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Fabric Costing with S/4 HANA in Textile Industry catering Make To Order Configurable Material scenario-Part 2

Relevance: Fabric production with Super BoM and Super Routing.

Finished fabric: Fully configurable.

Scenario: Our client gets requirement from customer. Customers are stitchers, who order all the parts of a garment and then stitch them together to give it a shape of a garment.

Hence, sale orders get created with line items representing different parts of a finished garment that we wear in our daily life.

Let’s assume a T-shirt will consist of main body,cuff,collar and trim.

Hence, the customer will ask for a quote for all of these parts, together.

For example, an order will be:

10,000 KG : MAIN BODY
1,000 : TRIM
100 PC : COLLAR
100 PC : COLLAR
200 PC : CUFF
200 PC : CUFF

And the corresponding sale order will be created in the manner, shown below:

Figure 1: Sale order with all components needed to stitch a garment

once the sale order will be created, it has to be costed, which will be based on sale order configuration.

So, each item is the sale order would depict its dependent component, when we see the configuration via the menu path of the sale order.

Figure 2: Sale order configuration screen

Costing of sale order components will happen based on the above configuration and hence it is very important that object dependencies at PP end would work perfectly.

Now, we should check whether the configuration components are matching with the cost components, resultant out of sale order costing.

Figure 3: Sale order costing result

Figure 4: Matching components in costing and configuration for the same sale order

Point to be noticed is that Sale Order cost estimate do not show all the levels within the BoM of a finished part. it will only show the immediate level[for example: Greige fabric and dyes/chemicals/recipe etc.]

Figure 5: Cost components of a finished fabric

So, if we think to download/extract all of the line items of finished fabric cost estimate, it is directly not possible from finished fabric sale order cost estimate. We have to go to each and every step of the fabric structure[like Greige Fabric, Dyed Yarn, Recipe etc.] and then only we can avail the rest of the detail.

Figure 6: Cost components of greige fabric

All of these materials[greige fabric, dyed yarn] present in the structure of the finished fabric are having Configurable MTO strategy, which is linked to requirement type customized for MTO- Configurable material.

Now, let us check how the production orders have been created and addressed in relation with the same order.

SAP has given standard transaction code COOIS to check all the production orders tagged to a specific sale order.

Outcome of the said transaction has been checked for the sale order under discussion.

Figure 7: Order information system

Outcome is all the production orders, required to produce finished fabric along with it’s components. This is why MRP has to happen on sale orders at hand.

We will analyze one of such production order and check if the GR against the production order has updated sale order stock valuation table EBEW or not.

Figure 8: Before going to production order confirmation screen, let us validate the theory that none of the fully configurable materials are having standard cost updated in the material master. Reason being, standard cost will be against sale order items, for which these materials are being produced.

Now, as per process of MTO – Configurable material strategy without sale order being a cost object, we would be settling the production order cost to corresponding materials, as the valuated sale order stock is intended.

For the purpose of this article, I kept the material not maintained with any variance key. So, the production order will not be having any variance key copied, nor any variance shall be calculated.

Only thing will happen that difference between GR and GI will be settled on to the material, as material is the receiver in the settlement rule.

Figure 9: Difference between GR and GI

Notice: the yarn will be receipted at the sale order cost estimated price, once the production order is confirmed.

Of course, the yarn[YDR1/024CNOCC001] should have a BoM and routing, along with object dependencies, if required. In the case of discussion, spoilage has been included, as well in the BoM of yarn.

Our PP consultants have used reference characteristics and MDATA procedures to set up quantity calculated of components.

For example: $self.S_QTY = (mdata$self.S_QTY + (mdata$self.S_QTY * $root.K_YDL /100))   —- this code tells the system to calculate the header material quantity to be calculated by adding up header material quantity and a defined loss % multiplied by the header material quantity.

If I see the BoM for YDR1/024CNOCC001[Dyed yarn], I can see it having YGR1/024CN0CC001[greige yarn] and some recipe. Since, process orders are not being used, PP team has created materials to define recipe, which consists of certain chemicals/dyes.

So, the cost of BoM and the recipe[chemicals] is the cost of dyed yarn[YDR1/024CNOCC001] to be produced.

This cost estimate becomes the GR value for the dyed yarn.

Figure 10: Sale order cost estimate depicting the dyed yarn cost

Figure 11: Settlement of production order via KO88 transaction and related accounting documents.

The settlement transaction will change the value of sale order stock’s MAP. Let us see how.

Before settlement execution,the MAP was Inr 200.55.

Figure 12 a: Table view for sale order related stock segment[before settlement]

Figure 12 b: Table view for sale order related stock segment[after settlement]

So, it is seen that MAP is increased for the material[in this case dyed yarn, which was the receiver of settlement].

Though, the stock value of the produced fabric/material/component remain same as per the GR value. In other words, total stock value remain = (total stock*standard price), before and after settlement.

Accounting entry of settlement will be:

CHANGE IN STOCK SEMI-finished due to production/Factory output of production      Cr.
PRICE DIFFERENCE             Dr.

At the time of production order settlement, CO-PA document has got generated. As per the PA transfer structure, the price difference went to a custom value field related to “Other Cost”.

Figure 13: Depicting CO-PA actual line item posted for the settlement of production order.

Figure 14: Account based CO-PA postings reflecting the settlement.

As early derivation of characteristics is activated, ACODA table capture the sale order characteristic “SHADE CODE”.

Figure 15: Early derivation of characteristics [SHADE CODE = “NOTAPPLIED”]

In a similar way, another production order has been settled for the same sale order. Point to be noted is all of the production orders will be settled to respective materials, as the stock is valuated.

Total variance will be settled to FI and hence, we shall see the variance calculation for the production order. In order to calculate variance, order is to be TECOed.

Figure 16: Results of variance calculation for target cost version 0

Now. the production order settlement shall settle the cost to material and the variance to CO-PA, at the time of settlement execution.

Figure 17a: Outcome of settlement run

Figure 17b: Showing the senders

Figure 17c: Showing the receivers

Now, let us check what has happened to the MAP and standard price of the fabric under discussion.

We shall see the sale order stock values from EBEW table.

Fabric code: KGFBYCTN0241O

Figure 18a : Valuated stock before settlement

Figure 18b : Valuated stock after settlement

Point to be noted: Before and After the settlement transaction, only the MAP has been changed for the fabric. The standard price remain fixed at Inr 213.59.

Coming to the accounting document related to the settlement, following entries have been passed:

592001 CHANGE IN STOCK SEMI 22,910.50      Cr.
592102 PRICE DIFFERENCE-REV 22,910.50                   Dr.
592102 PRICE DIFFERENCE-REV 22,910.50     Cr.
592994 PRD-Split-OPPV 2.34                                  Cr.
592996 PRD-Split-INPV 22,912.84                                       Dr.

The above postings are result of S/4 HANA Finance’ new functionality of splitting the price variances/differences according to variance categories.

Figure 19 : Splitting of price difference and assignment of G/L accounts

 

4 CO-PA documents have been posted, as well, while settlement.

Why 4? They are related to the posting of price difference[calculated variance] settled to FI, reversal of main price difference account and simultaneous splitting into specific variance categories.

Figure 20 : Final accounting entries

Following the MTO scenario, the variances are settled to CO-PA during production order settlement.

I shall now show when the COGS is getting posted to CO-PA in MTO scenario.

As per standard process of MTO, COGS should be posted to CO-PA[provided availability of required configuration].

Assuming the client can make partial delivery at their wish, one delivery document has been created with 10 KG of finished fabric KFFBYCTN0241O. Net value of finished fabric is Inr 1000. So, accounting document will be

1991 XYZ . 1,000.00 Dr.
400000 SALES – DOMESTIC – F 1,000.00    Cr.

Figure 21 : COGS posting to CO-PA at the time of billing document generation

Detail of the CO-PA line item validate the idea of COGS posting to CO-PA. In this case, COGS has been posted to custom value field VV300.

Figure 22 : COGS posting in CO-PA

COGS value is the same as it appears in sale order stock table EBEW. The standard price for 1 KG of fabric is Inr 43,688.09. Total sold quantity is 10 KG and hence, COGS value is = Inr(43,688.09*10) and this value is being associated to value field VV300, which represent COGS in CO-PA.

The variance against an production order = [(GI+confirmation) – GR]. The variances appears under “total actual cost” column and will be calculated via variance calculation transaction. In this case, the variance is Inr (-25,524,418.21). As the variance is negative, if settled, it will reduce the fabric’s MAP.

A message may pop-up intimating the same.

Figure 23 : Settlement of production order

Figure 24 : Impact of settlement

Figure 25 : Before and After settlement MAP of the fabric from EBEW table

As a result of settlement and S/4 HANA Finance’ new production variance splitting functionality, following entries gets generated.

GL          GL Description                 Amount                                   Dr./Cr.       Profit Center                     Order

590000 CHANGE IN STOCK FINI   25,524,418.21                           Dr.         1024FKN000                  4300000020
590101 PRODUCTION VALUE DIF 25,524,418.21                          Cr.         1024FKN000
590101 PRODUCTION VALUE DIF 25,524,418.21                          Dr.         1024FKN000
592994 PRD-Split-OPPV                0.16                                            Cr.         1024FKN000
592996 PRD-Split-INPV                  1,793.53                                     Dr.         1024FKN000
592997 PRD-Split-RSUV                24,743,332.35                           Cr.         1024FKN000
592998 PRD-Split-PRC                   3.65                                            Dr.         1024FKN000
592999 PRD-Split-QTY                   782,882.88                                Cr.          1024FKN000

7 CO-PA documents will be generated for the posting lines starting from 2nd onward.

Figure 26 : CO-PA documents generation at the time of production order settlement.

At this point, production order balance becomes “0”.

Conclusion – Some of the features have been introduced with newer releases. But, the basic remain same for MTS and MTO scenarios.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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