planned orders are created with

(79)

Creation of the Sales Order and Planned Order

Creation

Sales Order

Creation

Sales

Order

_{Material Requirement Planning/}

Assembly Processing

SD

Production Line

Planned Order

Planned

Order

Header

Material Quantity Date

Items

The system generates a planned order for the material listed in the sales order item. This planned order contains all the material components necessary for the manufacture of the finished product. The planned order can be created in the following ways:

In requirement planning When the sales order is saved

In order to generate the planned order generated when the sales order is saved, you must enter assembly type 1 (planned order: static processing) or 4 (planned order: dynamic processing) in the requirements class.

(80)

Controlling Scenario Product Cost Collector

Stock Sales Order valuated $ MM MM Stock Sales Order valuated $ MM MM Stock Sales Order valuated $ MM MM

Product

Cost Collector

Product

Cost Collector

Debit

Credit

Sales Order Sales SalesOrderOrder

Planned Order

Planned PlannedOrderOrder

SD

Sales Order

Sales SalesOrderOrder

Planned Order

Sales Order

Sales SalesOrderOrder

Planned Order

SD SD _SD_SD COCOPAPA- -Actual Actual + Product Group Product Group + -30,000 30,000 45,000 45,000 54,000 54,000 12,500 12,500 20,000 20,000 21,500 21,500 5,000 5,000 13,000 13,000 Motor

MotorCyclesCycles

Freight vehicles

Cars

Sport

Sportcars cars

Convertibles Convertibles Limousines Limousines Class ClassAA Class ClassBB CO CO- -PC PC

If you are in a sales-order-related production environment and using a valuated sales order inventory with repetitive manufacturing, you can collect the costs for a configurable material on a product cost collector for the material.

(81)

Logistical Benefit - Separate Backflushing

3 C

Aggregated Component Goods Issue

Single Component Goods Issue

Finished Product Level / Assembly Level

Component Level

C = Component

2 C

Monday

Tuesday

1C

_1C

1C

_1C

1C

_1C

1C

_1C

Separate Backflushing

If you have to process a high volume of data, you can significantly improve performance by separating the backflushing processes.

For this purpose, the backflushing processes are split into critical and uncritical partial processes. In the standard system backflushing includes the following partial functions:

Goods receipt posting

Goods issue of the material components

Calculation of actual costs in production activity posting Reduction of the production quantities

Adjustment of the dependent requirements of the components in the reporting point backflush Adjustment of the capacity requirements

By separating the backflushing processes, you can instruct the system to post the goods receipts, and reduce the production requirement quantities and capacity requirements immediately. The partial functions that can be carried out later (uncritical functions) are collected in a work list and processed in a background job sometime later. These uncritical functions include, for example, BOM explosion, posting goods issues, reduction of the dependent requirements and posting the production activities.