[

Rolls-Royce Corporation approach for

Actual Costing US DoD Contracts
Michael Hines

Real Experience. Real Advantage.

[ The Past

Real Experience. Real Advantage.

[ The Present

Real Experience. Real Advantage.

[ Learning Points
Invitation into Rolls-Royce today
Education of the Rolls-Royce SAP Journey

Share an SAP Strategy for Actual Costing US DoD

Contracts at Rolls-Royce Corporation

Real Experience. Real Advantage.

[ AboutMichael Hines
Role
Finance Process & Applications Specialist

Location
Rolls-Royce Corporation Indianapolis, Indiana

Experience
20+ Years Manufacturing IT
12+ Years Functional SAP

Education & Certification

Purdue University - BS, AAS (CPT, Supervision)

University of Indianapolis - MBA
SAP Controlling & Project Systems
APICS CPIM

Real Experience. Real Advantage.

[
VIDEO

Real Experience. Real Advantage.

[ Four Global Markets

Civil Aerospace

Defence
Aerospace

Marine

14,000 engines

24 products

25,000 power &

500 airlines

18,000 engines

1,700 business jets

160 armed forces

75,000 deck units

103 countries

30,000 vessels

propulsion units

Energy

4,000 power systems

1,600 customers
120 countries

4,000 customers

Real Experience. Real Advantage.

[ AboutRoll-Royce Group plc

Founded in 1906
Charles Rolls and Henry Royce
Current CEO John Rishton

Headquarters
City of Westminster, London UK

Industry
Aerospace & Defense

Products
Civil and Military Aero Engines
Marine Propulsion Systems
Power Engineering Equipment

Employees
Approx 40,000 worldwide
Real Experience. Real Advantage.

[ Rolls-Royce Global Presence

Real Experience. Real Advantage.

[ Rolls-Royce Group 2011 Financial Results

Real Experience. Real Advantage.

[ Rolls-Royce North America Locations

Real Experience. Real Advantage.

[ AboutRoll-Royce Corporation
Business Units
Civil, Defense, Energy & Marine

Location
Indianapolis, Indiana USA

History
Formally Allison Engine Company (AEC) division of GM
1995 Rolls-Royce Purchased AEC and the smaller
Allison Advanced Development Company (AADC)

Size
4000+ Hourly and Salaried employees
Engineering and Manufacturing plants
North American Financial Shared Services
Real Experience. Real Advantage.

[ The Rolls-Royce SAP Journey

Real Experience. Real Advantage.

[ The Rolls-Royce SAP Journey cont

23K User IDs Globally
(approx.)
US 2,000

Non-US
21,000

Real Experience. Real Advantage.

[ The Rolls-Royce SAP Journey cont

General ERP Landscape

Change
Control

Development
DBW

UAT
UBW

Production
PBW

Development
DHR

UAT
UHR

P&K Production
PHR

Production Copy
SVT

international (UK)

Development
DEC

UAT
UEC

Intl Production
PRD

UAT
USU

Production
PSU

UAT
LWT

Production
LWP

Naval Marine (UK)

LibertyWorks (US )

Real Experience. Real Advantage.

[ Actual Costing US DoD Contracts - The Story

Who: Rolls-Royce Corporation
What: SAP Actual Costing Strategy for
Developmental Manufacturing Projects
When: Fall 2005 Implementation
Where: Indianapolis, Indiana
Why: Improve U.S. DoD CAS capability
How: SAP Approach

Real Experience. Real Advantage.

[ Developmental Manufacturing - Problem

In 1998, SAP R/3 v3.0f was implemented at the Rolls-Royce
Corporation Indianapolis Site. The project scope excluded
Developmental Manufacturing which continued to use legacy
mainframe IMS systems developed in the 1970s
Post SAP go-live, the legacy mainframe systems continued to
degrade with business process change and become more
heavily scrutinized by US Government auditors (DCAA)
Replacing legacy mainframe IMS systems with an SAP solution
became a priority to significantly improve US Government
compliance and exceed audit reporting capability

Real Experience. Real Advantage.

[ Developmental Manufacturing - Approach

Utilize SAP for actual costing Project owned
materials
Provide capability to transfer project owned
material at cost or no-cost
Obtain some understanding of SAP costing
approaches in A&D community

Real Experience. Real Advantage.

[ Developmental Manufacturing SAP Setup

Set PS Project Definition master data to nonvaluated project stock
Utilized SAP MM enhancement MB_CF001 and
added logic to capture project stock material
movements into custom Z table
Created unique FI inventory account and valuation
class for non-valuated Project owned materials

Real Experience. Real Advantage.

[ SAP Setup cont

Project Definition Control data tab non-valuated stock sets Q

stock material movements with no accounting documents

Real Experience. Real Advantage.

[ SAP Setup cont

SAP Enhancement (SMOD) MB_CF001 add Function module logic

to capture project Q stock material movements into Z table

Real Experience. Real Advantage.

[ Developmental Manufacturing - Cost Process

SAP MM exit enhancement captures Project material
movements into custom Z table
When Project material transfers via 411Q/415Q, the MM exit
enhancement dynamically calculates the moving average cost
for a material/project combination at that point in time using
prior material movement quantities and costs captured into Z
table

Material/Project Transfer Cost = total all valid inflow

costs/quantities, subtract the valid outflows of
costs/quantities and divide the cost difference by the
quantity difference

Real Experience. Real Advantage.

[ Developmental Manufacturing - Cost Reposting Process

Nightly scheduled batch job processing adjusts
standard SAP FI and CO postings
Standard 411Q movements post accounting documents
for materials assigned to non-valuated valuation class
and are adjusted using FB01
Standard 415Q COST movements post no accounting
documents and are adjusted using KB11
Reposting errors are loaded into a BDC session for
manual re-processing via SM35

Real Experience. Real Advantage.

[ Developmental Manufacturing Modules Leveraged

Real Experience. Real Advantage.

[ Summary
Determination of material moving average cost by
material/project combination with ability to perform
transfers at cost and no-cost is a custom SAP
solution implemented to address US DoD CAS
requirements
Rolls-Royce Corporation learned that other SAP
users in the A&D industry also determined a
requirement to develop customized approaches to
address US DoD CAS requirements

Real Experience. Real Advantage.

[ Key Learnings
Who is Rolls-Royce today
The Rolls-Royce SAP Journey

An SAP methodology for Actual Costing US DoD

Contracts

Real Experience. Real Advantage.

27

QUESTIONS?

Trusted to deliver excellence

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[`

Thank you for participating.

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For ongoing education on this area of focus, visit the
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Real Experience. Real Advantage.

SESSION CODE: 1905

TITLE: Rolls-Royce Corporation
approach to Actual Costing US
DoD Contracts

29