Enrich Production Variance
Analysis of variance with S/4HANA
With S/4HANA some approaches are updated.
In the past Profit Analysis was mostly Costing based, more integrated, more agile with other modules and of course we had some limitations.
The limits were understanding because SAP Database and technology obliged to use redundant data. One table to cover one need.
Today Profit analysis is accounting based, it’s mean that profit analysis is based on accounting document with enrich data. For each analytical process, we have to think it through an FI document with all the force of the detail.
Into a line item, we have a nature of expenses/revenue (primary or secondary), company code amount in different valuation as transaction, company, group profit center valuation and free currency, until 3 quantity fields + 1 standard quantity, profitability segment, trading partner, functional area … and S/4 Hana gives tools to define GL accounts based on process flow. The purpose of this article is to present the new way of thinking for analysis of variance for production orders.
With database in column (check in Wikipedia, it’s not a new concept) and technology to put data in memory, the SAP HANA platform has been available since 2010, and SAP applications like SAP ERP and the SAP Business Suite are able to run on the SAP HANA database and/or other supported database systems.
The new suite, SAP S/4HANA, launched on 3 February 2015 at the New York Stock Exchange. The event introduced cloud and on-premises editions, with the on-premises edition becoming available on the same day. The cloud edition went live at SAPPHIRE NOW (SAP’s annual customer conference) on 6 May 2015 in Orlando, Florida.
Go back in our topic: Analysis of variance.
We have many blogs to exposure the concept, the purpose is to understand why yield is better or lower than schedule and to understand in which topic we have to work harder to be equal or better than standard.
We can have a look on:
Analysis of variance from Wikipedia
Variance analysis from SAP Help
Variance Analysis in SAP Controlling from ERP fixer (drive by Paul Ovigele)
The purpose of company is to do some benefice each year. To accomplish this story, sales department needs to be able to sale at the best price with the best product to answer needs of their customers. To product finish good, we must do it at the best price at the standard price.
Standard is equal to the budget for a manager in production. It’s corresponding on his engagement to be able to produce. Of course, they will work to do better or standard.
If we present a summary of the different flows to produce (very simplified):
Like we can see, we’ll have variances at each stage of production.
Our concern on this article is variance from production order by cost component. This is a main difference from ECC.
With S/4 Hana the variance category could be defined by origin using dedicated primary PnL accounts.
The customizing point is behind:
The principle is to define a price difference profile per controlling area and Chart of account
For the profile you define by origin cost element, the target account and the variance category
Screen copy of example of customizing
You have to define a default assignment in case SAP requires it.
All targets accounts should be included into margin analysis using OKB9 transaction (default assignment).
By the way, Business is in capability to analyze variance by category (like we did into ECC) and by component (new for S/4 Hana). Imagine in your Profit analysis, you have order type, business can analyze variance base on source and the way to produce.
If for product costing, we are using an origin group. Here, there is no option to select cost element and origin group, so variance is limited at cost element.
In the S4 implementation, to be able to do a large analysis of variances based on CCS elements, we shouldn’t use anymore origin group for product costing.
There is a second limit, the price difference profile is assigned at company code level. It’s mean we can have only one profile for one company.
We know into a plant we have different way to produce, and we need to have different variance.
For this second limit, with an enhancement (nonstandard for now) it’s possible to adjust the price difference profile based on order type (way to produce) or plant.
In this case, you can define accounting scheme similar like this example:
example cost elements used
The new features on production variance allow to design reporting based on cost component structure and (with enhancement) by way of production.
These approach permits to analyze with different perspective the different variance.
May attention on :
- by default, you have one profile per company code, not sufficient in many cases
- If you are using origin group in your CCS, this feature is not a trigger for variance only GL accounts assigned to CCS are permit as trigger
- Variance split is based on primary CCS
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