Productised Service Offering

Product Costing in Repetitive

Manufacturing
SAP Practice
Enterprise Application Solutions
Productised Service – Product Costing in Repetitive Manufacturing

 Offering Description
 Repetitive Manufacturing (RM) is a very common business process in a
manufacturing environment. The nature of business demands
manufacturing of a particular commodity on repeated manufacturing
process. This is also called as “Made to Stock” in a Production
terminology. This feature of repetitive manufacturing is elegantly
incorporated in SAP R/3 and handled in the system with all the best
business practices incorporated. The costing in RM scenario is handled
through a cost object called Product Cost Collectors. You can use the
function of the Product Cost by Period for Product Cost Collector object in
Repetitive Manufacturing Plant. The settings defined are used for the
following operations in the Product Cost Collector like Creating a
Preliminary Cost Estimate for the Product Cost Collector. The system in
this stage allows you to define the origin groups, overhead groups,
overheads and the templates for Product Cost Collector. The material is
created as Product Cost Collector and it collects all the debits and credits
and the difference between the debit and credit is settled to Production
Settlement Account. The major benefit of RM in SAP is that the variances
are settled to Production Settlement Account on a Periodic basis (PER)
using the Product Cost Collector, thereby minimizing the variances (Plan /
Target vs. Actual)
 <the pitch – Guide me in this point>

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Productised Service – Product Costing in Repetitive Manufacturing

 Target Customers
 This product suits better for any type of manufacturing unit like
automobile manufacturer, FMCG manufacturers and they have “Made to
Stock” scenario in their existing Production Process. All these
manufacturers will have MTS scenario, and it is for sure which is validated
with the following example:
“The automobile manufacturing industry will have both MTS and MTO (Made
To Order) Scenario. The company will keep manufacturing basic
components like Assembling a Tyre with Wheel, Engine Assembly etc and
that doesn’t have any significance with the color of a final car. The
demand projected in the market will be for a particular model and color
and the Made to Order scenario will be driven by this factor. But in the
case of Made to Stock scenario, the production will keep on continuing
and the semi-finished components coming out of the MTS will be fed as
Raw Material for MTO and thereby the final Finished Product comes out of
the stable”
Productised Service – Product Costing in Repetitive Manufacturing

 Scope
 The scope of this Productised Service is to implement the Product Costing
component for Repetitive Manufacturing Business Scenario. The production system
in legacy should have all the information of bifurcating the Repetitive Manufacturing
scenario and we should be able to migrate the data in the relevant slot for RM is
covered as a Scope of the Productised Service.
 Exclusions
 Data Cleansing is not considered as part of the scope, the Productised Service will
provided a template required for Data Migration in SAP format and the data from the
legacy to be provided in a flat file fit for migration.
 Assumptions
 The basic assumptions are this Productised Service are prepared for a Vanilla
Implementation i.e. Standard SAP Product Costing Implementation for Repetitive
Manufacturing and doesn’t cover any additional developments for meeting client
specific requirements.
 The business has a legacy production system which will be able to provide all the
information required for configuring the Productised Service
 The AS-IS is approved by the Business Users and is ready for mapping the same in
the TO-BE, thereby finalizing the Business Blue Print.
 It is also assumed that there would be no interface from any other Production
System like REWARDS or any other Bar Coding System for capturing the same in SAP
PP system and would be subsequently passed on to Product Costing System.

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Productised Service – Product Costing in Repetitive Manufacturing

 Deliverables
 Basic Understanding Documentation on Product Costing by Period i.e. usage of Product
Cost Collector as a cost object.
 Business Blue Print Documentation (Vanilla Implementation) covering the TO-BE scenario
for Product Costing by Period (Repetitive Manufacturing)
 Functional & Technical Documentation providing information like Objective of
Customization, Value of Customization (benefits to existing business process), Risks (if
that particular customization is not carried out), Settings that would be carried out in the
R/3 system
 Configuration Documentation covering the customization by nodes like Overhead Types,
Order Type (RM01) with screenshots and also would be covering a Proof of Concept on
the basic process
 User Acceptance Testing Documentation with Standard Test Scripts (Business related Test
Scripts to be provided by the Client’s Core Team)
 Power User Manual
 End User Manual
 Additional Components involved
 The data from Product Costing can be viewed with variety of reports available in Standard
SAP reporting for Product Costing by Period. But for having a crisp reporting for meeting
the management requirement, can be mapped to Profitability Analysis which can provide
a User Definable reports. This is an additional component and left to the discretion of
client for using the same to meet the Top Management Reporting requirement.
Productised Service – Product Costing in Repetitive Manufacturing

 Estimated Effort
 Onsite - 2 Manmonth (consisting of 21 Mandays) with Data
Migration effort
 Offshore – 1 Manmonth (required for Data Migration Support)
 Estimated Duration – 60 Days