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Design and Implementation of GCP in a make to order environment based upon SAP ERP 4.7

Thesis

Submitted in partial fulfillment for the degree of

Master of Science

in Business Consulting

at the Faculty of Business Application of Computer Science

Hochschule Furtwangen University

by

Wang HongLiang

Supervisors: <Prof. Dr. Thomas Marx> <Diplom. Wirtschaftsingenieur. Fritz Wurm> 31. August 2009

I

Announcement of Copy Right I declare here that I present the thesis ‘Design and Implementation of GCP in a make to order environment based upon SAP ERP 4.7’ independently and without illegal external help. All the used sources are completely cited. Furtwangen, den _____BCM 08/09; WI_________

__________________________

__________________________ Wang Hong Liang

II

Observe Everything. Communicate Well. Draw, Draw, Draw. Frank Thomas (1913-1992) Disney Animator, when asked to give advice to young animators

III

Abstract Thesis Design and Implementation of GCP in a make to order environment based upon SAP ERP 4.7 We have seen the globalization trends in our era and this trend is going further continuously. It leads to various effects - such as cost, market, technologies - which drive companies to enter international market. Furthermore, many global groups are trying to extend their supply chain in their industrial lines to maintain high competence with high quality, low cost or unique technique. For these international groups, product costing and profitability is always an important issue in the main processes such as manufactory, sales and procurement. Nevertheless, in global scope, product costing becomes a challenge. Most groups have implemented various methods to monitor the value chain and analysis the cost and profit. Moreover, most of them are convinced by the benefit of centralize the information for whole supply chain. For example, lower cost can be reached by centralized purchasing or harmonize the data in supply chain. With the support of modern ERP system, the information we can access is getting more and more concrete and synchronized with the performance of the group in real time. This enables corporate controlling to do better information collecting, monitoring and planning. SAP ERP has been very successful implemented in many global companies. Business activities are reflected in SAP ERP in real time physically and financially. For single company, SAP ERP is no doubt offering a sophisticated solution. But for group companies with a long supply chain, there are many limitations from SAP ERP to do group costing. Recognizing this gap, IM&C GmbH has been continuously developing a SAP add-on for group costing and profitability calculation which is called GCP Engine. This solution will bring transparency of cost and profit in a group wide scope. And the value flows in group companies become visible. Moreover, in circumstance with the mixture of ‘make to stock’ and ‘make to order’, the situation gets even more complexity. When there are different valuations for same material at same time, it requires us to drill down further to calculate precisely the cost and profit of each sales order. This thesis will describe how the value flows physically and financially in global supply chain in plan and actual, and how GCP Engine works to calculate cost and profit in circumstance of ‘make to stock’ and ‘make to order’.

IV

Table of Content ANNOUNCEMENT OF COPY RIGHT ........................................................................................... I

ABSTRACT .......................................... ........................................................................................ III

TABLE OF CONTENT .................................. .............................................................................. IV

FIGURES .................................................................................................................................... VI

TABLES ............................................ ........................................................................................ VIII

ABBREVIATION DICTIONARY ........................... ...................................................................... IX

1 INTRODUCTION ................................................................................................................ 10

1.1 MOTIVATION................................................................................................................. 10

1.2 PURPOSE..................................................................................................................... 11

1.2.1 Intercompany profit and profit ................................................................................ 11

1.2.2 The transparency of cost component split ............................................................. 12

1.2.3 Value of stock ........................................................................................................ 13

2 BASIC CONCEPTS .................................... ....................................................................... 15

2.1 PUSH/PULL IN SCM ..................................................................................................... 15

2.2 SUPPLY CHAIN IN PLANNING .......................................................................................... 18

2.2.1 Planning in SAP ERP ............................................................................................ 18

2.2.2 Purchase................................................................................................................ 20

2.2.3 Production.............................................................................................................. 21

2.2.4 Sales ...................................................................................................................... 22

2.3 SUPPLY CHAIN IN ACTUAL ............................................................................................. 23

2.3.1 Actual in SAP ERP ................................................................................................ 24

2.3.2 Purchase order ...................................................................................................... 25

2.3.3 Production order .................................................................................................... 26

2.3.4 Sales order ............................................................................................................ 27

3 GCP ENGINE BASIS .................................. ....................................................................... 29

3.1 SCENARIOS IN GCP ..................................................................................................... 29

3.1.1 Planning scenario .................................................................................................. 30

3.1.2 Actual scenario ...................................................................................................... 32

3.2 DEFINITION .................................................................................................................. 34

3.2.1 TType definition ..................................................................................................... 34

3.2.2 Costing item ........................................................................................................... 40

3.2.3 Mini Costing ........................................................................................................... 41

3.3 MAPPING OF SOURCE TO TARGET SYSTEM ..................................................................... 43 3.3.1 Cost components split ........................................................................................... 43

3.3.2 Map cost components to process .......................................................................... 46

3.4 GCP CYCLE ................................................................................................................. 47

3.4.1 Extraction ............................................................................................................... 48

3.4.2 Aggregation ........................................................................................................... 49

3.4.3 Sequence............................................................................................................... 50

3.4.4 Costing................................................................................................................... 51

3.4.5 Mapping of Sales Orders (EPS/EPI) ..................................................................... 52

4 GCP SOLUTION IN PLANNING .......................... .............................................................. 59

4.1 GCP SOLUTION FOR MAKE TO STOCK IN PLANNING ........................................................ 60

4.1.1 Purchase................................................................................................................ 60

4.1.2 Production.............................................................................................................. 62

4.1.3 Sales ...................................................................................................................... 64

4.2 GCP SOLUTION FOR MAKE TO ORDER IN PLANNING ....................................................... 67

4.2.1 Purchase................................................................................................................ 68

4.2.2 Production.............................................................................................................. 71

4.2.3 Sales ...................................................................................................................... 74

5 GCP SOLUTION IN ACTUAL ............................ ................................................................ 77

V

5.1 GCP SOLUTION FOR MAKE TO STOCK IN ACTUAL ........................................................... 77

5.1.1 Purchase order ...................................................................................................... 77


5.1.3 Sales order ............................................................................................................ 82

5.2 GCP SOLUTION FOR MAKE TO ORDER IN ACTUAL........................................................... 85

5.2.1 Purchase order ...................................................................................................... 85


5.2.3 Sales order ............................................................................................................ 89

6 CASE STUDY FOR OTHER PROCESSES ....................................................................... 92

6.1 SUBCONTRACTING ....................................................................................................... 92

6.2 BUYBACK ..................................................................................................................... 94

6.3 THIRD PARTY DEAL ...................................................................................................... 95

7 SUMMERY ......................................................................................................................... 98

7.1 GROUP VALUE CHAIN .................................................................................................... 98

7.2 PRODUCT PROFITABILITY ............................................................................................ 100

REFERENCES .......................................................................................................................... 103

SOURCES OF QUOTATIONS ....................................................................................................... 103

ATTACHMENT A. TTYPE DEFINITION .................... ............................................................... 106

INTERNAL TTYPE DEFINITION ................................................................................................... 106

EXTERNAL TTYPE DEFINITION .................................................................................................. 107

ATTACHMENT B. COST VARIANT USED IN EXAMPLES ....... ............................................. 109

COST VARIANT FOR COST ESTIMATE (TABLE KEKO) ................................................................ 109

ATTACHMENT C. TABLES USED IN GCP FROM SAP ERP ..... ........................................... 110

TABLES USED FOR PLANNING ................................................................................................... 110

TABLES USED FOR ACTUAL ...................................................................................................... 110

ATTACHMENT D. SAP ERP SYSTEM ARCHITECTURE ......... ............................................. 111

GRAPHICAL VIEW OF SAP ERP SYSTEM ARCHITECTURE ........................................................... 111

ATTACHMENT E. EPS/EPI FLOW CHART................... .......................................................... 113

EPS/EPI INDICATORS ............................................................................................................. 113

ATTACHMENT F CD ................................... ............................................................................. 115

VI

Figures FIGURE 1 INTERCOMPANY PROFIT AND PROFIT ................................................................................ 12

FIGURE 2 COST TRANSFER INTERCOMPANY IN LOCAL VIEW .............................................................. 13

FIGURE 3 COST TRANSFER INTERCOMPANY IN GLOBAL VIEW ............................................................ 13

FIGURE 4 DIFFERENT VALUES BY SALES ORDER STOCK AND NORMAL STOCK ..................................... 14

FIGURE 5 FIVE MANAGEMENT PROCESS IN SCOR MODEL ............................................................... 15

FIGURE 6 PRODUCT/SERVICE FLOW IN SUPPLY CHAIN ...................................................................... 16

FIGURE 7 PUSH STRATEGY ............................................................................................................. 16

FIGURE 8 PULL STRATEGY ............................................................................................................. 16

FIGURE 9 PUSH / PULL BOUNDARY ................................................................................................. 17

FIGURE 10 SUPPLY CHAIN PLANNING MATRIX .................................................................................. 18

FIGURE 11 QUANTITY AND VALUE STRUCTURE IN PLANNING ............................................................. 19

FIGURE 12 CO-PC PLANNING IN SAP ............................................................................................ 20

FIGURE 13 COST ESTIMATE WITH QUANTITY STRUCTURE IN PURCHASE ............................................. 21

FIGURE 14 COST ESTIMATE WITH QUANTITY STRUCTURE IN PRODUCTION ......................................... 22

FIGURE 15 COST ESTIMATE IN SALES .............................................................................................. 23

FIGURE 16 PHYSICAL AND FINANCIAL FLOW OF SUPPLY CHAIN IN ACTUAL .......................................... 23

FIGURE 17 QUANTITY AND VALUE STRUCTURE IN ACTUAL ................................................................ 24

FIGURE 18 DOCUMENT STRUCTURE FROM PURCHASE ORDER .......................................................... 25

FIGURE 19 ASSOCIATION OF MSEG AND BSEG ............................................................................. 26

FIGURE 20 TABLE FOR PRODUCTION COST ...................................................................................... 27

FIGURE 21 CONNECTION FROM MATERIAL DOCUMENT TO CO-PA .................................................... 28

FIGURE 22 SCENARIO OF COMMUNICATION BETWEEN GCP AND SAP ERP ...................................... 29

FIGURE 23 COSTING IN SAP .......................................................................................................... 30

FIGURE 24 TOP-DOWN AND BOTTOM-UP PROCEDURE IN PLANNING ................................................. 31

FIGURE 25 PROCUREMENT ALTERNATIVES IN PLANNING .................................................................. 31

FIGURE 26 PLAN COST AND TARGET COST ...................................................................................... 32

FIGURE 27 BOTTOM-UP PROCEDURE IN ACTUAL .............................................................................. 33

FIGURE 28 PROCUREMENT ALTERNATIVE IN ACTUAL ........................................................................ 33

FIGURE 29 ACTUAL COST AND TARGET COST .................................................................................. 34

FIGURE 30 SINGLE ITEM, FINANCIAL ITEM AND COSTING ITEM ........................................................... 41

FIGURE 31 INTERCOMPANY COST AND PROFIT STRUCTURE .............................................................. 43

FIGURE 32 CURRENCY AND VALUATION PROFILE IN SAP ERP ......................................................... 44

FIGURE 33 COST COMPONENT SPLIT IN LOCAL AND GROUP .............................................................. 45

FIGURE 34 GCP PROCESS WITH LOCAL COST COMPONENT SPLIT ................................................... 46

FIGURE 35 GCP PROCESS WITH GLOBAL COST COMPONENT SPLIT ................................................. 47

FIGURE 37 GCP EXTRACTION ........................................................................................................ 48

FIGURE 36 GCP ENGINE SEQUENCE .............................................................................................. 48

FIGURE 38 GCP STANDARDIZING OF DATA ..................................................................................... 49

FIGURE 39 GCP AGGREGATION ..................................................................................................... 50

FIGURE 40 GCP SEQUENCE ........................................................................................................... 50

FIGURE 41 COSTING LEVELS IN SEQUENCE ..................................................................................... 51

FIGURE 42 GCP COSTING .............................................................................................................. 52

FIGURE 43 COSTING BETWEEN PERIODS ......................................................................................... 52

FIGURE 44 DOCUMENT BETWEEN SENDER AND RECEIVER ................................................................ 53

FIGURE 45 BROKEN LINKS IN MAKE TO ORDER ENVIRONMENT ........................................................... 54

FIGURE 46 FLOW CHART FOR EPS/EPI .......................................................................................... 54

FIGURE 47 LINKS IN ASSIGNMENT TABLE ......................................................................................... 56

FIGURE 48 LINKS IN PARTNER MAPPING TABLE ................................................................................ 57

FIGURE 49 LINKS IN MERGE TABLE ................................................................................................. 58

FIGURE 50 PART OF BOM FOR MACHINE WITH MATERIAL NUMBER 351110 ....................................... 59

FIGURE 51 COST ESTIMATE FOR PURCHASING MATERIAL 0357692 FROM EXTERNAL ......................... 60

FIGURE 52 TTYPE FLOW IN GCP FROM PURCHASE TO CONSUMPTION IN PLANNING ........................... 62

FIGURE 53 COST ESTIMATE FOR PRODUCTION IN MAKE TO STOCK ................................................... 62

FIGURE 54 TTYPE FLOW IN GCP FOR PRODUCTION IN PLANNING ..................................................... 64

FIGURE 55 SALES PROCESS FOR MATERIAL 976323 IN PLANNING .................................................... 65

FIGURE 56 TTYPE FLOW FOR SALES OF MATERIAL 976323 IN PLANNING .......................................... 67

FIGURE 57 PURCHASING MATERIAL 370210 IN MAKE TO ORDER...................................................... 68

VII

FIGURE 58 SALES ORDER LINK FOR MATERIAL 370210 FROM EPS/EPI ............................................ 69

FIGURE 59 TTYPE FLOW FOR PURCHASE OF MATERIAL 370210 IN PLANNING ................................... 71

FIGURE 60 COST ESTIMATE FOR MATERIAL 351110 IN MAKE TO ORDER .......................................... 72

FIGURE 61 VALUE FLOW FOR MATERIAL 351110 PRODUCTION IN PLANNING WITH LOCAL VIEW .......... 73

FIGURE 62 VALUE FLOW FOR MATERIAL 351110 PRODUCTION IN PLANNING WITH GLOBAL VIEW ........ 74

FIGURE 63 VALUE FLOW OF SALES ORDER TO CUSTOMER IN PLANNING............................................. 74

FIGURE 64 TTYPE FLOW OF SALES ORDER 28038144 TO EXTERNAL CUSTOMER IN PLANNING ........... 76

FIGURE 65 PURCHASE ORDER FOR MATERIAL 0357962 FROM EXTERNAL ......................................... 78

FIGURE 66 TTYPE FLOW FOR CONSUMPTION OF MATERIAL 0357962 ................................................ 79

FIGURE 67 DOCUMENT FLOW IN PRODUCTION ORDER OF MATERIAL 1255046 ................................... 80

FIGURE 68 TTYPE FLOW FOR PRODUCTION OF MATERIAL 1255046 IN ACTUAL .................................. 82

FIGURE 69 SALES OF MATERIAL 976323 IN ACTUAL ......................................................................... 82

FIGURE 70 TTYPE FLOW FOR MATERIAL 976323 OF INTERCOMPANY SALES IN ACTUAL ...................... 84

FIGURE 71 PURCHASE ORDER FOR MATERIAL 370210 IN INTERCOMPANY TRANSFER ........................ 85

FIGURE 72 TTYPE FLOW OF MATERIAL 370210 FOR INTERCOMPANY PURCHASE IN ACTUAL ............... 86

FIGURE 73 DOCUMENT FLOW IN PRODUCTION ORDER OF MATERIAL 351110 ..................................... 87

FIGURE 74 TTYPE FLOW FOR PRODUCTION OF MATERIAL 351110 .................................................... 89

FIGURE 75 SALES TO EXTERNAL CUSTOMER ................................................................................... 90

FIGURE 76 TTYPE FLOW SALES TO EXTERNAL CUSTOMER ............................................................... 91

FIGURE 77 SUBCONTRACTING PROCESS ......................................................................................... 92

FIGURE 78 TTYPE PROCESS FOR SUBCONTRACTING AND PRODUCTION IN PLANNING ......................... 92

FIGURE 79 TTYPE PROCESS FOR SUBCONTRACTING AND PRODUCTION IN ACTUAL ............................ 93

FIGURE 80 BUYBACK PROCESS ...................................................................................................... 94

FIGURE 81 BUYBACK PROCESS IN PLANNING ................................................................................... 95

FIGURE 82 BUYBACK PROCESS IN ACTUAL ...................................................................................... 95

FIGURE 83 THIRD PARTY DEAL PROCESS ........................................................................................ 96

FIGURE 84 THIRD PARTY DEAL FLOW WITH VIRTUAL COMPANY ......................................................... 96

FIGURE 85 THIRD PARTY DEAL PROCESS IN PLANNING ..................................................................... 97

FIGURE 86 THIRD PARTY DEAL PROCESS IN ACTUAL ........................................................................ 97

FIGURE 87 VALUE CHAIN BY PORTER 1985 ..................................................................................... 98

FIGURE 88 VALUE CHAIN OF GROUP COMPANIES IN LOCAL VIEW ....................................................... 99

FIGURE 89 SUPERIMPOSED VALUE CHAIN OF GROUP COMPANIES IN GLOBAL VIEW ........................... 100

FIGURE 91 GROUP PROFITABILITY ANALYSIS ................................................................................. 101

FIGURE 90 EXAMPLE OF VALUE CHAIN IN ONE GROUP .................................................................... 101

FIGURE 92 PRODUCT COST AND PROFITABILITY IN MTS AND MTO ................................................. 102

FIGURE 94 SAP ERP ORG - COST CENTER .................................................................................. 111

FIGURE 95 SAP ERP ORG - PURCHASE ORGANIZATION ................................................................ 111

FIGURE 93 SAP ERP SYSTEM ARCHITECTURE .............................................................................. 111

FIGURE 96 SAP ERP ORG - SALES AREA ..................................................................................... 112

VIII

Tables TABLE 1 PUSH-PULL BOUNDARY AND MANUFACTURING ENVIRONMENT .............................................. 17

TABLE 2 COST ESTIMATE WITH QUANTITY STRUCTURE ..................................................................... 21

TABLE 3 TTYPE FOR STOCK TRANSFER BETWEEN PLANTS ................................................................ 35

TABLE 4 TTYPE FOR PRODUCTION PROCESS .................................................................................. 35

TABLE 5 TTYPE FOR TRANSFER WITHIN CONSOLIDATED PARTNERS .................................................. 36

TABLE 6 TTYPE FOR TRANSFER WITHIN NON-CONSOLIDATED PARTNERS ........................................... 37

TABLE 7 TTYPE FOR TRANSFER FROM EXTERNAL ............................................................................ 37

TABLE 8 TTYPE FOR TRANSFER WITH CONSOLIDATED SUBCONTRACTOR ........................................... 38

TABLE 9 TTYPE FOR TRANSFER WITH NON-CONSOLIDATED SUBCONTRACTOR ................................... 38

TABLE 10 TTYPE FOR TRANSFER WITH SUBCONTRACTOR FROM EXTERNAL ....................................... 39

TABLE 11 TTYPE FOR SALES TO EXTERNAL CUSTOMER .................................................................... 39

TABLE 12 EXAMPLE FOR FINANCIAL ITEM AGGREGATION .................................................................. 40

TABLE 13 TYPICAL COSTING ITEM .................................................................................................. 40

TABLE 14 MINI COSTING IN PLANNING WITH CO-PA ......................................................................... 42

TABLE 15 MINI COSTING IN ACTUAL WITH DELIVERY AND INVOICE ...................................................... 42

TABLE 16 MAPPING FROM LOCAL VIEW TO GROUP VIEW ................................................................... 45

TABLE 17 SENDER AND RECEIVER IN ASSIGNMENT TABLE ................................................................ 55

TABLE 18 SENDER AND RECEIVER IN MAPPART TABLE ..................................................................... 56

TABLE 19 SENDER AND RECEIVER IN MERGE TABLE......................................................................... 57

TABLE 20 CONTENT STRUCTURE FOR CHAPTER 4 ........................................................................... 59

TABLE 21 COST ESTIMATE FOR MATERIAL 0357962 IN PLANT 1101 ................................................. 61

TABLE 22 COST ESTIMATE DATA IN TABLE CKIS FOR MATERIAL 0357962 ........................................ 61

TABLE 23 COSTING IN GCP FOR PURCHASE MATERIAL 357962 IN PLANNING .................................... 61

TABLE 24 COST ESTIMATE FOR MATERIAL 1255046 IN PLANT 1101 ................................................. 63

TABLE 25 COSTING IN GCP WITH TTYPE FOR PRODUCTION IN PLANNING ......................................... 64

TABLE 26 LOCAL VIEW FOR SALES OF MATERIAL 976323 IN PLANNING .............................................. 65

TABLE 27 GROUP VIEW FOR SALES OF MATERIAL 976323 IN PLANNING ............................................ 66

TABLE 28 CALCULATION FOR COST AND PROFIT OF MATERIAL 976323 FOR SALES IN PLANNING ......... 67

TABLE 29 HEADER FOR MATERIAL 370210 COST ESTIMATE IN PLANT 1101 ...................................... 68

TABLE 30 MATERIAL 370210 COST ESTIMATE IN PLANT 1101 .......................................................... 68

TABLE 31 HEADER FOR MATERIAL 370210 COST ESTIMATE IN PLANT 1141 ...................................... 69

TABLE 32 MATERIAL 370210 COST ESTIMATE IN PLANT 1141 .......................................................... 70

TABLE 33 COSTING FOR MATERIAL 370210 IN GCP FOR PURCHASE IN PLANNING ............................ 70

TABLE 34 HEADER OF COST ESTIMATE FOR MATERIAL 351110 IN PLANT 1101 ................................. 72

TABLE 35 COST ESTIMATE FOR MATERIAL 351110 IN PLANT 1101 ................................................... 72

TABLE 36 COSTING IN GCP FOR MATERIAL 351110 PRODUCTION IN PLANNING ................................ 73

TABLE 37 COST AND PROFIT CALCULATION FOR SALES ORDER 28038144 IN PLANNING ..................... 75

TABLE 38 TTYPE HIERARCHY IN COMPANY 314 FOR SALES ORDER 28038144 IN PLANNING ............... 75

TABLE 39 CONTENT STRUCTURE IN CHAPTER 5 .............................................................................. 77

TABLE 40 MSEG FOR PURCHASE MATERIAL 0357962 ..................................................................... 78

TABLE 41 COSTING IN GCP FOR MATERIAL 0357962 ...................................................................... 79

TABLE 42 CALCULATION FOR MATERIAL 1255046 WITH PRODUCTION ORDER 53120970 ................... 81

TABLE 43 COSTING IN GCP FOR MATERIAL 1255046 IN ACTUAL ...................................................... 82

TABLE 44 COST AND REVENUE OF MATERIAL 976323 IN ACTUAL ...................................................... 83

TABLE 45 INTERCOMPANY SALES PROCESS FOR MATERIAL 976323 IN ACTUAL .................................. 84

TABLE 46 CHECK SALES ORDER ASSIGNMENT FOR MATERIAL 370210 .............................................. 85

TABLE 47 INTERCOMPANY PURCHASE PROCESS FOR MATERIAL 370210 ........................................... 86

TABLE 48 CHECK SALES ORDER ASSIGNMENT FOR MATERIAL 351110 .............................................. 87

TABLE 49 FIND OBJECT NUMBER FOR PRODUCTION ORDER FOR MATERIAL 351110 ........................... 87

TABLE 50 CALCULATION FOR MATERIAL 351110 WITH PRODUCTION ORDER 53129110 ..................... 88

TABLE 51 COSTING IN GCP FOR MATERIAL 351110 IN ACTUAL ........................................................ 89

TABLE 52 COST AND PROFIT CALCULATION FOR SALES ORDER 28038144 IN ACTUAL ........................ 90

TABLE 53 TTYPE HIERARCHY IN COMPANY 314 FOR SALES ORDER 28038144/1000 IN ACTUAL ......... 91

TABLE 54 COST ESTIMATE OF SUBCONTRACTING AND PRODUCTION ................................................. 93

IX

Abbreviation Dictionary GCP Group costing and profitability

ERP Enterprise resource planning

SCM Supply chain management

POS Point of sale

DP Demand planning

SNP Supply network planning

ATP Available to promise

ALE Application Link Enabling).

TType Transaction Type

SI Single item

FI Financial item

CI Costing item

EPS Extraction preparation step

EPI Extract partner identification

SO Sales order

PO Purchase order

MTO Make to order

MTS Make to stock

BOM Bill of Material

EDI Electronic Data Interchange

APO Advanced Planner and Optimizer

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1 Introduction In the following sections, I will describe the circumstance for this thesis, how this topic is created and the purpose of the solution given by this thesis.

1.1 Motivation Information technology has great effects to our society. In business, ERP (Enterprise resource planning) systems make it possible that information is shared among companies with EDI1. As one of the opportunities for business consulting, we are looking for different IT solutions for various problems in the aim of helping companies. It is very common in global companies that many subsidiary companies owned by same group (parent company) are working together in one supply chain. With the development of IT, many global companies have chosen SAP ERP system for supporting business. Because so many companies are using SAP ERP system, more and more consulting companies are motivated to offer tools and solutions for SAP ERP. The project of this thesis is launched in Informations Management & Consulting GmbH2 (IM & C GmbH) which is a consulting company established in 1991 focusing in the field of information technology. It sees the challenge in designing software products to suit infrastructure of global supply chain and corporate goals. SAP ERP also has the function of group costing3. But it has many limitations: In Plan

- All subsidiaries in one client, one SAP ERP system globally - One controlling area globally - Unique usage of one cost component split globally - Unique material, vendor and customer numbers - Cost of sales locally cannot be mapped as cost of manufacture for global

purpose - Transport cost between plants of different subsidiaries - Special procurement key4 must be maintained and only one may be

defined by material - Mixed costing must to be manually maintained in case of procurement

alternatives In Actual

- All restrictions of plan apply even more for actual - Special procurement and mixed-costing are not relevant for actual

scenarios - Material Ledger has to be activated with parallel valuation - IDOC has to be activated for sending and receiving plants

1 Kantor, Michael; James H. Burrows, 1996 [13] 2 IM&C GmbH [1-1] 3 SAP online documentation[10-25] 4 SAP online documentation[10-26]

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- Strange valuation of intercompany goods receipts with correction only at time of invoice received

- Material ledger, parallel valuation is considered as highly complex, even from knowledgeable SAP consultants

IM&C GmbH recognized these gaps in SAP ERP among companies within same group. So, from 2005, this company has been developing a SAP software add-on - GCP Engine (Group Costing and Profitability Engine) - to allow such functionality of optimizing a production network. And GCP aims to work in multiple controlling areas, operating concerns and even systems. The solution in GCP for ‘make to stock’ is available and improving continuously. Further, we find in some industry lines, each sales order brings a big amount of revenue. Therefore a calculation based on each sales order is needed for steering committee to see gain and loss in each customer order. So we are looking for solution for GCP engine in ‘make to order’ circumstance. In order to make a clear logic and understandable content structure, this thesis is written in the way of stepping from ‘make to stock’ to ‘make to order’.

1.2 Purpose The concepts and solution approaches which will be described and discussed in this thesis covers ‘make to stock’, ‘make to order’ and how some specific problems are resolved. I will describe in the following some gaps recognized in SAP ERP and aims of further research.

1.2.1 Intercompany profit and profit One of the aims of GCP is to split cost and intercompany profit from revenue from companies in same group. Because SAP ERP uses standard price or moving average to calculate the product costs, no matter where the material is purchased from, the cost is handled in same way in the company. But in real business, if the material is purchased from another company internal group, the information carried by the cost is different. If one material is purchased and consumed in production, the cost is taken material cost. It is true if it is from external supplier. But if it is from another company from same group, the price contains the cost from another company and profit they made in the transfer. In order to realize the real cost and profit for specific product or sales order in the supply chain of the group, GCP is implemented to split ‘global cost’ from ‘cost’ and ‘intercompany profit’ from ‘profit’.

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As we can see in the example, the global cost and intercompany profit from company 1 are all taken into material cost in company 2 which is handled same as external supplier. If company 2 only purchase from company 1, we are able to see the cost and profit in company 1. But when there are procurement alternatives, it gives challenge to calculate global cost from the product. When the group’s steering committee looks into each company’s profit on one specific product, a merged profit of intercompany profit (from internal group) and profit (from external group) can be seen. By recognizing intercompany profit, it can be seen from group view whether one product is beneficial for the group companies or not. In another word, we can see in the last company who sells the product and what is the profit earned from external. But it doesn’t reflect the profit for whole group. Only by splitting intercompany profit from profit, the real profit of the product can be seen. Additionally, the option of taking majority of alternatives is needed. For example, if the external supplier delivers less than 5% of the whole quantity, it could be ignored in calculation.

1.2.2 The transparency of cost component split Because SAP ERP valuates material by standard price or moving average, when product is produced and put in inventory, only posting value of goods receipt is given. The cost component split during production is lost. On the other hand, if the product is sold to another company, there is no clue of these cost split anymore. Calculation throughout the supply chain is needed in order to see the performance of the cost change of each cost component. This helps to see the character of the product and allocate responsibility of different departments.

10 - Standard price - Moving average

Company 2

Company 1

Ext.Supplier

Ext.Customer

Material A

Material A

Company 1

External supplier

8- Global cost

2- Intercompany profit

10- Price

P IP

Material C

Profit

Customer Company 2

Value Add

Figure 1 Intercompany profit and profit

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As we can see in the example, the cost of material changes due to different reasons. But when we calculate the price by standard price or moving average, the cost is merged together. In order to see the reason of the cost fluctuation, we want to see the result of following.

The goal of bringing transparency of cost component to supply chain in group is that the reason and responsibility can be allocated. And also, if the cost of the product is fluctuating, by comparison of plan and actual, we can see what is the reason and find out the bottle neck to resolve the problem.

1.2.3 Value of stock For materials in inventory, even though they have same material number, they are actually valuated in different way. Same material can have different actual

Period 2 Period 1

Material

Production

Freight

Company 1

Company 2

€10

€5

€4

€1

Profit €2

€12

Material

Production

Freight

€7

€3

€2

Profit €2

€14

€12

Material A

Material A

Material

Production

Freight

€5

€4

€1

IP €2

Material

Production

Freight

€7

€3

€2

Profit €2

Period 2 Period 1

Material

Production

Freight

Company 1

Company 2

€10

€5

€4

€1

Profit €2

Cost €12

Material

Production

Freight

€7

€3

€2

Profit €2

Cost €14

€12

Material A

Material A

Figure 2 Cost transfer intercompany in local view

Figure 3 Cost transfer intercompany in global view

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cost due to different usage, e.g. for ‘make to stock’, ‘make to order’, consignment stock or a project stock.5 In SAP ERP, value for sales order stock can be found in table [EBEW] and normal stock in table [MBEW]. But when the material is issued, it is calculated by moving average (or standard price). The information is mixed.

If we compare the difference of value of material A in the inventory from company 1 and company 2, we can get the profit earned by company 2. But it doesn’t reflect concretely the profit earned by sales order 4711. Because the material for specific sales order is valuated in different way, the result of profit margin calculation for sales order will be concrete if we can pursuit the route and find out the real cost coherence to the sales order. Therefore, it is necessary to find out the link from the top material or top order to bottom and roll up all the cost and intercompany profit. From all above, we can see the purpose of this thesis is mainly to answer these questions: - How to extract all relevant cost for make to stock and make to order; - What is the procedure of calculating group cost by article and customer order item; - How to calculate cost and profit margin by article and sales order item;

5 SAP online documentation[10-27]

Material A

Material A

10PC, €160 – by sales order 4711

20PC, €140 – by normal stock

Company 1 / plant 101

Company 2 / plant 201

Profit €20

€10/PC

10 PC, €180 – by Sales Order 4711

20 PC, €150 – by normal stock

€11/PC

Profit €10

Figure 4 Different values by sales order stock and normal st ock

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2 Basic concepts In this chapter, I will discuss the concepts of ‘make to stock’ and ‘make to order’, how these strategies are implemented in SAP ERP, then go further to how it works in GCP.

2.1 Push/Pull in SCM Before we go deep in SAP ERP, let’s start from a brief introduction to SCM (Supply Chain Management) to begin. In early 1980’s, the term supply chain management was introduced by the business consultants Oliver and Webber.6 In 2005, Supply-Chain Council7, a non-profit organization formed as an independent consortium in 1996, standardizes supply chain terminology and processes in the widely accepted and adopted Supply-Chain Operations Reference (SCOR) model. From this model, we can get a whole view of the supply chain.

Figure 5 Five management process in SCOR Model 8 If we look into the sequence in supply chain, we found product/service flows among business partners until customer while the finance flows opposite. In meanwhile the information is exchanged among partners. We can find more in theory in literature by Kuhn Axel9. In the supply chain, if the company is offering a product or service to customer, there will be information flow, money flow and product/service flow. Raw material or supportive service comes from suppliers and offer to customer as finish product. On the opposite direction, money comes from end customer to the company, and then from the company to supplier for the payment. Information flow goes interactively between business partners.

6 Oliver and Webber, 1992,[8] 7 Supply Chain Council, 2005, [7] 8 Supply Chain Council, 2005, [7] 9 Kuhn.Axel, 2002,[4]

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10

Determined by trigger event, planning strategies in opposite directions are called ‘Push’ and ‘Pull’ in SCM. Push strategy is driven by demand forecasting or production planning. The company produces products according to plan, puts finished products in stock and tries to sell to next stage partner.

Pull strategy is driven by order from customer. The company produces products based on sales order which is ordered from market. The company produces products to fulfill the demand.

10 Kuhn.Axel, 2002,[4]

Supplier

Company

Customer

Product/Service

Order

Order Product/Service

Pull

Supplier

Company

Customer

Product/Service

Forecast

Forecast Product/Service

Push

Supplier

Company

Customer

Product/Service

Money

Money Product/Service

Information

Information

Figure 6 Product/Service flow in supply chain

Figure 7 Push strategy

Figure 8 Pull strategy

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Push/Pull boundaries refer to the positioning of a decoupling point in the supply chain – up to which supply is pushed forward as ‘make to stock’ but beyond which demand drives ‘make to order’ execution.11 In SCM, there are four classical segments of production strategy. The boundary12 of push and pull are understood as POS (Point of Sale) when the stock is given a real sales order from customer.

The difference among them depends on the push-pull boundary in production planning. We can understand the difference as following table: Engineer to Order Make to Order Assembly to Order M ake to Stock

Push/Pull boundary

Design & raw materials

Raw material & common components

Components & subassembly units

Finished products

Production planning

Engineering capacity

Determine capacity flexibility & cushion

Determine production & delivery cycle time and dates

Forecast finished goods inventory level

Master Production Schedule

Final production Final production Mix forecasts & actual demands

Forecasted demands

Table 1 Push-pull boundary and manufacturing enviro nment 13 But in real business - standing on the position of the machine manufacturer - even if we are producing products on sales order, the components we are using

11 Douglas M Lambert, 2008, [5] 12 Douglas M Lambert, 2008, [5] 13 LingLi, 2007, [3]

R&D Produce Assemble Distribute

Forecast driven Demand driven

Push: Inventory flexibility

Pull: Capacity flexibility

Engineer to Order

Make to Order

Assemble to Order

Make to Stock

Figure 9 Push / Pull boundary

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are still in mixture of ‘make to stock’ (e.g. standard components) and ‘make to order’ (e.g. special components).

2.2 Supply Chain in planning In one planning period, supply chain in planning is done from long term to short term. Normally the planning is done from strategic level to operative level.14 In SAP, if we look into the supply chain by four phases – procure, produce, distribute and sell – all the functions are covered by ERP system. The supply chain planning matrix15 is shown as following.

As we can see from the planning flow, the aim of planning is to make sure all the materials from whole network can be available with right quantity and on right time. This functionality is covered by SAP APO (Advanced Planner and Optimizer). Further, from the result of MRP, we should find the planned quantity of materials each level in BOM. The planning we are talking now is focus on the result after MRP run.

2.2.1 Planning in SAP ERP In SAP ERP, ‘Product Cost Planning’ (CO-PC-PCP) is an area within ‘Product Cost Controlling’ (CO-PC) where you can plan costs for materials without

14 Roland.Fischer, 2008 [11-3] 15 J.Rohnde, 2000, [9]

Figure 10 Supply chain planning matrix

Procure Long term

Short term

Strategic Network Planning

Master Planning

Material Require-

ments Planning (MRP)

Production Planning

Scheduling

Distribution Planning

Transportation Planning

Demand Planning

Available To

Promise (ATP)

Produce Distribute Sell

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reference to orders, and set prices for materials and other cost accounting objects.16 To estimate product cost in SAP ERP, cost should be collected from both material side and activity side. After decision of BOM and routing is made for one product, MRP will do BOM explosion and get cost for each material from material master. From bottom, material cost together with quantity in BOM, material price is given. Then, work center offers operations which have activity cost rate, together with the operation time from routing, activity cost is given. The planning flow of quantity and value structure17 is shown as following.

After planning is done in APO or SEM, target sales quantity is planned in CO-PA. Planned sales quantity is transferred from CO-PA to SOP and aggregated into product group. In PP and MM, all the master data are adjusted based on planning sales quantity. From FI and HR, amortization of assets and labor costs are calculated and transferred to cost center accounting. In CO-PC, production cost is transferred from PP, material cost can be got from MM, and Overhead is given in CO-CCA. Product cost can be calculated. The planning flow18 is show as following.

16 SAP online documentation[10-1] 17 Roland Fischer: Advanced Controlling [11-1] 18 Roland Fischer: Advanced Controlling [11-2]

Overhead

Production

BOM

Routing

Product Cost

Work Center

Material Master

Cost Center

Quantity

Material price

Activity cost rate

Time

Material Cost

Activity Cost

Figure 11 Quantity and value structure in planning

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We can see in the flow that the cost estimate in planning is sales quantity based. Therefore, when planning in CO-PC is done, the cost estimate for each partner in supply chain is there in system.19 In SAP ERP, cost estimate with quantity structure can be displayed by transaction [CK13N], and the data comes from table [KEKO] (header) and [CKIS] (items).20 However, the planning flow here is normally within one company code. When there is intercompany transfer happened, it is not easy from end of the chain to trace back activity cost and material cost from different companies. Group costing can be done in SAP if the material is assigned to same profit center.21 But this is hard to be a solution for all the products. In the following, I will describe how cost estimate is done in one company code with the procedure of purchase, production and sales. This is the basic information we can get from SAP ERP as a data source. I will discuss in the circumstance of manufactory in make to order.

2.2.2 Purchase As a preparation of purchasing, RFQ (request for quotation) and quotation should be done with vendor.22 When a material is planned to be purchased from this vendor, the cost estimate can be displayed by transaction code [CK13N] and five fields are needed to be filled in. The costing variant23 can be used to differentiate ‘make to stock’ or ‘make to order’. 19 SAP online documentation[10-4] 20 Note: See attachment C. 21 SAP online documentation[10-3] 22 SAP online documentation[10-5] 23 SAP online documentation[10-28]

Material cost Overhead Production cost

Demand planning (in CO-PA, BI or APO) Planning target production quantity

SOP. Aggregate production planning

PP - Activity quantity planning - BOM, Routing, Work Center - Material usage planning

MM Material usage prices planning

FI-AA Amortize of exist assets

HR Personal costs

CO-CCA - Secondary costs planning - Activity quantity planning - Price calculation

CO-PC Calculation of Standard Prices

Figure 12 CO-PC planning in SAP

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Cost estimate with quantity structure [CK13N]

Material Plant Costing Variant Costing version Valid on

MATNR WERKS KLVAR TVERS KADAT

Table 2 Cost estimate with quantity structure In the header [KEKO], there is information to identify the material and plant, and costing variant indicates if it is ‘make to stock’ or ‘make to order’. In the item table [CKIS], the cost estimate of the material is given.

Therefore, for materials purchased from external, we can find the cost from SAP ERP. From the information in cost estimate, we can allocate the valid period and usage of the material. For some materials, cost estimates change from time to time. And also, cost estimate can be different for ‘make to stock’ and ‘make to order’.

2.2.3 Production As we see in CO-PC, cost estimate for production comes from internal activity, material, and overhead. 24 Same as cost estimate for purchase, the cost estimate in production can also be displayed by transaction [CK13N] with the material number of the finished product. Some features additionally, if the product is in make to order. There are sale order number [VBELN] and position [POSNR] in the header table [KEKO]. In the item table [CKIS], the cost items are divided in the field [TYPPS] with internal activity (E), material (M), and overhead (G). Costing variant has same functionality as what we described in purchase order. Additionally, there is


Cost estimate with quantity structure

Header [KEKO]

Cost estimate Nr. KALNR

Item [CKIS]

Total cost WERTN

Material number MATNR

Fix cost WRTFX

Plant WERKS

Valid date KADAT

Costing variant KLVAR

Plant

Material

Vendor

Costing version TVERS

Figure 13 Cost estimate with quantity structure in purchase

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indicator [SBDKZ] showing whether the material is from individual requirement (Key 1) or collective requirement (Key 2). This can also displayed within Material Master with transaction code [MM03] in MRP4.25

So, from the cost extracted from production cost estimate, the cost components of material, activity and overhead are split. And by costing variant indicator, we can differentiate the consumed material by normal stock and sales order stock.

2.2.4 Sales In make to stock, there is planned demand for sales. We can follow the planned demand to MRP. In make to order, the top sales order already exists. We can find following orders from sales order explode. From top sales order, more documents can be found with all documents coherence to sales order, such inquiries, quotations and sales orders26 in same system. To do cost estimate for each sales document item, it is possible in SAP ERP to calculate product cost by sales order. Costs and revenues planned can be displayed.27 So, requirements explosion should be done to see if it is individual or collective requirement, and then transfer the cost of materials, the product

25 SAP online documentation[10-6] 26 SAP online documentation[10-7] 27 SAP online documentation[10-8]

Key 1, 2,

Cost estimate with quantity structure

Header [KEKO]

Cost estimate Nr. KALNR

Item [CKIS]

Total cost WERTN

Material number MATNR

Fix cost WRTFX

Plant WERKS

Valid date KADAT

Costing variant KLVAR

Plant

Material A

Sales order VBELN

SO item POSNR

SO (MTO)

Item category TYPPS

Requirements SBDKZ

Material B

Material C M

Labor E

Overhead G

Material A

Material B

Material C

Figure 14 Cost estimate with quantity structure in production

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cost estimate for sales order item28 is done. Another approach which can also be taken is order BOM cost estimate29 for complex make to order production. In cost estimate for sales order item, the quantity and value flow are identical. The cost estimates comes from local cost estimate of the sales company. Profit can be calculated together with the revenue and discount from CO-PA.

In SAP ERP, we can access CO-PA by transaction code [KE23N], and check revenue by sales order number. The amount of revenue is also available in table of sales order item [VBAP]. But all the revenues will be reflected in CO-PA in the end. Therefore, no matter in ‘make to stock’ or ‘make to order’, revenue can be found in CO-PA.

2.3 Supply Chain in actual In actual of supply chain, all the material movements and production are done, and then all the cost planned is actualized. Between business partners, we can find the documents of delivery not for physical movements and invoice for financial transfer.

28 SAP online documentation[10-9] 29 SAP online documentation[10-10]

Manufacturer Customer

Physical

Supplier

Physical

Delivery note

Delivery note

Invoice Invoice

Financial Financial

Cost estimate

Cost estimate Sales Order

Machine

Item 2000

Item 16000

Item 26000

Sheet Master

Tool Master

Cost estimate COPA

- Revenue - Discount

Figure 15 Cost estimate in sales

Figure 16 Physical and financial flow of supply chain in actu al

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Financial flow and corresponding physical flow may split in the time. If the payment should before the delivery, or there is only service instead of goods, the invoice will be order related. If the payment is after the delivery, the invoice will be delivery related.30 For each sales order, it should be possible to find the related delivery and invoice. But it is possible that delivery and invoice is posted in different period. Now we look into the manufacturer to see how the actual document flows internally in SAP ERP.

2.3.1 Actual in SAP ERP Actual in SAP ERP is quite different from planning. In planning, the quantity and value flow are synchronized in the time. Therefore, in order to calculate the cost of a product or a sales order item in planning, we drill down along quantity flow with BOM, collect the costs (material, internal activity, overhead), then sum up to the final product or sales order item. In actual, quantity flow and value flow split in the time. But with the actual documents, we can directly sum up the cost by rolling up the cost. On quantity side, the resource used in actual can be different from plan because there are procurement alternatives31. So, the percentage of each alternative can be different from plan. The actual quantity can also be different from plan. It may happen that some material or activity is not used or new material or activity is used. On value side, the price can be different from plan. Furthermore, non-valuated stock32 will be calculated directly to the cost collector. After purchase and production are done, the actual movement and cost will be recorded in material documents and accounting documents.

30 SAP online documentation[10-13] 31 SAP online documentation[10-11] 32 SAP online documentation[10-12]

Activity price

Material Quantity

Material Price

Product Cost

Goods Receipt

Purchase Order

Invoice

Production Order

Routing

Operation Record

Activity rate Sales Order

Figure 17 Quantity and value structure in actual

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Following, I will describe the document flow in actual with purchase, production and sales procedure. That gives an overview of how the data of actual in SAP ERP flows.

2.3.2 Purchase order When a purchase order is released and all the movements are done, all the actual information is recorded in various documents. Then the links to this information are also given in purchase order. We can use transaction code [ME23N] to display the purchase order. What we find in display is purchase order header, items, and item details.33 In item details, we can further find purchase history and account assignment in purchase order display.34

If the material is in make to order, information can be found in assignment table for which sales order [VA03] is the item purchased. And in purchase history, related document number can be found such as goods receipt [MIGO] and invoice document (payable) [FB03]. With the information, more records can be found, for example, delivery notes and invoice.


Purchase order

Header [EKKO]

Purchase order Nr. EBELN

Item [EKPO]

Company code BUKRS Plant

Material

Item number EBELP

Plant WERKS

Material number

MATNR

Company

Sales order

Account assignment [EKKN]

Sales order Nr VBELN

Item number VBELP

Purchase history [EKBE]

Material Doc Nr BELNR

Item number

BUZEI

GR

Invoice Doc

Delivery Doc

Invoice

Figure 18 Document structure from purchase order

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As all movements should be recorded by documents, the quantity should be found in material document [MSEG] and the value can be found in accounting document [BSEG].

Additionally, we can also find out some further information from the indicators in [MSEG]. Field [SOBKZ] indicates the special stock type which can be used to identify sales order stock or normal stock. Field [KZBEW] indicates the movement type which presents sending or receiving and for what aim the material is used for, e.g. for purchase order or for production order.

2.3.3 Production order When a production order is placed, we can display its header, operations and components.35 In SAP ERP, there are solutions for production in different conditions. But in general, when we talk about make to order in manufactory, the following tables and data should be important. In header of production order, we can find the information of company code, plant, and material number. If the material is make to order, the assigned sales order number and item can also be found. In operations, time records are given with activity rate from work center. Therefore, the production cost can be calculated. Material is assigned to operation in production order. (If it is assigned to header, the material should be ready before the production is launched.) So, for each operation, the assigned components can also be displayed. Due to some features of material, the real consumption might be different in actual compared to planning.

• Phantom material Exist in plan, but it will not appear in actual, because its components will be consumed directly instead of phantom material.


Material doc

MBLNR

MSEG

Material number

MATNR

Special stock

SOBKZ

Movement type

KZBEW

Purchase Order Nr.

EBELN

PO item

EBELP

Purchase order

Trigger

Purchase history [EKBE]

Accounting doc

BELNR

BSEG

Material number

MATNR

Value

DMBTR

Material document Accounting document

Figure 19 Association of MSEG and BSEG

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• Bulk material Exist in plan, but it will not be posted in actual if not consumed.

• Backflush Exist in plan, but in actual it depends on confirmation of operation.

Although there might be difference from plan to actual, the material consumption will be reflected in CO if it is actually used in the end. Therefore, we can take the production order number and look into CO for the cost.

From these tables, we can see the target cost for production. Furthermore, we can get the actual cost with the settlement.

2.3.4 Sales order If all the costs rolled up from purchase order and production order with sales order assignment, the revenue will come from sales order. And in the end, the revenue will be reflected in CO-PA. In actual, the goods issue to customer can be recognized for the sales order in material document. It helps us to find the physical movement of the final products. And the value of the goods is in sales order items. Further, they will be reflected in CO-PA. If the material issue is assigned to sales order, it will be shown in [MSEG]. Through this clue, CO-PA item can be found with the sales order number.

Production order

Order Master data [AUFK]

Company code BUKRS

Plant Plant WERKS

Company

Prod order Nr. AUFNR

MSEG

Material

Object number OBJNR

Sales order

Sales Order Nr. KDAUF

SO position KDPOS

Activity target cost [COSS]

Object number

OBJNR

Material target cost [COSP]

Object number

OBJNR

Prod order Settlement [COEP]

Object number

OBJNR

Figure 20 Table for production cost

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In this way, the revenue for each sales order item can be found for calculation. The physical movements and corresponding financial movement can be extracted. So far, I have introduced basic concepts of production process. And in technique way, I have explained how the quantity and value of product and sales order are recognized in SAP ERP in plan and actual. This is some basic knowledge of SAP ERP. Then, I will describe the theoretical basis of GCP Engine in the following section.

Sales Order

Header [VBAK]

SO Number VBELN

Item [VBAP]

Item Number POSNR

Material Number MATNR

Plant WERKS

MSEG

Material doc Nr. MBLNR

SO Number KDAUF

Item Number KDPOS

CO-PA

Docu Nr of CO-PA BELNR

SO Number KDAUF

Item Number KDPOS

Figure 21 Connection from material document to CO -PA

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3 GCP Engine basis GCP Engine (Group costing and profitability engine) is a tool for analyzing product cost and profit from a group view. IM&C GmbH recognized the gaps among the systems from companies in same group. Therefore, a group cost and revenue accounting system is developed to meet the requirements of group management.36

3.1 Scenarios in GCP SAP ERP has a good solution for business processes in one company as an ERP product. GCP cooperates with the principle of SAP ERP, uses its data and do calculation for group costing and profitability purpose. The communication processes can be described generally as following.

Because GCP extracts the price and sales quantity from SAP ERP, it should follow costing scenarios as SAP. Following cost flow in SAP, we can calculate plan-target and actual cost with time line. When we plan for the future, both the price and sales quantity are based on plan, so we can only get plan cost. When real demand is confirmed today, the quantity of material is given by BOM and activity can be calculated with the planned output and operating rate37 to get the target cost38. But we cannot tell the actual price before invoices and settlements

36 Fritz Wurm: Planning and controlling consolidated earnings based on consolidated cost of goods manufactured, P3 [1-4] 37 SAP online documentation[10-2] 38 SAP online documentation[10-22]

SAP ERP

CO-PA Planning

Cost planning and tarifiteration in CO-CCA

GCP Extraction of CO-PC itemization in local valuation

GCP Extraction of actual data in local valuation

Volume planning of quantities for activities, materials and services

GCP Costing plan (versions)

Profitability reporting by plan-, actual- or simulation version

GCP Costing actual (versions)

GCP

Figure 22 Scenario of communication between GCP and SAP ERP

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have been posted at period end. Then, after the period has been closed for further postings, we obtain actual cost by taking all FI postings of the month relevant for inventory valuation and profitability of the products.

In order to give a clear picture of GCP costing flow, following sections will describe plan and actual scenarios separately.

3.1.1 Planning scenario In planning, we are looking from today to the future in the time line. Therefore, the prices and quantities are taken as estimated in CO-PC and sales quantities may be taken from any forecasting tool. Procurement alternatives may be results from APO-SNP or may be proposed by GCP on actual data and adjusted according to the expectations of the planner. This is planned cost. We assume there is a product produced in one company with components produced in another company within same group. When we do planning, all the cost estimates are there after the CO-PC mass run in SAP. In order to obtain quantity volumes to be purchased and produced by product, we need to start a process from planned sales quantities from SAP ERP or the forecasting tool and break them down to next levels throughout the supply chain. This is called ‘Top-Down’ procedure. After ‘Top-Down’ structure is given, we can collect all the planned cost in each level with the planned sales quantity. The product cost can be calculated by

Actual costing

Plan costing

Target costing

Future Today

Plan Price

Time

Today

Plan Quantity

Plan Price

Actual Quantity

Actual Cost Actual Quantity

Today Past

Figure 23 Costing in SAP

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rolling up all the costs for all the components and activities in the breakdown structure. This is called ‘Bottom-Up’ procedure.

Additionally, there are some features in ‘Top-Down’ procedure. It happens that some components have procurement alternatives. This means, for example, there are possibilities for same material to be purchased from external or produced internally in same period. In SAP ERP, this is customized by special procurement type39. The special procurement key can be found in material master MRP2. In planning, special procurement key is reflected in [KEKO] table, field [SOBSL] and [SOBES].

Corresponding to procurement alternatives, GCP put these entries into ‘Mix table’. The planned quantities and sources are reflected ‘Mix table’. Furthermore, the user has options when proposing these alternatives from


A

B

Activity

Company 1

B

C D Activity

Company 2

B

Supplier (external)

Plan

Company 2

Supplier

B

70%

30%

Bottom-Up

Top-Down

A

B

Activity

B

C D Activity

Company 1

Company 2

€1/PC

1 PC

5 PC 5 PC

2 PC 3 PC 4 h

€2/PC €3/h

€2 €6 €12 + + = €20

€20

€4/h

€12 +

€32 =

3 h 1

2

3

4

A

1 2

3 4

Figure 24 Top-Down and Bottom -Up procedure in planning

Figure 25 Procurement alternatives in planning

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actual data, such as ignoring small quotations (< 5%) or taking the maximum quotation only. Moreover, the planner may also change the proposed quotation to his expectations. In planning, the product cost is calculated from cost estimate for each unit multiply planned sales quantities. The cost estimate is given in system for the future. Planned costs are calculated from cost estimate and sales quantity from each level. Therefore, product plan cost is given when all the costs are rolled up in ‘Bottom-Up’. Target cost is calculated when the sales quantity is realized. The same method is implemented to calculate target cost. We can take the cost estimate for that period and multiply confirmed sales quantity. Product target cost can be calculated in ‘Bottom-Up’.

The target cost is triggered when the demand is confirmed. Because value of the goods is corresponding with goods movement in planning, we look for price and sales quantity on the same time point to calculate plan cost and target cost. The difference of target costing and plan costing only comes from the sales quantity. The price should be set when it is planned.

3.1.2 Actual scenario Actual cost is calculated from what has happened in previous period. Costing can be seen in a different way when the production is done, goods are sold and sales order is closed. Because all the costs are realized, costs are reflected by actual FI postings. Therefore, in actual costing, we can roll up all the costs by bottom-up for the finished product or sales order. If there are goods transfers, we can find the connections by purchase order, sales order and production order. And then, we look for following documents in the orders and collect all the costs to roll up.

Future Today

Plan Price

Time

Plan Quantity Actual Quantity

Financial

Physical

Target cos t Plan cost

Plan Price

Figure 26 Plan cost and t arget cost

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When there are multiple procurement sources in actual, the quantities of the alternatives in actual posting can update ‘Mix table’. Therefore, target cost calculation is closer to actual with same sold quantity. Then the comparison can show the responsibility of variances with the result of procurement alternatives. The planner also has options to ignore the small quotations (<5%). (See section 3.1.1)

With all the results given, we can find the variance with comparison of target cost and actual cost. Furthermore, it will be even more concrete to see the cost components split in these cost to allocate the reason of cost increase or decrease. And then, the responsibility can be allocated. Nevertheless, there is no time difference of value and sales quantity in target cost. In actual, the financial posting and physical movement are independent in the time.

Prod Order

Bottom-Up

A

B

Activity

B

C Activity

Company 1

Company 2

1 PC

5 PC

3 PC 4 h

€3 €15 + = €18

€18 €8 +

€26 =

2 h

1

2

A

1 2

5 PC PO SO

Prod Order

A

B

Activity

Company 1

B Company 2

B

Supplier 1 (external)

Plan

Company 2

Supplier 1

B

70%

30%

Actual

65%

30%

B Supplier 2 (external)

Supplier 2 5%

Figure 27 Bottom -Up procedure in actual

Figure 28 Procurement alternative in actual

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In actual costing, we should collect financial posting and physical movement. Then they can be put together in Bottom-Up calculation.

3.2 Definition In GCP, some basic definitions should be described first. The following sections are to introduce these definitions for some words which are important to know for further chapters.

3.2.1 TType definition The Transaction Type (short TType) describes the type of the process mapped within GCP. GCP uses TType to reflect processes from SAP. Regarding the various situation in supply chain, user may define his processes more detailed than standard delivery of SAP, if it is necessary.40 There are internal TType and external TType in GCP. Internal TType is given as basic elements by the system to clarify the character of business processes. Internal TType is embedded in the system which can only be changed by programming. External TType can be defined by customizing. Definition of external TType can be given in various situations based on internal TType. In this way, different customizing need to be done for various business processes from customers’ side. The aim is to give flexibility of reflecting the complex supply chain. Detailed TType definition is in Attachment A (Internal TType definition) and Attachment B (External TType definition). In order to explain the use of TType, I explain some processes here as examples. These processes are used in case study in later chapters from one company to partners with the processes of stock transfer, production, sales, purchase and subcontracting.

3.2.1.1 TType for transfer between plants TType 8700 and 2200 are used in pair. They indicate the stock movement between plants inside one company which means material is consumed from

40 IM&C GmbH: GCP Engine documentation [1-2]

Period end Time

Financial

Physical

Target cos t Actual co st

Actual Cost

Delivery

Actual Quantity

Today

Actual Quantity

Plan Price

Figure 29 Actual cost and target cost

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one stock and transferred to another. Because the quantity must be equal in the transfer, 8700 and 2200 are coupled TType. In GCP extraction, coupled TType is two TType indicates transaction in pair partners but shares same value.

DE Company Code 1 Plant 1 Material 1

Plan → Plan


Material 8700 2200 Material

Actual → Actual


Table 3 TType for stock transfer between plants

3.2.1.2 TType for production order Following table indicates the TType used for producing material 2 from material 1. In planning, 8300 and 3400 are used for material consumption which is also coupled TType. Production cost is carried by 3200 which is planned local value add. In Actual, TType 8310 and 3410 indicates the actual material consumption. TType 3410 is the target cost. So additionally, actual cost will be adjusted with TType 8310 and the difference is put to TType 3415. For local value add, 3210 is taken from settlement of production order for adjustment.


Plan → Plan



3200 Production

Actual → Actual


3415 Material Adj.

3200 Production

3210 Prod. Settlement

Table 4 TType for Production process

3.2.1.3 TType for transfer within consolidated part ners If one company from Switzerland purchases material from another company in Germany which is in same group and consolidated. Coupled TType 8100 and 5100 are used to indicate material cost and production cost. And 5120 is

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planned delivery cost. We notice here quantity and value are together in planning. In Actual, value of transferred material is carried by TType 8070, and quantity in TType 8060. TType 8100 is the confirmed transaction from sender. It links to TType 5100 on receiver side. Additionally, 5130 is used to adjust actual cost for delivery.

DE Company Code 1

Plan → Plan

CH Company Code 2


5120 Delivery Cost

Actual → Actual


-Financial 8070 5110 Adjustment

-Physical 8060

5120 Delivery Cost

5130 Deliv-cost Adj.

Table 5 TType for transfer within consolidated part ners

3.2.1.4 TType for transfer within non-consolidated partners In scenario of with non-consolidated partners inside group, because information from sender side is missing, we only have the TType for receiving company. They are in similar structure but different TType correspondingly.

DE Company Code 1

Plan → Plan

CH Company Code 2

5200 Material

5220 Delivery cost

Actual → Actual

5200 Material

5210 Adjustment

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5220 Delivery cost


Table 6 TType for transfer within non-consolidated partners

3.2.1.5 TType for transfer from external supplier For purchasing from external company, the logic is also the same.

External Company

Plan → Plan

CH Company Code 2

3100 Material

3120 Delivery cost

Actual → Actual

3100 Material

3110 Adjustment

3120 Delivery cost


Table 7 TType for transfer from external

3.2.1.6 TType for transfer with consolidated subcon tractor When production is subcontracted to a partner company, material will be sent to partner and get the processed material from the partner. So we need other TType for this process. The value-add by subcontracting is transferred by TType 8150 and 5150, which is similar with consolidated partners previously (TType 8100 and 5100). But it is special that TType 8350 and 3450 indicates the material move out of the company and come back after processing in subcontracting company. Then in actual, the cost can be adjusted by TType 5160.

(Subcon.) DE Company code 1

Plan → Plan

DE Company Code 2

Subcon. 8150 5150 Subcon.

5170 Delivery Cost

→ 3450 Material Cost

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← 8350 Material Cost

Actual → Actual

Subcon. 8150 5150 Subcon.

5160 Adjustment

5170 Delivery Cost



Table 8 TType for transfer with consolidated subcon tractor

3.2.1.7 TType for transfer with non-consolidated su bcontractor For non-consolidated subcontractor inside group, the cost structure is the same but in different TType. Because the information from partner is missing, TType is only for receiver side. Nevertheless, the logic is still similar.

(Subcon) DE Company code 1

Plan → Plan

DE Company Code 2

5250 Subcon

5270 Delivery cost



Actual → Actual

5250 Subcon

5260 Adjustment

5270 Delivery cost



Table 9 TType for transfer with non-consolidated su bcontractor

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3.2.1.8 TType for transfer with external subcontrac tor Same logic, for external subcontractor, we also use different TType for the movements but in same cost structure.

(Subcon) External Company

Plan → Plan

DE Company Code 2

3250 Subcon

3270 Delivery cost



Actual → Actual

3250 Subcon

3260 Adjustment

3270 Delivery cost



Table 10 TType for transfer with subcontractor from external

3.2.1.9 TType for sales to external customer For sales to external customer, TType 7100 is used in planning including both quantity and value. But in Actual, quantity (Physical) and revenue (Financial) come from different documents. Therefore, two TType are used in actual.

DE Company Code 1

Plan → Plan

Customer

Product 7100

Actual → Actual

Revenue 7200

Physical 7110

Table 11 TType for sales to external customer

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There is also TType 7300 which means sales from third party to customer. This will be described in case study.

3.2.2 Costing item Single item in GCP is defined as the lowest level cost component. Single item can be found in material documents in SAP ERP by transaction code [MIGO]. It is displayed in one line in material document as one item. Because this is the lowest level in material movement, the material document item is taken as single item. Financial item is aggregated from single items. In one period, single item with same attributes can be aggregated together. For example, one material moves from one plant to another three times in one month. In goods movement document, we can find three single items with same material number in different time. Then, GCP will sum quantity into same financial item as the following.

Single item aggregate Financial item

Goods Receipt, Vendor 1, Qty 20PC

→ Goods Receipt, Vendor 1, Qty 75PC



Goods Issue, Customer 1, Qty 10PC

→ Goods Issue, Customer 1, Qty 40PC



Table 12 Example for Financial item aggregation Financial item is used to calculate costing item. The definition for costing item in GCP is based on [OrgUnit] + [Product] + [Source indicator]. It is defined based on customer, but the typical costing item can be:

Costing Item

Plant + Material

Plant + Material + Sales Order

Company code + Profit center + Source indicator (Int. /Ext.)

Table 13 Typical Costing item The costing item contains the information of a basic cost element with location identification. For one period, financial items are put in different categories which is differentiated into bring-in items and outgoing items. The calculation on each costing item will start with beginning balance for this period. Then GCP will get pre-costing balance when bring-in financial items are added to beginning balance. Next step, GCP will withdraw the financial item for outgoing, and end up with ending balance. The relationship between single item, financial item and costing item is shown in following picture41.

41 Friz Wurm: GCP Engine documentation [1-2]

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The picture shows, we find many single item in material document for goods receipt and goods issue. We sum up the quantity of received goods together in on financial item and consumption together in another. Then the calculation goes as 10 PC (Beginning Balance) + 75 PC (GR) = 85 PC (Pre-costing). Then 85 PC (Pre-costing) – 35 PC (GI) = 50 PC (Ending Balance).

3.2.3 Mini Costing When there are stock transfers, there are some situations that the transfer from sender side and receiver side is not balanced due to shipment, work in process, etc. What is more complex is, in actual, the transfer physically and financially happens in different time. This also leads to problem of stock coverage if moving average is used for material in inventory.42 In order to calculate the value transferred between partners, the method of mini costing is introduced. Mini costing is subsidiary costing for main costing, which uses confirmed quantity from receiver and give local cost to receiver.

3.2.3.1 Mini costing in Planning In planning, mini costing takes the confirmed quantity from receiver side and planned revenue from sender side, divide them based on the confirmed quantity, and put the rest into delta. Therefore, the cost is got and can be transferred from sender to receiver. From the sender in main costing, above pre-costing balance TType [6000], GCP calculates incoming quantity and cost. Then, mini costing sums up delivery in CO-PA, the planned revenue is distributed from TType [8000] to each receiver [8100]. The confirmed quantity is transferred back to main costing and value in sender is calculated. The receiver gets the delivered quantity,


GR Supl. A 20 PC.

GR Supl. A 30 PC

GR Supl. A 25 PC

GI Cust. Y 10 PC

GI Cust. Y 15 PC

GI Cust. Y 10 PC

Single Items Material XY in Plant 1000

+ GR Supl. A 75 PC

- GI Cust. Y 35 PC

Costing Item

Financial Items Beginning Balance (10 PC)

= Pre-costing Balance (85 PC)

= Ending Balance (50 PC)

Plant : 1000 Material: XY

Figure 30 Single item, financial item and costing item

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value from sender as group cost, revenue from sender as local cost. And the difference goes to intercompany profit. Main costing Mini costing Sender TType Qty Val. TType Qty Rev. + 3100 Purchase 10 50 + 8000 CO-PA 8 64 = 6000 PB 10 50 = 6000 PB 8 64 - 8100 GI 3 15 - 8100 GI 3 24 … … Receiver TType Qty Val. Grp IP + 5100 GR 3 24 15 9 … = 6000 PB Table 14 Mini costing in planning with CO-PA The method of mini-costing enables GCP to bring transparency from sender to receiver with the value in local and group view. Therefore, intercompany profit can be calculated on this basis. Another function is to differentiate confirmed goods delivery partner from others and the delta. Thus, in planning, the calculation can be based on the right quantity. There are some further features in GCP for specific situations. If CO-PA is missing, which means there is no planned revenue available, GCP takes the revenue from Revenue-DKO. Revenue-DKO is a table with records from last period with the information of revenue of materials. It can be taken as reference in GCP. Furthermore, if there is no Revenue-DKO available, the revenue will be calculated from the cost estimate of the receiver.

3.2.3.2 Mini costing in Actual In actual, the value and quantity will be split in SAP. The delivered quantity is got from delivery note [8060] and revenue is got from invoice [8070]. But Mini costing runs in similar way as in planning. The confirmed quantity and revenue are summed up and calculated based on delivered quantity to each partner. Main costing Mini costing Sender TType Qty Val. TType Qty Rev. + 3100 Purchase 10 50 + 8060 Delivery 8 + 8070 Invoice 56 = 6000 PB 10 50 = 6000 PB 8 56 - 8100 GI 3 15 - 8100 GI 3 21 … … Receiver TType Qty Val. Grp IP + 5100 GR 3 21 15 6 … = 6000 PB Table 15 Mini costing in actual with delivery and i nvoice

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In actual, problems may happen if the data of delivered quantity or invoice is missing. If invoice is missing, the goods will be evaluated as zero until the invoice comes in future period. If there is no delivery, the goods will be evaluated by DKO43 and transferred to receiver. Meantime, the invoice will be kept to the future until there is delivery. When delivery happens in next period, the value of the invoiced quantity will be adjusted to delivered quantity for calculation.

3.3 Mapping of source to target system In this section, I will describe the logic which drives the extraction of data from source system and used in GCP engine. All cost components can be found in SAP ERP in one company. But, when intercompany transfer happens, the cost component split is no longer traceable if we don’t know the coherence of sales order and purchase order. From the receiver’s local view, all the cost components from sender are merged into simply material cost. On the other hand, for the group, the concrete cost component split is interesting as we introduced in the purpose of GCP. This section describes how these cost components are transferred into group view.

3.3.1 Cost components split In ERP system, when material is sold from company 1 to company 2 (in same group), the cost in company 2 is the price which they bought it from local view. Therefore, the revenue in company 1 is the cost in company 2. The information of fix cost, variable cost and profit from company 1 is no longer visible. But in group view, the cost and profit composition in company 1 should be succeeded by company 2. The cost component split structure is kept. Each company just has value-add in different cost component until it is sold to external customer.

43 Note: DKO table contains values recorded from previous period

Local Cost 1 Local Cost 2 IC Profit 1

Raw Material Cost

Local Cost 1 Local Profit 1

Local Profit 2

Company 1 (Supplier from same group)

Cost structure from GCP in Company 2

Local Cost 2 Local Profit 2

Cost structure from SAP ERP in Company 2

Figure 31 Intercompany cost and profit structure

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In SAP, there are settings for currency and valuation profile which can be checked with transaction [OKTZ]. The cost in each company can be evaluated by local currency and group currency with local view and group view. It has lots of limitations and hard to change. And it is hard to make all the companies globally in group into same controlling area. GCP maps the cost component from SAP in same way. Currency and valuation profile44 in SAP ERP is described by SAP as following.

Figure 32 Currency and valuation profile in SAP ERP As we can see the currency and valuation profile, key 10 stands for local view with company code currency, key 30 stands for local view with group currency, key 31 stands for group view with group currency. GCP gives options of valuation in same way as currency and valuation profile 10, 30 and 31.45 In GCP, key 10 is reflected by local, key 30 is reflected by historical and key 31 is reflected by group. More differences from local view and global view can be seen from the following picture. From local view, there is fix cost and variable cost in cost side, Revenue and sales cost on sales side. Then in historical view, these cost and revenue will be transferred into group currency. In group view, cost and profit are put together showing the total cost, intercompany profit and profit from external. This is also corresponding to currency and valuation profile in SAP ERP.


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With the cost given from local, GCP roll them up from raw material to finished product with cost component split. When intercompany transfer happens, revenue structure will be shown on this level and be transferred from sender to receiver. The bottom-up runs until sales to external customer. In the following picture, we can see how the costs are rolled from local to group.

Group Material Freight Subcon. Add Value Overhead Customs IP

Material X X X X X X X X X X X

Local

Material X

Freight X X

Activity X

Production X X

Overhead X X

Profit X

F V F V F V F V F V F V

Table 16 Mapping from local view to group view So each cost components in each level from local is extracted from one company. Then the cost is put in same category as group cost. Profit in local is taken to intercompany profit when transfer happens. And then the same procedure happens again in next company. Now we should see how it is realized.

Revenue structure (of level)

Sales & Admin

Profit

Sales & Admin

Profit

Manufacturing cost structure (roll up)

Fix

Local – with local currency

Variable Gross revenues

Sales reductions

Historic in local view – with group currency

Fix Variable Gross revenues

Sales reductions

Group view – with group currency

Fix Variable Sales & Admin

Intercom Profit

SAP C&V 10

SAP C&V 30

SAP C&V 31

Figure 33 Cost component split in local and group

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3.3.2 Map cost components to process The basic methodology of implementing the theory of group costing is to use TType to carry the quantity and value. In GCP costing, there are three phases for each period. For one material in one company, ‘Beginning Balance’ is the initial stock for one period. Then a certain amount is brought in to the stock such as by purchase. All the costs and quantity are summed up to get the ‘Pre-costing Balance’. Then comes the outgoing part, which includes the cost and revenue happened when the material is transferred to partner. If there are still some quantities left after the outgoing transformation, they go to ‘Ending Balance’. They will be taken as ‘Beginning Balance’ in next period. When single items for specific material are extracted to GCP, TType should be assigned to these cost components. And then, GCP can do calculation with TType flow. In GCP, there are options to see the cost components split in local view and group view. From local view, cost above pre-costing balance is brought in from partner (purchase or intercompany transfer) or taken from local (production). Then, the material will be transferred out to production of upper level material. Or it will be sold to partners or customers who give the revenue. So, the cost split in local view is like the following.

9000

1000

Local Fix Cost

Local Var Cost

Revenue Reduction S+A

+Beginning Balance +External Purchase +Production +Transfer IC =Pre-costing Balance -External Sales -Delivery IC confirmed -Consumption for production =Ending Balance

3100

1000

3010 3010

5100

6000

7200 7200

8100 8100

8300 8300

7200 7200

8100 8100

7200

8100

Figure 34 GCP process with Local Cost Component Split

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From group view, we do not only concern local cost but also group cost and intercompany profit. When there are intercompany transfer happened, the profit split from the revenue of the sender should be calculated as intercompany profit and transferred to receiver. Therefore, material of semi-finished product or finished product should contain the information of the cost structure. The main difference from group view to local view is that the incoming materials are already having the intercompany profit succeeded from previous processes. And the cost and intercompany profit will be kept and rolled up to next level. The costing should be done as the following.

So, the cost component split with local view and group view is described. This is the basic structure of costing in GCP. Take this as frame, now we should discuss how we can get the content and put in the frame of GCP.

3.4 GCP cycle GCP is an add-on for SAP ERP. So the fundamental procedure is to collect data from SAP for calculation. In SAP ERP, the cost and profit from companies in same group were in different islands. There are many limitations in SAP for group costing calculation. In order to calculate costing and profit on group level, GCP engine works in four phases – extraction, aggregation, sequence, and costing46 – to collect data from each business partners as the following.


9000

1000

Global Fix Cost

Global Var Cost

S+A Intercompany Profit

+Beginning Balance +External Purchase +Production +Transfer IC =Precosting Balance -External Sales -Delivery IC confirmed -Consumption for production =Ending Balance

3100

1000

3010 3010

5100

6000

7200 7200

8100 8100

8300 8300

7200

8100

7200

8100

1000 1000

3010 3010

5100 5100

8300 8300

5100

Figure 35 GCP process with Glo bal Cost Component Split

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Additionally, in order to get the coherence orders in all the transfer processes, GCP has preparation steps to guide extraction (see 3.4.5). In the following, I will explain the aim and function achieved in each phase in GCP Engine.

3.4.1 Extraction GCP collects relevant data from source systems in this phase. GCP reads relevant data - such as sales (in CO-PA actual), goods receipts, invoices, consumption, and production - from operational SAP and non-SAP systems. Then GCP does mapping of operational transactions to GCP transactions, operational cost vectors to GCP cost vectors. The following picture shows how GCP extractor maps data from source system to GCP.

Figure 37 GCP extraction 47


SA

P

SA

P

SA

P

Group Costing and Profitability Engine

Extraction Aggregation Sequence Costing

Figure 36 GCP Engine sequence

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To do group cost and profit analysis, GCP can extract both plan and actual data. The method to distinguish plan and actual data is to separate data into versions. Additionally, GCP accepts imported data from Excel. But no matter what is the source, GCP extractor standardizes the data into single items. In plan, quantity of material is given by ‘Top-down’ and value comes from cost estimate. In actual, quantity is given in documents such as goods receipt, goods issue, and value can be got from invoice or other FI documents. GCP extractor takes the function of finding the data from source system and put them together as following picture shows.

Figure 38 GCP Standardizing of data 48 The graph shows that single item in GCP is extracted from different categories in planning data and actual data. All these data will be extracted from documents and create a list view in GCP.

3.4.2 Aggregation The aim of aggregation is to put single item into categories of financial item. So GCP will convert single item’s transaction currency into local currency and group currency, and then map the cost components in single items to local and global value vectors in aggregated data record (financial item).


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Figure 39 GCP aggregation 49 In aggregation, GCP generates a graph with nodes and edges for costing items. These nodes and edges define the relation between the costing items; the quantities consumed, transferred or sold define the edge of the graph.50 But notice, the financial item from actual data does not always have cost. In actual, the quantity and value of material come from different documents. Therefore, some items bring quantity and some bring value.

3.4.3 Sequence GCP reads the sequence of nodes in the previously generated value graphs. Then costing item along with the levels of calculation is identified, the sequence of costing items throughout value chain is determined.

Figure 40 GCP sequence 51

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Before this stage, the whole structure of corresponding costing items is not yet known. It is merely a statement about the relationship among nodes. Therefore, the sequence must determine where the start and end points of the value chain. In order to determine the sequence, GCP gives levels for the various stages. The highest level is assigned to level 999, the lowest (starting point) goes to level 001. Level 001 to 999 presents the levels in the chain.

The graph shows a three-level value chain. The indicators show beginning node (B) for raw material, middle node (M) for semi-finished product and ending node (E) for finished product. Then the sequence of material movements will be clear. With the relationship after sequencing, cost of raw material can be roll up to semi-finished product and further to finished product. There can be difference in costing levels between plan and actual. In actual, when the material B is moved from supplier directly to work center of AB, the cost will go to cost collector of the production order. Therefore, the costing level of material B will be in Level 998 which is different from plan. For GCP, the cost won’t be lost in bottom-up procedure because material document is extracted to single item.

3.4.4 Costing The aim of costing is to give financial items values according to the graph of value chain.

Raw Material A Level 997 Indicator B

Raw Material B Level 997 Indicator B

Semi-Fin Prod AB Level 998

Indicator M

Finished Prod ABC Level 999 Indicator E

Raw Material C Level 997 Indicator B

Semi-Fin Prod AC Level 998

Indicator M

Costing from raw material to semi-finished product

Consumption

Consumption

Begin node

Middle node

Costing from semi-finished product to finished product

End node

Figure 41 Costing levels in sequence

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Figure 42 GCP costing 52 Each costing item will succeed the beginning balance from the ending balance in previous period. So the quantity in inventory is same as SAP ERP.

When each costing item gets its beginning balance, GCP takes it as begin stock and sums up it with bring-in cost. After all the out-going movements (consumption, sales) below pre-costing balance, the quantity left will be kept to ending balance and used in next period again. Therefore, the cost is given to the flow through value chain in one period and also has effect on next period.

3.4.5 Mapping of Sales Orders (EPS/EPI) In order to calculate the cost of final product, we should collect all the cost related to the sales order. When there are intercompany transfers, the links should be found to get the cost which is coherence to the sales order. Therefore, links from sender to receiver should be found before extraction. When both ends of the chain - the top from external customer and bottom from external supplier - are found, all cost from each level can be rolled up. 52 Friz Wurm: GCP Engine documentation [1-2]

Period 1 Material A + + - -

Beginning Balance

Pre-costing Balance

Ending Balance


Beginning Balance

Pre-costing Balance

Ending Balance


Beginning Balance

Pre-costing Balance

Ending Balance

Figure 43 Costing between periods

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It is quite normal that consumed materials are in mixture of make to stock and make to order. For each component in one period, it is also possible that a certain quantity is for sales orders (sales order stock) while the rest are for normal stock. It is due to many reasons, such as fix lot size from vendor, minimum production volume, etc. When we extract the cost of materials, we need to differentiate the cost of sales order stock and normal stock. The link for normal stock can be recognized by special procurement key. But, for sales order stock, we should also figure out the partner for the sales order item in order to put the cost in right value chain. A broken link from sales order item to purchase order item needs to be fixed. In general, situations can be put in three categories:

• Material from sender is make to order: the sales order-purchase order connection should be found

• Material from sender is make to stock: the sender plant and purchase order connection should be found

• Material number is different or multiple materials from sender are merged to one material in receiver

EPS (Extraction preparation step) and EPI (Extract partner identification) is the solution given in GCP. Actual data from SAP ERP is used to find out the connections from purchase order item on receiver side to sales order item on sender side. When the connection is found, GCP can look for relevant documents in further steps. In SAP ERP, there are several types of documents to record the movements between sender and receiver. In common cases, the sender who posts sales order will send goods with delivery note which will be documented by material document (physically, goods issue). And then, invoice will be sent which will be recorded by accounting documents (financially, receivable account). On the receiver side, who posts purchase order, there will be material document (physically, goods receipt) and invoice document (financially, payable account). The details of these documents will be introduced in next section. The process can be seen in the following picture.

When the material from sender is in make to stock, we can get the value as soon as the partner is recognized. But when the material from sender is in make to order, we have a broken link in make to order value chain.

Sender Receiver

Physical

PO SO

Goods receipt

Financial Invoice Document

Invoice

Goods Issue

Delivery Doc

Figure 44 Document between sender and receiver

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Figure 45 Broken links in make to order environment 53 In order to get the links for both make to stock and make to order environments, GCP implemented EPS/EPI to get the value chains from sender to receiver. The documents which are extracted from actual data in SAP ERP to GCP are collected to ‘Cluster’ table. In GCP, there are two approaches to find matching pairs. One is reference numbers related to purchase order and sales order which can be invoice number or delivery note number. The other is the order number from customer in sale order which refers to the purchase order from receiver. The flow chart of the procedures of finding matching pairs is as the following.

Figure 46 Flow chart for EPS/EPI 54

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Six indicators are used to give the relations of matching pairs from sender [BUKRS_P] and receiver [BUKRS]. The left wing of the flow chart takes the reference number as connector. Indicator 1 is set to ‘1’ when the sales order and purchase order have same reference number [XBLNR]55, which can be invoice number or delivery note. Indicator 2 is set to ‘1’ when the material number is same on both sides. If the connection is one sales order item is linked to one purchase order item, it is 1:1 connection. Indicator 3 is set to ‘A’. If same reference number is found but material numbers are different in sender and receiver, the situation can be multiple sales order items are linked to one purchase order item. It is n:1 connection. Indicator 3 is set to ‘B’. The right wing takes the customer purchase order number in sales order reference [BSTNK]56 as connector. But similar procedure is implemented. Indicator 4 is set to ‘1’ when purchase order number in sales order and the same purchase number in receiver are found. Indicator 5 is set to ‘1’ when the material number in sales order item and purchase order item are matching. If the connection is one sales order item is linked to one purchase order item, it is 1:1 connection. Indicator 6 is set to ‘A’. If purchase number matches but material numbers are different in sender and receiver, the situation can be multiple sales order items are linked to one purchase order item, it is n:1 connection. Indicator 6 is set to ‘B’. In the end, purchase orders with item positions and sales orders with item positions are sorted and give the result to several tables. Links of sender and receiver (Company code) are divided into three categories, reflected by the following tables.

3.4.5.1 Assignment table Assignment table is for the situation that the sender is in make to order and 1:1 matching from sales order item to purchase order item. Sender Receiver

Make to Order → Make to Order

→ Make to Stock

Table 17 Sender and Receiver in assignment table When company 2 purchases material from company 1, company 2 places a purchase order to company 1 with same material number. When the sales order and purchase order is closed, both sender and receiver will put material document or accounting document in the sales order and purchase order as reference. (Ind 1) Company 1 will put the order number from customer 54 IM&C internal document (Attachment E) 55 Note: XBLNR can be found in material document and accounting document. 56 Note: BSTNK can be found in header of sales order

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(purchase order number) in sales order. (Ind 4) With the procedure described in the flow chart previously, when material number matching is found (Ind 3=1), the sales order item and purchase order item are matched. In this case, Ind 3 or Ind 6 is set to ‘A’.

When this connection is found, a part of the value chain is given here. Furthermore, if the receiver is in make to order, the sales order of receiver can also be put in assignment table.

3.4.5.2 Partner mapping table If the sender is in make to stock, partner mapping table, named in GCP [Mappart] table, should find the connection of sender and receiver. Sender Receiver

Make to Stock → Make to Order

→ Make to Stock

Table 18 Sender and Receiver in mappart table The procedure of finding connection in cluster table and put into mappart table is similar are last section. This table is also used in the condition of same material number. Sales order item and purchase order item with same reference number is put in matching. (Ind 1) If the purchase order is set as

Sender Company code 1 Sales order

Receiver Company code 2

Purchase order

Header [VBAK]

SO Number VBELN

Item [VBAP]

Item Number POSNR


Plant WERKS

Header [EKKO]

PO Number EBELN

Item [EKPO]

Item Number EBELP

Assignment [EKKN]

SO Number VBELN

SO item VBELP

Company Code BUKRS


Plant WERKS

Material Document [MSEG]

Accounting Document [BSEG]

Assignment table EBELN EBELP VBELN VBELP POSNR VBELN

COPA

1:1 Same material Nr.

Figure 47 Links in Assignment table

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customer order number in sales order is also put in matching. (Ind 4) When the matching is found, Ind 3 or Ind 6 should be set to ‘A’.

Because the sender is in make to stock, we only need to know the sending partner. Therefore, the sending plant is put to mappart table with purchase order and item from the receiver.

3.4.5.3 Merge table When the receiver wants to purchase one material and the sender sells another material or several materials to satisfy the purchase order. There are different material number in sender and receiver. This situation is taken as sales order merge which means several material numbers by different sales order positions are merged to one purchase order position. The connection is written to merge table when this happens. Sender Receiver

Make to Order → Make to Order

Make to Stock → Table 19 Sender and Receiver in merge table The matching still works with the two connectors same as previous section, but material number is not the same in this situation. When same reference number is found in both sales order and purchase order, indicator 1 is set to ‘1’. Also, if the purchase order number is given in sales order as the customer order number, indicator 4 is set to ‘1’. When different material numbers are found in



Purchase order

Header [VBAK]

SO Number VBELN

Item [VBAP]

Item Number POSNR


Plant WERKS

Header [EKKO]

PO Number EBELN

Item [EKPO]

Item Number EBELP

Company Code BUKRS


Plant WERKS



Partner mapping

table EBELN EBELP LIFNR

COPA

Vendor number LIFNR

WERKS

1:1 Same material Nr.

Figure 48 Links in partner mapping table

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sender and receiver, indicator 3 is set to ‘2’. In this situation, there can be several sender positions to one receiver positions, a merge is set. In this case, Ind 3 or Ind 6 should be set to ‘B’.

The form of the result in merge table is similar to assignment table. Sales order position, purchase order position and the assigned sales order number from receiver are given in this table.



Purchase order

Header [VBAK]

SO Number VBELN

Item [VBAP]

Item Number POSNR


Plant WERKS

Header [EKKO]

PO Number EBELN

Item [EKPO]

Item Number EBELP

Assignment [EKKN]

SO Number VBELN

SO item VBELP

Company Code BUKRS


Plant WERKS



Merge table

COPA

Vendor number LIFNR

n:1 Different material Nr.

EBELN EBELP VBELN VBELP POSNR VBELN

Figure 49 Links in Merge table

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4 GCP solution in planning The planning in GCP is based on CO-PC and CO-PA from SAP ERP. In general, material cost, production cost including the overhead planned in CO-PC within MRP run is used to get product cost. Sales and administration cost, and revenue planned in CO-PA are used to make profitability analysis. In order to explain GCP process, I take the example from machine manufactory. In this case, the machine is ‘make to order’. Some of its components – such as machine body, head, and tool master – are also ‘make to order’. But some small parts and some of the subsidiary components are ‘make to stock’. In the aim of showing purchase and sales process, these examples are chosen from typical processes among business partners internal and external group.

In this chapter, in order to describe the value flow internal and external the group, I will organize the sections as following table. For those which are not taken in examples, they are in similar logic of the referred sections. Planning Internal Grp External Grp

Make to Stock Purchase Ref.4.2.1 4.1.1 Production 4.1.2 Sales 4.1.3 Ref.4.2.3

Make to Order Purchase 4.2.1 Ref.4.1.1&4.2.1 Production 4.2.2 Sales Ref.4.1.3&4.2.3 4.2.3

Table 20 Content structure for Chapter 4 The examples start from purchase from external to intercompany transfer, and end with sales to external. In the circumstance of the example, final product is produced in ‘make to order’. Sales quantities used in this example are from

BOM 00124914 (part)

Note:

110-1101-351110

Machine 1PCE

110-1101-257851

Small parts chute 1PCE

Head 1PCE

Head component 1PCE

Machine body 1PCE

Frame 1PCE

Company-Plant - Material

Description - Quantity

Make to Order

Make to Stock

110-1101-976372

221-2211-976323

Tool Master 1PCE

110-1101-947404 262-2621-976374

110-1101-980368

Tool Master 1PCE

114-1141-370210

Light barrier 1PCE

110-1101-1255046

Figure 50 Part of BOM for machine with material number 351110

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actual order. It is explained in chapter 3 that when sales quantities are taken with planned cost, the result of cost calculation for final product is actually target cost.

4.1 GCP solution for Make to Stock in planning In this section, I will describe the processes of purchase, production and sales with examples. The goal is to explain how GCP extracts data from SAP ERP and calculate them for group costing.

4.1.1 Purchase In order to extract the data for planning, GCP collects the data from cost estimate. This section will explain where the source data comes from and how they are used for costing. In this example, one material is purchased from external supplier and put into stock, and cost estimate is done in planning. Some components are required to be purchased from external supplier to produce the light barrier which is a part of small parts chute. The small parts chute is in make to stock. And its components are produced in same plant or purchased from external.

First of all, we should get the quantity from ‘Top-Down’ process. The sales quantity of top material (machine) is given. And the quantity of all the components can be got from BOM in ‘Top-Down’. Then, we need the cost for ‘Bottom-Up’. When planning is SAP ERP is done, the cost estimate can be displayed by ‘material cost estimate with quantity structure’ with transaction code [CK13N].

Purchase cost estimate Make to Stock

Machine 1PCE

110-1101-351110


…

Light barrier 1PCE

LB component 2PCE

Cost Estimate KALNR:104449169 Material: 0357962 Price: 600 EUR Valid on: 31.08.2007

600EUR / 1PCE

1200EUR, 2PCE

…

…

110-1101-257851

110-1101- 1255046

110-1101- 0357962

CKIS

Figure 51 Cost estimate for purchasing material 0357692 from e xternal

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Display material cost estimate with quantity struct ure (CK13N) Item category Resource Total value Fix value Currency

I57 1101 0357962 600 0 EUR Table 21 Cost estimate for Material 0357962 in plan t 1101 We can also see that the cost of material which is purchased from external is assigned to variable cost. Because the cost estimate of material changes by time, we want to find the right cost estimate for each period. Therefore, we read cost estimate data which is kept in table [CKIS]. Table CKIS(Content table for cost estimate) Data element KALNR WERTN WRTFX FWAER MATNR KADKY

104449169 600 0 EUR 0357962 31.08.2007

Table 22 Cost estimate data in table CKIS for Mater ial 0357962 58 The field [KALNR] is important for planning because it is unique for the cost estimate of certain material on specific date. In GCP, cost estimate is extracted from [CKIS] table with [KALNR] number and assigned to TType 3100. On business process side, material 0357962 is purchased and consumed for production of material 1255046. The cost estimate of both material 0357962 and 1255046 are extracted. Cost of material 0357962 (variable cost) is transferred to material 01255046 as consumption. This is reflected by TType flow as the following.

TType KALNR Quantity Sum Local Cost

Sum Global Cost

Sum Global Variable

Material 0357962 / Plant 1101

Purchase Ext. 3100 104449169 2 1.200,00 1.200,00 1.200,00

Pre-costing Balance 6000 2 1.200,00 1.200,00 1.200,00

Consumption for Production 8300 104629770 2 1.200,00 1.200,00 1.200,00

Material 1255046 / Plant 1101

Production Material cost 3400 104629770 1.200,00 1.200,00 1.200,00

Table 23 Costing in GCP for purchase material 35796 2 in planning 59 We should also notice in the process that the quantity of the material is only taken from the purchase but not the production. GCP takes the material cost on the bottom level and rolls up the value in Bottom-Up. We can show the process as following.

57 I=delivery costs, which means cost of purchase from external 58 WERTN:TotalValue;WRTFX:FixValue 59 Note: Currency is EUR

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As one of the advantages of GCP, GCP extracts data from cost estimate with concrete time. Therefore, the cost estimate is taken from the past when MRP was done. It reflects the fact better than moving average price in material master. Because moving average price has the mixture calculation by material from different time, it does not reflect the real planned cost by the time when it is planned to be purchased. Because GCP uses cost estimate for materials to roll up, it can be more accurate than SAP ERP while comparing the variance between target cost and actual cost.

4.1.2 Production After purchasing, raw materials are there for consumption in production. So in this section, I will step further from the example in last section. After material 0357962 is purchased, it will be consumed in plant 1101 by production of material 1255046 together with other materials. Some of the others are also purchased from external. And some materials are produced from same plant.

Vendor

0357962

1255046

8300

3400

Material cost estimate [CKIS]

Var.600EUR / 1PCE

3100

Var.2400EUR / 2PCE

Production cost estimate Make to Stock

Machine 1PCE


…

Light barrier 1PCE

LB component 2PCE

V.1200EUR

…

…

Cost Estimate KALNR: 104629770 Material: 1255046 Costing date: 1334,33 EUR Costing date: 31.08.2007

V.1230,81 EUR

F.113,78 EUR

Angle 4PCE Angle 4PCE

F.42,07 EUR / V 3,33 EUR F.23,48 EUR / V 1,55 EUR

Production&Overhead

V.24,04 EUR

F.48,19 EUR

110-1101-351110

110-1101-257851

110-1101- 1255046

110-1101- 0357962 110-1101- 252229 110-1101- 1253244

CKIS

Figure 53 Cost estimate for production in Make to Stock

Figure 52 TType flow in GCP from purchase to consumption in p lanning

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The cost estimate from [CKIS] table is as following. It can also be displayed by transaction code [CK13N] in SAP ERP. There are fix cost for material because these materials are produced in same plant in previous production process.

Table CKIS

Data element POSNR TYPPS KALNR WERTN WRTFX FWAER MATNR KADKY

1 M 104629770 45,44 42,11 EUR 1253244 01.08.2007

2 M 104629770 25,03 23,48 EUR 0252229 01.08.2007

3 M 104629770 0,72 0,00 EUR 0016012 01.08.2007

4 M 104629770 0,36 0,00 EUR 0014605 01.08.2007

5 M 104629770 0,02 0,00 EUR 0020206 01.08.2007

6 M 104629770 0,10 0,00 EUR 0016225 01.08.2007

7 M 104629770 0,12 0,00 EUR 0022314 01.08.2007

8 M 104629770 0,58 0,00 EUR 0062260 01.08.2007

9 M 104629770 1.200,00 0,00 EUR 0357962 01.08.2007

10 E 104629770 0,00 0,00 EUR 01.08.2007

11 E 104629770 48,19 48,19 EUR 01.08.2007

12 G 104629770 24,04 0,00 EUR 01.08.2007

Sum WERTN of TYPPS M = 1.272,37

Sum WERTN of TYPPS E+G = 72,23

Table 24 Cost estimate for Material 1255046 in plan t 110160 GCP only takes the local value add for production which means only production cost and overhead is taken to calculation. As we described in previous section, the material cost is rolled up from purchase (TType 3100) and consumed (TType 8300) in production (TType 3400). So, the material cost estimate (TYPPS M) is only taken as statistical value as a reference. The GCP value for material comes from previous step. And the activity cost (TYPPS E) and overhead (TYPPS G) from cost estimate is taken to this process which is assigned to TType 3200.

• 3200 Production cost (Including Overhead) With the all the estimated cost assigned to TType for production process, the costing run in GCP is as following.

Hierarchy TType KALNR Qty Sum Local Cost

Sum Global Cost

Sum Global Variable

Beginning Balance 1000 0 0 0

Production and Subcontracting 1.344,54 1.344,54 1.230,80

Production & Overhead 3200 104629770 1 72,23 72,23 24,04

60 Note:TYPPS:M-Material,E-InternalActivity,G-Overhead;WERTN:TotalValue;WRTFX:FixValue

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Material 3400 104629770 1.272,33 1272,33 1.206,78


Consumption for Production 8300 100161707 1 1.344,56 1.344,56 1.230,82

Ending Balance 9000 0 0 0

Table 25 Costing in GCP with TType for production i n planning 61 The production & overhead (TType 3200) is extracted from this step and material (TType 3400) is transferred from previous step. The production cost from previous production processes will be put in the same cost component in this production process. Therefore, all cost components are kept separately during production processes in GCP. The process is shown graphically as the following.

In GCP, it is very clear to see what is the value rolled up from previous procedure and what is the value added in this step. This gives the opportunity to assign all these values to different segment for global calculation.

4.1.3 Sales In this section, we take sales between companies from same group for example. In SAP ERP, we can find the planned revenue from the sender and the cost estimate of the transferred material from the receiver. From the production process, cost component split is already given in GCP from cost estimate of the raw material and production process. When revenue comes from the receiver, the difference of cost and revenue is the intercompany profit which can be calculated in GCP.

61 Note: Currency is EUR

…

1255046

8300

Cost estimate [CKIS]

Materials

0357962

Production

Overhead

8300

F.65,55 EUR V.1206,78 EUR

F.48,19 EUR V.24,04 EUR

3200

3400

F.48,19 EUR

V.24,04 EUR

V.1200EUR

V…F…

F.113,74 EUR V.1230,82 EUR

Figure 54 TType flow in GCP for production in planning

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And further, GCP takes the cost and profit structure from the sender as the cost of receiver. Therefore, the cost component split can be kept and transferred during sales process. From the following picture, it shows that plant 2211 from company code 221 produces 9 pieces of material 976323 and put to stock. Then, 1 piece is sold to plant 1101 from company code 110.

The following table shows what we can find out of the table [CKIS] for cost estimate in two companies. The cost and revenue are taken from local view from each company. We can see that the revenue from company 221 is becoming variable cost in company 110. Meanwhile, the fix and variable cost split is lost during the transfer. Statistical value of Material 976323

Qty Fix cost Variable cost Revenue

Comp221 10 PCE 110.995,49 CHF 404.388,14 CHF

Production 88.778,69 CHF 18.574,90 CHF

Material 22.216,80 CHF 385.813,60CHF

Transfer 1 PCE 11.099,55 CHF 40.438,81 CHF 37.414,97 EUR

(6,918.62 EUR) (25,203,98 EUR) Comp110 1 PCE 0 EUR 37.414,97EUR

Table 26 Local view for sales of material 976323 in planning 62 In group view, different from local view, global fix cost, global variable cost and intercompany profit are separated under group currency. When intercompany

62 Note: Ratio: CHF/EUR=0,6233

Revenue

Cost

Intercompany sales Make to Stock

Machine 1PCE

110-1101-351110

…

110-1101-976323

Tool Master 1PCE

Tool Master 1PCE

110-1101-980368

221-2211-976323

Tool Master 9PCE

Purchase

Production

Intercompany revenue

Company 221 Profit = Revenue - Cost

KALNR: 100987946 Fix+Var: 51.538,36 CHF

KALNR: 114687510 Var: 37.414,97 EUR

CKIS

CKIS

COPA

IP

Figure 55 Sales process for material 976323 in planning

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transfer from company 221 to company 110 happens, the fix cost should be kept as fix cost and variable should be kept as variable. GCP value of Material 976323

Qty Global fix cost Global variable cost IC profit Revenue

Comp221 10 PCE 69.186,23 EUR 252.039,72 EUR 18,22 EUR

Production 55.337,96 EUR 11.578,20 EUR

Material 13.848,27 EUR 240.461,52 EUR 18,22 EUR

Transfer 1 PCE 6.918,62 EUR 25.203,98 EUR 5,292,37 EUR 37.414,97 EUR Comp110 1 PCE 6.918,62 EUR 25.203,98 EUR 5,292,37 EUR

(Sum=37.414,97 EUR)

Table 27 Group view for sales of material 976323 in planning 63 In group view, the global cost is hand over along the business partners (TType 8100). As we described in previous sections, company 221 purchased material internally and externally (TType 3400), then produce tool master 976323 in plant 2211 (TType 3200). Now, one piece of tool master leaves plant and is sold to company 110 (TType 8100). In this way, material and production cost with fix and variable are split from intercompany profit. Moreover, the Intercompany profit will also be rolled up along the supply chain.

Hierarchy TType Qty Sum historical cost

Global fix cost

Global variable cost

IC profit

Comp221 - Production

Beginning Balance 1000

Production and Subcontracting

Production & Overhead 3200 10PCE 66.916,16 55.337,96 11.578,20

Material 3400 254.328,01 13.848,27 240.461,52 18,22

Pre-costing Balance 6000 10PCE 321.244,17 69.186,23 252.039,72 18,22

Sales and Shipment IC 8100 1PCE 32.124,42 6.918,62 25.203,98 1,82

…

Ending Balance 9000

Sales from Company 221 to Company 110, Revenue=37.41 4,97 EUR

Comp110 - Transfer


Transfer IC 5100 1PCE 37.414,97 6.918,62 25.203,98 5.292,37

Pre-costing Balance 6000 1PCE 37.414,97 6.918,62 25.203,98 5.292,37

Consumption for Production 8300 1PCE 37.414,97 6.918,62 25.203,98 5.292,37

63 Note: Currency is converted to group currency EUR

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Ending Balance 9000

Comp110 - Production 3400 1PCE 37.414,97 6.918,62 25.203,98 5.292,37

… Table 28 Calculation for cost and profit of materia l 976323 for sales in planning 64 From all above, we can see the difference from local view and global view. In local view, fix cost, variable cost and profit are merged to variable cost at receiver side after the transfer. In global view, cost of the receiver is split into global cost (fix and variable) and intercompany profit. Therefore, more transparency is made during the transfer process in GCP.

We can see in the picture above with the TType process which carries the cost from sender to receiver. In this way, GCP can keep the cost and profit split for intercompany sales.

4.2 GCP solution for Make to Order in planning In following section, I will describe planning in GCP for make to order. When customer order is placed for top material, all the cost coherence to this sales order should be collected to this sales order. The goal is to find out the planned cost and profit which is relevant to this sales order. As I mentioned before, the cost calculation here is target costing because the sales quantity is actual quantity from the sales order in make to order circumstance. Similar as former sections, this topic will also be described with division of purchase, production and sales. 64 Note: In group currency EUR

Historical cost 37.414,97 EUR

Historical cost 32.124,42 EUR

Global fix cost 6.918,62 EUR

Global var cost 25.203,98 EUR

Company 110

Company 221 IC Profit

1,82EUR

Var

Material 976323 1PCE


3400 3200

Transfer Intercompany

8300

8100 5100

Fix Var


Global var cost 25.203,98 EUR IC Profit

5.292,37 EUR

3400

Fix Var

Fix Var

Figure 56 TType flow for sales of Material 976323 in planning

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4.2.1 Purchase When one sales order is placed, in order to estimate the total cost of this sales order, we need to allocate all the cost which is relevant to it. So when a material is needed to be purchased for the sales order, the cost should also be put into this sales order stock. The following example shows the head (material 370210) which is purchased from another company in group for a sales order of a machine (material 351110, SO 28026271/item2000). Because material 370210 is purchased for the sales order, the sales order number is in its assignment.

On receiver side, we can find the cost estimate of material 370210 specifically for the sales order 28026271 in company 110. Therefore we need to look into the header of cost estimate for the sales order number. The header of cost estimate is in table [KEKO]. Table KEKO(Header for cost estimate)

Data element KALNR MATNR WERKS KLVAR KADAT VBELN POSNR

114687491 0370210 1101 ZSKA 29.05.2007 28026271 2000

Table 29 Header for Material 370210 cost estimate i n plant 1101 65 To differentiate between ‘make to stock’ cost estimate and ‘make to order’ cost estimate, there is a field KLVAR (cost variant) to indicate the condition. In the customizing on this example, the cost variant for ‘make to order’ is ‘ZSKA’.66 With the KALNR in header, we can look into table [CKIS] for the value. Table CKIS(Content for cost estimate)

Data element

KALNR WERTN WRTFX FWAER MATNR

114687491 82.600,00 0 EUR 0370210

Table 30 Material 370210 cost estimate in plant 110 1 65 KADAT: Costing date from; KLVAR: Cost variant; VBELN: Sales order Nr.; POSNR: Item Nr.; 66 Note: Some examples are given in Attachment B

Purchase cost estimate Make to Order

Machine 1PCE

110-1101-351110

Head 1PCE

110-1101-370210

Head 1PCE

114-1141-370210

Sales Order 28026271 Item 2000

CKIS

KEKO

CKIS

KEKO

Sales order stock

Figure 57 Purchasing material 370210 in Make to Order

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What has to be mentioned here is, although we are talking about the calculation in planning, we have the influence from actual here. Because we are discussing in ‘make to order’, we have to know the coherence of orders to put values together in the chain. In order to get the coherence of orders, we have to look into actual data for the connections. Through EPS/EPI (see section 3.4.5), the connection is found from purchase order 66598307, which is assigned to sales order 28026271, to another sales order 28142064 from company 114. When the broken link is connected in GCP, cost of material 370210 from company 114 can be found for in sales order 28026271. The connection is like following.

With the information of material number, sales order number and organization unit, we can look into table [KEKO] from the sender.

Table KEKO(Header for cost estimate)


114754077 0370210 1141 ZSKA 31.05.2007 28142064 10

Table 31 Header for Material 370210 cost estimate i n plant 1141 With the same KALNR in header, we can find the value in [CKIS] table.

Table CKIS(Content for cost estimate) Data

element POSNR TYPPS KALNR WERTN WRTFX FWAER MATNR

1 E 114754077 68,54 32,09 EUR 1253244

2 E 114754077 68,54 32,09 EUR 0252229

3 E 114754077 68,54 32,09 EUR 0016012

…

…

23 M 114754077 220,32 0,00 EUR 0978838

24 M 114754077 210,22 0,00 EUR 0947404

25 G 114754077 368,95 0,00 EUR 0062260

26 G 114754077 421,05 0,00 EUR 0357962

Purchase cost estimate Make to Order

Machine 1PCE

110-1101-351110

Head 1PCE

110-1101-370210 …

Head 1PCE

114-1141-370210


CKIS

KEKO

CKIS

KEKO


Purchase Order 66598307 Item 10

Figure 58 Sales order link for material 370210 from EPS/EPI

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Sum M: 63.934,38 EUR (Material cost)

Sum E+G: 3585,52 EUR (Production & Overhead)

Sum all: 67.519,90 EUR (Total) 1.799,99 EUR (Fix)

Table 32 Material 370210 cost estimate in plant 114 1 We have described production process in GCP before. When GCP does cost estimate, Production cost (E) and Overhead (G) are taken to the costing item level by TType 3200, Material cost (M) comes from lower level material by TType 3400. Based on this hierarchy, the split of cost and intercompany profit are transferred between companies from sales process.


Global fix cost


IC profit

Comp114 – Production of material 370210




Material 3400 64.205,30 7.154,66 47.580,36 9.470,28


Sales and Shipment IC 8100 1PCE 67.790,91 8.365,11 49.955,52 9.470,28


Sales of material 370210 from Company 221 to Company 110, Revenue= 82.600,00 EUR

Comp110 - Transfer Beginning Balance 1000 0 0 0

Transfer IC 5100 1PCE 82.600,00 8.365,11 49.955,52 24.279,37


Consumption for Production 8300 1PCE 82.600,00 8.365,11 49.955,52 24.279,37


Comp110 - Production 3400 1PCE 82.600,00 8.365,11 49.955,52 24.279,37 … Table 33 Costing for Material 370210 in GCP for pur chase in planning The intercompany transfer in make to order is in same procedure as in make to stock. The difference is the purchased material is in sales order stock which is coherence to the top sales order. Material 370210 is produced in company 114 and transferred to company 110. And it is consumed again for production in company 110. The value flow can be graphically shown as following.

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As we can see in the picture above with the TType process in intercompany purchase is corresponding to intercompany sales. The same TType carries the cost from sender to receiver. From previous section 4.1.3 and this section, the cost component split is kept and intercompany profit is calculated in the transfer from sender to receiver.

4.2.2 Production In production for make to order, cost estimate for the final product is done in SAP ERP with the cost component of material (M), internal activity (E) and overhead (G). This is same as ‘make to stock’. The difference is that this production is assigned to sales order. We take the machine in sales order 28026271 for example. To display the cost estimate for this product, we can also find cost by table [KEKO] and [CKIS] as we described previously. Because this production is assigned to sales order 28026271, sales order assignment is shown in the system by the cost variant. In the system for this example, make to stock materials are with the variant [ZSTA], make to order materials are with the variant [ZSKA]:67

67 Note: More examples are in attachment B

Historical Cost 82.600,00 EUR




Company 110

Company 114 IC profit

9.470,28 EUR

Var



3400 3200


8300

8100 5100

Fix Var



IC profit 24.279,37 EUR 3400

Fix Var

Fix Var

Figure 59 TType flow for purchase of Material 370210 in plann ing

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We can find data in the header table of cost estimate for material 351110 related to sales order 28026271, item 2000. Table KEKO(Header for cost estimate)


114687295 0351110 1101 ZSKA 29.05.2007 28026271 2000

Table 34 Header of cost estimate for Material 35111 0 in plant 1101 Then the values can be found in [CKIS] table with KALNR 114687295.

Table CKIS

Data element POSNR TYPPS KALNR WERTN WRTFX FWAER MATNR

1 M 114687295 163,93 0,00 EUR 0978459 2 M 114687295 20.357,25 2.231,03 EUR 0980339 … 8 M 114687295 30.816,00 0,00 EUR 0976372 … 57 M 114687295 82.600,00 0,00 EUR 0370210 … 64 M 114687295 3.084,42 1.454,86 EUR 0257851 …

76 E 114687295 3.888,27 3.820,17 EUR

…

126 G 114687295 4.804,71 0,00 EUR

Sum WERTN of TYPPS M = 345.635,73

Sum WERTN of TYPPS E+G = 33.656,25

Table 35 Cost estimate for Material 351110 in plant 1101

Production cost estimate Make to Order

110-1101-351110

Machine 1PCE

110-1101-257851


Head 1PCE

Machine body 1PCE

110-1101-976372

110-1141-370210

…

Production &

Overhead

Cost Estimate KALNR:114687295 Material: 0351110 Total value: 379.291,98 EUR Costing date: 29.05.2007

Sales Order: 28026271 Item: 2000

V.5546,84 EUR

F.28.209,41 EUR

V.30.816,00 EUR

V.82.600,00 EUR

F.1.454,86 EUR

V.1.629,56 EUR

…

CKIS

Figure 60 Cost estimate for Material 351110 in Make to Order

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Only production and overhead is used in GCP for calculation. From local view, we can find internal activity (E) and overhead (G) from cost estimate which are local value add, then plus Material (M) cost from the revenue of vendor.

As we discussed in previous sections, the costs transferred in are split by fix, variable and intercompany profit in global view. Then we adapt the cost component split to the costing hierarchy, the intercompany profit is inherited from sender to receiver in GCP as the following.


Global fix cost


IC profit

Comp114 - Production




Material 3400 346.374,74 56.621,97 249.010,87 40.741,90



Ending Balance 9000

Table 36 Costing in GCP for Material 351110 product ion in planning From the same business process, global view offers more details from the beginning of the supply chain. The fix cost and variable cost from previous production process are kept and summed up. Additionally, intercompany profit is split out from the cost. With the costs from global view, the value flow is changed as the picture in following.

…

Machine 351110

8300


Materials

Head

Production

Overhead

8300

3200

3400

V

F…V… Sales order 28026271 Item2000

V

F…V…

Figure 61 Value flow for Material 351110 production in planni ng with local view

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We can notice the cost we get in GCP has some differences from cost estimate in SAP ERP. The reason is the material cost is taken from the sender but not the cost estimates in the receiver. The difference will be reflected in material (TType 3400). The local cost (TType 3200) will be same as cost estimate in SAP ERP.

4.2.3 Sales In the end of the chain in planning for make to order, revenue from external customer comes. We will see the result in different views in SAP ERP and in GCP. Continue with the example in last section, company 314 sales the machine to customer with sales order 28038144, item 2000. Then the demand goes to company 110 from sales order 28026271. The connection is also found by EPS/EPI. Value flow for this sales order goes as the following.

Revenue

Cost (Calculation in GCP)

Sales to external Make to Order

Machine 1PCE

110-1101-351110

Customer

Company 314

Sales order 28038144 Item 2000

Item 2000

Revenue COPA Company 110

Sales order 2802671 Item 2000

Purchase order 66551757 Item 10

…

Machine 351110

8300


Materials

Head

Production

Overhead

8300

3200

3400

F…V… Sales order 28026271 Item2000

F…V…

F…V…IP...

F…V…IP...

Figure 62 Value flow for Material 351110 production in planni ng with global view

Figure 63 Value flow of sales order to customer in planning

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When the revenue is given from company 314, profit can be calculated from the cost of the machine and the revenue from customer. This profit is different in local and global view. In local view, profit from external customer is got by revenue minus the local total cost. But in global view, the difference of revenue and global total cost contains intercompany profit, and profit from external customer. The revenue structure has revenue and discount which comes from sales. Historical cost is the cost from local view. In global view, the cost structure has global fix cost, global variable cost and intercompany profit. Historical

cost Global fix cost


IC profit Revenue Discount

Product 0259837 15.296,05 831,31 6.405,17 8.059,57 0351110 537.809,17 84.831,35 266.864,41 186.113,41 0415060 103.248,35 20.897,58 65.456,73 16.894,04 … CO-PA 3009764159 21.400,00 -5.604,80 3009764139 560.600,00 -146.824,75 3009764154 167.750,00 -43.934,80 … Sum 656.353,57 109.432,73 343.765,85 203.154,99 953.810,00 -249.808,99 704.001,01 Profit from external: 47.647,44 Table 37 Cost and profit calculation for sales orde r 28038144 in planning 68 In both sales order and CO-PA, we can find sales order items and setup the link. Then we can get the cost calculation in group view shown with TType like following.

Hierarchy TType Qty Material Historical cost

Global fix cost

Global variable cost IC profit


Production and Subcontracting 1PCE 656.353,57 109.432,73 343.765,85 203.154,99

3400

0259837 15.296,05 831,31 6.405,17 8.059,57 0351110 537.809,17 84.831,35 266.864,41 186.113,41 0415060 103.248,35 20.897,58 65.456,73 16.894,04 …



Ending Balance 9000 Table 38 TType hierarchy in company 314 for sales o rder 28038144 69 in planning Then, the TType can be shown graphically as following. The sales company group gets the materials with TType 3400, and then sells them to external customer with TType 7300.70

68 Note: Currency is EUR 69 Note: Currency is EUR 70 Note: TType 7300 is sales from third party to external customer. See section 6.3

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We can see in the picture that GCP not only makes the cost component split, but also differentiate the profit from internal and external the group.



Global var cost 343.765,85 EUR Company

314 IC profit 203.154,99 EUR

3400

Fix Var Fix Var

Customer

7100 Global fix cost

Global var cost

IC profit Profit 47.647,44 EUR

Revenue + Discount = 704.001,01 EUR

Int. group

Ext. group

Figure 64 TType flow of sales order 28038144 to external cust omer in planning

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5 GCP solution in actual In actual, GCP extracts the data from documents in SAP ERP and generate single items. Then, with the connections offered by EPS/EPI, financial items are created from these documents after the procedures of aggregation, sequence and costing. And then, the value flow can be displayed in GCP system. To indicate the implementation of GCP in actual for different circumstances, I set the structure as following. Therefore we can see how GCP works for business partner internal and external group. Actua l Internal Grp External Grp

Make to Stock Purchase Ref.5.2.1 5.1.1 Production 5.1.2 Sales 5.1.3 Ref.5.2.3

Make to Order Purchase 5.2.1 Ref.5.1.1&5.2.1 Production 5.2.2 Sales Ref.5.1.3&5.2.3 5.2.3

Table 39 Content structure in Chapter 5 Same as in planning, I will describe from purchase from external to intercompany transfer, and end with sales to external. And the other circumstances can be understood in similar way as the referred sections.

5.1 GCP solution for Make to Stock in actual In order to have the comparison with planning, examples in this chapter are same as which are used in planning. It will show the logic how group costing works in GCP based on actual data from SAP ERP.

5.1.1 Purchase order When we calculate the cost for one material purchased from external, we should look into all the purchase orders in one period for this material. Normally, for material in make to stock, it is purchased by lot. Therefore, there can be several purchase orders with single or multiple lot size. In SAP ERP, when the purchase order is displayed [ME23N], material document and invoice document number can be found in purchase order history which presents the quantity flow and value flow of the material. In each purchase order, physical transfer and value transfer are recorded in accounting document [BSEG] and material document [MSEG]. These documents are the lowest level records in SAP. Therefore, GCP extracts data from these tables as single items and takes them as the basis of calculation.

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Because all the cost from bottom are collected, the cost in actual is calculated by Bottom-Up procedure. So, we search for the single items which refer to material 0357962 during the period and then calculate the cost for it in the consumption to material 1255046. Each purchase order item gives the information of goods receipt and invoice document in purchase history, GCP uses goods receipt as a trigger to find relevant quantity and value for each goods receipt. Material movement is recorded in material document [MSEG] in SAP ERP. After the invoice posting, through invoice document, we can also find accounting document [BSEG] which is taken as adjustment if there is differences. All the documents which fit with same purchase order number and item are taken to single item. Then, GCP sum up them and put into TType 3100. Mat Doc Year Material Valid D Plant Qty PO Nr PO item Value

MKPF MSEG MBLNR MJAHR MATNR BUDAT WERK MENGE EBELN EBELP DMBTR 50364770 2007 0357962 24.05.2007 1101 20 66621731 10 12000 50434358 2007 0357962 20.06.2007 1101 20 66658142 10 12000 50488075 2007 0357962 10.07.2007 1101 20 66712341 10 12000 50508696 2007 0357962 18.07.2007 1101 20 66736037 10 12000 50614720 2007 0357962 30.08.2007 1101 20 66786533 10 12000

In total 100 60000 Table 40 MSEG for purchase material 0357962 GCP starts calculation with beginning balance. Cost for material purchased is brought in to calculate pre-costing balance. When consumption is confirmed by receiver’s production with TType 3410, it will trigger on the TType 8310 on sender side with the consumed quantity, and then the material cost for consumption can also be calculated.

Hierarchy TType Partner Qty Sum Local Cost (variable)

Sum Global Cost (variable)

Beginning Balance 1000 28 16.827 16.827

Purchase order Make to Stock

Machine 1PCE

110-1101-351110


…

Light barrier 1PCE

LB component 2PCE

…

…

110-1101-257851

110-1101- 1255046

110-1101- 0357962

Purchase order

Material document

Invoice document

Accounting document

MSEG

BSEG

Figure 65 Purchase order for material 0357962 from external

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Purchase Ext. 3100 100 60.000 60.000

Pre-costing Balance 6000 128 76.827 76.827

Consumption for Production 8310 1101/1255046 2 1.200,42 1.200,42

8310 1101/1253984 1 600,21 600,21

8310 1101/1253983 1 600,21 600,21

…

Ending Balance 9000 18 10.803,80 10.803,80

Table 41 Costing in GCP for material 0357962 After the cost is calculated for consumption in TType 8310, the cost for material 0357962 will be transfer to upper level with TType 3410 into production. The TType flow shows as following.

Data from [MSEG] is extracted to GCP from lower level material (e.g. raw material) and transferred to higher level ones (e.g. semi-finished product). If there is difference in the invoice value with the purchase order value, the actual posted price will be taken from [BSEG] for adjustment.

5.1.2 Production order Production process in GCP keeps the cost components separated from the consumption (material, activity, overhead) to finished products. When goods receipt is posted in SAP ERP, all the costs are merged. In order to keep the cost component split, GCP puts the cost in different category in production process. Production order can be displayed by transaction code [CO03]. There, the components and operations can be found. As material 0357962 is consumed in production of material 1255046, we continue with this example for production in make to stock.

Vendor 0357962

1255046

3100

3410

MSEG 1253984 3410

8310

… 3410 8310

8310

Figure 66 TType flow for consumption of material 0357962

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In the production order, we can find the documents for material movements. We can see the goods issue for material consumption with movement type 261. The costs of them are credited to G/L account. And then, for material 1255046, goods receipt can be found by movement type 101. And the cost of it is debited to G/L account. In order to get operation cost, work center offers the rate of activity cost, and then times the process duration recorded in confirmation, cost is debited from cost center. The cost is given from cost center accounting. GCP doesn’t take material cost from production but directly from the consumption. So the confirmed delivery from the sender brings the cost of material. Calculation process Step 1: Table [MSEG] – To find production order number MJAHR MATNR BWART KZBEW71 MBLNR AUFNR 2007 1255046 10172 F 50325465 53120970 *SOBKZ 73=initial Step 2: Table [AUFK] – To find object number AUFNR OBJNR 53120970 OR000053120970 Activity & Overhead Material Step 3: To collect target costs

TType 3200 (Table [COSS]:Activity+OH)

TType 3410 (Table [COSP]:Actual consumption)

OBJNR Fix Variable Material Variable

OR000053120970 47,64 26,35 0252229 29,69

(WRTTP74=1) 0357962 1.200,42

71 Note: KZBEW=F for production 72 Note: Trigger 1 – Goods receipt (e.g. movement type 101) 73 Note: SOBKZ: Special stock indicator, here initial indicates Make to Stock material 74 Note: WRTTP=1 for plan

Production order Make to Stock

Machine 1PCE


…

Light barrier 1PCE

LB components 2PCE

Bulk Materials

…

Angle 4PCE Angle 4PCE

110-1101-351110

110-1101-257851

110-1101- 1255046

110-1101- 0357962 110-1101- 252229 110-1101- 1253244

Documented Goods Movements

GI 261

GR 101

MSEG MSEG

Value Add - Activity - Overhead

COEP

COSS

Figure 67 Document flow in production order of material 12550 46

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*adjusted to ‘Posting value of GR’ 1253244 32,94 Step 4: To adjust to actual costs Settlement75 (Table [COEP]) Material adjustment76 OBJNR Fix Variable TType 3415 = 8310 - 3410 OR000053120970 47,30 26,44 TType 3210=COEP-3200 0,34- 0,09 Table 42 Calculation for material 1255046 with production order 53120970 In step 1, GCP reads material document in [MSEG] and takes goods receipt as trigger. For each goods receipt for production, production order number can be found. In step 2, object number can be found in header of production order, table [AUFK]. The object number is identified uniquely for an order, project or cost center. We can get cost from cost object controlling77 with this number. In step 3, we want to find material cost, activity cost and overhead with object number from previous step. Target cost for activity and overhead can be found in table [COSS]. And Material target cost is in table [COSP]. GCP takes the plan cost from them in order to get the cost component split. From this step, the cost component split is given in GCP. Then comes step 4, GCP reads actual costs in table [COEP] and put settlement to get actual cost from target cost. The local value-add (production and overhead) is adjusted to ‘posting value of goods receipt’ which is same as in SAP ERP. Settlement is put with TType 3210. For material adjustment, the cost is taken from sender to receiver, the difference will be put in TType 3415 (in this example, there is no adjustment for material). So the material cost is exactly given by sender. From this procedure, local value-add is align with SAP ERP while material is succeeded from sender. Therefore, GCP value keeps cost component split, and more concrete than SAP ERP because of concrete material valuation. So we take all the production order happened in plant 1101 in this period and sum up, costs are calculated in GCP as following.

Hierarchy TType Qty Sum local cost

Sum global cost

Sum global variable

Beginning Balance 1000 1 1.336,64 1.336,64 1.224,62

Production 3200 10 738,42 738,42 259,43

Production Settlement 3210 6,15 6,15 -2,55

Material 3410 12.630,50 12.630,50 12.173,40


75 Note: Trigger 2 – Settlement for production (from table[AUAK]) 76 Note: Trigger 3- Goods issue from sender (e.g. movement type 261) 77 SAP online documentation[10-24]

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Consumption for Production 8310 1 1.337,43 1.337,43 1.241,36

8310 1 1.337,43 1.337,43 1.241,36

8310 1 1.337,43 1.337,43 1.241,36

…

Ending Balance 9000 2 2.674,86 2.674,86 2.482,71

Table 43 Costing in GCP for material 1255046 in act ual The transfer process can be shown graphically as following.

5.1.3 Sales order When sales order is placed from one company to the other in same group, we can find invoice and delivery bill in SAP ERP. Sales quantity and value can be found in different documents.

Cost

Intercompany sales Make to Stock

Machine 1PCE

110-1101-351110

…

110-1101-976323

Tool Master 1PCE

Tool Master 1PCE

110-1101-980368

221-2211-976323

Tool Master 9PCE

Intercompany revenue

Intercompany Profit

Material cost

Production cost

Overhead

Invoice

MSEG/GI

COPA

MSEG/GR

Product Consumption

[COSP] -Material

…

1255046

8310

0357962

Raw Material

[COSS] -Production -Overhead

3200

8310

[COEP] -Settlement

3410

0252229

3415

3210

Figure 68 TType flow for production of material 1255046 in ac tual

Figure 69 Sales of material 976323 in actual

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Revenue is transferred from receiver to sender. In the transfer process, the quantity comes from the material document of goods issue. Cost is calculated from production process. And revenue comes from CO-PA. From cost and revenue, the intercompany profit can be calculated. GCP extracts material document (GI) and CO-PA document as single item to get the information of quantity, posted value and revenue. In order to transfer the right quantity and right value, quantity is given by receiver and calculated from sender (TType 8100). Then the cost of delivered material can be calculated.

Minicosting calculation of material 976323

Financial item Single Item

TType Quantity Revenue (EUR)

Ref.Doc Quantity Revenue

Shipment IC 8060 9 (GI-sender) (MSEG)

4900823901 1 4900864773 1 4900894273 1 …

Sales IC 8070 336.734,73 (CO-PA)

3001077459 37.414,97 3001084528 37.414,97 3001086280 37.414,97 … Pre-Costing Balance 6000 9 336.734,73

Shipment IC confirmed 8100 1 37.414,97 (GR-receiver) (MSEG)

50346812 1

Table 44 Cost and revenue of material 976323 in act ual When cost and revenue are given, the intercompany profit can be calculated. As we have seen the process of purchase and production, the difference of cost from local view and global view can be shown as following. Sales process of material 976323

TType Qty Sum historical cost

Global fix cost

Global variable cost IC profit Revenue

Company 221 / Plant 2211 / Material 976323

Production 3200 10 64.338,84 52.981,38 11.357,46

Production Settlement 3210 890,26 863,17 27,09

Material planned 3410 248.840,81 11.885,70 236.936,71 18,40

Material Adj. 3415 -2.964,71 146,39 -3.111,92 0,82

Pre-costing balance 6000 10 311.105,20 65.876,64 245.209,34 19,22

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Confirmed shipment 8100 1 31.110,52 6.587,66 24.520,94 1,92 37.414,97

. …

Company 110 / Plant 1101 / Material 976323

Transfer IC 5100 1 37.414,97 6.587,66 24.520,94 6.306,37

6000 1 37.414,97 6.587,66 24.520,94 6.306,37

8310 1 37.414,97 6.587,66 24.520,94 6.306,37

Production 3410 1 37.414,97 6.587,66 24.520,94 6.306,37

Table 45 Intercompany sales process for material 97 6323 in actual As we can see in the calculation, from local view, the cost component split is lost during the process of intercompany transfer. In another word, the fix cost, variable cost and profit for the sender will be taken as material cost (variable) from now in SAP ERP. It is also reflected in GCP by local view. But GCP keeps the cost component split in global view. We can also see the cost components and plus intercompany profit on receiver’s side in GCP by global view. The process of intercompany transfer can be shown graphically as following.

In the sales process, historical cost which is in local view is taken as variable in receiver. But in global view, the fix and variable are kept in split from sender to receiver. Additionally, intercompany profit is also transferred separately.





Company 110


1,92 EUR

Var


3410 3200


8310

8100 5100

Fix Var


Global var cost 24.520,94 EUR IC profit

6.306,37 EUR

Fix Var

Fix Var

3415 3210


3410

Figure 70 TType flow for material 976323 of intercompany sale s in actual

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5.2 GCP solution for Make to Order in actual For make to order in actual, the head of the supply chain is sales order. The object of calculation is the products with confirmed sales quantity from specific sales order. Therefore, it is needed to recognize all the costs and revenues related to this sales order. Based on the logic in ‘make to stock’, we want to implement it in to ‘make to order’ circumstance. In the following section, I will introduce how GCP is implemented for ‘make to order’ in actual.

5.2.1 Purchase order With the same procedure as ‘make to stock’, GCP extracts material document [MSEG], accounting document [BSEG] and revenue in CO-PA as single items. They are taken as basis to calculate the values in local view and global view. The example taken here is purchase between companies in same group.

The material for sales order stock can be identified by material document. In table [MSEG], we can find the indicator to identify the material in sales order stock. Then we can further find the purchase order number. In table [EKKN], sales order number which the purchase order is assigned to can be found. Sales order assignment check (receiver side) [MSEG] – Material document table MBLNR BWART MATNR SOBTZ KZBEW EBELN EBELP 50345752 101 370210 E78 B79 66598307 10 [EKKN] – Account assignment in purchasing EBELN EBELP VBELN VBELP 66598307 10 28026271 2000 Table 46 Check sales order assignment for material 370210

78 Note: SOBTZ=E means sales order stock 79 Note: KZBEW=B means for purchase order

Purchase order Make to Order

Machine 1PCE

110-1101-351110

Head 1PCE

110-1101-370210 …

Head 1PCE

114-1141-370210


Material document

Invoice document

Accounting document

BSEG

MSEG/GI

MSEG/GR

COPA

Figure 71 Purchase order for material 370210 in intercompany transfer

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GCP takes the revenue from sender as material cost of receiver. Therefore, we need to find the partner. From EPS/EPI, we can find sales order from sender. Then revenue is taken from [COPA] of sender and transferred to receiver as cost. The result is as the following.

Purchase process of material 370210

TType Qty Sum historical cost

Global fix cost


IC profit Revenue

Company 114 / Plant 1141 / Material 370210 - C/28142 064/10

Confirmed shipment 8100 1 65.970,93 8.071,28 50.166,76 8.517,33 82.600,00

Company 110 / Plant 1101 / Material 370210 - C/28026 271/2000

Transfer IC 5100 1 82.600,00 8.071,28 50.166,76 24.361,96

6000 1 82.600,00 8.071,28 50.166,76 24.361,96

8310 1 82.600,00 8.071,28 50.166,76 24.361,96

Table 47 Intercompany purchase process for material 370210 We can also see the difference between local view and global view. The logic is same in ‘make to stock’ which has been described in section 4.2.1. The difference is only the material is assigned to sales order stock. The following picture shows the TType flow.





Company 110


8.517,33 EUR

Var


3410 3200


8310

8100 5100

Fix Var



IC Profit 24.361,96 EUR

Fix Var

Fix Var

3415 3210


3410

Figure 72 TType flow of material 370210 for intercompany purc hase in actual

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5.2.2 Production order In production for ‘make to order’ in actual, we can find the production order with sales order assignment. Then cost from the production order can be collected to the sales order. To explain how GCP Engine works, I take the same example as what we used in section 4.2.2.

GCP recognize the material document of good receipt for material in sales order stock. In [MSEG], we can find production order with the sales order assignment as the following. Step1: Sales order assignment check (receiver side)

[MSEG] – Material document table MBLNR BWART MATNR SOBTZ KZBEW AUFNR80 MAT_KDAUF MAT_KDPOS 50387562 10181 351110 E82 F83 53129110 28026271 2000

Table 48 Check sales order assignment for material 351110 Then we look in to header of production order, table [AUFK], for object number in cost center accounting. Step2: Find object number [AUFK] – Header of production order AUFNR OBJNR KDAUF KDPOS 53129110 OR000053129110 28026271 2000 Table 49 Find object number for production order fo r material 351110

80 Note: Production order number 81 Note: Trigger 1 – Good receipt (e.g. movement type 101) 82 Note: SOBTZ=E means sales order stock 83 Note: KZBEW=F means for production order

Production order Make to Order

110-1101-351110

Machine 1PCE

110-1101-257851


Head 1PCE

Machine body 1PCE

110-1101-976372

110-1141-370210

…

Production &

Overhead

Sales Order: 28026271 Item: 2000

MSEG/GI

MSEG/GR

MSEG/GI

MSEG/GI

COEP

COSS MSEG

/GI

Figure 73 Document flow in pr oduction order of material 351110

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GCP calculates production cost by two parts. The planned local value-add, which means activity cost and overhead, are extracted from table [COSS]. Then, GCP takes cost in settlement table [COEP] to adjust production cost to posting value of goods receipt. For material consumption, GCP takes planned cost from table [COSP] to get the cost component split. Then it is adjusted with consumption from sender. Therefore, the actual cost with cost components split is got in GCP for production. Actual cost calculation Activity & Overhead Material

Step 3: To collect target costs TType 3200

(Table [COSS]:Activity+OH) TType 3410 (Table [COSP]:Actual consumption)

OBJNR Fix Variable Material Fix Variable OR000053129110 28.212,43 645,45 976372 (WRTTP84=1) 370210 *adjusted to ‘Posting value of GR’ 257851 1.091,36 1.774,17

… … Total 21.474,41 78.426,98

Step 4: To adjust to actual costs Settlement85 (Table [COEP]) Material adjustment86 OBJNR Fix Variable Material Fix Variable OR000053120970 -2.056,77 -23,32 976374 2.728,27 25.873,55 370210 8.050,42 49.458,70 257851 … Total 19.174,73 179.220,39 TType 3210=COEP-3200 TType 3415 = 8310 - 3410 26.155,66 622,13 40.649,14 257.647,37 Table 50 Calculation for material 351110 with produ ction order 53129110 Compared to the example in section 4.2.2, there are some differences in the materials which I explain here for the reason.

- In the production order, Material 976372 is marked as phantom material, which means its components will be brought to the work center directly and consumed. In this way, its component – e.g. Material 976374 - will be put directly in the production order.

- In the production order, Material 370210 is marked by ‘N’ in item category which means ‘non-stock position’.87 Therefore, it will not be calculated in TType3410, but directly get from TType 8310 to TType 3415.

- Material 257851 is marked by ‘L’ in item category which means stock position. So it is calculated with target cost and then adjusts. (In this example, the adjustment is zero.)

The calculation display in GCP is as the following.

84 Note: WRTTP=1 for plan 85 Note: Trigger 2 – Settlement for production (from table[AUAK]) 86 Note: Trigger 3- Goods issue from sender (e.g. movement type 261) 87 Note: Item position: L=stock position, N=non-stock position

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Hierarchy TType Qty Sum

historical Cost

Global fix cost

Global variable

cost

Intercompany Profit


Production 3200 1 28.857,88 28.212,43 645,45

Production Settlement 3210 -2.080,09 -2.056,77 -23,32

Material 3410 100.592,30 21.474,41 78.426,98 686,17

Material adjustment 3415 254.117,36 19.174,73 179.220,39 55.722,24

Pre-costing Balance 6000 1 381.487,45 66.804,80 258.269,50 56.408,41

Shipment Intercompany 8100 1 381.487,45 66.804,80 258.269,50 56.408,41

Ending Balance 9000

Table 51 Costing in GCP for material 351110 in actu al The TType process can be shown as following. The logic of the process is same as what I have explained in production for ‘make to stock’.

5.2.3 Sales order To the end of one sales order, we need to calculate all the revenue and costs together in this order. Then we can finally get the profit from external. With all the calculation in GCP which I described before, we can eventually see the cost component split meet revenues which give us a concrete view of the structure of cost, profit and intercompany profit. Here we take the same example as what we used in planning. It is a sales order to external customer.

Consumption Product [COSP] -Material

…

Machine 351110

976372

Raw Material [COSS]

-Production -Overhead

3200

8100

[COEP] -Settlement

3415 3410

370210

8310

3210

Sales order 28026271 Item2000

Figure 74 TType flow for production of material 351110

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For this sales order, item 1000 is the leading item (higher-level item) for item 2000, 3000 and others. Therefore, GCP collects the revenue and discount for these following items in CO-PA and meet the cost and intercompany profit coming from companies who produced the product. In the case of sales directly to customer, there will be good delivery and revenue in opposite direction. These movements will be recorded by goods issue in [MSEG], and revenue (also discount, etc) in CO-PA. With the cost of material from sender and revenue from customer, the calculation can be done as the following. Historical

cost Global fix cost


IC profit Revenue Discount

Product 0259837 15.296,05 863,71 6.392,81 8.039,53 0351110 544.399,16 66.804,80 273.406,98 204.187,38 0415060 103.248,35 16.945,99 62.919,32 23.383,04 … CO-PA 3009764159 21.400,00 -5.604,80 3009764139 560.600,00 -146.824,75 3009764154 167.750,00 -43.934,80 … Sum 662.943,56 87.462,34 347.331,99 228.149,23 1.041.610,00 -272.804,38 Net sales:

768.805,62 EUR Sales cost:

17:678,88 EUR Profit from external: 88.183,18 EUR Table 52 Cost and profit calculation for sales orde r 28038144 in actual Same as we described before, we fulfill these values in GCP display by TType. Then the clear procedure of the value flow of the sales process is shown. Although this example is taken from third party deal, the procedure is similar as sales to external from other sales organizations. More features of third party deal will be described in section 6.3. The sales process is show as the following.

Financial flow

Value flow

Sales to external Make to Order

Machine 1PCE

314-Z314-351100

Customer Company 314

Sales order 28038144

Item 1000

MSEG/GI

COPA

Item 2000

Item 3000

Item ….

Figure 75 Sales to external customer

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Hierarchy TType Qty Material Historical cost

Global fix cost

Global variable cost IC profit


Production and Subcontracting 1PCE 662.943,56 87.462,34 347.331,99 228.149,23

3400

0259837 15.296,05 863,71 6.392,81 8.039,53 0351110 544.399,16 66.804,80 273.406,98 204.187,38 0415060 103.248,35 16.945,99 62.919,32 23.383,04 …



Ending Balance 9000 Table 53 TType hierarchy in company 314 for sales o rder 28038144/1000 88 in actual As this is the end of the chain, the costs are rolled up from the bottom, and the revenue comes in this level. Then all the cost and profit can be shown and drilled down in GCP. The process for sales to external customer can be shown graphically as following.

So far, we have introduced purchase, production, sales in both planning and actual in the circumstance of ‘make to stock’ and ‘make to order’. The basic logic and process is given. And from the description above, we can recognize GCP Engine offers detailed structure of cost and profit to support decision makers.

88 Note: Currency is EUR



Global var cost 347.331,99 EUR Company

314 IC profit 228.149,23 EUR

3400

Fix Var Fix Var

Customer

7300 Global fix cost

Global var cost

IC profit

Int. group

Ext. group

Sales cost

Profit 88.183,18 EUR

Revenue + Discount = 768.805,62 EUR

Figure 76 TType flow Sales to external customer

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6 Case study for other processes Previously, we introduced the logic of GCP Engine in the circumstance of purchase-production-sales process in make to stock and make to order. It is most common processes. But there are also special processes which gives great complicities. In order to meet the needs and give a complete group costing and profitability solution, GCP Engine also recognizes and involves these processes into solution.

6.1 Subcontracting Subcontracting is a kind of outsourcing. In general, the supplier takes the raw material from the company and delivers the processed material back. This process can be seen as purchasing service from supplier with material movement in both directions.

We can take the following example that the material is consumed for both production and subcontracting process. From the example, we will see the flow.

Subcontracting / Production Plant 1181 / Planning

Material 0071707

Vendor

Material 1286557

Other materials

Value added from Subcontractor

Material 976835

Local Value added

Other materials

3100

8350 8300

3250

3450

8300

3400

3200

8300

CKIS CKIS

CKIS CKIS

Subcontractor Company

Material 1

Material 2

Invoice (for service)

Purchase Order

Figure 78 TType process for subcontracting and production in planning

Figure 77 Subcontracting process

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We want to keep the material cost and value added from subcontractor separated. TType 8350 is consumption of material in subcontracting. TType 3250 is the value added from subcontractor. The costs of both come from [CKIS] table. The difference is the item category, [TYPPS], is different. Subcontracting Production

Material Subcontracting Overhead Material Subcontracting. Overhead

SAP-CKIS TYPPS M L G M E G

GCP TType 8350 3250 8310 3200

Table 54 Cost estimate of subcontracting and produc tion In planning, subcontracting can be handled in similar way as production. The cost components split for subcontracting can be also got with local and global view with same logic. In actual, there are differences between subcontracting and production. As we know from previous chapter, GCP gets cost for production from [COSS] and [COEP]. And material cost comes from the consumption. It is similar in subcontracting if we regard it as a production process externally. The goods issue for subcontracting is the actual material cost. So GCP takes the cost of goods issue, and plus the cost of subcontractor service from table [EKBE]. This is the value-add from subcontractor. Therefore, the cost of goods receipt is given. Same as production, all the cost components for subcontracting are kept split. The TType flow is as following.

So, GCP can handle subcontracting process in similar way as production. Cost of material in local and global view can also be kept during subcontracting process.

Subcontracting / Production Plant 1181 / Actual

Material 0071707

Vendor

Material 1286557

Other materials

Value added from Subcontractor

Material 976835

Local Value added

Other materials

3100

8350 8310

3250

3450

8310

3410

3200

8310

MSEG MSEG

EKBE COSS

Subcontract Production

3415

3210

COEP

Figure 79 TType process for subcontracting and production in actual

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6.2 Buyback Buyback is defined as the process of selling product to company outside the group, and buy the manufactured product back to company inside group. The difference between buyback and subcontracting is that subcontracting only has one purchase process which is the payment from the company to subcontractor for service. In buyback, there is sales first, then purchase the processed material back. If the buybacker is not defined, the sales will be taken as sales to external and purchase also. The benefit of recognizing buybacker is that the broken link will be fixed. Because the profit earned from buybacker will be reflected as a part of cost when the material is purchased back to group, the cost component split should be kept and plus the value added from the buybacker.

Buybacker is defined and maintained by customizing. It can be regarded as a virtual company. The logic is that the virtual company of buybacker purchases material 1, and produces material 2, and then sells it back to the company. As we know from former introduction, there are TType for external suppliers and customers. In real, buybackers certainly belongs to external. But as soon as they are customized as buybacker, a virtual company is created in GCP. In planning, when material 1 leaves company 1 from the group, the revenue is in [COPA]. GCP takes it and transfers it to buybacker (virtual company). After the production process in the buybacker which we are not sure what is added, the material will be purchased back to the group by company 2. There, we can find the cost estimate in [CKIS]. So, all the cost components split is in TType 8100 when it leaves the company, and the value added by buybacker will be found by the difference from [CKIS] to [COPA] when it is back to company 2 by TType 5100.

Buybacker Company

Material 1

Invoice 2

Invoice 1

Sales Order

Purchase Order Material 2

Figure 80 Buyback process

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In actual, there are actual revenue, delivery and invoice. So the actual value can be extracted in the same process from [COPA] and [MSEG]. The difference will be allocated to the value add from Buybacker.

Therefore, the business process of buyback can be integrated in the value chain of GCP. The cost and profit can be kept and transferred during the process with both local and global view.

6.3 Third Party Deal Third party deal is for the case of having a sales company or sales representative who signs the contract with customer for trading. And then the shipment of the products goes from the manufacturing company directly to customer. In this case, the invoice and delivery go by different paths.

Buyback process Planning

Material 1

Customer Material 2

Other materials

Value added from Buybacker

7100

8100

5100

7400

COPA

COPA Company 2

Buybacker

5100 CKIS

Company 1

Buyback process Actual

Material 1

Customer Material 2

Other materials

Value added from Buybacker

7100

8070

5100

7400

COPA

COPA

Company 2

Buybacker

5100 MSEG

Company 1

8060

Figure 81 Buyback process in planning

Figure 82 Buyback process in actual

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If we look in the profit earned by company 1, it can be calculated by price in invoice 1 and local cost in company 1. If we look into the profit earned by company 2, there is only profit earned by the differences from invoices 2 and invoice 1 (receivable and payable). But the finished product doesn’t go in same way. In order to calculate the cost and profit for products, the physical flow and financial flow should be aligned. GCP uses virtual company to replace ‘Third party dealer’ to combine the physical flow and financial flow.

By creating virtual company to replace the third party dealer, the goods transferred physically to customer are aligned with financial flow. Therefore, the third party process is broken down into an intercompany transfer process and a selling to external process. Then these processes can be handled in same way as what we described in chapter 4 and chapter 5. In planning, the entire cost estimate for sales items are taken from cost estimate with sales quantities. These costs are transferred to company 2 with intercompany profit which is calculated with CO-PA in company 1. And then, GCP makes a virtual production to merge all the items into one item with all the

Revenue

Sales quantity & invoice

Sales to external Third party deal

Customer Company 2 Company 1


Item 2000 Item 1000


Item 16000

Item 17000

Item 21000

Item 25000

Virtual Company

Product

Company 2 (Third party dealer)

Company 1

Invoice 2

Invoice 1

Customer Invoice

Revenue

Finished product

Figure 83 Third party deal process

Figure 84 Third party deal flow with virtual company

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cost and intercompany profit split. Finally, they are transferred to external customer against the revenue from CO-PA in company 2.

In actual, cost of finished product is rolled up from the supply chain. GCP takes the revenue of company 1 from CO-PA in actual. Then the local cost in company 2 is got. It follows the virtual production similar to planning. And then, the profit will be calculated with revenue from customer which can be found in CO-PA in actual from company 2.

So, GCP breaks down third party process into an intercompany transfer process and external sales process and brings together physical and financial transfers. Therefore it can be calculated in GCP in same way as processes described in chapter 4 and chapter 5.

Third party deal Actual



Item 2000 Item 1000


Item 16000

Item 17000

Item 21000

Item 25000

Virtual Company

8060 COPA 5100

Item 2000

Item 16000

Item 17000

Item 21000

Item 25000 8300

3400

7300

COPA MSEG

8070

Third party deal Planning



Item 2000 Item 1000


Item 16000

Item 17000

Item 21000

Item 25000

Virtual Company

8100 CKIS 5100

Item 2000

Item 16000

Item 17000

Item 21000

Item 25000 8300

3400

7100

COPA COPA

Figure 85 Third party deal process in planning

Figure 86 Third party deal process in actual

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7 Summery This thesis has introduced the approach of GCP for cost and profitability calculation in ‘make to stock’ and ‘make to order’. I have presented in previous chapters with examples some common business processes and how they are implemented in GCP based on SAP ERP. As a summery, I want to high light the benefit of implementing GCP Engine as an add-on for SAP ERP.

7.1 Group value chain In Michael.E.Porter‘s book ‘competitive advantage’ in 1985, a common business model of value chain is introduced.89 By his theory, we can see the value delivered to customer by the company is divided into different divisions. As an advanced ERP system, SAP handles all these values sophisticatedly.

Figure 87 Value chain by Porter 1985 But in the situation of enterprises which have global supply chain with lots of intercompany transfers, multiple supply chains can be found in each product group. The value of the product can be different when it is for ‘make to stock’ or ‘make to order’. In some business, they are in mixture for same product. It is even more common that there are procurement alternatives in the supply chain. The business processes get higher complicities in this situation. In value flow, the costs components split are kept in each node of the supply chain. When the intercompany transfer happens, all the revenues in one node are taken as costs of materials or services in next one. This is reflected by ‘Local view’ in GCP.

89 Michael E. Porter, 1985 [12]

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If one product is produced through three companies with one alternative manufacture in second step, we can see the transfer as the following.

Figure 88 Value chain of group companies in local v iew After each intercompany transfer, the cost and profit are merged to material cost in next company. Therefore, all the cost changes will be reflected as material cost change in company 4. But no concrete reason can be given. Considering the ratio changes among different currencies, it is even more difficult to do cost and profit analysis on group level. That is why we are not satisfied with these local views. A ‘Big picture’ with cost component split on group level is needed for one product or one sales order. We want to see if the product is beneficial for whole group. And we want to see whether the cost, e.g. production cost, is stable or fluctuating. Therefore, GCP sees the group value chain not only in local view but also in group view. This means, all the cost from each company is rolled up and all the information of intercompany profit are kept to the end of the chain. Therefore, we can see the group value chain as a superimposed value chain and see the group as a whole.

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Figure 89 Superimposed value chain of group compani es in global view In global view, all the cost components added from local are kept in the same category through the supply chain. If the cost changes in next period, we can easily find the category which the change comes from. If we want to analysis the performance in the past, we can even set a fix ratio to put out the effect of currency exchange rate for simulation. That is the benefit of getting a clear cost components split and intercompany profit in supply chain. It is a strong support for decision maker when an overview on group level for each product or sales order is available.

7.2 Product profitability We are used to evaluate the profitability of the product based on the report from sales organization. From the report, we can usually see the sales, market share and profit from the sales organization. We can only estimate the total profit for one product by sum up the profit from each company and divide by sales quantity of the product from all product lines. When concrete calculation of the cost and profitability for one product or sales order is needed, all the sales order and purchase order have to be searched manually in SAP ERP to collect all the coherence cost from different companies in supply chain. Let’s take an example of two products which are produced and sold to market by four companies in one group.

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We assume there are two products simply sold through the path of company 1-2-3-4 to external customer. Steering committee of the group is planning a marketing event for one of the product. They see a very positive report for product 2 from company 4 which is the sales company, because company 4 has made very high profit from product 2. But when we look in supply chain throughout these four companies, we can find product 1 is actually much more beneficial for other group members. Therefore product 1 is more profitable for the group than product 2.

Figure 91 Group profitability analysis If we can do group profitability analysis with help of GCP Engine, we can have an overview on group level for a specific product. And this will be a powerful support to strategic decisions. Moreover, if the company has product in ‘make to order’. It is highly possible in reality that there is mixture of ‘make to order’ and ‘make to stock’. Therefore, GCP split value chain for the sales order out by different valuation types to evaluate cost and profitability for products in ‘make

Company 1 Company 2 Company 3 Company 4

Raw Material

Semi-finished product

Semi-finished product

Customer Finished product

Sales org

Figure 90 Example of value chain in one group

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to order’. And then, we can calculation the profit for one sales order with its sales order number in valuation type.

Figure 92 Product cost and profitability in MTS and MTO By the comparison of make to order and make to stock, we can calculate if the sales order is profitable for the group. Moreover, this can be taken as the basis of evaluate the value of each customer to the group. In all above, I have introduced the goal, the logic, the approach and benefit of GCP Engine with the examples of make to stock and make to order in common business processes. Additionally, some special situations are given to introduce the method how GCP adapt them. In the end of the thesis, the benefit of implementing GCP to group companies with global supply chain is explained. The following is the references and some additional information for understanding this thesis.

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References

Sources of quotations

1. IM&C GmbH, (valid link 08/2009): 1-1 www.im-c.net 1-2 GCP Engine documentation (IM&C internal documents) 1-3 Presentation of GCP Engine for corporate controlling http://www.im-c-gmbh.com/fileadmin/imc/daten/Supply_Value_Chain_EN.pdf 1-4 Fritz Wurm: Planning and Controlling Consolidated Earnings based on Consolidated Cost of Goods Manufactured, http://www.im-c-gmbh.com/fileadmin/imc/daten/artikel_original_EN.pdf

2. Christopher Solomon, SAP table relations, (valid link 08/2009): http://www.cvosoft.com/sistemas_sap_abap/manuales_sap_abap/esap_sap_tables.pdf

3. Ling Li: Supply Chain Management: Concepts, Techniques and Practices Enhancing the Value Through Collaboration, Published by World Scientific, 2007, P162

4. Axel Kuhn, Bernd Hellingrath: Supply Chain Management: Optimierte Zusammenarbeit in der Wertschöpfungskette, 2002, P10

5. Douglas M Lambert: Supply Chain Management: Processes, Partnerships, Performance, Published by Supply Chain Management Inst, 2008, P132

6. Prof. Peter Mattheis: Process oriented software, APO_PP_Prozesse.ppt, 2008, P33

7. Supply-Chain Council. Supply-Chain Operations Reference-model – SCOR Version 7.0 Overview. Technical report, Supply-Chain Council, 1400 Eye Street, NW, Suite 1050, Washington DC, 20005, USA, 2005. www.supplychain.org.

8. R. K. Oliver and M. D. Webber. Supply-chain Management: Logistics catches up with Strategy. In M. Christopher, editor, Logistics – The Strategic Issues, pages 63–75. Springer, Berlin, Deutschland (reprint of OUTLOOK 1982), 1992.

9. J. Rohde, H. Meyr, and M. Wagner. Die Supply Chain Planning Matrix. PPS Management, 5(1):10–15, 2000.

10. SAP online documentation, (valid link 08/2009): 10-1 Product cost planning http://help.sap.com/saphelp_470/helpdata/en/7e/cb7d6343a311d189ee0000e81ddfac/frameset.htm 10-2 Target costing http://help.sap.com/saphelp_46c/helpdata/en/66/bc73bf43c211d182b30000e829fbfe/frameset.htm 10-3 Group costing http://help.sap.com/saphelp_di46c2/helpdata/EN/7d/6e51392fc011d38ad70000e8214595/frameset.htm 10-4 Material cost estimate with quantity structure http://help.sap.com/saphelp_46c/helpdata/en/7e/cb7e3843a311d189ee0000e81ddfac/frameset.htm 10-5 Purchasing documents http://help.sap.com/saphelp_46c/helpdata/en/75/ee0aaf55c811d189900000e8322d00/frameset.htm

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10-6 Individual/collective requirements http://help.sap.com/saphelp_470/helpdata/en/dd/5601b5545a11d1a7020000e829fd11/frameset.htm 10-7 Sales order costing http://help.sap.com/saphelp_470/helpdata/en/90/ba6da4446711d189420000e829fbbd/frameset.htm 10-8 Product cost by sales order http://help.sap.com/saphelp_470/helpdata/en/90/ba6c38446711d189420000e829fbbd/frameset.htm 10-9 Product cost estimate for sales order items http://help.sap.com/saphelp_470/helpdata/en/90/ba6db1446711d189420000e829fbbd/frameset.htm 10-10 Order BOM cost estimates http://help.sap.com/saphelp_470/helpdata/en/90/ba70ca446711d189420000e829fbbd/frameset.htm 10-11 Procurement alternatives http://help.sap.com/saphelp_470/helpdata/en/97/d363c8e5e111d28a2e0000e83234f3/frameset.htm 10-12 Valuated stock http://help.sap.com/saphelp_470/helpdata/en/27/5f34d47d2a11d2b6690000e82d8bd1/frameset.htm 10-13 Invoice http://help.sap.com/saphelp_470/helpdata/en/dd/561009545a11d1a7020000e829fd11/frameset.htm 10-14 Purchase orders http://help.sap.com/saphelp_470/helpdata/en/75/ee0ccb55c811d189900000e8322d00/frameset.htm 10-15 Display purchase orders http://help.sap.com/saphelp_470/helpdata/en/75/ee0e1d55c811d189900000e8322d00/frameset.htm 10-16 Production orders http://help.sap.com/saphelp_470/helpdata/en/b1/c03ed1439a11d189410000e829fbbd/frameset.htm 10-17 Cost center http://help.sap.com/saphelp_46c/helpdata/en/ba/08540ab50c11d29c7b0000e8a51c6e/frameset.htm 10-18 Purchasing organization http://help.sap.com/saphelp_46c/helpdata/en/ba/085416b50c11d29c7b0000e8a51c6e/frameset.htm 10-19 Sales area http://help.sap.com/saphelp_46c/helpdata/en/6d/612b0ab9a711d29c7f0000e8a51c6e/frameset.htm 10-20 Currency and valuation profile definition http://help.sap.com/saphelp_di471/helpdata/EN/eb/1372ce43c411d1896f0000e8322d00/frameset.htm 10-21 Display currency and valuation profile http://help.sap.com/saphelp_46c/helpdata/en/06/aa82b4127611d383760000e8a5eb64/frameset.htm 10-22 Target cost and variance calculation http://help.sap.com/saphelp_46c/helpdata/en/90/ba6242446711d189420000e829fbbd/frameset.htm

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10-23 Special procurement type http://help.sap.com/saphelp_46c/helpdata/en/f4/7d2a3444af11d182b40000e829fbfe/frameset.htm 10-24 Cost object controlling http://help.sap.com/saphelp_pserv464/helpdata/EN/e9/3cb2a4b05411d29f5e080009b0db33/frameset.htm 10-25 Group costing and multiple valuation http://help.sap.com/saphelp_di46c2/helpdata/EN/7e/cb848443a311d189ee0000e81ddfac/frameset.htm 10-26 Special procurement http://help.sap.com/saphelp_di46c2/helpdata/EN/7e/cb7f5643a311d189ee0000e81ddfac/frameset.htm 10-27 Special stocks http://help.sap.com/saphelp_dimp50/helpdata/EN/4d/2b8ec943ad11d189410000e829fbbd/frameset.htm 10-28 Material costing http://help.sap.com/saphelp_di471/helpdata/en/ba/c80842e69a11d28a8e0000e8214595/frameset.htm 10-29 Stock coverage problem by using moving average http://help.sap.com/saphelp_di471/helpdata/en/db/606dcb2ed211d38a6b0000e83234f3/frameset.htm

11. Prof. Roland Fischer: 11-1 Advanced accounting and controlling, FHF_Accounting_2007_1_slides.pdf, 2008, P 109 11-2 Advanced accounting and controlling, FHF_Accounting_2007_3.pdf, 2008, P4 11-3 Advanced accounting and controlling, FHF_Accounting_2007_3.pdf, 2008, P36

12. Competitive Advantage: Creating and Sustaining Superior Performance (Hardcover) by Michael E. Porter, 1985

13. Kantor, Michael; James H. Burrows (1996-04-29). ‘ELECTRONIC DATA INTERCHANGE (EDI)’. National Institute of Standards and Technology. http://www.itl.nist.gov/fipspubs/fip161-2.htm (valid link 08/2009). Retrieved on 2008-05-13.

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Attachment A. TType definition

Internal TType definition Int.TType Description

AD Adjustment stock valuation AJ Subcontracting ext. Adjustment AQ Activity Quantity B1 Goods in transit BB B2 Initial Goods in Transit with ext. value BA Adj. stock valuation previous period BB Beginning Balance BS Beginning Balance from SAP CC Code Change out CI Code Change in CO Consumption for Production CP Consumption for Production CS Consumption for Subcontracting DF Adj. Stock Transfer Sender-Receiver DI Adj. Transfer Sender-Receiver E1 Goods in transit EB EA Adjustments EB Ending Balance EC Adjustments FA Production Material costs FG Production Material costs Adjustment FP Production Material costs planned FS Subcontracting Material costs IA Inventory Adjustments IE Misc. Inventory Adjustments with ext.val IO Inventory Adjustments w/o ext. value MA Production Settlement MP Production PA Manual Pre-costing Balance Adjustments PB Pre-costing Balance PO Purchase, Subcon. - ext., non-cons. PS RF Transfer IC RI Transfer IC, Subcon IC - Adjustments RS Subcontracting IC RW Transfer IC RX Transfer IC (coupled) SP Sales, Shipment - ext., non-cons. ST Sales ext., non-cons. virtual. plant TC Sales IC from virtual. plant TP Sales und Shipment IC TR Shipment IC confirmed TS Shipment Subcon. IC confirmed TW Sales and Shipment IC TX Sales and Shipment IC (coupled) XI Stock transfer in XO Stock transfer out

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External TType definition Ext.TType Int.TType Description

1000 BB Beginning Balance 1100 BS Beginning Balance from SAP 1200 B1 Goods in transit BB 1201 BA Adj. stock valuation previous period 1205 B2 Initial Goods in Transit with ext. value 2000 CI Code Change In 2100 CC Code Change Out 2200 XI Stock transfer in 3000 Production and Subcontracting 3001 IO Correction Broken Link 3010 Production 3020 Subcontracting 3100 PO Purchase ext. 3110 PO Purchase ext. Adjustment 3120 PO Purchase ext. Delivery costs 3200 MP Production 3210 MA Production Settlement 3211 MP Production Settlement. non-balanced 3250 PO Subcontracting ext. 3260 PO Subcontracting ext. Adjustment 3270 PO Subcontracting ext. Delivery costs 3300 AQ Activity Quantity 3400 FA Production Material costs 3410 FP Production Material costs planned 3415 FG Production Material costs Adjustment 3450 FS Subcontracting Material costs 5000 RW Transfer IC 5010 RX Transfer IC (coupled) 5100 RF Transfer IC 5110 RI Transfer IC Adjustment financial 5120 RI Transfer IC Delivery costs 5150 RS Subcontracting IC 5160 RI Subcontracting IC Adjustment 5170 RI Subcontracting IC Delivery costs 5200 PO Purchase non-consolidated 5210 PO Purchase non-consolidated Adj. 5220 PO Purchase non-consolidated Delivery costs 5250 PO Subcontracting non-consolidated 5260 PO Subcontracting non-consolidated Adj. 5270 PO Subcontracting non-con. Delivery costs 5900 PA Manual Pre-costing Balance Adjustments 5901 AD Adjustment stock valuation 5999 IO Inventory Adj. with ext. value 6000 PB Pre-costing Balance 6001 IA Inventory Adj. w/o ext. value 7100 SP Sales and Shipment ext. 7110 SP Shipment ext. 7200 SP Sales ext. 7300 ST Sales ext. from virtual plant 7350 ST Sales non-con from virtual plant 7400 TC Sales IC from virtual plant 8000 TW Sales and Shipment IC

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8001 DI Adj. Transfer Sender-Receiver 8010 TX Sales and Shipment IC (coupled) 8060 TP Shipment IC 8070 TP Sales IC 8100 TR Shipment IC confirmed 8150 TS Shipment Subcon. IC confirmed 8200 SP Shipment non-consolidated 8210 SP Sales non-consolidated 8300 CO Consumption for Production 8310 CP Consumption for Production 8350 CS Consumption for Subcontracting 8500 IA Misc. Inventory Adjustments 8501 IE Misc. Inventory Adjustments with ext.val 8700 XO Stock transfer out 8701 DF Adj. Stock Transfer Sender-Receiver 8800 EC Manual Ending Balance Adjustments 8900 E1 Goods in transit EB 8901 EA Adjustments stock valuation 8902 EA Quantity Difference GCP-SAP 9000 EB Ending Balance

• Internal TType is used to define external TType which can be done by customizing

• External TType definition in 08/2009

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Attachment B. Cost Variant used in examples

Cost Variant for Cost estimate (Table KEKO) Condition Costing Variant Plant

Make to Stock

ZSTA 1101

ZSTA 1102

ZSTA 1103

ZSTA 1104

ZSTB 1141

ZSTG 1241

ZSTH 1251

ZSTD 1181

ZSTF 1281

ZSTP 1371

ZVPI 2621

ZSTL 2211

ZSTN 2221

ZSTM 2231

ZSTO 2251

ZSTU 2311

ZSTÖ 3141

ZST7 2371

ZSTT All other Org.Units

Make to Order ZSKA All Org. Units

• Cost variant depends on customizing in SAP ERP. Information in this form is used for examples in chapter 4 and chapter 5

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Attachment C. Tables used in GCP from SAP ERP 90

Tables used for Planning Module T-code Table Description

FI/CO Cost estimate CK13N KEKO Product-costing header

CKIS Product-costing item

Tables used for Actual Module T-code Table Description

FI/CO

Accounting documents

FB03 BKPF Accounting documents

BSEG Accounting documents item

CO-PA (customizing)

KE23N (depends on customizing, e.g. CE1TD)

Operation concern DE

Operation concern CH

Operation concern US

Operation concern

Cost center accounting

COSS CO Object: Cost Totals for Internal Postings

COSP CO Object: Cost Totals for External Postings

COEP CO Object: Line Items (by Period)

Product cost collector

KKF6N Display product cost collector

SD

Sales order VA03

VBAK Header data

VBAP Item data

VBPA Partners in sales order

Billing documents

VF03 VBRK Header data

VBRP Item data

Delivery VL03N LIKP Delivery header

LIPS Delivery item

MM

Material document

MIGO MKPF Material document

MSEG Material document item

Material master MM03

MARA General Material Data

MBEW Material Valuation

EBEW Sales Order Stock Valuation

Purchasing ME23N

EKKO Purchase document

EKPO Purchase document item

EKKN Account assignment in purchasing

EKBE Purchase history

PP Production order

CO03

AUFK Production order headers

AFKO Order header data PP orders

AFPO Order item

RESB Order components

AFVC Order operations

90 Note: These are mainly used tables from SAP ERP to GCP

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Attachment D. SAP ERP system architecture

Graphical view of SAP ERP system architecture

• The detailed description can be found in SAP online documentation with the links given in quotations.

Figure 94 SAP ERP Org - Cost center 91

Figure 95 SAP ERP Org - Purchase organization 92


SAP ERP system

Client

Operating concern

Controlling area

Company code

Business area

Profit center

Cost center

Figure 93 SAP ERP system architecture

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Figure 96 SAP ERP Org - Sales area 93


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Attachment E. EPS/EPI flow chart

EPS/EPI indicators Ind 1 Description 1 XBLNR from Sender and receiver match 2 XBLNR is initial in sender document 3 XBLNR is initial in receiver document 4 XBLNR from Sender and receiver do not match Ind 2 Description 1 Material number is same in sender and receiver document item (match) 2 In receiver document item but not in sender document item 3 In sender document item but not in receiver document item

• Precondition: Ind 1=1 Ind 3 Description A 1:1 connection for sender and receiver B More than one sales order position relate to one purchase order position C All the other connections

• Only if Ind 1=1 & Ind 2=1, Ind 3 = A Ind 4 Description 1 Purchase order number is found in sales order as reference (one or more) 2 Purchase order number is not found in sales order as reference 3 Purchase order number in sales order as reference is not found in receiver

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Ind 5 Description 1 Material number is same in sender and receiver document item (match) 2 In receiver document item but not in sender document item 3 In sender document item but not in receiver document item

• Precondition: Ind 4=1 Ind 6 Description A 1:1 connection for sender and receiver B More than one sales order position relate to one purchase order position C All the other connections

• Only if Ind 4=1 & Ind 5=1, Ind 6 = A

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Attachment F CD

- Word file of this thesis (.doc)

- Reference files for quotations

- Presentation (.ppt)

- Additional information

*Details can be found from the index in the CD

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