11

CONTENTS

1. Objectives

2. Benefits of Profitability Analysis

3. What is CO-PA

4. Integration

5. Planning

6. Reporting

7. Assumptions

CONTENTS

1. Objectives

2. Benefits of Profitability Analysis

3. What is CO-PA

4. Integration

5. Planning

6. Reporting

7. Assumptions

22

OBJECTIVES

ObjectiveObjective

To provide an overview of Profitability To provide an overview of Profitability Analysis (CO-PA)Analysis (CO-PA) To understand the flow of actual data To understand the flow of actual data from other SAP R/3 Modules to CO-PAfrom other SAP R/3 Modules to CO-PA To introduce the Planning features in To introduce the Planning features in CO-PACO-PA To introduce the Reporting features To introduce the Reporting features in CO-PAin CO-PA

44

BENEFITS OF

PROFITABILITY ANALYSIS

Benefits of Profitability Benefits of Profitability AnalysisAnalysis

To extend the capabilities of SAP to To extend the capabilities of SAP to better analyse profitability of STH better analyse profitability of STH products by different dimensionsproducts by different dimensions Provide MKT and Management with a Provide MKT and Management with a tool for better product managementtool for better product management Basis for decisions in pricing, Basis for decisions in pricing, customer selection, policies on terms, customer selection, policies on terms, quantity control, choice of distribution quantity control, choice of distribution channel, channel, and marketingand marketing

Benefits of Profitability Benefits of Profitability AnalysisAnalysis

Up-to-the-minute reporting Up-to-the-minute reporting up-to-the-minute analysis of up-to-the-minute analysis of

profitability profitability up-to-the-minute analysis of sales up-to-the-minute analysis of sales

managementmanagement analysis of any segments of the analysis of any segments of the

business (products,customers, sales business (products,customers, sales districts and any combination of these districts and any combination of these and other characteristics) and other characteristics)

analysis of organisational units (such as analysis of organisational units (such as sales organisations or business areas) sales organisations or business areas)

77

WHAT IS CO-PA

Why CO-PA?Why CO-PA?

Sub-module of SAP R/3 CO (Cost Sub-module of SAP R/3 CO (Cost Controlling) ModuleControlling) Module Flexible reporting tool to analyse Flexible reporting tool to analyse company’s profit company’s profit and lossesand losses Freely defined “slices and dices” of Freely defined “slices and dices” of analysisanalysis Freely defined structure of P&L Freely defined structure of P&L sheet to match the company’s sheet to match the company’s requirementsrequirements

Key TerminologyKey Terminology

Operating ConcernOperating Concern- - CO-PA reporting environmentCO-PA reporting environment. . - C- Complex of CO-PA configuration tables omplex of CO-PA configuration tables

and data repositoriesand data repositories CharacteristicsCharacteristics

- - CCriteria/Dimension for analysis of a riteria/Dimension for analysis of a company’s profitscompany’s profits

Key TerminologyKey Terminology(Cont’d)(Cont’d)

Value FieldsValue Fields - P&L Reporting Lines- P&L Reporting Lines

Profitability SegmentsProfitability Segments

- - AA unique combination of unique combination of characteristic values which forms a multi- characteristic values which forms a multi- dimensional segment. dimensional segment.

Aims of Profitability AnalysisAims of Profitability Analysis

Billingdocuments

CompanyCompany

SalesDivision

SalesDivision

RegionRegion

ProductProduct

CustomerCustomer

MarketMarket

• Which are the largest and fastest growing customers ?

• How have sales and contribution margins changed in the last period for each product?

• What are my worst and best performing sales organisations in different regions ?

Typical Questions in CO-Typical Questions in CO-PAPA

Pro

duct

Gro

ups

Custo

mer

Gro

up

FFB

CPO

PK

Export-1

Export-2

Local

A B C

Customer

Profitability AnalysisProfitability Analysis

Operating Concern

AttributesData Structures

Operating Concern

AttributesData Structures

ControllingArea

ControllingArea

CompanyCode

CompanyCode

ControllingArea

ControllingArea

CompanyCode

CompanyCode

CompanyCode

CompanyCode

Creation of An Creation of An Operating ConcernOperating Concern

CustomerCustomer

ProductProduct

Distribution ChannelDistribution Channel

Components that make up the views of profitability

CharacteristicsCharacteristics

Fixed CharacteristicsFixed Characteristics

User-Defined User-Defined CharacteristicsCharacteristics

CustomerCustomer

ProductProduct

Distribution ChannelDistribution Channel

Unique combination of characteristic values

Export ABC

CPO

Profitability SegmentProfitability Segment

What is to be evaluated?Examples: Industry Group, Product Group, Product Type, Product, Customer, Customer Group, etc

What is to be evaluated?Examples: Industry Group, Product Group, Product Type, Product, Customer, Customer Group, etc

A characteristic value is a specific value of a characteristic.Examples: Customer : Customer A, Customer B

Product Group: FFB, CPO, PKCustomer Group: Export, Local

A characteristic value is a specific value of a characteristic.Examples: Customer : Customer A, Customer B

Product Group: FFB, CPO, PKCustomer Group: Export, Local

A profitability segment is a unique combination of characteristic values of characteristics.Examples: 1) Customer A, CPO, Local

2) Customer B, PK, Local

A profitability segment is a unique combination of characteristic values of characteristics.Examples: 1) Customer A, CPO, Local

2) Customer B, PK, Local

CO-PA ConceptsCO-PA Concepts

Profitability Profitability SegmentSegmentProfitability Profitability SegmentSegment

CharacteristicCharacteristic Value ValueCharacteristicCharacteristic Value Value

CharacteristicCharacteristicCharacteristicCharacteristic

SalesSales

DepreciationDepreciation

RebatesRebates

ReturnsReturns

DiscountsDiscounts

OverheadCosts

OverheadCosts

Numerical values that are reported for each profitability segment

Value FieldsValue Fields

Value FieldsValue Fields

Gross sales

Sales Deductions

Standard COGS

Prod..Variances

S&D Costs

Fixed Distribution

Advertising PromotionsG&AOther Income/Loss

Salesorder

Production order

Delivery Billing

Group

G/A Distribution

Advert. Campaign

PP-PC

SD

CCA

Internal Order

CO-PA

FI document

CO-PA Integration CO-PA Integration ChartChart

FI

An operating concern represents an An operating concern represents an organisational unit of a company. Each organisational unit of a company. Each operating concern contains certain operating concern contains certain attributes and a data structure.attributes and a data structure.

The characteristic determine the content of The characteristic determine the content of the operating concern. An operating concern the operating concern. An operating concern consists of a number of fixed characteristics consists of a number of fixed characteristics and up to 50 user-defined characteristics.and up to 50 user-defined characteristics.

The value fields contain the transaction data The value fields contain the transaction data of costing-based CO-PA.of costing-based CO-PA.

Organisational Organisational Elements - SummaryElements - Summary

Reporting DimensionsReporting Dimensions

• What are the reporting dimensions required by ABC?

• How to determine the dimensions?– Are they available in the Standard SAP Master Tables?

Eg. Material Master : Material Group Customer Master : Customer Group

– Can they be derived from existing master data fields?Eg. Material Number -> Species

2525

INTEGRATION

PAPAPAPA

External Data EntryExternal Data Entry Direct InputDirect Input

FIFI

SDSD

PCPC

CCACCA

Population of CO-PAPopulation of CO-PA

SD Billing DocumentsSD Billing Documents

Sales QuantitySales QuantitySales RevenueSales Revenue

Sales DeductionsSales Deductions

Product Costing Product Costing CO-PC CO-PC

Standard Cost Standard Cost of Productsof Products

Valuation Valuation CO-PACO-PA

Estimate Sales Estimate Sales and Administrationand Administration

Overhead CostsOverhead Costs

CO-PACO-PA

Profitability SegmentsProfitability SegmentsKey FiguresKey Figures

Cost CentersCost Centers

CO-CCACO-CCA

Departmental CostsDepartmental CostsAdministrativeAdministrative

Orders & ProjectsOrders & Projects CO-OPACO-OPA

Direct/Indirect CostsDirect/Indirect CostsProduction VariancesProduction Variances

Financial AccountingFinancial AccountingFIFI

Direct CostsDirect Costs

ExternalExternalData Data

TransferTransfer

Profitability AnalysisProfitability Analysis

ManualManualCO-PACO-PAPostingsPostings

Integration ModelIntegration Model

Example : SD InterfaceExample : SD Interface

SD Interface : ConcernsSD Interface : Concerns

Pre-requisites : Pre-requisites : GL Account Posted From SDGL Account Posted From SD

field status group : profitability segment field status group : profitability segment requiredrequired

cost element category = 11/12cost element category = 11/12

Efforts :Efforts : Create New Accounts For SD PostingsCreate New Accounts For SD Postings

Derivation RulesDerivation Rules

Customer HierarchiesCustomer Hierarchies

ValuationValuation

Characteristic Derivation & Characteristic Derivation & ValuationValuation

Direct Posting From FIDirect Posting From FI

Make to Stock Production Make to Stock Production VarianceVariance

Costing BasedCosting Based Transferred to Transferred to Value Value

Fields . Fields .

Fictitious costsFictitious costs are are permittedpermitted

Capture Capture Product Product CostingCosting Info Info

Short term up-to-date Short term up-to-date information information . .

Less Resource Less Resource IntensiveIntensive

Account BasedAccount Based Transferred to cost Transferred to cost

and revenue and revenue AccountsAccounts

ReconciledReconciled with FI with FI No Product Costing No Product Costing

Info.Info. Same as in FI Same as in FI

(data transferred (data transferred when posted in when posted in Financial Accounting)Financial Accounting)

More Resource More Resource IntensiveIntensive

Two Types of Two Types of Profitability AnalysisProfitability Analysis

Data Flow in Costing-Based Data Flow in Costing-Based Profitability AnalysisProfitability Analysis

Data Flow in Account-Based Data Flow in Account-Based Profitability AnalysisProfitability Analysis

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PLANNING

Online (Manual) PlanningOnline (Manual) Planning Parallel versions (multiple plan versions)Parallel versions (multiple plan versions) Flexible design of individual planning layoutsFlexible design of individual planning layouts Planning of profitability segments : Bottom-up strategyPlanning of profitability segments : Bottom-up strategy

Automatic Planning FunctionsAutomatic Planning Functions Copy, change and re-organise (delete) plansCopy, change and re-organise (delete) plans Perform top-down distributionPerform top-down distribution

Planning IntegrationPlanning Integration Transfer of planned overhead costs to CO-PATransfer of planned overhead costs to CO-PA Transfer of planned PA to SOPTransfer of planned PA to SOP

PlanningPlanning

Bottom Up PlanningBottom Up Planning

Top Down DistributionTop Down Distribution

Plywood-123Plywood-123Prod. Grp:PlywoodProd. Grp:Plywood

Plan 2000 : 110.00Credit : -110.00 Plan 2000 : 110.00Credit : -110.00

Plywood-ABCPlywood-ABC

Prod. Grp:PlywoodProd. Grp:Plywood

Plan 2000 : 220.00Credit : -220.00 Plan 2000 : 220.00Credit : -220.00

Cust. Grp : LocalCust. Grp : Local

Act 1999 : 3 pcsPlan 2000 : 33.00 Act 1999 : 3 pcsPlan 2000 : 33.00

Cust. Grp : LocalCust. Grp : Local

Act 1999 : 3 pcsPlan 2000 : 33.00 Act 1999 : 3 pcsPlan 2000 : 33.00

Cust. Grp : LocalCust. Grp : Local

Act 1999 : 3 pcsPlan 2000 : 33.00 Act 1999 : 3 pcsPlan 2000 : 33.00

Cust. Grp : LocalCust. Grp : Local

Act 1999 : 20 pcsPlan 2000 : 220.00 Act 1999 : 20 pcsPlan 2000 : 220.00

Planning RulesCharacteristics Char. Value Distr. Level Planning RulesCharacteristics Char. Value Distr. Level

Product Group PlywoodProduct *Customer Group x

Product Group PlywoodProduct *Customer Group x

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REPORTING

Forms

Key Figures Characteristics

Drill Down ReportCreateChangeExecute

Print

Email

Excel

Word

Architecture of Drill Architecture of Drill Down ReportingDown Reporting

Sales RevenueSales Revenue

- COGS- COGSGross MarginGross Margin

- Indirect Expenses- Indirect Expenses

Total Profit MarginTotal Profit Margin

Billing Documents/FIBilling Documents/FI

Billing Documents/FIBilling Documents/FI

Building A Profitability Building A Profitability ReportReport

Cost Center/Internal OrderCost Center/Internal Order AssessmentsAssessments

Functions in Drill Down Functions in Drill Down ReportingReporting

Plywood

Plan/Actual Reports• Act/Bud/LY By Period• Brand Results MTD (Act/Bud/LY)

Types of ReportTypes of Report

Actual Report

Budget Report

Product/Country Reports• Brand Results by Country• Brand Results by Product

Reporting Dimensions

Sample Report -By Sample Report -By Product/CountryProduct/Country

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ASSUMPTIONS

AssumptionsAssumptions

Reporting Dimensions Reporting Dimensions (Characteristics) will be based on fields (Characteristics) will be based on fields already defined in the systemalready defined in the system Re-conversion of existing material Re-conversion of existing material masters, if required, is specifically masters, if required, is specifically excludedexcluded

Goals of CO-PAGoals of CO-PA up-to-the-minute analysis of profitabilityup-to-the-minute analysis of profitability up-to-the-minute analysis of sales up-to-the-minute analysis of sales

managementmanagement analysis of any segments of the business analysis of any segments of the business

(products,customers, sales districts and any (products,customers, sales districts and any combination of these and other combination of these and other characteristics) characteristics)

analysis of organisational units (such as sales analysis of organisational units (such as sales organisations or business areas) organisations or business areas)

basis for decisions in pricing, customer basis for decisions in pricing, customer selection, policies on terms, quantity control, selection, policies on terms, quantity control, choice of distribution channel, and marketingchoice of distribution channel, and marketing

SummarySummary

Costing-based vs Account-based CO-PACosting-based vs Account-based CO-PA Costing-based CO-PA and account-based CO-Costing-based CO-PA and account-based CO-

PA.PA. Costing-based CO-PA allows the presentation Costing-based CO-PA allows the presentation

of results by comparison of posted revenues of results by comparison of posted revenues and sales deductions with imputed costs and and sales deductions with imputed costs and sales deductions.sales deductions.

Account-based CO-PA allows the presentation Account-based CO-PA allows the presentation of results in accounts (by omitting the use of of results in accounts (by omitting the use of costing based values), which ensures the costing based values), which ensures the ability to reconcile with FIability to reconcile with FI

SummarySummary(Cont’d)(Cont’d)

Areas of ConcernedAreas of Concerned Integration points require significant Integration points require significant

cross-functional team cooperationcross-functional team cooperation Early research minimizes problems laterEarly research minimizes problems later Table size and reporting performance Table size and reporting performance

must be managedmust be managed

SummarySummary(Cont’d)(Cont’d)

Accuracy of the Accuracy of the Dimension InfoDimension Info

• Are the dimension info available for the following reporting figures?

- SD [Sales Revenue, Std COGS, Discounts, etc]

- CO-PC [Production Variances]

- Cost Center Overhead [Administration Cost, Salary, etc]

- Direct FI Postings [Other Expenses, Miscellaneous]

Customer & Material RelatedMaterial

Related

User-Defined

update whichcharacteristics?