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DSC Green Thursday: Using SAP Product Lifecycle Costing to lift the fog of uncertainty

Digital Supply Chain Green Thursday – SAP Product Lifecycle Costing

Thank you very much for joining us in this article of the Digital Supply Chain Green Thursday blog series. Every Thursday we will together take a closer look at one of the SAP Digital Supply Chain solutions and how they contribute to sustainability in supply chains all over the world. Have fun in following the blog, we invite you to get in touch with us and feel free to share the blog posts among your peers. Here you can find last week’s article about enabling the customer to informed decision-making with SAP Recipe Development.

Driving on sight limits your performance

Imagine driving on a road through the countryside just after sunset in the end of the summer. It’s a clear night, you can see the stars above the fields right and left from the road. The temperature displayed on the car’s dashboard drops by the minute. Suddenly a white wall appears in front of you. As you drive through the fog, you have to slow down, the smooth driving mood from just a second ago has changed for a stressful atmosphere as you try to determine where to go. Is there a turn? Will there be a deer jumping out of the fog? Did you miss the right turn to go home?

Product design with less “guessing” of information

During the product development process, as developers and product managers, you may feel quite like you would have to steer a vehicle during a thick cloud of fog. Any information is merely a scheme, roughly visible and it is quite uncertain whether it will turn out to be as expected once you come close enough. One of the most important yet uncertain KPIs during a product development process is the cost. The production cost of a product is of utmost importance for the business case and verify whether the company will actually benefit from bringing the product on the market. Yet, especially in the early stages of the product development, the data, for example regarding the cost, is very vague.

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Data maturity over the Product Lifecycle; Source: SAP

The better the information, the better the decision

Being able to exactly know what will happen when making a decision is the dream of anyone who has to take decisions. Especially during the product development process many decisions are to be made – by many people. The product development team usually does not consist of only one product developer but of many experts and stakeholders giving input, information and requests. Being able to calculate possible outcomes and their cost can be a great contribution for those discussions during the decision-making processes.

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Data from SAP and non-SAP systems can be leveraged in SAP Product Lifecycle Costing; Source: SAP

The data is already there – take it!

In times of digitization and especially when using SAP ERP, the necessary data to estimate all these costs is already there. SAP Product Lifecycle Costing can leverage existing master data such as BoM, routings or material price, which might be stored already in a SAP or non-SAP ERP system, in an EXCEL-file or already in the SAP Product Lifecycle Costing solution, to generate cost estimates in an early development phase. The quality of this estimation can be enhanced by taking a similar cost structure of a proven product as a basis and simply editing the changes in between the products. Because the data is already verified, the cost estimation can be as reliable as possible in these early stages of production development. Throughout the product development process a SAP Product Lifecycle Costing add-in can provide feedback about the confidence level of the cost estimates. In custom fields the individual business scenario can be closely simulated and analyzed with integrated analytic tools.

Easy handling so that everyone finds what they need

Besides the easy generating, referencing and versioning of cost estimations, the layout in SAP Product Lifecycle Costing is easily adaptable to personal preferences; comparisons between different cost estimations can give further insights as well. Additionally, rules can be defined and applied to draw the attention immediately where it is needed, for example to identify parts with high impact on the product cost. This allows SAP Product Lifecycle Costing to provide relevant product costing information for all stakeholders. As different members of the product development team have different tasks, each user can be assigned to user groups which are equipped with different authorizations on a project level to avoid unwanted modification of data.

Estimate Carbon Emissions from an early stage

Similar to the money adding up throughout the production and lifecycle of a product, the carbon emissions add up as well. Therefore, the capabilities and functionalities of SAP Product Lifecycle Costing can be leveraged for an early stage estimation of carbon emissions by setting up respective custom fields. The carbon emission can be calculated like the cost, taking master data from the SAP ERP and combining it into a cost structure. Depending on the data filled into the master data, product developers can estimate the carbon emissions of their product already at an early stage and identify parts and raw materials which contribute the most.

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With custom fields additional information can be included as for example Co2e-values; Source: SAP

Reliable information lead to increased efficiency

With all the information in SAP Product Lifecycle Costing the time to market can be greatly accelerated as you can take the right decisions and can minimize the use of trial and error. The increased insights highlight right away which part needs to be reengineered or which material needs to be substituted for the biggest effects in product cost reduction or carbon emission reduction. As already shown in my blog article about SAP Intelligent Product Design, information is the key to good collaboration and SAP Product Lifecycle Costing can provide good information already at early stage.

Leverage quick and transparent cost calculations during the whole Product Lifecycle

During the later stages of the product development process and during the running production of the developed product, the data in SAP Product Lifecycle Costing can be adjusted to calculate the product costs on a real-time basis. Beside the great cost monitoring capabilities, this is helpful when it comes to the quick and reliable quota calculations. Additionally, the integration to SAP Analytics Suite allows meaningful analysis to drive decision-making.

SAP Product Lifecycle Costing accelerates your company during the product development process, when it comes to product cost optimization and to quickly provide customers with a reliable quotation. Reach out to your SAP contact to get further information or check here for additional information on how your company can benefit the most from SAP Product Lifecycle Costing.

Show your customer that your company does not drive on sight – with SAP Product Lifecycle Costing the fog of uncertainty is lifted and you can clearly see the right way to go!

I hope you found this blog post helpful and interesting. Please make sure you follow me to not miss any future blog posts in this series and stay informed about how a Sustainable Supply Chain is supported by SAP Digital Supply Chain solutions! Feel free to have a look at my earlier posts as well:

DSC Green Thursday: At the end of every tunnel there is a light – will it be a green one?

DSC Green Thursday: SAP S/4HANA for product compliance -“If you think compliance is expensive – try non-compliance”

DSC Green Thursday: SAP Intelligent Product Design – Too many cooks spoil the broth, or not?

DSC Green Thursday: Enable customers to make informed decisions with SAP Recipe Development

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