Transportation costs play a very important role in the overall performance and profitability of an organization. Some studies estimate it represents up to 10% of the cost of sales of an average company. Reality is, this topic is a big concern of cost controllers.
In the SDN there are several blogs related to TM, but none of them addresses the issue of the integration between TM and Material Ledger – Actual Costing in a scenario that the transportation costs are capitalizable. The intention of this blog is basically that, to show you an end-to-end process from the point of view of Cost Controller describing the FI entries involved on each step of the TM flow. Also, show you what you can accomplish in Material Ledger
I have 2 real live experiences with TM integration. When I started learning about 3 years ago (and let me clarify that I am not a TM consultant... I work in controlling), I did not know where to start, nor what to expect from the module (i know a lot about Le-TRA but for me TM was a mistery). Find the responses to my questions demand me lot of time. The last months I spend my spare time digging in TM not in the integration with ML but with the end to end process.
Let's start with the Story:
CO01 is an imaginary company in Colombia (the country I live) that produce variety of products including dairy, chocolates and juices. Their principal raw materials are MILK, CACAO and Oranges; and the company want to have a good track and detail on its cost. For that reason, in S4H this Materials are set as Standard with periodic valuation on Material Ledger (S/3 Materials). The transportation cost is very important, and a must requirement is to differentiate in the Cost Component Split of the materials the portion of the cost originated by its primary logistic process (cost incurred from the vendor to the Plant CO01 “Armenia Cacao” ).
One of its principal BP Suppliers is "LaViaLactea" who sells cow and goat milk (do you know the goat milk cheese is delicious?). The product is pack on 100kg drums (DR)
The transport of the milk from the vendors site to the plant CO01 is done by the supplier "SpeedyGon LTD". The rate per trip is a flat price of 200usd as the company fully utilize the truck.
Statutory regulations require capitalize the primary logistics costs; and the rule chosen is to distribute the transportation costs is proportional to the weight.
******* During the years, I worked in various companies that distribute the transportation cost in different ways, but the most common model is VolumetricKG and equivalent Pallets ( you can find the math about it on google). In TM you can accomplish this via BADI *****
Let’s move to S/4!
The 1st step is create a PO with 2 materials. I set my PO to create the Freight Unit automatically. The freight unit is basically a planning object on transportation management. There is not much interest on FU from the controlling point of view, but its required for the follow up document.
Here is the PO with the 2 materials, Goat Milk for 15DR and Cow Milk for 5 DR. Just for your info, 1 Dollar is about 2500 COP in the system.
With the App Freight Units – Worklist you can track the FU associated to the Purchase Order or Sales Order that trigger the requirement. In my example, 4100000261 and 4100000262 are the FU created for the PO.
Create Freight Order. In my example, i use the fiori app "Create Freight Order" as this is a demo. In the freight Order I include my vehicle, the means of transport, the Carrier (BP created with Vendor and Carrier Role).
In the Freight Order, we assign the Freight Units... so now our freight order know what product we are going to transport!!
Next step is to create the Settlement Document (i don't like the word settlement, because have lot of meanings... but whatever), in my example i do it directly from the Freight Order. Again, there are multiple ways to do it. My freight Settlement Document pick the price of 200 USD from a Freight Agreement (sort of info-record for TM rates). The freight agreement can handle scales of prices.
The next screen show how to create the settlement document from the Freight Order.
Here you can see in the “Cost Distribution” tab of the Settlement Document, the system split the Freight Costs proportionally to the KG of the materials in a 25%-75% .
When click on POST on the settlement document, the system creates in background a Purchase Order (service master) for the freight Service, and a Service Entry Sheet. In the Document Flow tab of the Freight Order you see all the TM documents and the original PO but not the Cost Distribution document .
In the document flow, you can see the PO and SES created.
With the SES the system debits a "Temporary" freight expense account and credit GR / IR account for “SpeedeGon” Vendor (WRX on OBYC). The temporary expense account is map on GBB-VBR for the valuation category of the service. I say temporary, because in the next step this account will be cleared. I put a Cost Center on OKB9 for this account but there are a BADI that allow you to manipulate the cost object on the SES.
The next step is posting the cost distribution financial entry. This is done in the Settlement Management module (also know as Agency Business), maybe you know about it because is often used to post Rebates. In this step, the system clears the temporary expense account and post to the material. As the material is S/3 Standard with periodic revaluation, the debit is post to a price difference account.
Here, the posting credit the cost center with the temporary account and debit the materials (in the price difference account)
The if we analyze both documents (the one created by the SES and the settlement distribution), we see the temporary account 5179000001 and the cost center have balance 0.
Post the GR of the Material Purchase Order. A this moment, system credit on GR/IR for “LaViaLactea” vendor, debit on Stock and Price Difference account (typical FI entry with Material ledger – actual costing)
We can use the T-Account analysis to see all the 3 postings:
Here, you see in the procurement, one record for the Goods receipt and one record for the receipt of the Transport costs SES. Also, you can see the transport cost is mapped to a specific CCS element named “transportation” so controlling guys can analyze the impact of the transportation costs in the total cost of the product.
In the next screen you see, 500KG of milk cost 560,675 COP. This value is the sum of 450,000 COP pay for the milk and 110,675 of the transport costs. Also, you can see in CKM3N the system differentiate 2 Process Categories (B+ Procurement and BB Purchase Order from table CKMLMV009) to differentiate the material and the additional cost come from different flows.
The same for the Goat Milk. This flow post 1800,000 of Milk Costs and 332,025 of transportation cost.
And thats is!
Wish this help you to understand the integration with Material Ledger and TM.
PS1. I create the hole flow from scratch, it involves lot of effort both in master data and custo. When I begin the journey to learn TM, I never thought it was so time consuming, but I’m very happy of all the stuff I learn .
PS2. This is only one scenario on cost distributing on TM so more blogs about it are coming!
Arturo!
In the SDN there are several blogs related to TM, but none of them addresses the issue of the integration between TM and Material Ledger – Actual Costing in a scenario that the transportation costs are capitalizable. The intention of this blog is basically that, to show you an end-to-end process from the point of view of Cost Controller describing the FI entries involved on each step of the TM flow. Also, show you what you can accomplish in Material Ledger
I have 2 real live experiences with TM integration. When I started learning about 3 years ago (and let me clarify that I am not a TM consultant... I work in controlling), I did not know where to start, nor what to expect from the module (i know a lot about Le-TRA but for me TM was a mistery). Find the responses to my questions demand me lot of time. The last months I spend my spare time digging in TM not in the integration with ML but with the end to end process.
Let's start with the Story:
CO01 is an imaginary company in Colombia (the country I live) that produce variety of products including dairy, chocolates and juices. Their principal raw materials are MILK, CACAO and Oranges; and the company want to have a good track and detail on its cost. For that reason, in S4H this Materials are set as Standard with periodic valuation on Material Ledger (S/3 Materials). The transportation cost is very important, and a must requirement is to differentiate in the Cost Component Split of the materials the portion of the cost originated by its primary logistic process (cost incurred from the vendor to the Plant CO01 “Armenia Cacao” ).
One of its principal BP Suppliers is "LaViaLactea" who sells cow and goat milk (do you know the goat milk cheese is delicious?). The product is pack on 100kg drums (DR)
The transport of the milk from the vendors site to the plant CO01 is done by the supplier "SpeedyGon LTD". The rate per trip is a flat price of 200usd as the company fully utilize the truck.
Statutory regulations require capitalize the primary logistics costs; and the rule chosen is to distribute the transportation costs is proportional to the weight.
******* During the years, I worked in various companies that distribute the transportation cost in different ways, but the most common model is VolumetricKG and equivalent Pallets ( you can find the math about it on google). In TM you can accomplish this via BADI *****
Let’s move to S/4!
The 1st step is create a PO with 2 materials. I set my PO to create the Freight Unit automatically. The freight unit is basically a planning object on transportation management. There is not much interest on FU from the controlling point of view, but its required for the follow up document.
Here is the PO with the 2 materials, Goat Milk for 15DR and Cow Milk for 5 DR. Just for your info, 1 Dollar is about 2500 COP in the system.
PO
With the App Freight Units – Worklist you can track the FU associated to the Purchase Order or Sales Order that trigger the requirement. In my example, 4100000261 and 4100000262 are the FU created for the PO.
FU
Create Freight Order. In my example, i use the fiori app "Create Freight Order" as this is a demo. In the freight Order I include my vehicle, the means of transport, the Carrier (BP created with Vendor and Carrier Role).
Freight Order
In the Freight Order, we assign the Freight Units... so now our freight order know what product we are going to transport!!
Next step is to create the Settlement Document (i don't like the word settlement, because have lot of meanings... but whatever), in my example i do it directly from the Freight Order. Again, there are multiple ways to do it. My freight Settlement Document pick the price of 200 USD from a Freight Agreement (sort of info-record for TM rates). The freight agreement can handle scales of prices.
The next screen show how to create the settlement document from the Freight Order.
FSD
Here you can see in the “Cost Distribution” tab of the Settlement Document, the system split the Freight Costs proportionally to the KG of the materials in a 25%-75% .
When click on POST on the settlement document, the system creates in background a Purchase Order (service master) for the freight Service, and a Service Entry Sheet. In the Document Flow tab of the Freight Order you see all the TM documents and the original PO but not the Cost Distribution document .
Document Flow
In the document flow, you can see the PO and SES created.
With the SES the system debits a "Temporary" freight expense account and credit GR / IR account for “SpeedeGon” Vendor (WRX on OBYC). The temporary expense account is map on GBB-VBR for the valuation category of the service. I say temporary, because in the next step this account will be cleared. I put a Cost Center on OKB9 for this account but there are a BADI that allow you to manipulate the cost object on the SES.
The next step is posting the cost distribution financial entry. This is done in the Settlement Management module (also know as Agency Business), maybe you know about it because is often used to post Rebates. In this step, the system clears the temporary expense account and post to the material. As the material is S/3 Standard with periodic revaluation, the debit is post to a price difference account.
Here, the posting credit the cost center with the temporary account and debit the materials (in the price difference account)
The if we analyze both documents (the one created by the SES and the settlement distribution), we see the temporary account 5179000001 and the cost center have balance 0.
Post the GR of the Material Purchase Order. A this moment, system credit on GR/IR for “LaViaLactea” vendor, debit on Stock and Price Difference account (typical FI entry with Material ledger – actual costing)
We can use the T-Account analysis to see all the 3 postings:
- Enter to Material Ledger Kardex, for the Goat Mil Material:
Here, you see in the procurement, one record for the Goods receipt and one record for the receipt of the Transport costs SES. Also, you can see the transport cost is mapped to a specific CCS element named “transportation” so controlling guys can analyze the impact of the transportation costs in the total cost of the product.
In the next screen you see, 500KG of milk cost 560,675 COP. This value is the sum of 450,000 COP pay for the milk and 110,675 of the transport costs. Also, you can see in CKM3N the system differentiate 2 Process Categories (B+ Procurement and BB Purchase Order from table CKMLMV009) to differentiate the material and the additional cost come from different flows.
The same for the Goat Milk. This flow post 1800,000 of Milk Costs and 332,025 of transportation cost.
And thats is!
Wish this help you to understand the integration with Material Ledger and TM.
PS1. I create the hole flow from scratch, it involves lot of effort both in master data and custo. When I begin the journey to learn TM, I never thought it was so time consuming, but I’m very happy of all the stuff I learn .
PS2. This is only one scenario on cost distributing on TM so more blogs about it are coming!
Arturo!
- SAP Managed Tags:
7 Comments
