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Cost and Profitability in SAP: PCM deployment: options – when to use PCM ? what to use PCM for ?

Ever wondered when to consider using PCM Profitabiltiy and Cost Management ? Or what to use it for ?

Well, here are a couple of ideas based on PCM’s features and functionality that allow for immediate adoption. Deployment can be based on standard, pre-configured or custom-developed scenarios.

Value Chain Costing

  • Cost assignments and re-allocations for primary and support activities
  • Activity Based Costing, Activity Based Budgeting and Planning, Driver-based Budgeting
  • Cost driver, Rule or Time Driven oriented cost calculations
  • Cost-To-Serve, IT Shared Services

Profit Management

  • Profitability and margin-insight for Customer, Product or other relevant business segments
  • Cost-breakdown (with trace-back) for bottom-line understanding of performance

Modeling & Simulation

  • Powerful ‘what-if’ analysis for enterprise optimization
  • On-demand calculations of impact on cost and profit

Cost and Profit Analytics

  • Standardization of performance management cycle activities (set goals, model and plan, analyze and report, optimize)
  • Packaged analytical views or applications to support decision making and business management

NEW: Modeling & Simulation for SAP ERP CO

  • Extraction of CO-CCA and CO-PA baseline information and modeling of selected functions and processes in PCM
  • Scenario analysis of changes to cost and cost structure and ‘write-back’ of results to SAP ERP CO

Distributed Models

  • Packaging of functions and processes of the overall value chain in manageable models, consolidation in entity-level model
  • Optimization of creation and maintenance in large scale SAP ERP CO implementation projects

Indirect cost costing engine

  • Separation of COGS and Indirect cost calculation accommodates continuation of existing manufacturing solutions
  • Grouping and reporting in Data Warehouse for consolidated, end-user oriented reporting

NEW: “Going Green’ with PCM

  • Leverage of standard PCM data objects and reporting and for the “going green” status and progress in the organization
  • Ability to report consumption of “green” resources, internal activities and processes and application in customer facing products and processes

IT Shared Services

  • Solution set (leveraging ITIL standard) to compose and cost your IT organizations activities and capacities

NEW: Lean Accounting

  • Manufacturing oriented solution to report and manage your organization in ‘lean accounting’ terms

NEW: Airline Route Profitability

  • Airline oriented solution to gain insight into route cost (factors) and route profitability

Budgeting and Planning

  • Cost management (in-depth) functionality, complement and data input for BPC based budgeting and planning processes
  • Activity focus, cost re-assignments, product / customer and activity output based (causal) calculation of resources requirements and cost, fixed and variable cost consideration, treatment of utilization variances, capacity management (unused capacity cost, capacity constraints)

Any other ideas out there ?

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  • Hi Carsten,
    Thanks for the feedback.
    Just have a couple more questions for you.

    1) According to SAP the PCM solution “minimizes the need for external consultants…” Does this mean that there will not be much of a demand for PCM consultants (as, say, BPS or BSC); that PCM can be completely installed “in-house”?

    2) I am also very interested in getting into BPC. Do you think it is possible for a consultant to gain expertise in both BPC and PCM?

    Thanks again for your valuable feedback!

    • 1) PCM, like SSM and BPC are business user solutions. Unlike our ERP solutions that were oriented towards transaaction processing we are able to focus on ease-of use, ease-to-implement and ease-to-maintain.

      So same thing for all these new products. Keep in mind though the ration between setup work and a typical project dealing with requirements, implementing them and testing them …

      What could be shorter projects migth very well be picked up through more projects per year.

      BPC and PCM provide a lot of similar functionality and, although they each have their strengths and functional areas that is not covered by the other, teh ycomplemetn each otehr very well. Stay tuned for a blog on that shortly


      • Further to Carsten’s comments, our experience of implementing PCM in EMEA is that projects can last anything from 20 days to 200 days and very much depend on what the solution needs to achieve.
        By leveraging the “out of the box” functionality and simply configuring the application it is feasible to have a production application up and running in as little as 20 days. The additional requirements for data capture using ETL, the building of web based data entry screens (called books in PCM) and associated workflow, and the requirement for specific rules for business modeling and simulation obviously increases the size of the project.
        Consultants typically have a good mix of technical AND business skills, especially around the domain of ABC / ABM.
        Although many customers do undertake much of the development internally there is always a need for skilled consultants who have the experience to be involved in the initial projects or phases.
  • If Cost and Profitability Management is going to be the future tool for all Profitability anlaysis, will there be any design change required in the current COPA module or will the COPA module itself become redundant. Looking forward to your valuable inputs.

    Thanks / J.Swaminathan

    • I don’t see CO-PA, like ERP, ever go away. They are in a ‘incremental innovation without disruption’ mode and CO-PA offers great functionality and is used by more most SAP customers.

      Having said that, the business world is moving from a looking backwards (analysis) into a looking forward (simulation) mode. Business users want to be able to know an outcome before the enact a change – and that is something PCM can complement CO-PA with.

      I don’t see any design changes but than I am not a member of the ERP development team. But we do work with them on an initiative to enable ‘ERP profitability and cost management in PCM’ by extracting CO-PA baseline data, importing it into PCM for modeleing and simulation and then feeding the results back into CO-PA.

      What do you think – does that sound like a valuable scenario ?

      • Sure, this sounds interesting and no doubt would be a valuable proposition; in sense that the CO-PA would feed as well as receive data back from PCM.

        Thanks for your clarification.


  • hello Carsten,

    Is there is a PCM implementation workplan template anywhere? where can I find it.Im currently working on a proposal and wants to draw up a tentative workplan for PCM