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In this blog I am giving another cost reduction and control technique which gives a logical reason to management whether they should replace and capitalize a particular equipment or simple repairing will suffice.

 

Introduction:

In plant area we can have thousands of equipments. We can fetch their maintenance report in on real time basis. These reports give information of maintenance history and cost of maintenance pertaining to the equipments. In Finance we can get the depreciation value and book value of any asset on real time basis. if we integrate these two reports then we can easily compare the maintenance history and cost of maintenance of equipment with the depreciation value of asset on real time basis. By such information we can decide whether we should replace and capitalize a particular equipment or routine repairing will suffice.

 

Explaination:

Before replacing any asset from plant area there must be a logical reason. In the IW38 report we can easily get the maintenance cost (Planned/ Actual) of an equipment on real time basis. On the other hand we can also get the aquisition value, depriciated value and book value of an asset in AW01N.

Now management should decide by comparing these values whether they should replace the equipment or capitalized the same, depends upon the technical reviews.

If any renovation is increasing the efficiency or production of the asset. Then it should be capitalized.

 

Business benifits:

1. Easy to develop, less complex.

2. Concrete information for cost reduction and control.                                      

 

Important Tables/ Function Module

AUFK, AFIH, ANLC, FM:-PMCO_FOR_WORKORDER_READ

 

Important definitions:

Cost Reduction is a method where by costs are reduced from the projected amount. Cost Control is a a method whereby costs are managed and monitored to ensure they do not grow beyond the projected amount.

Cost reduction and control can be achieved in any ERP software. However, in SAP this can be achieved with very less efforts and with less complexity.

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