Supply chain integration
Supply chain, or logistics, is probably the most integrated modules with controlling. Almost every material movement has a financial impact, so supply chain master data have many connections to controlling master data to facilitate the accounting postings (see Figure 5.3). One great example is COST CENTERS, which are assigned to a variety of different supply chain master data to facilitate cost collection.
As discussed in previous sections, cost centers are assigned to work centers and resources in order to track costs associated with production or maintenance at a specific location. Activity types are assigned to cost centers during COST CENTER PLANNING. The activity rate established at each work center’s cost center is multiplied by the plan activity quantity to determine the activity cost in a product.
One of the key integration points that we have not discussed yet is the assignment of activity types to cost centers. This assignment is made when activity quantities or rates are entered in transaction KP26. This step must be done prior to the creation of a work center or resource because there is a costing tab in the work center and resource master data that links the cost center and activities to that piece of data. This applies to both production and maintenance work centers.
Another key linkage between controlling and logistics is formulas. Activity types contain configuration called formulas which are a logic that determines how the activity is calculated. Often supply chain will coordinate with controlling to make certain activity types as a fixed vs. a variable activity. Setup is a good example of a fixed activity type because it does not fluctuate based on the quantity of material produced.
The combination of relevant activity types for a work center or resource is configured in a standard value key. For example, electricity, direct labor, energy, setup, indirect labor, and overhead may be a set of standard value keys. There may be work centers where only three of those activities are possible, so a separate standard value key could be configured to avoid data entry errors. A standard value key only allows a maximum of six activity types. You could create virtual work centers to go beyond six activity types, but this complicates the data setup process. The activities in the standard value key for a work center must match the activities assigned to the work center’s cost center in transaction KP26.
Figure 5.3: Integration of cost center and activities in supply chain
The integration of cost centers is not just important for work centers and resources. Cost centers are also assigned to equip records in plant maintenance. The cost center on the equipment record can even be used as the settlement rule for the maintenance order.
Cost centers need to be either manually entered or defaulted on many supply chain postings. Often we use configuration in transaction OKB9 to automatically derive a cost center based on the company code, cost element, and in some cases profit center. This configuration is an important integration point with the supply chain. If the proper configuration is not in place, supply chain will have errors in material movements, or they will process a movement with an incorrect cost center assigned.
In addition to cost center master data, there are many processes that are owned by supply chain, but controlling must understand to cost materials properly. We discussed the costing lot size in MATERIAL MASTERS which can often be set to an average production run size. This information would need to come from supply chain and be updated annually or as needed to accurately spread fixed costs over that run size.
Costing team members also need to understand how materials are moved into a plant. This includes the movement types, the general process flows, and how materials are issued to production. Scrap is a great example because there are a variety of different ways to account for production scrap: a scrap rate on the BOM, a scrap material, issuing to a cost center vs. issuing to an order, etc. These details must be understood by controlling, and the supply chain team members should be sure to clear these key decisions with finance to ensure they are accounting for materials correctly.
The sales module has a lesser integration with controlling than supply chain, but it is another important integration point for intercompany transfers and revenue postings. In many cases, companies base intercompany pricing on cost plus a markup method. This requires integration between controlling and sales to maintain pricing conditions in a condition table in transaction VK11. This transaction allows you to set up various sales conditions based on material group, material type, plant, company code, etc. You can set up percentage or dollar amount conditions and leverage various markups instead of using one flat rate. We discussed in COSTING RUN EXECUTION, about how you can cost an intercompany purchased material using these pricing conditions and the sending plant’s cost.
The sales team also requires controlling to maintain account assignment groups in the Sales Org 2 view of the material master to drive revenue postings. Account assignment groups can be configured to drive which revenue account is used when a material is sold. Of course, this field is only required for materials that are sold. For example, you may want to post revenue to a separate account for finished goods versus services.
The purchasing team is also closely integrated with controlling to ensure prices on purchase information records are correct and pricing conditions are maintained (if applicable). Depending on your costing design for costing purchased materials, you may use purchase info records to cost materials. If that is the case, you would want to be sure that the purchasing team creates purchase information records, with the correct price, whether it be the last purchase price, or the average purchase price. However, if you are using a moving average price or standard price for purchased materials, you still want purchasing to use the correct price on purchase information records to minimize purchase price variances.
If you are working in an interim scenario with intercompany plant transfers that are interfaced with a legacy system, you might use pricing conditions to keep intercompany balances in sync. In that case, the product costing team might maintain pricing conditions in transaction MEK1 that are consistent with the sales conditions in transaction VK11.
I have used statistical pricing conditions several times to satisfy product costing requirements. One recent example is the use of a statistical pricing condition that adds an overhead percentage to a material’s purchase price statistically to account for overhead added with a costing sheet. This statistical pricing condition essentially ensures that a purchase price variance does not post due to the material’s additional cost from a costing sheet. The statistical pricing condition also avoids overpaying the vendor, which would occur with a non-statistical, or real, pricing condition. The condition I am referring to is RUE1 for negative percentage accruals.
SAP Business Planning and Consolidation, or BPC 10.1, version for SAP NetWeaver (and HANA) was released into general availability this summer, giving the planners out there some great new features that will be highlighted in my blog today. This is a release that focuses heavily on usability and NetWeaver platform integration so unfortunately there is no Microsoft Platform equivalent with the 10.1 release. SAP has been making fantastic strides in the usability space over the past few years by releasing a harmonized user interface strategy that straddled the various server platforms called SAPUI5. SAPUI5 works on all SAP Platforms; ABAP, JAVA and SAP HANA’s XS Engine enhancing the user experience SAP end users can expect from SAP applications as a whole. SAPUI5 is HTML5 based and therefore allows for application consumption across most mobile devices in addition to the desktop.
SAP BPC 10.1 has embraced this shift in user experience design by completely rebuilding the SAP Business Planning and Consolidation web client.
Profit centers are often a key data element in Business Process Consolidations (BPC) because cost centers do not exist in BPC. We have previously discussed that profit centers can be assigned to materials in order to default on-material movement documents. Since cost centers are also assigned to profit centers, each expense posting to a cost center will also post to the respective profit center. As a controlling user, you may be involved with the consolidations team to set up profit centers and other master data correctly for use in consolidations.
Partner profit center is another data element used in BPC that can be configured to track the sending and receiving profit center on financial postings. For example: If you allocate costs from a cost center with profit center “100” to a cost center with profit center “103”, the partner profit center would be “100”. This provides a clear picture of the sending and receiving party in any intercompany profit center movement and aids in consolidations in BPC.
Regardless of whether you work with SAP’s BPC consolidations tool or another tool, integration will be required from controlling users to design the system in a way that supports consolidations.
Get Updates on Tech posts, Interview & Certification questions and training schedules