Q

An order to cash question

The finished goods inventory, sales and sales deductions, accounts receivable are recorded at this level: company code and business area. We are presently upgrading to 4.6C and want to be one face to our customers (common products (material). We want to ship common products out of a common warehouse. The 10 pieces could have been produced at three different production mills at three different standard costs. How can we split the FI/CO docs to the proper business area? Inventory, production allowance, cost of sales, sales and deductions/provisions.

This is an order to cash question. We use the business area methodology to retain a full balance sheet and P&L

by operating location (production facility). The finished goods inventory, sales and sales deductions, accounts receivable are recorded at this level: company code and business area. We are presently upgrading to 4.6C and want to be one face to our customers (common products (material). We want to ship common products out of a common warehouse. The 10 pieces could have been produced at three different production mills at three different standard costs. How can we split the FI/CO docs to the proper business area? Inventory, production allowance, cost of sales, sales and deductions/provisions. Note, we have met with the SD/MM team to discuss the possibilities. We are to search the FI/CO options. Can you help?


On the FI side, your existing company code/business area setup should take care of your inventories, receivables and other balance sheet items for each mill.

On the CO side, setting up a profit center for each mill will allow you to capture the sales, cost of sales, and production allowance dollars. Other costs (i.e., labor, variable, and fixed costs) can easily be captured with cost centers specific to each of the mills beneath each of the profit centers. For SD purposes, each mill would be set up as a shipping point, and the warehouse would be the billing plant, which would accomplish the "one face" objective.

However, if the plan is to show all sales coming out of the centralized warehouse rather than the individual mills, then the picture gets more complicated. A transfer pricing scheme will need to be developed for moving inventory from the mills to the central warehouse, to retain some measure of the profitability of each mill. Then, inventory valuation decisions will need to be made for the warehouse, e.g., valuing the goods at some weighted average of the standards for the three mills. If you enjoy pain, you could even set up three different product codes for the same material to identify which mill produced it and thereby preserve the standards from each of the mills.

One side note: Your MM (Material Master) people will ultimately hold your life in their hands. They will need to make sure each mill has its own plant number in SAP, since the inventory standards will attach to the combination of product code and plant number. Then, they must make sure the correct profit center is entered in the Material Master file for each combination of plant and product code. This process is not difficult, but it is unforgiving if errors are made, so check, double-check, and triple-check!


This was first published in May 2002

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