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A Cost Allocation Engine You’ll Want to Use

Question 1: Does your SAP Financial users find it difficult to know when or how to use the various methods of cost allocation in SAP Controlling?

  • Assessment
  • Distribution
  • Indirect activity allocation
  • Template allocation
  • Target=Actual activity allocation
  • Top-down Distribution

You’re organization is not alone.

Question 2: Has your organization run into performance issues in their ERP system trying to use any of the above allocation tools?

Perhaps you have looked at, or even attempted, to move the allocation processing into the SAP NetWeaver BI system, using the Integrated Planning engine.  This approach introduces several more types of allocation functions to learn and maintain and monitor:

  • Distribute by key
  • Distribute by reference data
  • Formulas
  • Exits 

No doubt you’ll need to bundle and schedule these allocation processes to run using global planning sequences.  But even then, you may have, or may be having, difficulty getting your GPS chains to complete, based on your design and data requirements.    

Despite the very rich functionality offered by SAP Financials and the NetWeaver BI system for performing cost allocation, a common complaint I often hear when visiting projects, is that your organizations still struggle to create customer or product P&L’s. 

Yet with today’s data processing power, this information should be easier to obtain than ever before.

I think the root cause of this issue is too much complexity, because taken on their own, any one of the above mentioned allocation tools can be learned and understood given the right instruction and adequate documentation.  However assembled together, along with a complex data flow from source documents to final P&L report, gaps are created.

  • Business Users who provide requirements to the System Designers and Support users don’t have adequate knowledge of the tools or the flow.
  • System Designers and Support users don’t have adequate knowledge of the business requirements, or perhaps even the tools available, to match the business requirements to the right tool.

Given the above situation, I’m very excited to have the opportunity to assist SAP/Business Objects customers with an alternative.  The allocation engine that comes in the Profitability and Cost Management solution is very powerful, yet straightforward to setup, and is also quite easy to understand the cost assignments and the data flow.  It provides a great new alternative for SAP customers that have struggled with customer and/or product P&L’s. 

To learn more please visit the EPM page at, the on the Wiki, and also checkout my colleague Carsten Hilker’s recent blog about PCM Cost and Profitability in SAP: PCM deployment: options – when to use PCM ? what to use PCM for ?.

Also be sure to register for TechEd 2008 in Las Vegas and to enroll in my IM205 course ABC 101 With Business Objects Profitability and Cost Management.

For those of you attending TechEd 2008 in Berlin, register here for the same IM205 course, led by John Carter from PCM Solution Management.

With PCM, I know you will discover a new allocation engine you will want to use and will use successfully.

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  • “organizations still struggle to create customer or product P&L’s”

    I’m hoping that the new tool will finally make this a bit easier to implement.