Using Sales Orders for Make-to-Order (MTO) Services

In addition to the sales order, other cost objects and combinations of multiple cost objects are available for sales-order-related and engineer-to-order (ETO) production, using work breakdown structures (WBS) as cost objects.

• Sales and distribution (SD) document as a Controlling (CO) object:

  The sales order item serves as the sole account assignment object for costs and revenue, which is useful when the given functions of the sales order item suffice for representing the Cost Object Controlling scenario. The typical account assignment category is "E".

  If this is not the case, for example when bills of material (BOMs) are to be processed or when you need to conduct in-depth planning, you can add additional objects to the scenario. 

• A network is a CO object that can be added to the SD document:

  The network contributes a logistical quantity structure, such as internal activities, external activities, and material that can also be used for automatic cost estimates. Scheduling and capacity monitoring are also possible. You can assign the costs to the sales order item and to the network operations. The network is generally settled to the sales order item. You can also assign the revenue to the sales order item using billing. The typical account assignment category is "E".

• Work breakdown structures (WBS) – manual account assignment:

  In addition to creating a sales order, you can also create a project. This is useful if you require the typical capabilities of the project in the Cost Object Controlling scenario, such as budgeting, availability control, Project Cash Management, Easy Cost Planning, employee assignment, division of the business project into various subprojects that can represent various tasks, responsibility areas, and assignments such as profit center and company code. In this scenario, the project is the leading object. This means that the system does not control the sales order item as a cost object, but assigns it to a billing element of the project. The system assigns costs and revenue to accounts in the project. The typical account assignment categories are "G", "D", and "Q".

• The system automatically creates a network using the sales order:

  The system can automatically create a project for this order derived from a standard network and a standard project. This is called assembly processing. This option is useful if you already know that you will need a project and a network to map your business project when you create the sales order. You need a network and a certain project with a certain structure without considering other alternatives for procurement and representation. The typical account assignment categories are "D" and "Q" (with KZVBR = P). ​

Sales Order

In standard cases, MTO production assumes that the customer places an order before you start with the production or service process. The service creation process follows the sales process. With the account assignment category in Customizing, you can define which cost objects you want to use for the assignment of costs and revenue.

Sales Order Controlling for Services

The figure shows the creation of a service or product for the customer. As the sales order item is created as a cost object, you can collect the cost and revenues for this service or production process on the sales order item.

The sales order can be billed. Customer, activity-specific, or condition records are taken into account.

You can choose from the following forms of billing:

• Starting from a standard price. A sales price is derived using the price determination schema of Sales and Distribution (SD).
• Starting from the costing result of the sales item or project. A sales price is derived using the price determination schema of SD.

You can find the sales price based on actual expenses in resource-related billing.

The process, as described in the Sales Order Controlling for Services figure, is as follows:

• Costs are charged to the order on the basis of goods issues, posting internal activities, travel expense reporting, and so on.
• The revenues are calculated in SD pricing based on the billed line items. Resource-related billing is run.
• The sales order is settled to Profitability Analysis (CO-PA).

The figure shows a sales order that has been created using the option of planning the business project on the sales order using a Unit costing estimate.

When the task is then executed, post the resulting costs directly to the sales order item.

Planning Options with Unit Costing

You can plan the costs of a service with a unit cost estimate. You can use spreadsheets to make costing decisions and to access information on material costs, internal activity prices, purchasing costs, overhead, and process costs. For existing cost estimates, you can refer and copy the relevant items to the unit cost estimate.

Within a unit costing, you can calculate totals, subtotals, and formulas for mathematical operations. When the information in the cost estimate expires, you can use the revaluation function to determine the most current material or activity prices for the items in the cost estimate.

If the unit costing includes a material item with a cost estimate, you can explode this cost estimate to display the items that make up the material cost. Also, if you enter a base planning object as an item, you can explode its cost estimate.

The item categories in unit costing are as follows:

Item Categories in Unit Costing

Category	Value	Item Category	You Enter	The System Calculates
B (base object)	Name and quality	G (overhead)	Created formula	Overhead surcharge and cost element
E (internal activity)	Cost center or work center, quality, and activity type	O (operation)	Formula	Result of the formula
F (external service)	Info record (normal), plant, and purchasing organization	S (total)		Sum of the item values
L (subcontracting)	Info record (subcontracting), plant, and purchasing organization	T (text)	Description
M (material)	Material, plant, and quantity	V (variable item)	Quantity, price	Item value
N (service)	Service and quantity	X (process)	Created automatically	Quantity, price, unit of measure, text, cost element, and item value
P (process manual)	Process and quantity	Y (customer exit)

The system can calculate the price, unit of measure, text, cost element, and item value. To support full integration between unit costing and product costing, the item categories F (external service) and L (subcontracting) are available in unit costing.

You can use item category P (manually assigned process) to manually add business processes in a unit costing without using a template.

Additional item categories in unit costing are as follows:

Item Categories in Unit Costing (2)

Item Category	You Enter	The System Calculates
G (overhead)	Created formula	Overhead surcharge and cost element
O (operation)	Formula	Result of the formula
S (total)		Sum of the item values
T (text)	Description
V (variable item)	Quantity, price	Item value
X (process)	Created automatically	Quantity, price, unit of measure, text, cost element, and item value
Y (customer exit)

When you use a template to calculate process quantities, item category X is created automatically. The system can also activate item category Y (customer exit) as an enhancement KKEK0001, if customers require their own calculation logic.

• Sales orders can be used as cost objects for service scenarios.
• Sales order items serve as account assignment objects for costs and revenue.
• Costs are charged to sales orders based on various activities and expenses.
• Revenues are calculated in Sales and Distribution pricing based on billed items.
• Sales orders are settled to Profitability Analysis for financial tracking.