Cost Planning 1

8/2/2019 Cost Planning 1

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2006 Wellesley Information Services. All rights reserved.

Enhance Current BudgetPlanning Processes with

SAPs Controlling (CO)Functionality

Tammy FraleyAlta Via Consulting


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What Well Cover

Why plan at all?

Planning options in SAP R/3

Quantity-based planning Resource planning

Resource pool planning

Formula planning

Integrated planning

Planning scenario demo

How to make it work

Wrap-up


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In This Session

Do you realize

In the average organization, the planning process iscompletely broken

Planning is a drawn-out, resource-intensive process

The product of the planning process is often obsolete on thefirst day of the fiscal period for which it was intended

You have invested in SAP what is there in SAP that can helpwith the planning process?

Practically, what does it mean?

Implementation considerations


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The Big Picture

PS Project Systems

LIS Logistics Information Systems

PP Production Planning

SOP Sales Operation Planning

CO-OM Controlling Overhead Management

CO-ABC Controlling Activity-Based Costing

CO-PC Controlling Product Costing

CO-PA Controlling Profitability Analysis

FI-GL Financials General Ledger

FI-SL Financials Special Ledger

EC-PCA Enterprise Controlling

Profit Center Accounting


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The Big Picture (cont.)

Plan

Reconci-liation

Target

EqualsActual

COPlanning

Cost-to-Serve


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What Well Cover

Why plan at all?




Formula planning

Integrated planning


How to make it work

Wrap-up


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Why Plan At All?

The naysayers

There is some opposition toplanning at all. The best example of

this is the Beyond BudgetingInitiatives concept.

Planning remains important

It is a key managerial process andcentral to the proactive stance ofthe enterprise

Planning and re-planning iscentral to achieving overall

strategic objectives

Planning is the foundation formeasurement and triggeringadaptive and corrective actions

throughout the planning period

Strategy

Continuum of Management

Processes


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Why Plan At All? (cont.)

Planning remainsimportant (cont.)

Planning and control plays

a central role in theintegration of managerialand organizational processes.Planning is the glue

of an integrated strategy,performance measurement,and the organizationsreward system.

OrganizationalPlanning and

Control

OrganizationalOrganizational

StrategyStrategy

PerformancePerformance

MeasurementMeasurementRewardReward

SystemSystem

KPIs

KPIs

KPI

s


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Why Plan At All? (cont.)

Planning remainsimportant (cont.)

Planning enables a

comprehensive view ofenterprise operationsalong three timelines.The reflective view

is provided in real timeat standard.

Limits of planning

Planning in SAP CO ascovered in this session willbe limited to the monetaryreflection of enterprise

operations

Descriptive Predictive

Reflective

A Single Integrated System


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What Well Cover

Why plan at all?




Formula planning

Integrated planning


How to make it work

Wrap-up


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Planning in SAP CO

A comprehensive ERP solution

SAP, as the leading ERP vendor in the market, providesextensive planning functionality

You can divide this functionality into two broad categories:

Value-based planning

Quantity-based planning


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Value-Based Planning in SAP CO

What is it?

The practice of working with predominantly financial data inplanning/budgeting

The SAP system provides for both crude top-down anddetailed value-based planning

Usage

Uses planned cycles (distributions and assessments) toassign dollars to receivers

Causality is not a primary feature of the value-based approach

Not conducive to a robust control cycle Weak on effective decision support


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Quantity-Based Planning in SAP CO

What is it?

The practice of working with predominantly quantitativeoperational data in planning/budgeting, which is subsequently

valued to come up with a financial plan

The SAP system provides only for a bottom-up approach toplanning in this case

Usage Uses a range of methods which we will focus on in

this session

Causality is a key feature of quantity-based planning Enables as robust a control cycle as the company desires

Strong on effective decision support


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What Well Cover

Why plan at all?




Formula planning

Integrated planning


How to make it work

Wrap-up


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Quantity-Based Planning

Planning areas

Resource Planning detailed and quantitative inputplanning with predetermined rates

Resource Pool Planning primary (cash flow) andsecondary (internal service consumption) planning

Formula Planning automating input planning and

coming to terms with differences in resource supplyand demand

Integrated Planning pulling information in fromother modules


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What Well Cover

Why plan at all?




Formula planning

Integrated planning


How to make it work

Wrap-up


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Resource Planning

What is it?

Defining certain inputs as resources that are planned in aquantitative manner and valued with predetermined prices

You can further automate resource planning throughformula planning

What do you get?

The ability to revalue input prices independent of inputquantities

Reflect planned resource excess/idle capacity

Automate overtime calculations for when resource demand ishigher than supply

The ability to calculate both input price and input quantityvariances if it adds value, of course


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Resource Planning (cont.)

Live DemoWalk-through of Configuration Screens


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Resource Planning (cont.)

Live DemoWalk-through of Data Screens


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What Well Cover

Why plan at all?




Formula planning Integrated planning


How to make it work

Wrap-up


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Resource Pool Planning

What is it?

Provides the ability to plan resource supply

Provides the ability to plan corresponding inputs cash flow

(primary) and internal services (secondary) that will beconsumed

Serves as the basis for the price calculation

What do you get? Resource supply/output

Resource output rates

The ability to do a high-level reconciliation of resource supplyand demand also for support services


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Resource Pool Planning (cont.)



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Live DemoWalk-through of Master Data Screens


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What Well Cover

Why plan at all?






How to make it work

Wrap-up


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Formula Planning

What is it?

Provides the ability to automate planning calculations

Allows for the entry of statistics a statistical key figure (SKF)

for full-time employees (FTEs) and derives detailed quantity-based planning

What do you get?

A highly streamlined planning process The need for minimal user interaction/data feeds

into the system

Accurate and detailed planning outputs


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Formula Planning (cont.)



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What Well Cover

Why plan at all?






How to make it work

Wrap-up


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Integrated Planning

What is it?

The ability to incorporate planned information from onemodule into another module

Integration SAP provides to make planning easier

What do you get?

A rolled-up cost view on any object that includes costs

planned in other CO sub-modules The ability to enter planning data once and have it permeate

the cost model


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Integrated Planning (cont.)



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What Well Cover

Why plan at all?






How to make it work

Wrap-up


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Planning Scenario

Demo scenario

The manager of a facility has been given a number ofscenarios from the sales department. The financial

department has approached him to provide an estimateof the impact on his resources for the most optimistic salesscenario in the plan for the next fiscal period.

Steps Current resource supply and the most likely sales scenario

data is presented first

The optimistic sales scenario is then simulated to determine

impact on resource requirements


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Planning Scenario (cont.)



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C


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What Well Cover

Why plan at all?






How to make it work

Wrap-up

H M k i W k


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How to Make it Work

Conceptual requirements

Obviously there is a need to think about planning in SAP in adifferent way. The cost model must be designed differently.

Conceptual design issues are discussed further in the sessionUnlock the Benefits of Resource Consumption Accounting(RCA), by Anton van der Merwe.

Skills requirements SAP resources would need to know how to use the

functionality in the various planning areas shown

Change management

It is likely that the biggest issue is getting managers to thinkdifferently about planning as a process and the informationplanning provides them

H t M k it W k ( t )


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How to Make it Work (cont.)

Conceptual requirements

Ensure adequate time is allotted for detailed conceptualdesign

Investigate and educate on new Resource ConsumptionAccounting (RCA) concepts

Skills requirements

Develop a training plan for all project team members Present road shows to business to give background

information

Change management Accept this to be the number one issue dont IGNORE it

Wh t W ll C


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What Well Cover

Why plan at all?


Quantity-based planning

Resource planning




How to make it work

Wrap-up

Resources


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Resources

Books:

The 123s of ABC in SAP, Dawn Sedgley and Chris Jackiw,Jon Wiley & Sons Inc., 2001

For its quantity-based illustrations of ABC, a key featureof RCA

Case study:

Clopay A Plastics Extrusion Company RCA at Cloplay, Douglas Clinton and Sally Webber,

Strategic Finance Magazine, October 2004 issue

http://www.imanet.org/ima/sec.asp?TRACKID=&CID=1371&DID=2697

Resources (cont )


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Resources (cont.)

Web sites:

http://www.rcainfo.com a free subscription service onResource Consumption Accounting

http://www.altavia.com a public library is available witharticles and white papers

http://www.imanet.org The Institute of Management

Accountants a discussion database/email exchangededicated to GPK and RCA (Note: In order to have access, youneed to subscribe to the IMAs List Server)


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Your Turn!


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Your Turn!

How to contact me:Tammy Fraley

[email protected]

Documents

Cost Planning 1