Describing Material Ledger

The material ledger is a tool that collects data for materials for which master data is stored in the material master. The material ledger uses this data to calculate prices for valuating materials. The material ledger is the basis of actual costing and enables inventory to be valuated in up to three currencies and valuations.

As a subsidiary ledger for materials, the material ledger is the prerequisite for multiple valuation of the material inventories. Without the material ledger, the inventory values of materials managed on a value basis are updated in only one currency, namely the company code currency. With the material ledger, inventory values can be carried in two additional currencies in the SAP S/4HANA application. This is indicated by the fact that all the goods movements are updated in up to three currencies or valuations in the material ledger.

At the time of posting, values are translated to foreign currency amounts at historical exchange rates. Therefore, the material ledger can provide businesses located in high-inflation countries with additional information about inventories in a hard currency, which reveals the effect of inflation on inventories.

The actual costing function picks the periodic values collected and automatically calculates the new inventory values and the valuation prices, independent of each other, in the various currencies and valuations.

With the material ledger, multilevel material price determination can calculate the variances that the system transfers to the higher levels of the production process using a multilevel actual quantity structure.

This quantity structure is an actual Bill Of Material (BOM) based on recorded inventory consumption and production. The system keeps a record of which materials were used for producing the goods. The prices of finished products can then be calculated.

As a result, price differences, for example, of raw materials can be rolled up to semi-finished goods, and in a subsequent process, to finished goods.

The period-end closing process for multilevel material price determination enables you to recognize the actual prices for each material, such as raw materials, semi-finished products, and finished products at the end of the period. These actual prices contain the prices incurred for the actual quantity produced or procured for each period.

You can use these actual prices to revaluate products or raw materials.

These procedures enable you to use an actual cost system in addition to the standard cost system because the values of the standard cost system, such as cost centers and orders, cannot be readjusted during a subsequent allocation.

Using actual costing with the material ledger, you can analyze the actual procurement cost through a multilevel structure.

The material ledger records the periodic variances that occurred for a product. During period-end closing procedures, a periodic unit price is calculated and these variances are distributed to the multilevel structure and the ending inventory.

As of Release 4.6C, the system can calculate an actual cost component split for all the periodic unit prices. This enables you to compare the cost components of standard prices with the cost components of actual costs.

The trading report is radically different with the following views of the company:

• Legal view:

  Point of view of independent legal companies.

• Group view:

  Point of view of the organization as a whole.

• Profit center view:

  Point of view of the decentralized responsibility areas.

When you analyze the group as a whole, you do not see the individual companies in the group. You see the group only as a single company.

For individual companies, the results according to the view of the legal company are relevant. The managers of profit centers want to view the individual profit centers as if they were independent companies.

Parallel valuation of materials enables a company to establish various values for the materials supporting various reporting requirements. The material ledger must be used to support parallel valuation.

In the example above, there is no value added in any of the steps. Also, profit center 1000 and 1500 are both part of company code 1000.

To be able to determine the actual costs of goods manufactured according to the view of the group, it is necessary to eliminate all real or assumed profits in the value-added chain. To do this, you can add the group view, which displays the costs of goods manufactured and ignores exchanges between company codes and profit centers.

In the plan version, you can use the material costing function in the form of group costing.

In the actual version, it is assumed that the actual costs of the order are equal to the value of the delivery to stock to avoid discrepancies.

SAP Product Lifecycle Costing is a solution that calculates costs and other dimensions for products and quotations in an early stage of the product lifecycle. You can calculate costs quickly and precisely.

You can simulate and compare alternatives to gain better visibility and control throughout your product lifecycle. This transparency helps you to identify costs and harness cost-saving potential.

You can optimize product quality, drive profit margins, and mitigate future risk to make the most favorable product costing decisions for the entire lifecycle of your products.

We listened to our co-innovation customers and identified the major requirements, which are also our key aspirations for the solution. These include performance, usability, and leveraging the ERP data.

Let's talk about the characteristics of our solution to meet these needs.

In real-time SAP HANA the SAP Product Lifecycle Costing is based on the HANA platform. Product costing is a real SAP HANA case to increase performance and transparency in complex structures.

Taking a user-centric approach, our co-innovation customers told us that cost controllers love Excel. So it was common to provide an Excel-like UI. The front-end software component is a Microsoft .NET framework client application.

You can use SAP Product Lifecycle Costing stand-alone or integrate it with your existing solution landscape to calculate variables of cost in real time using data from your enterprise software.

You can integrate ERP and PLM data or import data via Excel.

In addition, we provide extensibility options to integrate to other systems using APIs. We will talk about this later in detail.

With flexible cost structure, the flexibility is key in the early product costing. You can create cost estimates even when structure and values are only partially available by taking into account the variability of material, labor, and overhead costs.

You can not only use temporary data created in PLC, you can also import and replicate data from ERP systems like SAP ERP and SAP S/4HANA. The replication is done by the SAP Landscape Transformation Replication Server (SLT).

The following are different ways to get prices:

• You can enter prices and price units manually, such as material prices or activity prices. Think about the split between fixed and variable price portions.

• You can maintain them in the administration view and derive them when entering the item.

In SAP ERP and SAP S/4HANA, all accounts for material related postings are derived automatically from a material account assignment logic, which is to set up in the customizing of the ERP system. Therefore, for all calculations, it is also required to derive accounts for all calculation items. In PLC you can set up a material account determination based on some of the characteristics also used in ERP.

So we have the option to specify an account to be valid only if the plant and the material type are specified and the valuation class is empty. This might be helpful if we do not have any material defined in the master data, but we use temporary materials and still want to assign an account automatically.

You determine which account groups are assigned to which cost component ID. The cost component split is the drill down of the calculation result to the individual IDs.

We see the SAP HANA platform at the bottom of our screen. This is the back-end of our application. Above the SAP HANA platform, the PLC client user is working. The data is placed there and it is written down in the physical tables in the back-end of SAP HANA platform.

The PLC analytics views access this data and offer them to external tools like SAP Lumira or SAP Analysis for office. It is important for us to know that the external tools can only see the data that are on the SAP HANA platform. To view this data, we have to write the data into the back-end and save the application so that the data is available in the physical tables as well as in the analytic views.

In the Calculation view you can show a report of the overheads by opening the side panel Costing Sheet and show the cost component split by opening the side panel Cost Component Split.