Con2013karchhowrockwellautomationoptimizeditsproductcostingprocess 150507210802 Lva1 App6891

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Case Study: How Rockwell Automation Optimized its Product Costing Process in a Single Global Instance of SAP

Chris KarchRockwell Automation

Introduction

• We will review how Rockwell Automation’s product costing process transitioned from many disconnected legacy systems to a single instance of SAP in order to:• An overview of Rockwell’s product costing process from

standard to complex engineer-to-order products• How Rockwell optimized SAP costing with minimal manual

master data maintenance• Leveraging out of the box SAP functionality to support

specialized costing requirements such as maintaining freight and duties adders with third party vendor procurement

• How Rockwell overcame unique global design challenges using customized reports and transaction codes

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Topics

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• Overview of Rockwell Automation• Scope of Product Costing• Master data • Product Costing Process• Ongoing Challenges• Lessons Learned

Start of first section:List the main points in your presentation and insert this slide at the start of each new topic. Move the highlighted box down for each new section. This divides your presentation into easy to follow sections.

Leading global provider of industrial power, control and information solutions

Rockwell Automation At A Glance

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Fiscal 2012 Sales• $6.26 Billion• > 50% outside the U.S.• 22% in emerging markets

Two Segments – One Business• Architecture & Software• Control Products & Solutions

Global Reach• 22,000 employees• 80+ countries

Serving Customers for 100+ Years• Culture of integrity &

corporate responsibility• Domain expertise• Technology innovation

= Distribution Centers= Manufacturing Locations

Rockwell Automation Sites Running on SAP

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Rockwell Automation – SAP System Scope

• Single instance of SAP• ECC 6.0

• Implementation consists of:• Order-to-Cash• Purchase-to-Pay• Issue-to-Resolution• Market-to-Quote• HCM• Finance

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Rockwell Automation – Costing Organization

• Cost Accounting centralized daily and annual costing needs• Team of 11 to support global costing and production analysis• Daily costing service level agreement to complete costing

within 24 hours of request• Cost completion only achieved if the cost relevant master

data is accurate at the time of the cost roll request

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Rockwell Automation – SAP Costing Scope

• Diverse product range required multiple costing techniques• Standard Costing

• Fixed BOM’s and routings : product not specific to individual customer requirements

• Often stocked at distribution centers• Sales Order Costing

• Products which require engineering support• Products are manufactured for specific orders

• Material Variant Costing• Products with unlimited variations but main assembly is the same

(ex. Push buttons)• Products which can be both stocked and nonstocked

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Rockwell Automation – Costing Design Requirements

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• Daily new part / product costing• About 11,000 – 15,000 materials per month

• Annual cost roll• Maintain costs on close to 1,600,000 material extensions in

SAP in 58 plants • Manufacturing (21 Plants)• Distribution (11 Plants)• Returns (4 Plants)• Support feeding information to Non SAP (22 Plants)

• Ability to include markups on 3rd party as well as intra/intercompany transactions

• Minimize master data maintenance• Build process to easily identify parts to be costed

Topics

• Overview of Rockwell Automation• Master data • Product Costing Process• Ongoing Challenges• Lessons Learned

11


Master Data

• Utilized PIR’s for 3rd party purchases and subcontract materials• External Operations as part of routings• Purchasing conditions for Freight and Duties adder• Utilized special pro keys to cost intercompany purchases

• Costing sheets used to apply intra/intercompany freight, duties and markups

• BOMs and routings for make items• SuperBOMs and routings for material variants

• Fully Burdened rates used for labor and burden absorption• Costing sheets not utilized to allocate overhead at month end• Most labor is back flushed based on routed hours, not actual

time (except in ETO manufacturing)

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Master Data Objectives

• Minimize the amount of time spent maintaining master data• Automate data maintenance where feasible• Programs that update cost fields based on changes in other

master data• Eliminate redundant master data

• Intercompany and intracompany should not require purchasing records

• One source of truth• Intercompany transactions should not require maintenance

of data to support purchasing (STO’s), sales and costing• Minimize requirements to communicate need to cost

• Build process that initiates costing based on changes material master

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Master Data – Freight

• Tcode MEK3• Condition type ZFR1• Plant/Vendor based setup as a

percentage application• Default rate maintained per plant• Rate setup for parts purchased from

other Rockwell SAP locations (VXXXX – XXXX represents the sending plant)

• Mass upload program available for Annual/mass maintenance purpose

• Maintained by OES• Plant to Plant rates are loaded to

costing sheet which is used for Inter/Intra costing purposes

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Master Data – Duties

• Tcode MEK3• Condition type ZD01• Plant/Vendor based setup as a

percentage application• No Default • Rate setup for purchases made from

other Rockwell SAP locations• Mass upload program available for

Annual/mass maintenance purpose• Maintained by OES• Plant to Plant rates are loaded to

costing sheet which is used for Inter/Intra costing purposes via custom program

15

Master Data – Intra / Intercompany Markups

• Condition type ZG01• Company Code/Inv. Party/BU

• Used for Purchasing, Costing and Billing purposes – Fully Integrated

• No Default rate should be maintained • Rate setup for purchases made from

other Rockwell SAP locations• Rates must be loaded for all the BU’s• Mass upload program available for

Annual/mass maintenance purpose• Currently owned by Tax and Cost

Organization• Markup rates between regions on SAP

are loaded to costing sheet which is used for Inter company costing purposes via custom program

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Intra / Intercompany Markup Costing Integration

• Used only for planning purpose for setting standard costs• Costing sheet is used to support Inter/Intra company usage of condition tables• Rates are updated daily using a batch program to ensure purchasing percentages are

in sync with costing percentages• Markup is applied to the base value of the part• Freight and Duties are applied to the sum of base & markup

Overhead Rates/Costing

Sheet

Master Data Results – Freight/Duties/Inter & Intra Markup

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Automated Master Data Maintenance & Review

• Created daily change report to email cost organization for cost relevant fields• Procurement Type, Special Procurement Key, Plant Block

• Created program to update key fields utilized for costing• Origin Group, Overhead group

• Created program to remove costing block when new parts are costed and released without error

• Automated costing sheet updates tied to Intercompany Purchasing conditions for freight, duties and markups

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Daily Change Report

• Created daily change report to email Cost organization for cost relevant fields

• Procurement Type, Special Procurement Key, Plant Block• Excludes approved users to removed Costing Block

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Update Key Fields

• Created program to update key fields utilized for costing• Origin Group, Overhead group

• Program reviews changes to special procurement keys

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Remove Costing Block

• Created program to remove costing block when new parts are costed and released without error• TVARV created to allow team to change based on status

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Review and Update Costing Lot Size

• Program to review and update costing lot size on mfg parts that have setup time or purchased parts that have scale pricing

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Master Data Maintenance

• Maintenance Continued• Upload and download capability of freight, duties and

intercompany markup tables• Freight Table has over 1,800 records• Duties Table has over 500 records• Markup Table has over 6,000 records

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Analyzing Inventory

• Custom report for analyzing inventory• Inventory by Cost Component Split

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Amount Quantity Raw Material Import Duty Inter-co Transfer Freight Subcontracting Full Burden Absorpti

Plant Material MYR MYR MYR MYR MYR MYR MYR

5120 Malaysia Distribution Center XXXXX 13,107.35 1.000 EA 2,944.7700000 1,660.2900000 5,461.3900000 640.4000000 0.0000000 789.6300000

5120 Malaysia Distribution Center XXXXX 14,029.82 7.000 EA 2,913.4700000 1,812.3000000 5,845.7700000 868.0700000 0.0000000 723.3800000

5120 Malaysia Distribution Center XXXXX 4,788.38 1.000 EA 1,116.8800000 618.8600000 1,995.1500000 307.6100000 0.0000000 268.4900000



5120 Malaysia Distribution Center XXXXX 3,896.93 1.000 EA 938.7400000 503.3900000 1,623.7200000 233.2700000 0.0000000 218.4400000



5120 Malaysia Distribution Center XXXXX 15,604.52 1.000 EA 704.6100000 2,062.4800000 6,501.8800000 1,007.4400000 0.0000000 850.3200000

5120 Malaysia Distribution Center XXXXX 2,066.06 5.000 EA 679.6200000 279.9500000 860.8600000 143.6500000 1.7300000 99.8200000

5120 Malaysia Distribution Center XXXXX 2,337.42 2.000 EA 620.2400000 316.7200000 973.9200000 158.5600000 1.4600000 85.6400000

Machine Absorption Semi finished Goods Finished Goods Trading Goods Customs Brokerage External Proc Cost Total Material Cost Total Burden Cost Total Cost

Plant Material MYR MYR MYR MYR MYR MYR MYR MYR MYR

5120 Malaysia Distribution Center XXXXX 8.5000000 1,593.0000000 0.0000000 9.3700000 0.0000000 0.0000000 12,309.2200000 798.1300000 13,107.3500000


5120 Malaysia Distribution Center XXXXX 0.0000000 466.0300000 0.0000000 15.3600000 0.0000000 0.0000000 4,519.8900000 268.4900000 4,788.3800000









Master Data Challenges

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• Complexities with Costing and Master Data• Products Change from make to buy and procure from plant A

today to procure from plant B tomorrow.• Owners of master data are spread around the world• Communication between master data owners and Cost

Accounting is minimal• Lack of understanding the integration of master data to the

successful costing of products in the business

Topics


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Product Costing Process – New Parts

DEVELOPMENT OF MATERIAL COST FIELD MAINTENANCE MATERIAL READY FOR COSTING

MATERIAL READY FOR COSTING COSTING RUN MATERIAL COSTED SUCCESSFUL

MATERIAL FAILED COSTING

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Product Costing Process – New Parts (cont.)

DEVELOPMENT OF MATERIAL

Create/Extend Material (08 Plant Specific Block)

Load Cost Relevant Data

BOMs

PIRs

Spec Proc KeysCOST FIELD MAINTENANCE Batch Jobs run nightly and before cost rolls to mantain cost fields

MATERIAL READY FOR COSTING Business changes Plant Specific Block to 03- Ready for Costing

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Product Costing Process – New Parts (cont.)

LOT SIZE REVIEWCost Accounting reviews for 03 materials

with Setup or Scales and reviews/changes lot sizes

COSTING RUNCA runs T-Code CK40N for materials in 03 status and no released std, four times per

day, each region in two cost runs daily

MATERIAL COSTED SUCCESSFULIf material costed successfully cost

Released and program runs to remove 03 Blocks

MATERIAL FAILED COSTING If material failed costing, move to FC plant specific block and email sent to person who

applied 03 block

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Key Points to Daily Costing Process

• Process designed around change to plant specific material status• No internal communication required

• Automation of key fields used in costing• Automation of block removal on costed parts• Automation of failed costing status• Analysis report built for setup time and scales

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Product Costing Process – Annual Cost Roll

COMMUNICATION MOCK COST ROLLS FROZEN COST ANALYSIS

RATES & PURCHASING COSTS LOT SIZE REVIEW Year Over Year Review

RELEASE OF STANDARD COSTS

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Product Costing Process – Annual Cost Roll (cont.)

RATESCollection of

Freight/Duties and Burden Rates

PURCHASING COSTS

Buyers reviews of PIR pricing for 3rd

party purchases

RATES & PURCHASING COSTS

DNC (Do not cost analysis)•DNC should be on

Procurement types "E" or "F" with a special

procurement type •Analyze for recent

activity and consider removal of frozen costs•DNC flagged materials

are marked (ZPCS)

Planned Price 1 analysis

•PP1 should be on "F blanks"

•Analyze for valid purchasing, vendor

records

FROZEN COST ANALYSIS

Mock cost rolls run at different costing

versions and materials in error

status are monitored and

fixed Selection:

•30 'live' plants•(excl. Shadow,

Returns, or Closed, Plants)

•Exclude Blocked Materials

MOCK COST ROLLS

"Quiet Period" communication to all global SAP live

locations

COMMUNICATION

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Product Costing Process – Annual Cost Roll (cont.)

58 Plants (Distribution Centers,

manufacturing, Shadow, Return,

closed plants)For Configured

Materials and Standard Materials

Excluding 22 blocks

RELEASE OF STANDARD COSTS

Analysis of changes in cost year over year by

material component (material, labor/burden/

freight/ intercompany markup) with quarterly

usage

Year Over Year Review

Review Manufactured and Purchased

materials Lot sizes

LOT SIZE REVIEW

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Key Points to Annual Costing Process

• Process is dependent on key cost relevant master data freeze• Many parts are excluded due to blocks (last time buy, phase

out, obsolete, no longer used etc…)• Test cost rolls begin 3 months before final cost roll• Issues occur due to variant and standard cost roll colliding• Lot sizes are updated based on last five production orders or

purchase orders if setup time or scales exist• Year Over Year review is done an prioritized based on sales or

usage• Costs are released over the weekend

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Topics


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Ongoing Challenges

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• Accuracy of fields affecting costing• PIR price per inaccurate

• Potential user exit to analyze percent change from prior price• Components in BOM that are blocked• Inter/Intra company cost request when not costed in sending

plant• Major changes to BOM/Routing after cost requested• Removal of blocks by business before costing and

subsequent inventory activities• Annual Cost Roll runtime is getting out of control• Inability to cost variants and standard products complicates

annual cost roll

Topics


38


Lessons Learned

• Intercompany costing too integrated• Issues with price changes when parts are recosted in certain

countries• Peso Legal Entity selling in US dollar currency and effects on

daily exchange rate conversion• Challenge part extension proliferation during design

• Parts are extended to every distribution center, even if never sold there.

• Maintenance of the data when never used

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Lessons Learned (cont.)

• Standardization on company code, plant, special procurement keys across implementation streams• Company code to plant consistency• Special procurement keys consistent across all plants

• Use of material variants versus sales order costing• Would recommend not to create a material number for each

variation at time of first order.• Ensure reporting requirements are well understood before

doing custom reporting• Rework due to revised requirements caused delays and

excessive development costs

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Resources

• Product Cost Controlling with SAP (SAP Press)• http://www.sap-press.com/products/Product-Cost-

Controlling-with-SAP.html• Production Variance Analysis in SAP Controlling (SAP Press)

• http://www.sap-press.com/products/Production-Variance-Analysis-in-SAP-Controlling-%282nd-Edition%29.html

• SAP Help – Product Costing• http://help.sap.com/saphelp_46b/helpdata/en/0d/

d5e33698d0eb07e10000009b38f889/frameset.htm

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Five Key Ideas

• Importance of understanding master data and the implications of decisions made at the start of the project

• Automation of master data maintenance is key to successful costing in organizations with massive amounts of materials

• Controls put into other areas processes are key to accurate costing

• Think outside the box! Many times I was told something could not be done, but we found a way

• Educate non-finance people on how their process affect costing

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Questions

• Now:• Ask questions now for immediate answers

• Later:• [email protected]

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Q&A

Disclaimer

SAP®, R/3, mySAP, mySAP.com, xApps, xApp, SAP NetWeaver®, Duet®, PartnerEdge, and other SAP® products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP AG in Germany and in several other countries all over the world. All other product and service names mentioned are the trademarks of their respective companies. ERP Corp is neither owned nor controlled by SAP.

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