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stefan_mueller
Advisor
Advisor
This blog post is part of a series of related blog posts highlighting the enhancements to address the handling of landed costs. .

Link to main blog post

Overview Analytical Enhancements


In this blog post I would like to highlight the enhancements made in analytics for financial accountants responsible for inventory valuation and procurement monitoring. The same reports can be used by the procurement department to analyze the accuracy of landed costs planned vs. actually allocated landed costs.

Landed cost enhancements for financials

New reports (all assigned by default to the work center view Landed Cost – Clearing)

  • Landed Costs – Monitor Allocations to Goods Receipt for Inventory Valuation Update
    (this report is crucial for the entire process – here the landed costs clearing sets are set by an action to ‘To be Cleared’ by the customer

  • Landed Cost – Financial Analysis

  • Landed Cost – Line Items

  • Landed Cost – Balance Summary


All the above-mentioned new reports have been built on this new data source FININVU24 - Purchase Ledger Account Line Items (Landed Cost). It is a filtered and enhanced projection of the general purchase ledger details data source. The new reports are assigned by default to the work center view Landed Cost Clearing. The landed cost detailed information relevant for these reports originates from the journal entry lines affecting the purchase ledger.  In order not to overload the existing purchase ledger data and its related reports, we decided to provide a dedicated new data source filtered only on those transactions contributing to the landed cost process.

Based on the landed cost allocation postings the relation between:

Receiving material

  • Material

  • Product Category

  • Supplier


and allocated landed costs

  • Landed Cost Category

  • Landed Cost Components

  • Landed Cost Invoice Item – Service (if used in the landed cost invoice item)

  • Landed Cost Invoice Item– Product Category (if used in the landed cost invoice item)

  • Landed Cost Invoice – Supplier


can be analyzed.

Landed cost enhancements for purchasing

Landed costs information is important for a purchaser to decide which supplier is selected to provide certain materials. Sometimes landed costs contribute to the material costs at a large scale.

In order to give the purchaser a good overview e.g. which landed cost amounts were added to the material costs in a certain time frame, we enhanced existing data sources with the landed cost information and provided additional reports and data sources:

  • New Report and Data Source: Landed Cost Allocation Details

  • New Data Source for Landed Costs in Purchase Orders

  • Enhancement of Supplier Invoice Item Details Data Source


Furthermore, the comparison of the planned landed costs and the invoiced landed costs could be analyzed with the help of the Report Landed Costs – Monitor and Set Clearing Status for Goods Receipts by selecting the cleared items for a certain period.

Report Details: Landed Cost – Monitor and Set Clearing Status for Goods Receipts


This report and the available action to set landed cost clearing sets to ‘To be Cleared’ is essential and critical for the overall landed cost process to ensure that landed cost variances and unplanned landed costs are cleared against the material ledger in a timely and responsible manner. These cleared variances update the material unit cost in case of a moving average unit cost controlled material. Many companies do have different procurement pattern and different landed cost invoicing and timing complexities. Therefore, we provided a report with actions to set the clearing set status to ‘To be Cleared’. The very flexible adaptation and personalization of view variants, selections variants or combining them as bookmarks makes it easy to customize the report to your business needs.

To avoid unwanted fluctuations of the moving average unit costs a conscious decision by authorized users is required for the landed cost clearing sets that are in status Open. Before setting the status on a landed cost clearing set / landed cost component to ‘To be Cleared’ a responsible business user should go through a thorough check list:

  • Unplanned landed cost are

    • Wrongly assigned -> allocation to be cancelled and corrected

    • Correctly assigned -> set status to ‘To be Cleared’



  • Allocations significantly higher than planned

    • because wrongly assigned -> relevant allocation to be cancelled and corrected

    • Correctly assigned -> set status ‘To be Cleared’



  • Allocations are in range with goods receipts valuation based on planned landed costs

    • Correctly assigned -> set status to ‘To be Cleared



  • Allocations significantly lower than planned

    • Still awaiting further landed costs to be allocated -> do not set status‘To be Cleared’

    • Not awaiting any further landed costs -> set status to ‘To be Cleared’



  • Aged landed cost planned and used during goods receipt valuation but no allocation

    • Double check that no allocations are to be expected -> if yes: set status to ‘To be Cleared’




The report should be assigned to a business user who is very familiar with the landed cost processes in his company. It is not recommended to assign this report to an untrained business user because also these will have access to the critical action. For the typical sequence of checks that should be done on a regular basis (daily) by a business the report provides:

Multiple report views with applied value filters to address the above-mentioned typical scenarios.
The default is to show All Values.


Landed Cost - Available Report Views


Selection criteria including a threshold % (default 90%) = allocated landed cost amount / planned landed cost amount. This entered threshold only affects the views:

  • LC Allocations < Threshold %

  • LC Allocations >= Threshold %


As a prerequisite the characteristic Landed Cost Clearing and Component must be part of the report view. The action ‘Change Status to be Cleared’ is available. The action can be applied either:

a) for the entire result set that has been filtered by selection and use of view


Action: Apply to entire result set


b) For a single line by marking a line of the characteristic Landed Cost Clearing and Component



Action: Apply to single Landed Cost Clearing / Component


 

We expect that users will define respective sets of selections and report view variants that suit the respective business needs best.  In case the action is used for the entire result set ((a)), all selected sets need to be in status ‘Open’.

Note: After the status has been set to ‘To be Cleared’ it cannot be reverted.

The clearing set will usually be picked up by the next landed cost clearing run. Once processed, variances are cleared, and the clearing set status is set to Cleared. Any subsequent change to the affected landed cost clearing set will revert it back to ‘To be Cleared’. These late changes could originate from:

  • An additional, cancelled or adjusted landed cost allocation

  • A late goods receipt quantity adjustment

  • A cash discount taken during payment of the landed cost invoice

  • An allocation of a landed cost credit memo


Available main key figures

The key figures shown in company currency are:

  • Landed Cost Planned Amount is primarily based on goods receipts that used the planned landed cost from the purchase order

  • Landed Cost Actual Amount is based on the data that originates from the landed cost allocations

  • Landed Cost Actual / Planned Amount indicates the ratio of actually allocated amounts compared to the planned amount. 100% indicates that the allocated amounts exactly match the planned amounts used at goods receipt.

  • Landed Cost Exceeds Threshold % is an indicator that compares the Landed Cost Actual / Planned Amount % with the threshold % entered in the variable screen. It has value ’1’ (green) if the value is greater than or equal the entered threshold. It is ‘0’ (red) if the value is less than the entered threshold.


Selection Screen:

  • Company

  • Set of Books: The default set of books should be used

  • Landed Cost Clearing Set Status - The action set ‘To be Cleared’ is only applicable for clearing sets that are open. Therefore, these values are defaulted.

  • Threshold % - is defaulted to 90% and only relevant for 2 report views


To filter and focus additional optional parameters are available

  • Landed cost component

  • Purchase order


Note: In case you want to select on the Actual Delivery Date of the Inbound Delivery (example – last 2 weeks) please use key user analytics extensibility or personalization by using the Add Fields in the Analysis pattern.


Enhance selection by Actual Delivery Date


Report View: All Values

No value filters are applied, and you can see all values. This view is usually not suited for the mass action unless you have other clear filter criteria specified in the selection screen.


Report View: All Values


Report View: LC Unplanned Landed Costs

Two value filters are applied:

  1. Landed Cost Planned Amount = 0,00 – this means no landed costs for that landed cost component were initially planned

  2. Landed Cost Actual Amount > 0,00 – landed costs have been allocated


Usually, it is expected that a business user can set the status to ‘To be Cleared’ as a mass action.


Report View: LC Unplanned Landed Costs


Report View: LC Allocations >= Threshold %

This view is to be used in combination with different threshold values (probably stored with other criteria for reuse as selection variants)

  1. Initially a threshold that might indicate wrong allocations could be useful – say 150%. Single landed cost clearing sets (that are correct can be set to ‘To be Cleared’ – all others should be corrected by cancelling the allocation and creating new allocations

  2. If the allocations have reached for example 90% of planned, it can be assumed that allocations are complete. Therefore, the mass action could be applied.



Report View: LC Allocations GE Threshold %


Report View: LC Allocations < Threshold %

This view shows landed cost clearing sets where actual allocations exist, but they are below the threshold %. Further allocations are likely to be expected. The landed cost clearing sets are NOT to be set ‘To be Cleared’.


Report View: LC Allocations lower than Threshold %


Report View: LC Actual Amount = 0

Two value filters are applied:

  1. Landed Cost Actual Amount = 0,00

  2. Landed Cost Planned Amount > 0,00


If for example the actual delivery date is used that is more than 30 days old and there are no actual allocated landed costs, it is likely that no further landed costs are to be expected. The initially applied planned landed costs should be set ‘To be Cleared’ ensuring that with the next landed cost clearing, the inventory valuation will be reduced.


Report View: LC Actual Amount = 0


Report to Report Navigation

To analyze the detailed origin of the contributions of a single landed cost clearing set it is recommended to use the Landed Cost – Line Item report. Changes of the drill down in the view can make the provided comparison key figures useless. They are designed to work at the landed cost clearing set granularity and aggregations.

Report Details: Landed Cost – Financial Analysis


The report addresses primarily financial accountants. It enables the user to identify the distribution and the origin of landed costs, and focuses on data originating from landed cost allocations and its related journal entry line-item information. It is not so much about a planned / actual comparison on a granular level but more intended to provide means to analyze the structure and source of landed costs over time and across many procurement processes on company level. Moreover, for this report a report-to-report navigation has been enabled to navigate to the Landed Cost – Line Items.

A set of report views have been built. These are to be seen as templates for useful drill-down and graphical analysis. We expect key user analytics or business user by personalization to tune the views and selection settings fitting to their needs.


Report: Landed Cost - Financial Analysis / Views


Report View: (Graph) Actuals Heatmap – Landed Cost Components / Materials


Report View: (Graph) Actuals Heatmap – Landed Cost Components / Materials


Based on actual landed cost allocation data the, heatmap shows which materials have absorbed or caused most landed costs, split by landed cost component. This is an easy way to identify hotspots. In case the granularity of the heatmap needs to be changed, use the report view personalization and exchange product and landed cost component with characteristics that suit your needs better. For example, substitute landed cost category (instead of landed cost component) and product category (instead of the product).


Report View Settings for Heatmap


Report View: (Graph) Landed Cost by Product Category and Landed Cost Category

This view shows a stacked by product and grouped by product category showing the allocated costs at a granularity of landed cost category.
Also, here the view is based on actual allocation data and its journal entry data.
A similar analysis can be done by substituting the landed cost category by the supplier of the landed cost.


Report View: (Graph) Landed Cost by Product Category and Landed Cost Category


Report View: (Graph) Plan vs Actual by Landed Cost Category and Period

This analysis gives insight on the used planned landed cost valuation at inbound delivery compared to the actually allocated amounts by accounting period. This view can give a good indication on the trend over time for selected landed cost categories. Moreover, on a high level it indicates the gap of planned landed cost vs actual allocated costs. Whether this gap is relevant for inventory valuation is subject to the customer assessment and nature of procurement processes.
Note: Keep in mind that the accounting period is derived from the posting date of the underlying transactions.


Report View: (Graph) Plan vs Actual by Landed Cost Category and Period


Report View: Landed Cost Clearing Analysis by LC Category, LC Status, GL Account
This final report view focuses on the respective G/L accounts for landed cost clearing purposes defined by landed cost category showing Debit / Credit originating from different transactions represented by the journal entry type. To identify the individual transactions a report-to-report navigation to the Landed Cost – Line Items report is enabled. This navigation will pass the selection and navigation status information to the receiving report.


Report View: Landed Cost Clearing Analysis by LC Category, LC Status, GL Account



Report Details: Landed Cost – Line Items


This report is based on the purchasing subledger structure, but specifically  enhanced by characteristics that are relevant for landed costs. These characteristics are not available in the general Purchasing Documents – Line Items report/data source? We wanted to avoid “cluttering” the general-purpose data source and line item report with landed cost specifics.

The report offers 2 views:

  • Landed Cost Details

  • Landed Cost Details - Amount with Reference Quantity


Note: Fundamentally different key figures in these two views are used that means different set of postings are shown.

Report View: Landed Cost Details

This view allows the user to better understand the aggregation in the report Landed Costs – Monitor Allocations to Goods Receipt for Inventory Valuation Update. From here an authorized user can navigate to the journal entry and related source document.


Report View: Landed Cost Details


Report View: Landed Cost Details - Amount with Reference Quantity

Here the amount in company currency along with the reference quantity is shown. Compared to the prior view also the landed cost clearing related journal entry line items are also shown. The reference quantity indicates to which quantity the landed cost amount relates to.

Note: The landed cost clearing does not populate the reference quantity. Moreover, the reference quantity does not balance on result rows or result columns.


Report View: Landed Cost Details - Amount with Reference Quantity



Report Details: Landed Cost – Balance Summary


The report Landed Cost – Balance Summary is similar to the GR/IR - Balance Summary. It allows the user to select all purchase document items with landed costs that had an open balance at a certain key date. That means in particular:

  • landed cost invoice items that have not been allocated and posted at key date.

  • Goods receipt / landed cost component clearing sets that have a remaining balance at key date


The report can also be used to explain the opening balance / ending balance of the trial balance for the respective clearing accounts by using the respective key dates at period end.
The report is also enabled with a report-to-report navigation to the Landed Cost – Line Items report to analyze further details

Two views are provided in the standard delivery:

Report View: Landed Cost – Balance Summary


Report View: Landed Cost – Balance Summary


Report View: Landed Cost Inventories by G/L Account
This view is suitable for reconciliation purposes with the trial balance opening / ending balance on the respective clearing accounts.


Report View: Landed Cost Inventories by G/L Account



New Report: Landed Cost Allocation Details


The report Landed Cost – Allocation Details and its underlying data source SRMLCA_B01 provides all the data that is part of the landed cost allocation document. It can be accessed through the Supplier Invoicing work center in the Reports View.

New Data Source for Landed Costs in Purchase Orders


The data source Planned Landed Costs in Purchase Orders SRMPLC_B01 contains all the information which is related to the planned landed costs that can be maintained in the purchase order. For example, you can query the landed cost components which were planned for a certain material and the results list can show you the planned landed cost amount for each purchase order item.

Enhancement of Supplier Invoice Item Details Data Source


The data source Supplier Invoice Item Details SRMIV_B03 is enhanced by the following fields: Allocation Document ID, Allocation Status and Landed Cost Component.

 

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