Finished Product Logistic Cost

AGENDA

1. FPLC Definition and Components;

2. FPLC Accounting;

3. FPLC Variance

4. Reports

FPLC and its place

Total Delivered Cost =

Total Manufacturing Cost +

Finished Product Logistics Cost +

Product Supply Admin Cost

FPLC definition

“Cost incurred from the entry of finished, wrapped pallets or unit loads to the warehousing and distribution chain, until delivery of cases to the customer's receiving dock. May include administration costs that would normally be charged to PS-NME, if the administrative tasks are provided directly by third party vendors.”SAFE. P/(L). COPS 02 TDC.

FPLC Components

Local Cost Warehousing; Inter-site Freight; Customer Freight; Local General Logistics Charges; Distributor Logistics Charges

Import Cost Import Freight; Taxes, Customs and Duties; Import Logistics

Refer to SAFE. P/(L). COPS 02 TDC or COPS 03 TMC and FPLC Variances.

FPLC Accounting and Standard Costing Methodology

SAFE. P(L). COPS 03 TMC and FPLC Variances. “All P&G businesses throughout the world should use Standard Costing methods and processes for TMC and FPLC accounting.” “FPLC Standards are developed in the SAP-CO-PA module. (Markets which do not yet have CO-PA implemented report FPLC on an actuals basis only – they do not set standards or calculate variances.)”

FPLC Accounting and Standard Costing Process Flow

The general process flow for a standard cost management system includes the following five steps (same for TMC and FPLC): Develop Budget / Forecast; Develop Annual Standards; Accumulate Actual Costs; Analyze Variances; Perform Monthly Close.

SAFE. P/(L). COPS 03 TMC and FPLC Variances

FPLC Accounting and Inventory Valuation

SAFE. P/(L). INVENTORY 02. Inventory Valuation.

“The primary basis of accounting for product inventories is cost – the sum of both the applicable direct and indirect expenditures and charges incurred to bring an inventoried unit to its existing condition and location.”

This chapter sets a standard treatment of all TDC elements in corporate accounting books for inventory valuation – which element is inventoriable and which is not.Also it covers Variances Holding/Release Policy.

FPLC Accounting and Inventory Valuation

FPLC elements Inventoriable /

Non-Inventoriable

Warehousing Non-Inventoriable

Customer Freight Non-Inventoriable / Inventoriable

Inter-site Freight Inventoriable (1)

GLC Non-Inventoriable (2)

Import Freight Inventoriable

Tax, Customs and Duties Inventoriable

1) For all Practical purpose this cost is treated as Non Inventoriable and Yearend adjustment made for the Inventory.

2) GLC is charged based on the Peg Rate.

Standard Set-ups

Standards are calculated outside the SAP system.

This standard “Rate” is then maintained in COPA module at the beginning of FY.(Note: this need to be done before the first

shipment) Rates are maintained COPA Module

using the COPA Condition type

COPA- Conditions

Following Condition Types are used

ZCFR - Customer Freight ZGLC - Grl Logistics ChargeZIFR - Inter-site /Export Freight ZWHS - Warehousing StorageZWHH – Warehousing Handling ZFVR – FPLC Variance Thru ICBPs

FPLC Standard SettingsKey Concepts

Concept I (Component)

Several components corresponding to different types of non-inventoriable costs:

Warehousing Cost Intersite Freight Customer Freight GMC (General Manufacturing Charges) GLC (General Logistics Charges) Tax Drawback PSAdmin Export Admin Interest on Capital (ESC only) SR&A (Plant F&A) SR&A (Plant MS)

Concept II (Condition Table/Record)

Each component has a “standard rate” set per a set of characteristics. This is known as a condition record. For example, GLC can have a rate maintained per

shipping DC and per product category. A condition record would specify for the DC “XX50” and the product category “Laundry”, that the GLC rate is $2000 per 1000su.

A particular component can actually have many “condition tables”, specified as part of an access sequence. For example, GLC has two condition tables:

Table 1: Company Code x Shipping DC x Product Category

Table 2: Company Code x TDC VAL It may be for the characteristics of a particular shipment

that only one or both rates are maintained.

Concept II (Condition Table/Record)

Following Condition Types are used ZCFR - Customer Freight ZGLC - Grl Logistics Charge ZGMC - Grl Manufact. Charge ZIFR - Intersite /Export Freight ZPSN - PS Non-MFG Exp. ZSRF - SR&A (Plant F&A) ZSRM -SR&A (Plant MS) ZTAX - TAX Drawback ZVAR - Variance Thru ICBPs ZWHS - Warehousing Cost

Concept III Access Sequence

Where multiple condition tables exist for a particular component, an “access sequence” is established so that the COPA system knows which rate to use in the event that both condition tables are maintained with valid condition records.

For example, Table 1:

Table 2:

997 XX50 Laundry $2000/1000su 997 XX51 Laundry $2500/1000su

997 Laundry Liquids $2200/1000su 997 Laundry Powders $2100/1000su

Concept IV Standard Setting

At FIRM time, the budget for a particular cost component (eg warehousing) is calculated.

This is then allocated to the different characteristic values which will share the budget, for example for DC XX50, TDC VALs laundry liquids and laundry powders.

Using this allocated budget and the FIRM shipment volume, a rate for each condition record in a condition table can be calculated.

Concept V - Recovery

When a shipment is posted in SAP, a posting is made to the COPS (Cost of Product Sold) account for the inventoriable cost value of the shipment.No posting is automatically made for the non-inventoriable costs.=> COPS only corresponds to the inventoriable TMC costs

Essentially the standard cost for the non-inventoriable components = the actual shipment volume * the standard rate. This is known as the mix-adjusted value, or the recovery.

COPA calculates these values automatically using the shipped volume interfaced into COPA from the SD billing document.

Concept V – Recovery(Cont.)

FPLC STD P/L FPLC STD P/L IN0110IN0110

E.g : Customer Frt ($10/Su) x Shipment 100 SuE.g : Customer Frt ($10/Su) x Shipment 100 Su

$1000$1000

Cust. Frt Std Cust. Frt Std Pppp810Pppp810

$1000$1000

Concept VI – Actual & Variance

Actual costs are being generated for each of the non-inventoriable cost component types. These are captured and managed versus budget on cost centers.

For Transportation & Warehousing actual cost will be posted High Level Cost center and for GLC at TDC Val Cc /PC level

At the Monthend WH & Tpt Cost will be allocated to TDC Val Cc based on the Agreed Allocation Bases.

Using the “recovery” value as calculated by COPA for a particular component and posting this as a standard cost charge to COPS, and a credit to the appropriate non-inventoriable cost center (TDC Val Cc).

Concept VI – Actual & Variance (Cont)

Variance is than Calculated at TDC Val level

This variance gets cleared to COPS as part of the month end process to give “actual costs” in the COPS account.

However, the generated variance is also used for logistics costs scorecard reporting.

Concept VI – Actual & Variance

E.g : Customer Frt ($10/Su) x Shipment 100 SuE.g : Customer Frt ($10/Su) x Shipment 100 Su Actual Carrier Invoice is $ 1500.00Actual Carrier Invoice is $ 1500.00

FPLC STD P/LFPLC STD P/L IN0110IN0110

$1000$1000

Cust. Frt Std Cust. Frt Std PppppTDCVPppppTDCV

$1000$1000

Cust Frt Var Cust Frt Var PppppTDCVPppppTDCV

$500$500

Cust Frt VAR Cust Frt VAR PppppTDVCPppppTDVC

$500$500

Cust. Freight Cust. Freight PppppTDCVPppppTDCV

$1500$1500

Carrier VendorCarrier Vendor

$1500$1500

Ware-Housing

Ware-Housing

Definition: Receiving, handling, and storage of finished products at any location prior to delivery to the customer

This Comprise Of Ware-House Handling

Ware-House Storage

Warehouse- Handling

Warehouse Handling: Includes all warehousing

costs related to handling incoming and outgoing product:

placement, retrieval, pick-pack, issuing to dock, and other general handling operations.

Warehouse- Handling Drivers of warehouse handling costs are:

Number of cases which can be stored on a pallet

the effort differences of handling the product due to pick-pack operations, ability to stack pallets when moving them around the warehouse, type of pallet handling.

Special Product handling Warehouse Storage efficiency

Variable Cost

Warehouse - Storage

Warehouse Storage: Includes all warehousing

costs related to the infrastructure of the DC:

rent, depreciation, maintenance, insurance etc.

Warehouse - Storage

Drivers of warehouse storage costs are:

The number of cases which can be stored on a pallet (Storage Efficiency)

The effort differences of storing the product, due to stack height factor, special storage conditions, length of storage etc.

Special Storage Requirement (Cold Storage Pringles)

Fixed Cost

Warehousing - Budget

At the beginning of the FY Total warehousing budget for a particular warehouse is splited into storage & handling

This is to enable it to split down to the various product levels (e.g. TDC Val) based on the separate cost drivers for storage & handling.

Allocation factors for storage budget will be set based on:

positions occupied in the warehouse (stackability)average length in storage (inventory volume)

Allocation factors for handling budget will be based on:no. of pallets to be shipped

Warehousing – ‘Budget’ From allocated” budget per product hierarchy apply

FIRM shipment volume (Trade + Affiliate) Standard Warehousing Handling and Storage “rate” is

calculated in $/su. Also Firm Budget (Absolute Budget) needs to be

uploaded in the SAP CO Module at High Level Cc WH Budget is than need to be allocated to TDC Val cc

using planned Assessment cycle. This is required for two purpose

1) To track the Actual Warehousing cost against the Budget 2) Split the Warehousing Variance into Spending and

recovery Variance for better understanding of Variance cause.

Warehouse – ‘Actual Cost’

Actual WH Cost is be posted to the Cost element which is part of EPSTORAGE and EPHANDLING Grp

50050001 – Salary 51030001 – Dep Machinery & Equip 51750001 – Mntce & Repair 54300011 – Trf to SC WH Storage 54300062 – Trf to SC WH Handling

Actual WH Cost center is posted to WH High Level cc.

Ppppp800 (pppp = plant Code)

Warehouse – ‘Actual Cost’

At the MENDTotal WH Cost will be Allocated to

TDC Val Cc using the Assessment Cycle (80011400 : Storage) (80011500 : Handling)

Bases of Allocation : Storage : Average Inventory in PalletsHandling : Shipment in Pallets

Allocation – ‘Actual Cost’

InvoiceStorageXXXX

InvoiceHandlingXXXX

“800” Cost Centers

TDCVAL -1

TDCVAL -2

TDCVAL -1

TDCVAL -2

TDCVAL -3 TDCVAL -3

WH Allocatio

n

Storage Handling

Warehouse- ‘Cost Elements’

Warehouse- ‘Standard’

COPA Calculates the Mix Adjusted Standard for each shipment.

At the Month-end Cost Accounting post the Recovery entry to WH Cost at TDC Val Entry to Post the Recovery

Dr : Trade FPLC (CATPC)Dr : I/C FPLC (CATPC)

Cr. WH Storage Mix Adj Std (TDCVAL)Cr : WH Handling Mix Adj Std

(TDCVAL)

Cost Flow

FI CO

COPA

COPA

ACTUAL High Level CC

TDCVALA

TDCVALB

TDCVALB

TDCVALA

PlanMIX ADJ STD

Spending & Recovery Variance

Plan/Budget Actual Recovery

100 250 (150)

•Variance =Actual – Recovery •Warehousing Variance is further reclass to Spending and Recovery Variance

Warehouse- Spending/Recovery Variance

FPLC- P/L ViewFPLC STD

CATPC

XX

FPLC STDCATPC

WH Storage Spen/Rec (TDCv)

WH HandleSpend/Rec(TDCv)

FPLC Var tr toP/LTDCv

YY

AA

BB

YY

Note : YY = AA +BB

Customer Freight

FPLC ComponentsCustomer Freight (=Outbound)

Freight to move finished product to the customer from plants, warehouses, RDCs, or custom packers.

This is applicable for the customer located in the same country as well as the customer located in a different country.

FPLC Rate “Customer Freight”

Cost of transporting the finished product from the selling DC to the customer.

Drivers: freight company transportation type route (or source/destination combination) the amount of product which fills the truck

(ie volume-full or weight-full) how efficiently the trucks are filled

Customer Freight – ‘Actual’

Actual Cost will be posted to High Level transportation Cost center.

Cost Center : Ppppp810 GL Account : 52960034

SD D&T Module Calculate the Shipment Cost for each shipment and post the Accrual entry on daily bases.

Non D&T Market, Carrier Invoices are posted through FI/AP Module.

No Need for the Accrual Entry at the MEND for those Markets which implemented SD’s D&T Module

Customer Freight – ‘Actual’

At the MEND Total Customer Freight will be Allocated to

TDC Val CC using a Distribution Cycle .(Bases – Trade Shipment M3)

ZKXX0115 (D&T Mkt) or ZKXXR059 for Others Mkt

Customer Freight –Monthend

MEND (Cont) Mix Adj Std will be posted for the Customer Freight

recovery based on the COPA Report ( Customer Freight rate x Shipment)

Dr . Std FPLCCr. Customer frt Mix Adj Std

Variance will be calculated and MEND tool will pass following Accounting entry

Dr. Customer Freight VarianceCr. Frt Var Offset Account

Freight Reclass to MSA

Some time P&G ship Free Goods along with normal Goods to the customer.

Total Cost of Shipment is charged to the Customer Freight Account

Monthend Process is to reclass the Freight cost associated to Free Goods to MSA Account .

Freight Reclass to MSA

Monthend tool (ZKXX0115) provides details of Cross charge to MSA

Cost Accounting pass the following entryDr : MSA

Cr : Customer Frt Reclass (MSA)

FPLC P/L View

FPLC STDCATPC

XX

FPLC STDCATPC

Cust Frt Var (TDCv)

FPLC Var tr toP/LTDCv

YY

YY YY

Note : YY = AA +BB

FPLC Rate “Inter-site Freight”

FPLC ComponentsInter-site Freight

Transportation cost to ship finished product from the producing plant to a different ship point or between ship points (e.g., between distribution centers). This is a P&G to P&G transportation cost but only in the same country (boarder = Official National Boarder).

FPLC Rate “Inter-site Freight”

Cost of transporting the finished product from the initial local P&G shipment site to the DC that sells the product.

Drivers: route to the shipment site (or plant/DC

combination) transportation means (Truck/Train) product type (Bulky, Heavy)

“Inter-site Freight” Actual

Actual Cost will be posted to High Level transportation Cost center.

Cost Center : Ppppp810 GL Account : 51820007

SD D&T Module Calculate the Shipment Cost for each shipment and post the Accrual entry on daily bases.

Non D&T Market, Carrier Invoices are posted through FI/AP Module.

No Need for the Accrual Entry at the MEND for those Markets which implemented SD’s D&T Module

“Inter-site Freight” Monthend

At the MEND Total Intersite Freight will be Allocated to TDC

Val CC using a Distribution Cycle .(Bases – Trade Shipment in M3)

ZKXX0115 (D&T Mkt) or ZKXXR059 for Others Mkt

“Inter-site Freight”-Variance

MEND (Cont)Mix Adj Std will be posted for the Intersite Freight

recovery based on the COPA Report ( Inter-site Freight rate x Shipment)Dr . Std FPLC

Cr. Inter-site frt Mix Adj StdVariance will be calculated using MEND tool ,which

will pass following Accounting entry (ZKXXME20)Dr. Inter-site Freight Variance

Cr. Frt Var Offset Account

FPLC Rate“Export Freight”

FPLC Rate “Export freight”

Cost of transporting the finished product from the Plant/DC to Exporting Port

Drivers: route to the shipment site (or plant/DC combination) transportation means. Container Size product type

“ZIFR” Condition Type is used for the Export Freight

Affiliate Freight AccountingSale at ICBP

Affiliate Freight include the Frt. from Plant to Port Actual Frt will be posted to be Posted to High Level Cc

Cost Center : Ppppp810 GL Account : 51820011

Ocean Frt / Insurance / Accessorial Cost will be posted to a different Cc ( Harbor Plant Tpt cc or Export Tpt Cc Ppppp830)

At the MEND Total Affiliate freight will be Allocated to TDC Val

CC using a Distribution Cycle. (Bases :Aff Shipment in M3)

Affiliate Freight Accounting Sale at ICBP

MEND (Cont) Mix Adj Std will be posted for the Export Freight

recovery based on the COPA Report ( Affiliate Freight rate x Shipment)

Dr . Std FPLCCr. Aff / Export frt Mix Adj Std

Variance will be calculated and MEND tool will pass following Accounting entry

Dr. Affiliate/Export Freight VarianceCr. Frt Var Offset Account

Actual Ocean Frt , Insurance , Accessorial Cost will be reclassed to I/C COPS Frt Reclass Account .

FPLC Rate“GLC”

FPLC ComponentsLocal General Logistics Charges

Miscellaneous costs incurred in conjunction with the process of warehousing and distributing of finished products.

Key GLC cost lines for EE:

FP Losses, Manipulation cost, Scrapping cost, Taxes on currency purchase.

.

GLC

There will be peg-rates for GLC, developed as part of the annual standard setting process.

Peg-rates are charged to the P&L on a shipment volume basis throughout the year with the residual versus actual held on the balance sheet until year-end when it is cleared to the P&L at the end of June.

Peg-rates can only be adjusted once mid-year.

General Logistic Cost

Actual will be posted to the Cost element which is part of EPGLC Grp at TDC Val Cc.

5296xxxx - Rework FP 5296xxxx – Pallets 5296XXXX – FADO Gain/Loss 54300003 – Trf to SC GLC(GLC Cost)

Inventory Related GLC Cost will be posted directly to PC Accounting through Movement Type in IM Module

Any Cost that can not be identified upfront to any one of the TDC Val Cc is posted to GGLC Cc.

At the MEND Total in GGLC Cc will be Allocated to TDC Val Cc

using the Distribution Cycle .

General Logistic Cost

MEND (Cont.)Mix Adj Std will be posted for the GLC recovery

based on the COPA Report ( GLC rate x Shipment)

Dr . Std FPLCCr. GLC Mix Adj Std

Variance will be calculated and MEND tool will pass following Accounting entry (ZKXXME03)

Dr. GLC Variance (BS)

Cr. GLC Variance Trf to BS Account

GLC-Year End Variance Release

YEAR END BS Variance will be Trf to P/L

Dr . FPLC Variance to P/L

Cr. GLC Variance (BS)

KEY FPLC Reports

COPA Reports for Mix Adj Std CC Report for Warehouse Spending

and Recovery Variance ZKXX0115 Tpt Variance Analyses