Material Ledger and Value flow monitor. CKMLCP and CKMVFM
The objective of the blog is to explain the differences in the value flow monitor.
By reading this blog you can able to answer for the following questions:
- Why should we use Value flow Monitor..?
- The reason why price differences/ exchange rate differences not apportioned to the SFG/FG Materials.?
Material Ledger and Value Flow Monitor – Not Distributed and non-allocated balances:
The blog is more about the value flow monitor– Not Distributed and non-allocated balances, before that I will give brief introduction to Material Ledger as it is helpful for the new comers.
Objective of the Material Ledger:
The primary objective of the material ledger functionality is arriving the actual cost and we can see the results in multiple valuations and multiple currencies.
How system arrives the actual cost:
Initially all the transactions are happening with the standard price, during CO Month end process we will get the variances and those variances got settled when we execute the settlement.
By following the CO Month end process (OH Calculation – There are many methods, WIP calculation, Variance calculation and Settlement), we are able to settle the variances to the production or process order, but unable to get the actual price.
Importance of ML Run:
By performing ML run these variances/ price differences / exchange rate differences will get settled to the respective material. We will get the actual price. Actual price can be called as a periodic unit price (PUP).
I will start the primary topic – Value flow monitor – Not Distributed and Non Allocated Balances:
By reading the functionality of ML, management and every one feels that all the variances and differences due to price and exchange rate should get settled to the material and expecting no balances should be appeared in PRD GLs.
Expectation – Differences should be zero. But it is very much difficult in real time scenarios…but …..Why…?
We will look into the that……Here I am posting two questions:
- Is the actual price arrived during ML run is accurate only if there is no differences found in Value flow monitor….?
- Is there any hard and must rule, that the differences should be cleared to arrive the actual price..?
By the end of this blog you can able to answer those questions. Please find the further details:
Nature of the differences:
- Price differences
- Exchange rate differences
- Single level differences
- Single level price differences
- Multilevel differences
- Multilevel price differences
- Multilevel exchange differences
Reason for the differences which are appearing in the Value flow monitor:
There are many differences, it depends on the transaction history of that material.
Example – This I have faced recently.
There is a huge difference appearing in the value flow monitor. Management asking for the clearing that difference.
Then I went into the transaction history of that material.
I found some process orders which were partially confirmed and GR not happen. They feels that getting the output from that process order is no longer possible then they have confirmed with lower quantity and completed the final delivery.
- During CO Month end process, system posted a huge variance and got settled.
- After performing ML run, while analyzing the Value flow monitor found these differences which are not apportioned to material.
- System is clever ignored the difference (Which is not practical and genuine) while calculating actual price calculation.
- Still, there is an option of apportioning these differences if management feels it is required.
- If we apportion, in my case resulted price will be negative….so we strict to Value flow monitor.
Hope you got the answers to those questions mentioned above.
Last but not least:
Every error is not dangerous, sometimes it is an alert. Every difference need not distribute.
Pavan Kumar Arvapally