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SAP® Product Lifecycle CostingCompendium
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Table of Contents3 Introduction
6 Quick Facts
14 Co-Innovation
16 Challenges
21 Use Cases
26 Highlights
30 Key Features
42 Consulting and Training Offerings
46 Customer Testimonials
52 Benefits
62 Learn More
65 Contact
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Delivering Fast, Early, Accurate Cost Calculations
Revolutionizing Costing for New Products
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Dear Reader,
Welcome to the SAP® Product Lifecycle Costing solution compendium, a compilation of value collaterals spanning solution videos, success stories, analyst reviews, business transformation studies, brochures, and partner testimonials.
Driving product profitability, keeping future product costs under control, and accurately calculating product quotations with engineered products or machines are challenges today. And it’s becoming increasingly important to be able to gain insights on cost-optimization capabilities, simulate prod-uct volumes and costs, and make better decisions on a global scale.
SAP Product Lifecycle Costing helps you calculate costs and other dimen-sions, such as weight or CO2, to determine future product costs and quota-tions in an early stage of the product lifecycle where product data is incomplete and prices are only partially available. SAP Product Lifecycle Costing helps you quickly identify cost drivers along the lifecycle, and easily simulate and compare alternatives.
In this compendium, you will find all the materials you need to gather a deeper insight into the solution and how customers use it successfully. We look forward to hearing from you, discussing your needs, and providing you with more insights.
Best regards,Petra Koepfer-Behncke Head of Intelligent Product Design, SAP Product Management, SAP SE
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SAP Product Lifecycle Costing
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SAP Overview VideoHow do you calculate the cost of a new product? Most companies are still using spreadsheets even for cost control in the early engineering phase and beyond. What about integration into your corporate systems? Find out how SAP Product Lifecycle Costing can help you innovate for profitability.
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SummaryThe SAP Product Lifecycle Costing solution supports the calculation of costs for new products or quotations early in the product lifecycle. Powered by SAP HANA®, the solution can work with massive volumes of data in real time, so you can quickly identify cost drivers and easily simulate and compare alternatives.
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Quick FactsObjectives
Support manufacturers facing rising costs and competition in creating detailed cost estimates to identify savings before design starts
Provide cost estimates for quotes with many engineered parts
Support “should costing” processes
Forecast lifetime costs to asses new-product profitability
Increase data availability and accuracy, reduce total cost of ownership (TCO), and enable one costing process
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Gain transparency across the product lifecycle, and reduce costs for future products when only estimates of costs are available.
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Support production cost optimization through simulation and evaluation of production or supply costs
Reduce product costs and minimize unprofitable product variants by using a clear design-to-cost approach
Increase reuse of parts to reduce TCO
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Quick FactsSolution
Purpose-built solution for early engineering, quotation, and lifecycle costing
High-performance cost calculation powered by SAP HANA
Integration with the SAP ERP application and SAP S/4HANA®, plus access to other data sources
Local master-data administration, custom price sources, and flexible price-determination logic
Versioning, simulation, and baselining of cost estimates
Flexible user interface design and the ability to leverage formulas to adjust the tool’s algorithm to your needs
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Quick FactsBenefits
Lower development costs and increased profitability
Shorter quotation cycle, faster time to market, and higher quote-win rate
Improved estimate accuracy
Complete control over cost overruns
Reduced TCO through elimination of non- essential costing systemsand data sources
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Keep product costs and quotations in line with strategic targets – using SAP Product Lifecycle Costing. The software helps secure future prod-uct margins in the early stages, when the design is evolving and master data is incomplete. Gain visibility across teams, proactively manage costs, and support new product innovations as well as customer-specific engineered products.
Drive Product Profitability with SAP Product Lifecycle Costing
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Why SAP Product Lifecycle Costing?
Use flexible, hierarchical product-costing structures and natively integrate with the SAP ERP and SAP Product Lifecycle Management applications
The software offers world-class tools for early product engineering, quotation, and lifecycle costing – and can ultimately help you increase profitability. Built on the in-memory SAP HANA platform, SAP Product Lifecycle Costing delivers a real-time calculation engine, Microsoft Excel–like configuration, and a modern, role-based user interface.
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Leverage an open, standards-based API to integrate with other applications
Run what-if scenarios and analytics to explore alternative product structures, cost rates, and quantities
Increase visibility across teams – from product designers and manufacturers to executives
Reduce product design and development costs, shorten the quotation cycle, and speed time to market
Safeguard your data with robust application security, locking, and versioning
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Co-Innovation with SAP Product Lifecycle Costing
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To ensure the features designed into the new software met user requirements, the development backlog was shared with customers continuously, allowing them to prioritize those that were most important.
Designed with Manufacturers, for ManufacturersSAP Product Lifecycle Costing is the result of SAP’s col-laboration more than over 30 manufacturing custom-ers. The design was kicked off with design thinking, an approach that enabled us to quickly design the solution using paper mock-ups. Then we employed the agile development methodology to develop and refine the fea-tures and functions rapidly once they were agreed upon.
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Having this continuous interaction with customers enabled us to create a product-costing solution that meets all the key requirements of manufacturers.
And we are still adapting the solution to make it even more useful. Three times a year, customers meet with us for two days. They tell us about their experience implementing and using the solution and work on new features for future releases.
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Discover how SAP PLC empowers Varian Medical Systems in saving lives and eradicating cancer.
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Challenges with Complex Calculations
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The calculations themselves can be extremely complex, involving vari-ous prices and internal and external rates. Prices for different services or product components need to be obtained from internal departments and external suppliers. Decisions need to be made about the best plants and countries to source from or manufacture in. Time is always tight, and many iterations may be needed.
In addition to these factors, manufacturers face the challenge of using complex, self-built Microsoft Excel spreadsheets to manage the costing process. These simply do not provide the visibility, insight, and precision companies need.
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Spreadsheets Still in Use
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Data has to be extracted and pieced together from multiple sources. There’s no calculation history, and the data flow cannot be easily tracked or traced. Keeping spreadsheets up-to-date requires a great deal of manual, time-consuming effort, and there is a high propensity for errors and inaccuracies.
Spreadsheets do not support the interdepartmental collaboration and security features that are required. In addition, the expertise needed to maintain current solutions is often vested in a few people, leading to a risk that the solutions could become unusable when those people leave or retire.
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AGCO Supports African Farmers with Global Thinking and Local Action
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Forbes ArticleFor folks like Eric Froebel, director of Global Engineering Processes and IT Architecture at AGCO Corporation, the crisis of global hunger can be summed up by some straightforward logic. Froebel believes the answer to feeding 9 billion people by the year 2050 could lie in greater innovation throughout the agricultural sector. As he describes it, AGCO’s own idea of innova-tion includes both global thinking and local action.
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A New Solution
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Something smarter and simpler is needed. A solution that allows manu-facturers to quickly and reliably integrate market requirements and cost information at the early stages of the product development cycle.That’s why we developed the SAP Product Lifecycle Costing solution.
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The freedom to work with incomplete iinformation – that’s what calcu-lating the cost of new products is all about. The freedom to just not know yet what the best manufacturing plants are and which suppliers and countries to source from. The freedom to adjust prices, routings, or rates as they become clear throughout the design and manufactur-ing engineering process. SAP Product Lifecycle Costing gives you all this freedom − and yet enables a quick preliminary cost estimate for
the entire product that is as facts-based, pre-cise, and reliable as it can be at an early stage.
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“Freedom to Calculate” with SAP Product Lifecycle Costing
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Supporting All Manufacturer Costing Throughout the Entire Lifecycle
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Costing Throughout the Entire LifecycleSAP Product Lifecycle Costing supports manufacturers at all stages of the product development process.
Preliminary Cost EstimatesDespite not having detailed cost and product information in the initial stages of new-product design, many suppliers have to provide prelim-inary cost estimates to original equipment manufacturers.
SAP Product Lifecycle Costing lets you start designing products to a target cost at the earliest stages of a project. The calculation engine helps you develop a cost structure based on engineering knowledge. As a result, you can prepare cost estimates for the entire product, despite the lack of detailed information.
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Supporting Manufacturers
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Quotation CostingDriven by customer demand, this type of costing uses an iterative approach with many calculations and spans product development and manufacturing.
SAP Product Lifecycle Costing helps you quickly build new calculation models, either from scratch or by using bills of materials (BOMs) and pric-ing information from previously designed products. It enables you to col-laborate closely with sales, purchasing, manufacturing, and controlling to optimize the price you propose. Plus, you can rapidly recalculate costs and prepare new quotations as customer revisions occur.
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Lifecycle CostingLifecycle costing touches every stage of the product lifecycle, from design to disposal. Its focus is on evaluating and optimizing costs during each phase to maximize margins and profitability.
SAP Product Lifecycle Costing helps you calculate and evaluate one-off and special costs associated with warranties, service and support, and disposal. It also helps you analyze direct material and manufacturing costs, define cost-reduction targets, and support procurement and manufacturing operations.
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Costing Throughout the Entire Project Lifecycle
Concept acquisition
Product and pro-cess development
Production ramp-up Production Disposal
Preliminary cost estimate (NPI, CI) Inventory valuation (SAP ERP today)
Production cost simulation
Quotation costing
Lifecycle costing
Manufacturing bill of materialsEngineering bill of materials
Unstructured dataStructured data and values available (for example, materials, bill of materials, routing, and pricing information)
Time
Prod
uct m
atur
ity
Start of production
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SAP Product Lifecycle Costing
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Greater Speed, Accuracy, and InsightSAP Product Lifecycle Costing is an intuitive solution for calculating costs in the preproduc-tion phases of a product with greater speed and enhanced accuracy. It also provides insight into the cost drivers of the entire product lifecycle.
First-Class User ExperienceBuilt from the ground up to meet the needs of original equipment, subcontract, and specialist manufacturers, SAP Product Lifecycle Costing provides users with a familiar, intuitive, Microsoft Office–like user experience. Thanks to user- and role-specific access, you can give engineering, purchasing, manufacturing, sales,
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and finance professionals specific data and pro-cess views for their area of responsibility and intuitive tools that help them organize their work more efficiently.
High-Performance EngineTo deliver the speed and performance needed for today’s tighter product development cycles, SAP Product Lifecycle Costing uses a real-time calculation engine that runs on the SAP HANA platform. This means you can work with massive amounts of data in real time, enabling you to instantly undertake sophisticated analyses and rapidly roll up costs for complex products that contain thousands of components and rates.
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Integration with SAP ERPSAP Product Lifecycle Costing is fully integrated with the SAP ERP application. As a result, you can import data and structures, such as BOMs, routings, quantities, prices, and rates, for greater consistency and accuracy.
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Discover how SAP PLM connects engineering with your enterprise.
Early Product Lifecycle CostingKey to Winning Profitable Business –A CIMdata Commentary
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SAP Product Lifecycle Costing offers a comprehensive set of features that help you simplify the costing process while increasing collaboration, insight, and accuracy.
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SAP ERP and Non-ERP Master Data Importing Cost structures and master data can be imported from Microsoft Excel spreadsheets, SAP ERP, SAP S/4HANA, or other systems through the comprehensive APIs pro-vided with the solution. Alternatively, cost structures can be created and modified in the solution itself.
Flexible Costing Structure DesignWith its user-friendly interface, SAP Product Lifecycle Costing simplifies the creation of calculation structures. Using autocompletion, drag-and-drop options, and
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context-sensitive editing, you can develop new cost structures. The solution supports multiple pricing strategies for components and activities, as well as multiple currencies.
Comprehensive Price DeterminationTo help you price components and activities more accurately, SAP Product Lifecycle Costing offers sev-eral options for price determination, including manu-ally entered information, local pricing data, and global pricing information from SAP ERP. Once initial pricing is complete, the solution recalculates pricing auto-matically whenever new information is available. Price determination strategies can be set, and pricing based on vendors and projects, combined with confi-dence levels, can be determined.
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Versatile Versioning and SimulationSAP Product Lifecycle Costing gives you the power to copy cost struc-tures and run simulations and what-if analyses, enabling you to evaluate scenarios, for example, where to manufacture or the impact of higher energy prices. At the same time, it keeps a record of versions, allowing you to compare results.
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Reference CalculationWhen creating the initial product structure, you might want to separate the structure by different calculation versions so that various departments can edit different parts. For instance, you may have a complex product structure or large BOM. The functionality to use a referenced calculation enables you to create a reference version of a component or part that can be used later on in the main product structure as a reference. Cost compo-nents and costing sheet data are calculated along the main structure taking each item from the referenced version into account.
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The Calculation EngineThe costing run begins in the calculation en-gine by identifying the correct rates and prices and by interpreting costing sheet information. With this data, the engine calculates product overhead and determines the price of the new product by multiplying the rates or prices with the quantities along the structure. It deter-mines the price for each level of the product as well as for the product itself.
The calculation run is completed in real time while your team continues to work with the data, such as adding information or enhanc-ing structures. As a result, product costs are always up-to-date. During the costing run, the
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calculation engine keeps various dimensions, such as cost categories, organized for different plants. Once the costing run is complete, you can display costing information at a detailed, cost-element level per item and per calculation.
The software displays the results using the structure navi-gation to provide an up-to-date cost view at each level. Once the base calculation is complete, it is used to calcu-late production volumes along the product lifecycles.
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Project DataYou can group different products into one project, for instance, to offer a quotation to a particular customer. The header data of the project allows you to maintain important dates such as start of project and end of project, start of production and end of production, along with the stakeholder responsible for the project.
Once you have finished your base calculation, you can maintain the production volumes for each calculation belonging to a project to create the lifecycle version and to forecast production volume calculations for each year. This allows you to create a report for not only the base version but also for the subsequent years planned for production. You can combine those with the calculation version to cover your one-time
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costs, tool costs, or development costs. That way, in the end, you will be able to report on the profitability of each project and product, down to the individual items.
SAP Product Lifecycle Costing lets you perform flexi-ble what-if analyses to drive product-cost optimization along multiple dimensions. For example, you can determine the benefits of replacing a component, switching a manufacturing plant, or using a different machine or production line.
ExtensibilitySAP Product Lifecycle Costing offers a broad set of functionalities to adjust and create individual custom-er fields that are not standard. The fields can be easily created by the user and used in reporting. In addition, you can put a formula on each of those fields to per-form individual customer calculations. Also, standard
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fields can be used to take customer-specific calculations into account.
A software development kit with an add-in framework enables you to automate processes and make the calculation-creation process even faster. The framework can also be used to enhance the ribbon on the toolbar with additional customer features, such as a BOM compare report or a validation cockpit. The side panel can also be enhanced to bring in item-specific, context-sensitive tools, such as SAP 3D Visual Enterprise appli-cations for context-sensitive, 3D viewing or the SAP Jam™ collaboration platform.
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Boosting Efficiency with Intelligent Search and Machine LearningYouTube VideoSAP Product Lifecycle Costing uses intelligent search and machine learning to get better cost estimates in the early stage of the product lifecycle. More efficient and accurate retrieval of similar items supports quicker and more precise estimation of costs in the classic costing scenarios. Machine learn-ing optimizes the search parameters, at the same time allowing for easy
fine-tuning of the search function in SAP Product Lifecycle Costing. The intelli-gent search and machine learning function were developed in close collabo-ration with Daimler AG.
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Calculate New-Product and Quote Costs with Greater Speed, Accuracy, and Insight
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SAP Solution in DetailLearn how SAP Product Lifecycle Costing supports the calculation of costs and other dimensions for new products or quotations in an early stage of the product lifecycle.
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Reduce Total Cost of Ownership
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Fast-Track Time to Value with Tailored ServicesService offerings from SAP help you accelerate the implementation of SAP Product Lifecycle Costing and optimize cost calculations by combining as-sumptions and estimates with data from SAP ERP and other sources.
Select from predefined offerings that include work-shops, system configuration in one environment, exemplary configuration, testing, and knowledge transfer.
Choose our prepackaged service offering, and build your prototype in just a few weeks. Start a traditional implementation and then combine
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service packages to meet your unique business needs. Or use our analytics implementation service, which helps you design and implement tailored reporting on product costs and estimates.
Finally, consider our model company for product lifecycle manage-ment that helps you accelerate prototyping, preparation, and explo-ration activities by leveraging a preconfigured system in the cloud.
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Maximize the value of R&D and engineering solutions from SAP – and turn new ideas into viable products faster – with SAP implementation, optimization, and consulting services. Our consultants can help you eliminate IT complexity and streamline product development processes from idea to manufacturing. Develop an innovation road map, eliminate data silos, and take advantage of proven best practices, rapid implementation, and prepackaged solution enhancements.
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How Can Getting Fast and Accurate Quotes to Customers Mean Stronger Sales?
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Bühler GroupSAP Business Transformation StudyBühler, the family-owned Swiss company, is a leading provider of machinery for food production. It also offers die-casting and surface-coating technologies for high-volume application areas such as auto-motive, optics, and inks. Read how Bühler improves cost accuracy for the quotation process in engineer-to-order scenarios. It worked with the SAP Consulting organization to deploy SAP Product Lifecycle Costing. Now, it has a single global costing tool to lower financial risk.
Read the BTS >
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Improving Product Cost Accuracy and Profit Margins with SAP Product Lifecycle Costing
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AGCOSAP Business Transformation StudyRead how AGCO, a global leader in agricultural solutions, supports the world’s farmers and those they feed by consistently calculating product cost estimates with SAP Product Lifecycle Costing.
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Nils Franzen, Director Global Product Costing, AGCO Corporation
“With SAP Product Lifecycle Costing in place, I really believe we have a best-in-class product costing solution that will give us a big advantage going forward.”
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Driving Greater ProfitsOptimizing Costs and Maximizing Revenue By allowing you to calculate and model various cost scenarios while designs are evolving and master data is only partially available, SAP Product Lifecycle Costing delivers clear benefits.
Improved ProfitabilityHighly accurate calculations enable you to make better-informed decisions that help you maintain margins, for example, by eliminating nonprofitable product variants and producing more accurate quotations.
Continued
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Increased RevenueWith efficient calculation processes and accu-rate estimates, you can win more sales opportu-nities and deliver more products to market faster.
Optimized R&D ExpensesGreater collaboration leads to leaner processes and greater efficiency in research and develop-ment. In addition, precise phase-gate processes prevent further work on cost-losing prototypes earlier in the development process.
Fewer Engineering ChangesDue to greater accuracy in product designs and calculations, the number of engineering changes can be reduced, minimizing related scrap, rework, and prototyping costs.
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Phillip Feger, Business Process Manager, Progress-Werk Oberkirch AG
“We recently decided to use SAP Product Lifecycle Costing to calculate and analyze future new products at our company. Using the power of SAP Product Lifecycle Costing, we are working to reduce development costs and improve product margins. With the team spirit and unique support from SAP, plus the continuous co-innovation from the team of co- innovation customers, we have already made a huge step forward by learning from other organizations.”
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Quote Costs in Engineer-to-Order Scenarios with Greater Speed, Accuracy, and InsightSAP Community BlogFor too long now, manufacturers have struggled to get accurate, early product-cost estimates. And as product complex-ity increases, the situation continues to get worse. A smarter and simpler approach is needed to keep costs of complex products and quotations in line with market prices and to increase quote-win rates.
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Contact Marion Heidenreich, Solution Manager, Industrial Machinery and Components Industry, SAP SE
“The SAP Product Lifecycle Costing solution helps achieve accurate and reliable costs during the sales quotation process.”
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ContactMarion Heidenreich, Solution Manager, Industrial Machinery and Components Industry, SAP SE
“Design anywhere, build anywhere, and do so as efficiently as possible.”
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Design Anywhere, Build Anywhere with Greater Product Cost Accuracy and EfficiencySAP Community BlogIndustrial machinery and components manufacturers are facing increasing pressure to provide innovative, customer-specific solutions at competitive prices, and the specialization of customer re-quirements will only continue to grow. Read on and discover how SAP solutions are solving the problem.
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Unlock the Potential of Machine Learning to Get Better Cost Estimates in the Early Stage of the Product LifecycleSAP Community BlogAlthough machine learning is not a new concept, it has recently gained fresh momentum and promises high potential to get better cost estimates in the early stage of the product lifecycle and in the quotation stage of unique, complex products.
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ContactMarion Heidenreich, Solution Manager, Industrial Machinery and Components Industry, SAP SE
“SAP Product Lifecycle Costing is the result of SAP’s collaboration with over 30 manufacturing customers.”
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SAP Product Lifecycle CostingAdditional MaterialsVisit our SAP Cloud Appliance Library and discover all you need to know to get started with SAP Product Lifecycle Costing 2.0.
Learn more >
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Application Help for SAP ProductLifecycle CostingSAP Help PortalYou can use SAP Product Lifecycle Costing by itself or integrate it with your existing solution landscape to calculate variables of cost in real time using data from your enterprise software.
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