Planning to Product and the Impact to Product Costing

Material requirements planning (MRP) is carried out for the configurable forklift's material number through the MRP run. The MRP run identifies the individual customer requirement from the customer order—in this example, customer order number 92. This identification is controlled by the requirement type "KEK" (German: Kundeneinzelkonfiguration, or customer individual configuration) in the customer order item.

The MRP run incorporates the variant configuration from the customer order item for the forklift truck into the generated planned order. In the configuration used here, all assemblies—including configured assemblies such as counterweight, motorization, etc.—have the collective requirement indicator set in their material master records.

Key Implications:

1. There is no separate planning for configured variant assemblies in this MRP run
2. Variant assemblies are planned differently, such as based on inventory development
3. The company maintains inventories for all variants

If the variant assemblies were controlled based on individual requirements, the MRP run would have:

• Generated a separate planned order for each variant assembly controlled by individual requirements, or
• Created a purchase requisition for materials identified as external procurement items

This individual-requirement approach wasn't used in this scenario because it would have significantly increased complexity—especially in the subsequent exercise. Since the focus is on profitability accounting, we opted for collective requirement planning instead of individual requirement planning.

Before production control can begin, the availability of materials must be checked. If the availability of materials is given, the production order can be set to the RELEASED status. This means that the required materials are reserved according to the component overview. The required production times are also reserved according to the process overview.

The following two figures show the component overview and the process overview for the production order. The component overview contains the components based on the variant configuration of the related sales order.

The process overview was also transferred from the sales order. Reason: The variant configuration may make it necessary for the configured forklift to be manufactured on variant-specific workstations.

The following figure shows the operations for the forklift production order.

The operations for the production order were planned down to the second. Each operation has an earliest start date and start time, process duration, and correspondingly calculated earliest end date and end time.

The posting of material consumption refers to the materials reserved for the production order. Material consumption occurs for the order. The figure also shows that material consumption could also occur at a cost center. In this context, however, this only applies to operating materials if the consumption quantities are so small that they are not assigned to the production order as cost items. Rather, these costs are considered via overhead surcharges.

The removal of material is documented via a goods issue slip.

The integration of material consumption into accounting is explained below.

Of course, the material statistics are updated with the material consumption.

Since the material ledger is generally active in SAP S/4HANA, the material inventory and the corresponding material movements are managed or posted in the company code currency and in the group currency.

As the previous figure shows, the reserved materials are selected for the production order. The counterweight of 5000 kg is made up of 5 counterweight plates of 1000 kg each. In this scenario, a withdrawal quantity of 6 plates is booked from the Counterweight Plate component instead of 5 plates. This will lead to a quantity variance in the variance analysis of the production order.

Using the Analyze Order app, we can analyze the costs of the production order.

The following figure shows that the actual costs for the counterweight are EUR 110,- higher than the planned costs. This is due to the goods issue of 6 counterweight plates instead of the required 5 counterweight plates. It can also be seen that no target costs were calculated. The target costs result from multiplying the calculated costs per unit of the product (forklift) by the actual yield quantity reported within a confirmation for the production order. Since no confirmation has been recorded yet for the production order, no target costs were calculated.

From the Analyze Order report, you can jump to the individual line item and from there to the material document. From the material document, you can jump into the accounting documents. The accounting document shows the posting of the material consumption with the posting inventory change against inventory.

The system created two accounting documents. The second accounting document contains the posting:

Which is relevant for balance sheet and profit & loss statement.

The first accounting document contains the creation of Work in Process (WIP) based on the material costs.

Because these are expenses posted with assignment to the CO object production order, a cost accounting document is also created in addition to the financial accounting document for prima nota reasons.

Based on Event-based posting being active for the production order, the inventory change for Work in Process (WIP) has been posted.

The Material Ledger document displayed in the selection documents shows the posting in company code currency (FI) and group currency (CO).

An order confirmation is used for the consumption of internal activities. Confirmations are an important basis for entering internal activities performed for an order, progress check, and subsequent capacity requirements planning. For this reason, exact real-time confirmations are important.

After an order has been confirmed, the subsequent functions are performed. The confirmed quantity, the CNF (finally confirmed) status, and the actual costs are written in the production order. When an operation is confirmed, an automatic goods issue could be posted based on the quantity assigned to the material components (backflush). The material components must be prepared for backflush posting and provided for use at the work center.

When you confirm the last operation (or confirm the operation where this posting is defined in the control key), an automatic GR is posted.

Depending on the request, the GR posting for the materials produced can be attached to the order confirmation or carried out separately.

Capacity reduction is carried out in proportion to the quantity or activity. If a scrap or rework quantity is confirmed, the system automatically generates a quality notification.

The figure above gives an overview of the operations to confirm. The order quantity from a forklift is recorded as the actual good quantity. The production order therefore has the status CNF, which means finally confirmed.

The goods receipt for the production order can also be posted automatically. This can be set using a corresponding control key in the work process in the production order. This is not the case in this scenario. Therefore, the goods receipt of the actual good quantity recorded as 1 piece is posted manually as part of the confirmation. The production order is then given the status DLV (Delivered) and the cost variances can be calculated.

The GR posting represents the stock receipt of a product produced using a production order. The following functions are executed when a GR is posted:

• The system generates material documents, accounting documents, material ledger documents, and controlling (CO) documents.
• The material document describes the goods movement from a materials management (warehouse) perspective.
• The accounting document describes the goods movement from a financial accounting (FI) perspective.
• The system updates the delivered quantity in the order.
• The CO document records the credit posted to the production order.

The GR posting is controlled using a movement type (101), to which each posting refers. This can take place manually or automatically.

The material ledger document updates the moving price.

The figure shows the posting of the goods receipt. The plant and storage location are automatically selected from the production order if it has been entered there. Otherwise, it must be entered with the goods movement.

The financial accounting document shows that the goods receipt was valued based on the sales order cost estimate.

The work in process (WIP) has been offset.

The production order gets the status DLV – Delivered. The indicator for final delivery has been set.

Since this is a make-to-order production, the goods receipt was posted with the inventory type E - customer order stock.

In this scenario, a quantity deviation occurs because instead of the required 5 pieces of counterweight plates, an actual quantity of 6 pieces of counterweight plates was posted as goods issue.

The goods issue of the components used leads to a debit posting on the production order cost object. The actual times recorded as part of the confirmation for the production order led to an actual performance allocation of the production cost centers to the production order. Here too, with a debit posting. Additional actual cost debits would be possible, for example, by using additional external services. The posting of the goods receipt of the actual good quantity in the form of the forklift truck produced, on the other hand, leads to a credit posting. Since the production order has the status DELIVERED, the actual cost balance is also the variance.

In SAP S/4HANA Public Cloud Edition, event-based posting is the standard. If the indicator for event-based posting is set in the production order, it is not necessary and not possible to calculate variances manually.

The calculated variances can directly be analyzed in margin analysis.

The report shows the quantity variances of the production order, which has an assignment of the sales order.

The variances in the margin analysis report are shown in group currency USD.

To get a detailed report of the variance categories, you can use the costing analysis in the production order. In the production order, you can select the cost analysis.

The figure above shows the cost variances in company code currency of about EUR 110. The reason is the posting of goods issue for the counterweight plate of 6 pcs. instead of the needed 5 pcs.

You can navigate to the detailed variance analysis by pressing the arrow on the left.

The following figure confirms that there is a quantity deviation between the target quantity of 5 pieces and the actual quantity of 6 pieces. The additional consumption of 1 piece was multiplied by the price of the counterweight relevant for the evaluation.

In SAP S/4HANA Public Cloud Edition, you do not need to perform the settlement of Work in Process (WIP) or variances, as it is calculated automatically and updated in the universal journal ACDOCA (Accounting Documents Actual).

The same applies for the settlement. When the variances have been calculated automatically and updated in ACDOCA, you can analyze them using CDS-based reporting. Using the event-based posting, the production order does not need to be settled manually. The cost report in the production order shows that the actual costs have a balance of zero.

The figure below shows that the production order is automatically credited with the variances. Therefore, the actual balance is zero.