Product Cost Forecast and Simulation – a driver-based approach
Update February 2021:
The related SAP Business Warehouse Content has been set to “obsolete”.
Please refer to SAP note 1929531.
This article describes an analytical extension of the SAP ERP Product Costing. Based on freely-definable drivers such as commodities or exchange rates (FX), Product Costing results are forecasted. Ad-hoc what-if simulations are supported to provide deeper insight into your cost structure and the impact of the drivers on your P&L and margin.
This solution is available as part of the SAP HANA optimized BI Content.
Starting Point: standard product costs
Starting point of the solution are the results of the SAP ERP Product Costing (CO-PC). Product Costing is one controlling modules in SAP ERP. It is used to calculate the cost of goods manufactured (COGM) and cost of goods sold (COGS) for products, materials and services.
The calculation results can be extracted from the ERP system to an SAP BW with standard data sources. For the forecasting and simulation, the Full Itemization (“BOM”) and the Cost Component Split data sources are necessary. No changes to the ERP system are required.
Data is mapped to and stored in InfoProviders that can be installed from the latest BI Content. Non-SAP data sources may also be used using standard SAP BW ETL capabilities.
New BI Content “Product Cost Forecast & Simulation (SAP HANA-Optimized)” – a 3 step process
Once the Product Costing results and the relevant master data (e.g. material master) are available, the forecasting and simulation process runs in the following 3 steps:
- Step 1: Cost Drivers forecast and new Purchase Prices calculation:
In the first step, freely-definable cost drivers are used to determine future purchase prices for materials. Examples for possible cost drivers are commodities, energy costs or foreign exchange rates (FX).
Materials are grouped into similar subsets and these groups are correlated to one or more drivers. Thus, a predicted future price change of the driver changes the price of all correlated materials by the same percentage and new prices can easily be forecasted.
A cost driver may change all, some or one cost component. It can be correlated to more than one subset of materials.
Example: One subset consists of plastic bottles. This subset is correlated to crude oil by 50%. Then a future increase in crude oil by 20% will result in a price increase for all plastic bottles by 10%. In this case, only the cost component “packaging” should be changed.
- Step 2: Roll-Up changed purchase prices to new COGS:
In the second step, the full itemization (“bill-of-material”) information is used to roll up the new material prices into the future product costs of finished goods.
Of course, conversion costs or other non-material related cost components may also be changed.
For instance, all products using plastic bottles will become more expensive because the prices for plastic bottles will increase by 10%. The change will be visible in the packaging cost component of the finished goods.
Thus, the impact of the crude oil price change can be evaluated for a given product, product group or even the complete company.
- Step 3: Analyze future procurement spend and margin impact:
Finally, planned sales volumes as well as gross revenues and sales deductions may be taken into account to forecast the future margin and procurement spend.
The BI Content offers a basic contribution margin schema that can easily be enhanced. So ultimately, the impact of a crude oil change of 20% on your company’s margin can be analyzed.
The solution runs on a SAP BW-on-HANA system only. The calculation logic has been pushed down to the in-memory database and the processing speed allows you to evaluate your full set of materials and their complex itemization relationships on-the-fly.
Therefore it is feasible to ad-hoc simulate changes of the drivers in what-if scenarios. One might, for example, run the 3-step process explained above for various changes of crude oil and evaluate several scenarios and their impact on the company P&L in online transaction times.
The following architecture slide illustrates the building blocks of the solution:
Product Cost Forecasting and Simulation content within BI Content 7.57 is compatible with SAP BW 7.4 and 7.5. powered by SAP HANA.
All information on the BI Content Release Strategy can be found here:Note 153967 – BI Content Release Strategy.
For more details see the attached presentation and the available online documentation (BI Content 7.57)
Please also use the comments functionality to post any feedback.
Guido Eichmann – firstname.lastname@example.org
Rolf Sieberg – email@example.com
Update April 16th 2014:
We also encourage you to read the blog posted by Tristan Colgate from Bluefin: SAP’s Product Cost Forecasting and Simulation tool is SAP HANA’s best kept secret.
As the new BW 7.40 release offers many nice enhancements (see also Blog: 3 Major Reasons To Migrate To BW 7.4 on HANA | SAP HANA) we are currently working on using on or the other feature in our content – stay tuned for more information.
Update April 28th 2014:
We have upload a recording showing the BI Content in action. Please review it here:SAP HANA-optimized BI Content Product Cost Forecast & Simulation – Demo
Any questions and comments? Please feel free to post them here or directly at the demo video posting.
Update July 30th 2014:
In addition to the BI Content, SAP Consulting created the Implementation Service “Implementation of Product Cost Forecasting and Simulation for SAP BW” (CRM number 50124199). This service will implement the BI Content on a fixed costs basis within a short timeframe based on a scoping workshop to ensure, that the specific customer situation is taken into account. For more details please contact your SAP contact person.
Update June 30th 2015:
Some time has past since the last shipment and the last post here. But to be ableto ship the latest enhancements we relied on some enhancements within the SAP BW core stack. Here is whats new with BI content 7.57 SP06:
– ability to directly enter raw material prices and for such cases not use a driver based calculation
– the copy functionality which was until now only described in a note is now part of the shipment
More details can be found in the release notes: http://help.sap.com/saphelp_nw74/helpdata/en/b6/1034555cf98026e10000000a4450e5/content.htm?frameset=/en/2e/033455c4d86b38e10000000a174cb4/frameset.htm¤t_toc=/en/a3/16c204723d4c40a520489a544b68b1/plain.htm&node_id=13
Update November 2016:
With BW/4HANA available now were also planning the release of the existing “Product Cost Forecast and Simulation” content for BW/4 HANA. The target is to have it availble in Q2 2017 – current planning. We will provide an update early 2017.
Update Feburary 2017:
Unfortunately we will not be able to already provide an updated content for “Product Cost Forecasting and Simulation” for BW/4HANA in Q2 2017.
We are not yet able to share a new planned release date. Please check back soon.
As always we appreciate your feedback.
Update November 2017:
Want to enhance Cost Forecasting and Simulation with tariffs? – Please read the following blog.
Update February 2020:
Currently there are no plans to also provide the content for BW/4HANA.
Guido, great information. This would be very useful to our company as we have been live on Hana for over a year.
Question though on the product's placement. Does this replace the material ledger functionality in SAP ECC? Currently material ledger is used to roll up variances arising from multi-level BOM, up into the finished goods. Could the Hana solution perform this function as well?
a good question: No, it does not replace the ECC functionality. The material ledger is still the place to roll up your BOMs.
The HANA solution here builds on this: The CO-PC extractors can deliver the results of the roll-up into SAP BW. We use these results to calculate how much of a given raw material or semi-finished is required to produce a certain product. These calculation results are the basis for our simulation.
When we use the term "roll-up" in the text above, we mean it in the sense of "accumulate" all forecasted material price changes into the future product costs.
I just tried to implement all the content objects for the product forecasting, but am struggeling a bit with the connection of the DSO FX Rates Plan (Upload) - /IMO/CFS_D031 and the table TCURR. In the online documentation you say that this DSO will be filled by the DataSource Foreign Exchange Rates (/IMO/CFS_FX_RATES), but I cannot find this DataSource in the Content.
Can you help me with this problem? Is there any content DataSource Foreign Exhchange Rates or do I have to create an own generic DataSource which uses the table TCURR as basis?
Thanks and best regards,
thank you for your answer.
I am rather sure that we have shipped the data source. However it will not appear in the content activation if the "wrong" source system assignment has been chosen.
In our case, the source system "self" should be assigned, as we wish to extract from the local TCURR table.
You can find the settings in the menue under "Edit".
I hope this solves the issue,
I still cannot find the DataSource, even though I assigned the "self" BW system as the source system. The DataSource should also be within the BusinessFunction /IMO/BW_CONTENT, shouldn't it?
Could you double check if the DataSource was shipped with this content?
Thanks and best regards,
I have analysed our piece list one more time and I am positive that we have included the data source in the content shipment.
So why does it not appear in the content actviation in your system even though you have done everything correctly, including setting the business function switch?
I have only one more guess: The data source might not be active.
Would you please check in transaction SBIW --> Business Content DataSources:
Start "Transfer Business Content DataSources". You should find our DatSource under
BW -- SAP_COMP -- 0FMCO -- 0CO -- 0COPC.
In case the data source is not active, please activate it here.
Then you need to replicate the data source, e.g. by chosing your source system ("myself") in transaction RSA1 (modeling) and right-mouse click option "Replicate DataSources".
After that, the data source should finally appear in the BI Content view of RSA1.
I hope this helps, thanks for your perseverance!
that solved the problem.
Thanks for your help,
For any future readers:
I had a similar issue to the one Michael reported here a few years ago.
I could not see the DataSource under the “Self” Source System, and what’s worse, I also could not see it in SBIW as the entire 0FMCO component was not there.
The solution was to ensure the application component hierarchy is first replicated, which can be done through the same SBIW menu, just above the 'Activate Datasources' option, or (I believe) via T-Code RSA9. After that, you can follow the steps above.
Currently we are installing this content and understanding how it works. It is excellent.
We seem to be missing the business content planning functions, such as '/imo/cfs_r2_copy'.
I am looking within the RSA1 business content installation. I am only able to see the '/IMO/CFS_03_COPY' planning function. No others are available.
Do you know where we can find these?
Thank you, George
thank you first of all for your kind words.
You are right: The planning functions that copy the results ('snapshots') from the virtual provider into the dedicated DSOs have so far not been shipped.
In our note 1929531, we have described the steps that are necessary to create them manually.
The reason for this is as follows: We wish to combine the new SQL exit planning function capabilities with the so-called ABAP-managed data base procedures (AMDPs). We believe this to be the ideal way how to combine planning functions and sql procedures.
Unfortunately, minor enhancements in the software are required: The SQL planning functions work fine and the AMDPs also work fine. But combining them in our specific shipment which requires 3 activation steps - BW, HANA and BW again - was not feasible.
This gap has already been closed with the latest Software Patch and thus our plans include a shipment of the copy functions for content release that shall be shipped at the end of this year.
We decided not to ship an intermediate solution - which would also have required some manual interaction - but wait for the final solution.
I hope this helps to clarify the situation. In case you have additional questions or encounter problems when implementing the copy functions, please let me know.
Thank you for the information. After a bit of a delay, during which we have delivered and UAT'd the PCFS system, we can now turn our attention back to this.
I am getting an error when creating the stored procedure using the code in OSS 1929531. I have checked the definition of the CFS_TTYP_R1 table, which had a different sequence of fields.
Do you have any idea what is causing the type mismatch?
Could not execute 'CREATE PROCEDURE SAPBWD.SP_CV_MAT_PRC_COPY( IN I_VIEW SAPBWD.CFS_TTYP_R1, I_REF_VIEW ...' in 64 ms 838 µs .
SAP DBTech JDBC:  (at 258): return type mismatch: E_T_TABLE[ 0CFS_PRPRC:DOUBLE 0CFS_PRPRCL:DOUBLE 0FISCPER:NVARCHAR(7) 0FISCVARNT:NVARCHAR(2) 0MAT_PLANT:NVARCHAR(18) 0PLANT:NVARCHAR(4) 0VERSION:NVARCHAR(3) 0CCOMPSTRUC:NVARCHAR(2) 0COSTCOMP:NVARCHAR(3) 0CURRENCY:NVARCHAR(5) 0LOC_CURRCY:NVARCHAR(5) 0CFS_FPP:NVARCHAR(5000) 0MATL_TYPE:NVARCHAR(4) ] != [ CFS_PRPRC:DOUBLE CFS_PRPRCL:DOUBLE FISCPER:NVARCHAR(7) FISCVARNT:NVARCHAR(2) MAT_PLANT:NVARCHAR(18) PLANT:NVARCHAR(4) VERSION:NVARCHAR(3) CCOMPSTRUC:NVARCHAR(2) COSTCOMP:NVARCHAR(3) CURRENCY:NVARCHAR(5) LOC_CURRCY:NVARCHAR(5) CFS_FPP:NVARCHAR(7) MATL_TYPE:NVARCHAR(4) INFOPROV:NVARCHAR(30) ]: line 8 col 1 (at pos 258)
How can we leverage this BI content on our S/4HANA system?
Can we install and then update/modify for S/4 requirements or?
Dear Mr. Gandhi,
thank you for this interesting question:
Please refer to SAP Note 153967: This note states, that the software components BI_CONT and BI_CONT_XT are not recommended to be installed on an S/4HANA system, even though technically this would be feasible.
Please stick to this recommendation.
I realize that this does not answer the underlying question. In case you wish to use the Product Cost Forecast & Simulation together with S/4HANA, you have the following option:
Use a stand-alone BW system (Stand-alone means without an S/4HANA installation, just SAP NetWeaver and SAP BW, on SAP HANA) and replicate the required data from the S/4HANA system into it.
Technically, one could also create the required data model manually on an S/4HANA system and thus manually implement the Product Cost Forecast & Simulation content also on the S/4HANA system. However, there is no out-of-the-box realtime connection, so even in this scenario data would have to be replicated.
Thank you Rolf, this helps tremendously.
This looks like a great product for existing products when budgeting, but please can you tell me if this could be used in a situation for New Products, where a new product is being introduced and 99% of the BOM is the same as an existing one, but there is one material in the BOM that is different that makes it a new item at the top level. This material may not have been set up in ECC too.
Sorry for the late reply, but due to vacation the notification for that post seemed to have slipped somehow.
Concerning your question: The content as such does not offer an in-built functionality to introduce new products.
But depending our your BOM and the complexitiy of the BOM I could envision to copy from an existing product P1 to a new product P2 and then change the BOM of the new product P2.
You would also need take care to provide the cost component split for that new material P2, potentially also for a component material.
Please do not forget to maintain the master data upfront for the new material.
All existing logic and calcualtions would still run as they are. Please remember that you would also need sales data for a new material P2.
The realisation could e.g. include planning enabled objects - but here you need to decide and design what suits best your business requirements.
Any update from Nov. 2017 on BW/4 availability? The tariff function was interesting, wanted to see if the concept was extended further.
sorry for the delayed reply and thanks for your feedback on this topic.The tariff concept was perceived quite well, but to date we did not receive further feedback that indicated to really extend it. As with content in general, you could also adapt the tariffs template by yourself. What would it be, that you think could be added to the current concept?
Concerning BW/4, I am having no update and also can tell you that as of today bringing this to BW/4 is not part of any current roadmap.
Any further change to this will be added to this blog - I will also change this information in the blog accordingly.
Thanks and BR
Thanks for the update. I used the extractors from this project and merged with a new created extractor which writes out the content of CKMLQS and CKML3N into reporting tables each month. We use this to compare actual to standard usages at a micro-level (granular, below the cost component split level) to help forecast both raw material usage and the effects of any buy vs make decisions.
Trying to determine if SAP BW 7.5 for HANA can use this solution. In 5/21 Note 1929531 - Product Cost Forecast and Simulation was released that says:
"Product Cost Forecasting and Simulation content with BI Content 7.57 is compatible with SAP BW 7.4 powered by SAP HANA and SAP BW 7.5 powered by SAP HANA.
The Product Cost Forecasting and Simulation content will not be compatible with SAP BW 7.5 edition for SAP HANA and BW/4HANA."
I understand BW/4 HANA cannot use this solution, but what is the difference between 'BW 7.5 powered by SAP HANA' vs 'SAP BW 7.5 edition for SAP HANA'? Thanks!
Apolgies for the delayed reply. To understand the differences between the different BW version, in particular "powered by/on" and "edition for", please check the following blog
The main point is, that the edition for SAP HANA allows you to still use existing "legacy" BW objects (InfoCubes, classic DSO), but not create new ones. Basically you would have reached that state after having migrated from an "powered by/on SAP HANA" as a pre-step before you are ready to go to BW/4HANA.
The topic of product costs and cost simulation is still a relevant one. Therefore please check the Integrated Financial Planning for SAP S/4HANA content package in SAP Analytics Cloud. Find the documentation here.
I hope this answers your question.
Thank you for the blog, it is very helpful. We are on full legacy mode of BW on HANA. We will also be connecting to an SAC instance so it is great to see that this is supported. The plan is to utilize the "full legacy" objects and expose them to reporting in SAC.