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Welcome to the latest SAP S/4HANA edition of this groundbreaking SAP book.
Our new book, on publication Jan 26, 2023, immediately entered the SAP Press Bestsellers top ten.
The first edition in 2007 was the first-ever book on SAP Controlling (CO), which explains SAP CO in an easy-to-understand way and has continued to attract positive reader feedback and comments from our SAP Controlling community.
The 2nd edition was released in 2011 with a revised and improved layout, and new content based on SAP ERP 6.0, continued as a best-seller, and remained in the SAP Press catalog.
To completely transform the book to the latest SAP S/4HANA version, I asked Janet Salmon, Chief Product Owner of Management Accounting at SAP SE, to co-author with me. We've included S/4HANA version 2021 screenshots and content throughout the book, and S/4HANA version 2022 in the new chapter 7 on event-based processing, SAP Fiori Apps and the future direction of SAP S/4HANA.
Chapter 7 discusses new options for variance analysis delivered with SAP S/4HANA Cloud when you use scope item 3F0 (Event-Based Production Cost Posting) and SAP S/4HANA 2022, with the business function for universal parallel accounting.
Please find a chapter-by-chapter review of the updated contents and structure in this blog.
We provide an overview of the planning process to set the baseline for variance analysis.
Figure 1 Sales and Operations Planning
We look at sales and operations planning (S&OP) as shown in Figure 1. We also examine long-term planning to determine the raw materials to be purchased and the available manufacturing capacity to be reserved.
Note that S&OP is slowly being replaced by SAP Integrated Business Planning for Supply Chain (SAP IBP), which supports all S&OP features. S&OP is intended as a bridge or interim solution, which allows you a smooth transition from SAP ERP to on-premise SAP S/4HANA and SAP IBP. See SAP Note 2268064 for details.
Note also that production versions are mandatory with SAP S/4HANA. They allow you to define which BOM alternative goes together with which routing alternative. They make MRP sourcing simpler because there is only one option to determine BOM and routing alternatives to manufacture a material. See SAP Note 2267880 for more details.
We look at cost center planning and how to combine the planned expenses and activity usage with setting the plan activity rates for activities.
We introduce master data, explaining the material master, BOM, routing, and work center to create cost estimates as shown in Figure 2.
We present the role of the costing sheet in determining the overhead to be applied to your raw materials and manufacturing activities. We also discuss configuration for the cost components and the costing variant.
Figure 2 Cost Estimate BOM and Routing
We then provide instructions for creating and releasing a cost estimate to set the standard price for a single material. We introduce the costing run to develop the standard costs for all materials in a plant. Where multiple production options exist for a material, we explain how to use a mixed cost estimate to combine different production or procurement alternatives to deliver one standard cost.
We introduce the Universal Journal and its impact on primary and secondary costs. We walk through the steps on the shop floor such as production order and process order activity confirmation and component goods issue that result in actual postings as shown in Figure 3.
One of the fundamental changes in SAP S/4HANA is that the work center and operation are now part of the data structure for variance analysis.
Figure 3 Production Order Actual Costs During Goods Issue
We introduce two new critical SAP Fiori apps:
We explain how to configure SAP S/4HANA to calculate production variances and the variance categories to demonstrate their impact, including cost center and purchase price variance PPV.
We include detailed examples to help you easily understand period-end processing including overhead, Work in Process WIP, variance calculation and settlement.
Figure 4 Variance Splitting Profile
We explain actual costing and how it rolls up purchase and production variances through the value chain as shown in Figure 4.
We walk through scrap calculation.
Figure 5 Component Scrap Increases Component Input Quantity
We explain the types of scrap, including Assembly Scrap, Component Scrap, and Operation Scrap, and their interaction as shown in Figure 5.
We explain the impact of production variances on product profitability and walk through the options to analyze data in detail.
Figure 6 Standard Cost Center Reporting
We look at standard reports in detail including Cost Center Reporting as shown in Figure 6.
We analyze summarization reporting including product drilldown reports.
We explore both classic reports and tools and SAP Fiori apps.
We show how SAP is moving away from calculating production variances at period-end toward a new approach that sees the production variances calculated with every final goods receipt, known as event-based variance analysis as shown in Figure 7.
Figure 7 Event-Based Production Cost Cycle
Chapter 7 explains scrap and mixed price variances.
Chapters 1 to 6 are written and illustrated based on an on-premise SAP S/4HANA 2021 system.
Chapter 7 discusses new options for variance analysis delivered with SAP S/4HANA Cloud when you use scope item 3F0 (Event-Based Production Cost Posting) and SAP S/4HANA 2022, with the business function for universal parallel accounting.
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John Jordan is a seasoned SAP consultant with 20+ years of experience in SAP S/4HANA Controlling. As Lead SAP S/4HANA Controlling Consultant at ERP Corp, he specializes in seamless transitions to SAP S/4HANA, focusing on Product Costing, Material Ledger, and Margin Analysis.
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