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BHARAT ELECTRONICS LIMITED

SAP IMPLEMENTATION

Bharat Electronics Limited

SAP Implementation
BUSINESS BLUEPRINT

Business Blueprint

Controlling

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BHARAT ELECTRONICS LIMITED
SAP IMPLEMENTATION
DOCUMENT APPROVALS

....................................................... ................................
Mr.Mahapatra.K
Core Team Member- BEL

....................................................... ................................
Mr.Venkataramana.K Date
Functional Consultant-1

...................................................... ................................
Mr.Ramesh Babu M Date
Functional Consultant-2

....................................................... ................................
Mr.Venkata Swamy.V Date
Functional Consultant-3

....................................................... ................................
Mr.Yogesh Kulkarni Date
Project Manager - Wipro

....................................................... ................................
Sri.R.P.S.Gahlaut Date

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BHARAT ELECTRONICS LIMITED
SAP IMPLEMENTATION

DOCUMENT CONTROL SHEET

GENERAL INFORMATION

Project name Document name Document location


BEL SAP Implementation

DOCUMENT INFORMATION
Version Filename Date Author Reviewed Changes from previous version
by
V 1.0 Controlling

REFERENCE DOCUMENTS

Document Version Reference

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List of Business process covered in this Document:

Contents:

SLNO Process Code Process Description Status Remarks


01 BO1- CO- 010 Cost Element Master
02 BO1- CO- 011 Cost Element Group
03 BO1- CO- 012 Cost Center Master
04 BO1- CO- 013 Cost Center Group
05 BO1- CO- 014 Activity Types
06 BO1- CO- 015 Activity Type Group
07 BO1- CO- 016 Statistical Key Figures
08 BO1- CO- 017 Statistical Key Figure Group
09 BO1- CO- 018 Cost Center Planning
10 BO1- CO- 019 Internal Order
11 BO1- CO- 020 Internal Order Group
12 BO1- CO- 021 Profit Center Accounting
13 BO1- CO- 022 Profit Center Standard Hierarchy /
Group.
14 BO1- CO- 023 Planning & Budgeting – Prepare
Initial Plan
15 BO1- CO- 024 Review Draft plan
16 BO1- CO- 025 Set-Up Plan Costs for Plan
Overheads
17 BO1- CO- 026 Allocate Plan Overhead Cost
18 BO1- CO- 027 Calculate Planned Activity Type
Prices
19 BO1- CO- 028 Review Preliminary Plan
20 BO1- CO- 029 Finalize Plan & Budget
21 BO1- CO- 030 Set-Up Cost Allocation for Actual
Overhead Costs.
22 BO1- CO- 031 Allocation of Actual Overhead Costs.
23 BO1- CO- 032 Product Costing.

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SAP IMPLEMENTATION

ORGANIZATION STRUCTURE

Considering the modules to be implemented for BEL, the following Controlling organizational
structure

Controlling area
The controlling area is the highest organizational unit in Controlling. BEL Controlling Area shall
be 1000. There shall be only one Controlling Area across all company codes
All company codes of BEL shall be attached to Controlling Area - 1000 with single Chart of
Accounts – 1000 with single Fiscal Year Variant Z1

Company Code: A company code is the smallest organizational unit for which complete,
independent accounting can be carried out. This includes the entry of all transactions subject to
posting and the creation of all items for legal individual financial statements, such as the
balance sheet and the profit and loss statement.

As for BEL’s organization, it is proposed that the assignment of company code to be carried out
as follows:

Company Name Company Code

Corporate 1000

Bangalore 1100

Chennai 1200

Ghaziabad 1300

Hyderabad 1400

Kotdwara 1500

Machilipatnam 1600

Navi Mumbai 1700

Panchakula 1800

Pune 1900

All the company codes will be using INR as the Controlling Area and Company Code currency..

Inter-company automatic posting function will be activated for BEL as all companies will
maintain their full set of accounts in the same client.

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Chart of Accounts

A chart of accounts is a placeholder where all the required G/L accounts can be defined. In the
first place, the chart of accounts needs to be indexed so that it is possible to proceed with the
G/L account management.

As for BEL Organization, it is proposed that a single chart of accounts to be used for all the
companies within the scope of implementation, as follows:

Chart of Accounts Description Chart of Accounts

Chart of accounts for BEL group 1000

Table: - Charts of Accounts

Fiscal Year

Fiscal year definition is configured to ensure any posting or transactions to be captured in the
corresponding accounting period. Additionally, a fiscal year definition is the basis for
determining posting periods as well as audit adjustment periods.

A fiscal year variant is used to define the fiscal year. In short, the definition of a fiscal year

It is recommended for BEL requirements to use the following fiscal year variant.

Fiscal Year Variant Description

Z1 Fiscal Year, 4 special periods

Table: - Fiscal Year

Cost Center/ Profit Center Standard Hierarchy shall be 1000.

Standard Hierarchy means a tree structure representing all cost centers belonging to a
controlling area from a Controlling perspective.
You can combine cost centers into cost center groups. You can then create cost center
hierarchies from these groups by combining the groups according to decision-making area, area
of responsibility, or management area.
A cost center hierarchy comprises all cost centers for a given period and therefore represents
the whole enterprise. This hierarchy is known as the standard hierarchy.
To create cost centers, you need to define a hierarchical cost center structure (cost center
group). In Cost Center Accounting, this structure is known as the standard hierarchy
You can display and edit organizational units in your standard hierarchy assignment and the
related master data.

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Data Migration Considerations

This section summarizes the type of data, within this module, that is envisaged to be converted
from the legacy systems to SAP R/3 and the envisaged method of conversion. This section is
not intended to detail or document the data conversion strategy.

Data to Master / Estimated Conversion Method


Convert Transaction Volume
(active)
GL Master Master To be SAP Standard program.
Record Considered
GL Balances Transaction To be SAP Standard program.
(BS & P+L) Considered

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Broad Processes covered in Controlling Module are:

1. Cost and Revenue Element Accounting


2. Cost Center Accounting
3. Internal Orders
4. Profit Center Accounting
5. Planning & Budgeting
6. Product Costing

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Reports and Forms


This section summarizes the inventory of reports and forms identified within this module as
being required and the envisaged method of report generation. It should be noted that standard
SAP R/3 reports should be used wherever possible.

No Report / Form Name Frequency Method Remarks


Current Reports / Forms
1. KA23 - Cost Elements: Adhoc Standard report
Master Data Report
2. KS13 - Cost Centers: Adhoc Standard report
Master Data Report
3. KOK5 - Internal Adhoc Standard report
Orders: Master Data
Report
4. KAL7 - Overview of Adhoc Standard report
Cost Flows
5. KALR - Reconciliation Adhoc Standard report
Ledger: CO Line Items
6. Plan/Actual cost Adhoc Standard report
Comparisons
7. Target/Actual cost Adhoc Standard report
Comparisons
8. Planning Reports Adhoc Standard report
9. Profit Center Adhoc Standard report
Comparison: Return
on Investment
10. Profit Center: Adhoc Standard report
Statistical Key Figures
11. KE31 - Create Adhoc Standard report
Profitability Report
12. KE91 - Create Report Adhoc Standard report
Based on Line Items
13. KE94 - Define Forms Adhoc Standard report
for Reports Based on
Line Items
14. Analyze Costing Run Adhoc Standard report
15. Detailed Reports For Adhoc Standard report
Material
16. Material Cost Estimate Adhoc Standard report
vs. Preliminary Order
Cost Estimation
17. Reports for Product Adhoc Standard report
Cost by Period
18. Reports for Product Adhoc Standard report
Cost by Order
19. Cash Flow Adhoc Standard report
20. Actual Costing/Material Adhoc
Ledger

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Cost and Revenue Element Accounting:

Cost elements classify an organization’s valuated consumption of production factors within a


Controlling area. A cost element corresponds to a cost-relevant item in the chart of accounts.

We distinguish between primary cost and revenue elements and secondary cost elements.

Primary Cost/Revenue Elements:


A primary cost or revenue element is a cost or revenue-relevant item in the chart of accounts,
for which a corresponding general ledger (G/L) account exists in Financial Accounting (FI). You
can only create the cost or revenue element if you have first defined it as a G/L account in the
chart of accounts and created it as an account in Financial Accounting. The SAP System
checks whether a corresponding account exists in Financial Accounting.

Secondary Cost Elements:


Secondary cost elements can only be created and administrated in cost accounting (CO). They
portray internal value flows, such as those found in internal activity allocation, overhead
calculations and settlement transactions.

When you create a secondary cost element, the SAP System checks whether a corresponding
account already exists in Financial Accounting. If one exists, you can not create the secondary
cost element in cost accounting.

Cost Element Categories:


The cost element category has a technical control function. It determines whether you can
post to a cost element directly or indirectly.

Direct posting means: You post a fixed amount to an account by specifying the account
number. You can post directly to all primary cost elements.

Indirect posting means: The R/3 System determines the account automatically at the time of
posting You can not enter the account number with the posting transaction. You can only post
indirectly to secondary cost elements.

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BO1- CO- 010


Sub-Process: Cost Element Master

Current Scenario / AS IS:

Step SR NO Activity Input Output


CO-01-01 Presently GL account is treated as Cost GL Account Cost Elements
Elements. Ref: - G/L master Creation.

SAP Scenario / TO BE Process:

Step Ref Procedures T. Code Input Output


1. CO-01-01 Creation of Primary Cost/ KA01 Validity period, Primary
Revenue Element Cost element Cost/
name, revenue
Cost element Element
category will be
created
2. Creation of secondary cost KA06 Validity period, Secondary
element Cost element Cost/
name, revenue
Cost element Element
category will be
created

Benefits
New functionality for BEL

Gap Analysis

NIL

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BO1- CO- 011


Sub-Process: Cost Element Group

Current Scenario / AS IS:

Step SR NO Activity Input Output


CO-02-01 Cost element are grouped the labour
and Overheads
CO-02-02 Major Groups are
1. Labour and Overheads.
2. Material Overheads
3. Non-Manufacturing Overheads.
4. Development & Engineering
CO-02-03 This grouping is done by Finance Dept.

SAP Scenario / TO BE Process:


Organizational unit storing a group of cost elements. Cost elements with similar characteristics
may be grouped together in cost element group. You can define any number of cost element
groups for valuation, planning and allocation purposes as part of master data maintenance.
You can also arrange cost element groups in further cost element groups, creating a cost
element hierarchy.
Request for a Cost Element Grouping: These groups could be used for consistency and ease of
use in reporting, planning, allocations, etc

Changing of Cost Element Group: This process is for changing a Cost Element Group. This
allows for values to be added or deleted from the group, or for other groups to be added or
deleted from the cost element group (when the group is a hierarchy).

Display a Cost Element Group: This process is for displaying a Cost Element Group. This
would apply to a Standard Hierarchy or an Alternative Hierarchy. This allows for various cost
element groups to be viewed along with their values.

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Step Ref Procedures T- Input Output


code
1CO-02- Cost Cost
01& Creation of Cost Element KAH1 Element Element
CO-02- Group Group Group is
02& Name, created
CO-02- Controllin
03 g Area
2 Changing of Cost Element Cost Cost
Group KAH2 Element element
Group group is
Name changed
Controllin
g Area
3 Display a Cost Element Group Cost Cost
KAH3 Element element
Group group is
Name displaye
Controllin d
g Area

Gap Analysis

No Gaps

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COST CENTER ACCOUNTING

You use Cost Center Accounting for controlling purposes within your organization. Cost Center
Accounting lets you analyze the overhead costs according to where they were incurred within
the organization.

Cost Centers enables you to valuate semi-finished and finished products in Product Cost
Controlling (CO-PC), and to calculate contribution margins in Profitability Analysis (CO-PA). The
“activities” of cost centers represent “internal resources” for business processes in Activity-
Based Costing.

The costs of each cost-accounting-relevant business transaction portrayed in the R/3 System
can be assigned through Cost and Revenue Element Accounting to an account assignment
object in the Controlling component (CO).

For overhead costs this can be cost centers, internal orders, business processes, or overhead
projects.

Recording and assigning overhead costs allows you to control costs and prepare information for
the subsequent areas of Cost Accounting.

You can use the methods of activity allocation, assessment or distribution to further allocate
Costs.

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BO1- CO- 012


Sub-Process: Cost Center Master

Current Scenario / AS IS:

Step SR NO Activity Input Output


CO-03-01 Cost Centers are created based on the Fabrication, Cost Centers
function e.g.: - Fabrication, Assembly, Assembly,
Testing, Finance, and HRD.Etc. Testing,
Finance, and
HRD…Etc.
Details &
approval from
Finance dept

SAP Scenario / TO BE Process:

Cost Center master Creation: A cost center is an organizational unit within a controlling area
that represents a clearly delimited location where costs occur. You can make organizational
divisions on the basis of functional, settlement-related, activity-related, spatial, and/or
responsibility-related standpoints.

You use cost centers for differentiated assignment of overhead costs to organizational activities,
based on utilization of the relevant areas and for differentiated controlling of costs arising in an
organization
Master data determines the structure of the given application component in the SAP System
and remains essentially unchanged in a live system, that is, in the current settlement periods.

The system displays the master data fields on different tab pages on the basic screen. After
initial entry, the system displays the basic data tab page, which is ready for input. On this tab
page, the system generally displays all fields that need to be edited.

You can edit more fields by selecting the appropriate tab page. You can use pushbuttons on the
tab pages to go from one maintenance transaction or display transaction to another

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Step Ref Procedures T.Cod Input Output


e
1 CO-03-01 Cost Center Master Creation, KS01 Cost Center, Desired
change, display, delete, display Valid From/To, Cost
changes Name, Center
Cost Center Master is
Category, created
Person
Responsible,
Company Code,
Hierarchy
Area,

Gap Analysis

No Gaps

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BO1- CO- 013


Sub-Process: Cost Center Group

Current Scenario / AS IS:

Step SR NO Activity Input Output


CO-04-01 Cost centers are majourly grouped as Cost centers, Cost centers
Production, Material, Sales…Etc Grouped
Grouping
details,
Approval from
Finance dept.
CO-04-02 Under this major groups further sub
groups are there like under production
Fabrication, Assembly, Testing …etc

SAP Scenario / TO BE Process:

You can collect cost centers according to various criteria into groups. This enables you to use
cost centers to depict the structure of the organization in the SAP System.

You can use the groups to build cost center hierarchies, which summarize the decision-making,
responsibility, and control areas according to the particular requirements of the organization.
The individual cost centers form the lowest hierarchical level.

There must be at least one group that contains all cost centers and represents the entire
business organization. This cost center group is described as the standard hierarchy. You can
assign more cost center groups to the standard hierarchy.

Cost Center Group Creation: A Cost Center Group is an organizational unit storing a group of
cost centers. Cost Centers with similar characteristics may be grouped together in cost center
group. You can define any number of cost center groups for valuation, planning and allocation
purposes as part of master data maintenance. You can also arrange cost center groups in
further cost center groups, creating a cost center hierarchy.
Request for a Cost Center Group: - These groups could be used for consistency and ease of
use in reporting, planning, allocations, etc

You can also create any number of alternative groups. You can structure these, for example,
according to organizational and/or functional viewpoints. Cost center groups enable you to
perform evaluations for each decision-making, responsibility, or control area. They also support
the processes during planning and internal allocations

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Step Ref Procedures Code Input Output


1 CO-04-01 & KSH1 Cost Center Cost
CO-04-02 Creation of Cost Center Groups Group, Center
Controlling Group is
Area created

Gap Analysis

No Gaps

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ACTIVITY TYPES

Activity types classify the activities produced in the cost centers within a controlling area.

To plan and allocate the activities, the system records quantities that are measured in activity
units. Activity quantities are valuated using a price (allocation price).

In Overhead Cost Controlling, costs based on the activity quantity of an activity type are posted
separately in fixed and variable portions. When you divide the activities of a cost center into
activity types, you should consider whether the costs can be allocated effectively to the activity
types.

The prices of the activity types of a cost center can be either entered manually, or calculated by
the system based on the costs allocated to the activities. Prices can be calculated either using
plan costs or actual costs.

You can plan, allocate, and control costs either at the activity type level of a cost center, or at
the cost center level. You can enter actual costs at the cost center level. Costs entered at the
cost center level are assigned using splitting

You can also assign the activity type of a cost center directly. This use was designed for certain
application areas (such as personnel costs and depreciation postings).

When the activities produced by a cost center are used by other cost centers, orders,
processes, and so on, this means that the resources of the sending cost center are being used
by the other objects.

Typical examples of activity types for cost centers are machine hours, administrator hours, CPU
minutes or units produced.

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BO1- CO- 014


Sub-Process: Activity Types

Current Scenario / AS IS:

Step SR NO Activity Input Output


CO-05-01 Bellow Cost centers, work centers exist in GL a/c, Work Center Work centers
production cost centers. A work center finds details, created
a place in routing card.
Routing Card,
Approval from
concerned dept
CO-05-02 For cost a/cing purpose the hourly rate per
cost center is used and the hourly rate for
work center is not available

SAP Scenario / TO BE Process:


Creation of Activity types: The activity type classifies the specific activities provided by a cost
center along cost allocation lines. Activity inputs from a sender cost center mean that a
receiver (another cost center or an order, process, and so on) is drawing on the resources of
the sender cost center. Valuation of activity quantities is made with an allocation price
calculated based on the managerial strategy chosen.

Change Activity Type: - The activity type classifies the specific activities provided by a cost
center along cost allocation lines. Activity inputs from a sender cost center mean that a receiver
(another cost center or an order, process, and so on) is drawing on the resources of the sender
cost center. Valuation of activity quantities is made with an allocation price calculated based on
the managerial strategy chosen. Make changes to the activity type master data either at the
beginning or at the end of the fiscal year in order to ensure data consistency

Display Activity Type: The activity type classifies the specific activities provided by a cost center
along cost allocation lines. Activity inputs from a sender cost center mean that a receiver
(another cost center or an order, process, and so on) is drawing on the resources of the sender
cost center. Valuation of activity quantities is made with an allocation price calculated based on
the managerial strategy chosen.

Deleting an activity type: - The activity type classifies the specific activities provided by a cost
center along cost allocation lines. Activity inputs from a sender cost center mean that a receiver
(another cost center or an order, process, and so on) is drawing on the resources of the sender
cost center. Valuation of activity quantities is made with an allocation price calculated based on
the managerial strategy chosen. You can only delete activity types in the current Controlling
Area if no transaction data exists for the activity type in the plan, commitments or in the actual
for the given fiscal year(s). You are also not allowed to plan any statistical key figures

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Reviewing changes made to activity type: - Activity types created in the system may require
changes to correct errors made at the time of recording the master data or to update the data
with additional information. The following screens provide an internal audit trail to verify what
changes were made, when, and by whom. To review changes made to activity type master
data as a step in investigating other than expected results of activity type allocations

Step Ref Procedures T. Code Input Output


1 CO-05-01 Creation of Activity types KL01 Controlling Area, Create
& Activity Type Activity Type
CO-05-02 Beginning Basic Screen
and ending
dates.
2 Change Activity Types KL02 Controlling Area Activity Types
Activity Type changed
3 KL03 Controlling Area Display
Display Activity Types Activity Type Activity Type
Basic Screen
4 Deleting an activity types in total or KL04 Controlling Area Delete Activity
for a given period of time. Activity Type Type Basic
Screen
5 Reviewing changes made to KL05 Controlling Area Review
activity types Activity Type changes to
activity type
Gap Analysis
-- NIL --

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BO1- CO- 015


Sub-Process: Activity Type Group

Current Scenario / AS IS:

Step SR NO Activity Input Output


CO-06-01 New Process in SAP

SAP Scenario / TO BE Process:


You can gather activity types with similar characteristics into activity type groups.

You can use activity type groups to process multiple activity types in one business transaction
within Cost Center Accounting . This is true for planning or assessment. During planning, for
example, you can display and plan multiple activity types in one transaction. You can also use
activity type groups during assessment (for example, assessment to specified activity type
groups).

As with cost elements and cost centers, the SAP System enables you to create and
administrate activity type groups in parallel. For example, you can create separate activity type
groups for planning and allocation purposes. You can also define additional activity type groups,
for purposes such as price analysis.

Create Activity Type Groups: Use this transaction to create Activity Type groups. Activity
type groups are flexible structures and can be used in collective master data processing,
reporting, allocations, and authorization objects. Each sub group represents a level of
summarization. An Activity Type group is unique within a controlling area.
There is a business need or desire to group activity types for processing and reporting
requirements

Change An Activity Type Group: - Use this transaction to change an Activity Type Group.
When Activity Type Groups are changed both activity types and other activity type groups may
be added, revoked or re-assigned to the Activity Type Group being maintained. Activity type
groups are flexible structures and can be used in other activity type groups, collective master
data processing, reporting, allocations, and authorization objects.
Each sub group represents a level of summarization.
Groups are unique within a controlling area. When deleting a group, notice that it is not deleted
from the controlling area, its relationship to the next superior node is revoked

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Step Ref Procedures T. Code Input Output
1 Creation of Activity Type Groups KLH1 Activity type New
details group
created
2 Changing of An Activity Type KLH2 Activity type Structure
Group group, changed.
Controlling area

3 Transaction to view an existing KLH3 Activity type group, None –


Activity Type Group Key Data Display
only

Gap Analysis

-- NIL --

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BO1- CO- 016


Sub-Process: Statistical Key Figures

Current Scenario / AS IS:

Step SR NO Activity Input Output


CO-07-01 New process in SAP

SAP Scenario / TO BE Process:

You can define statistical key figures as either:

 Fixed values –
Key figures defined, as fixed values are valid as of the posting period, and in all
Subsequent posting periods of the fiscal year.
 Totals values
Key figures defined as Totals values are valid only in the posting period in which they
are entered.

Key figures defined as fixed values are valid as of the posting period, and in all subsequent
posting periods of the fiscal year.

You can create, change and display statistical key figures individually or collectively. Individual
processing lets you process only one statistical key figure. Collective processing lets you
process multiple statistical key figures simultaneously.

Change Statistical Key Figure: - The purpose of this script is to demonstrate how to change a
statistical key figure. When you make changes to key figures of the category Fixed values, you
must enter a new fixed value. This new value is valid for all subsequent periods, until you enter
another new value. When you make changes to statistical key figures of the category Totals
values, you can first reset the values using reversed +/- signs, and then enter the new values.

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Step Ref Procedures T. Code/ Input Output


1 Creation of Statistical Key Figure KK01 Statistical key New
figure, statistical
Controlling key figure
area
2 Change Statistical Key Figure KK02 Statistical key Statistical
figure key figure
Controlling Changed
area
3 Display Statistical Key Figure KK03 Statistical Statistical
key figure key figure
displayed

Gap Analysis

-- NIL --

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BO1- CO- 017


Sub-Process: Statistical Key Figure Group

Current Scenario / AS IS:

Step SR NO Activity Input Output


CO-08-01 New Process in SAP

SAP Scenario / TO BE Process:


You can gather statistical key figures into statistical key figure groups. You can use statistical
key figures, or parts of them, when you need to process multiple statistical key figures in one
business transaction.

Creation of statistical key figure Group: - When several statistical key figures have been
created, a statistical key figure group may be necessary for reporting and monitoring the
contents of the group. For example, a statistical key figure (SKF) type group could be
created for all SKFs managed by Business Systems, all SKFs managed by Human
Resources, etc. This will help assign responsibility for large numbers of SKFs.
To create an organized way of monitoring statistical key figures by creating groups for skf’s with
user defined similar characteristics

Changes To Statistical Key Figure Group: - To make changes to a previously created


statistical key figure group. Enter the statistical key figure group name or click on down
facing area which opens a statistical key figure group selection box. Leave the radio button
highlighted to all nodes and click on the green check mark. Make your selection
from the drop down list for the statistical key figure group you wish to make changes to and click
on the green check mark to continue

Display Statistical Key Figure Group: - To display a previously created statistical key
figure group, enter the statistical key figure group name or click on down facing area
which Opens a statistical key figure group selection box. Make your selection
from the drop down list for the statistical key figure group you wish to display and click on the
green check mark to continue.

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Step Ref Procedures T-code Input Output
1 Creation of statistical key figure Statistical SKF
Group KBH1 Key group
Figure, created
Controlling
area
2 Changes To Statistical Key Figure KBH2 SKF Group SKF
Group details Changed
3 Display Statistical Key Figure KBH3 SKF Group SKF
Group. details displayed

Gap Analysis

-- NIL --

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BO1- CO- 018


Sub-Process: Cost Center Planning

Current Scenario / AS IS:

Step SR NO Activity Input Output


CO-09-01 Only in proction cost centers the Production Result
standard man-hour availability is Cost center analysis of
planned. This is not in other cost centers details Cost centers
CO-09-02 These details for standard hours are
available in MRP II and maintained
Industrial Engg.Dept.

SAP Scenario / TO BE Process:

Cost center planning involves entering plan figures for costs, activities, prices or
statistical key figures for a particular cost center and a particular planning period. You can then
determine the variances from these figures when you come to compare these plan values with
the costs actually incurred. These variances serve as a signal to make the necessary changes
to your business processes.

Cost center planning forms part of the overall business planning process, and is a prerequisite
for standard costing. The main characteristic of standard costing is that values and quantities
are planned for specified timeframes, independently of the actual values from previous periods.

You can take plan costs and plan activity quantities to determine the (activity) prices. These
prices can be used to valuate internal activities during the ongoing period, that is, before the
actual costs are known.

Cost center planning has the following objectives:


 To plan the structure of the organization’s future operations for a clearly defined time
period. You should define performance targets and target achievement grades. You
must consider the internal and external (market) factors affecting your organization.
 To control business methods within the current settlement period.
This ensures that you keep as closely as possible to the plan. Iterative planning lets you
adapt the target performance to reflect any changes in the organizational environment.
 To monitor efficiency after completion of the settlement period using plan/actual or
target/actual comparisons.
 To provide a basis for the valuation of organizational activities, independent of
random fluctuations

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Cost Center Plan

Cost center planning consists of the following areas:

 Planning of activity quantities and/or prices


 Planning of costs expected to be incurred
 Planning statistical key figures, which are used as the basis for the allocation of costs

Together with sales planning, cost planning is the starting point for sales and profit planning.

Activity-Independent and Activity-Dependent Cost Planning

Activity-independent cost planning covers both primary and secondary costs, but does not refer
to a specific activity type. The opposite to this is activity-dependent planning.

Activity-dependent planning of primary and secondary costs enables you to plan both fixed and
variable costs. You may require this functionality if your costing system uses flexible standard
costing based on marginal costs. It is also possible to carry out flexible standard costing based
on full costs or marginal costs.

You can assign plan activity-independent costs to activity types using various rules, for
example, using equivalence numbers or your own splitting rules.

Step Ref Procedures


Ref: Process: BOI-CO-023 for details

Gap Analysis

-- NIL --

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BO1- CO- 019


Sub-Process: Internal Orders

Current Scenario / AS IS:

Step SR NO Activity Input Output


CO-10-01 Here Internal Orders are called as work Work order
Orders. Types of Work orders are types
Production, Capital, Standing, Tooling,
Procurement, Development&
Engineering.

CO-10-02 This work orders are created by Request from Work


IED/Planning dept at the request from the concern dept orders
concerned and authorized by finance. with approval created
from finance
dept.
CO-10-03 The work Orders are closed as per advice Work order Work
of the IED (Industrial Engg.Dept) closing details orders
closed

SAP Scenario / TO BE Process:

Creation of Internal Orders: The Enterprise needs to collect and analyze actual and planned
costs related to a specific project or event. The project/event will span several accounting
periods and all costs will be settled in the period they were incurred.
Internal orders are objects in CO that collect actual and plan revenues and cost, statistical
and activity data. Data is collected in the order at the transaction level. Based on the order’s
purpose, the values can be settled (periodically or all at once) to a final receiver such as a
cost center, general ledger account, work breakdown structure, asset, real estate object,
another internal order, profitability segment, etc. The order’s inflows as well as outflows can
be reported in the Internal Orders Information System. In the delivered reports, the user can
drill down through the original documents to the line item.
The order’s purpose is defined in Customizing in the Order Type. An Internal Order master
record is created on the functional side and includes the attributes established in the order type.
Use a statistical order to mange statistical detail with value detail posted to a cost center.

Change Internal Order: - Internal orders are objects in CO that collect actual and plan
revenues and cost, statistical and activity data. Data is collected in the order at the
transaction level. Based on the order’s purpose, the values can be settled (periodically or all
at once) to a final receiver such as a cost center, general ledger account, work breakdown
structure, asset, real estate object, another internal order, profitability segment, etc. The
order’s inflows as well as outflows can be reported in the Internal Orders Information
System. In the delivered reports, the user can drill down through the original documents to
the line item. The order’s purpose is defined in Customizing in the Order Type. An Internal
Order master record is created on the functional side and includes the attributes established
in the order type. Use a statistical order to mange statistical detail with value detail posted to

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a cost center. This example demonstrates an internal order used to accumulate transactions
in real time and settle transactions to a cost center periodically

Step Ref Procedures Code Input Output


1 CO-10-01 & Creation of Internal Orders: KO01 Order Type, Short Text, Internal
CO-10-02 & Company Code, Order
CO-10-03 Object Class, Currency, created
Plan-integrated order,
Cat - Receiver type,
Receiver Settlement
type
2 Change Internal Order: KO02 Internal Order Details Internal
Orders
changed
3 To change the same field on Internal Order Details Internal
several order master records: - Orders
1. Using of Manual Collective KOK2 changed
Processing
2. Automatic Collective KOK4
Processing

4 Display Internal Order: KO03 Internal Order Details Internal


Orders
Displayed

Gap Analysis

-- NIL --

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BO1- CO- 020


Sub-Process: Internal Order Group

Current Scenario / AS IS:

Step SR NO Activity Input Output


CO-11-01 Internal Orders are grouped based on Work Order Work Orders
the nature of the orders. details created
Like Main equipment, Spares, Standing
work orders, Service, plant Work Orders.

SAP Scenario / TO BE Process:

Internal order groups need to be created for use in collective processing and reporting
Internal Order Groups can be created either by (a) specifying specific internal order numbers to
be included within a group, (b) a range of numbers that defines the group, or (c) a combonation
of the two.

Internal Order Creation: Internal order groups are very flexible structures and can be used in
collective processing (master data and transaction), reporting, allocations, and authorization
objects. Each sub group represents a level of summarization.
Groups are unique within a controlling area.

Change IO Group: - Order groups as well as orders can be added, revoked or re-assigned here.
Order groups are very flexible structures and can be used in other order groups, collective
processing (master data and transaction), reporting, allocations, and authorization objects.
Each sub group represents a level of summarization.
When deleting a group, notice that it is not deleted from the controlling area, its relationship to
the next superior node is revoked. Delete a group by revoking its relationships to each superior
node

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Step Ref Procedures T. Code Input Output
1 CO-11-01 KOH1 Order group New
IO Group Creation: Set ID group
created
2 Change IO Group: KOH2 Order group Structure
Set ID changed.
3 View IO Group: KOH3 Order group Display
Key-date

Gap Analysis

-- NIL --

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BO1- CO- 021


Sub-Process: Profit Center Accounting

Current Scenario / AS IS:

Step SR NO Activity Input Output


CO-12-01 Production Divisions in a unit are treated Production PCA Creation
as profit centers. Division details
CO-12-02 Profit center accounting is done Cost Ledger, PCA
manually by compiling data from cost Gl A/cs, Calculation
ledger, GL and NMOH statement. NMOH details

SAP Scenario / TO BE Process:

Creation of Profit Center: The master data in Profit Center Accounting is the structural
concepts according to which data can be posted and analyzed in Profit Center Accounting.
This master data includes any number of profit centers, a standard profit center hierarchy, a
dummy profit center for non-assigned postings, and, if desired, a number of alternative profit
center hierarchies.
The Enterprise contains Profit Centers at the lowest organizational unit that requires a full
Income Statement. All actual and plan revenues are managed at the Profit Center level. Actual
and plan costs are managed at the Cost Center level, and, through the assignment of one or
many Cost Centers to a Profit Center, an income statement can be produced.
Use Profit Center assessments or distributions to allocate actual and plan revenues between
Profit Centers. Costs may be allocated between Profit Centers; however, this may be
considered a “top side” adjustment because an allocation between Profit Centers will not be
reflected in the assigned Cost Centers.
Plan revenues in Profit Centers. Again, plan costs can be reported here if a Cost Center is
assigned. Unlike Cost Centers, a Profit Center is active for all Company Codes assigned to a
Controlling Area

Change of Profit Center: - The Enterprise contains Profit Centers at the lowest organizational
unit that requires a full Income Statement. All actual and plan revenues are managed at the
Profit Center level. Actual and plan costs are managed at the Cost Center level, and, through
the assignment of one or many Cost Centers to a Profit Center, an income statement can be
produced.
Profit Center assessments or distributions are used to allocate actual and plan revenues
between Profit Centers. Costs may be allocated between Profit Centers; however, this may be
considered a “top side” adjustment because an allocation between Profit Centers will not be
reflected in the assigned Cost Centers.

Plan revenues in Profit Centers. Again, plan costs can be reported here if a Cost Center is
assigned. Unlike Cost Centers, a Profit Center is active for all Company Codes assigned to a
Controlling Area.

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Display of Profit Center: The Enterprise contains Profit Centers at the lowest organizational
unit that requires a full Income Statement. All actual and plan revenues are managed at the
Profit Center level. Actual and plan costs are managed at the Cost Center level, and, through
the assignment of one or many Cost Centers to a Profit Center, an income statement can be
produced.
Profit Center assessments or distributions are used to allocate actual and plan revenues
between Profit Centers. Costs may be allocated between Profit Centers; however, this may be
considered a “top side” adjustment because an allocation between Profit Centers will not be
reflected in the assigned Cost Centers.
Plan revenues in Profit Centers. Again, plan costs can be reported here if a Cost Center is
assigned. Unlike Cost Centers, a Profit Center is active for all Company Codes assigned to a
Controlling Area.

Step Ref Procedures T.Code Input Output


1 CO-12-01 & Creation of Profit Center KE51 Profit center, Profit
CO-12-02 Valid from Center
(Valid) to, created
Name,
Person in
charge,
Profit center
group.
2 Change of Profit Center: KE52 Profit center Profit
Valid from Center
(Valid) to Changed
Name
Person in
charge
Profit center
group
3 Display of Profit Center KE53 Profit center Profit
Input – Required Fields: Valid from Center
(Valid) to displayed
Name
Person in
charge
Profit center
group

Gap Analysis
-- NIL --.

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BO1- CO- 022


Sub-Process: Profit Center Standard Hierarchy/Group

Current Scenario / AS IS:

Step SR NO Activity Input Output


CO-13-01 Data compilation for all these profit Profit center, Profit Center
centers are done manually Approval from hierarchy
concern dept created
Profit Center hierarchy is
1. Unit wise: Under Unit

A. SBU
B. Divisions.

SAP Scenario / TO BE Process:

Creation of Standard Hierarchy/Group: - All profit centers must be assigned to the profit
center standard hierarchy. This profit center standard hierarchy is created during the initial
configuration of the SAP system. The standard hierarchy is defined with various nodes at the
top level. Additional nodes and sub-nodes may be added to this profit center standard hierarchy
as required.

The standard hierarchy is a profit center group, or tree structure, which contains all the profit
centers in one controlling area. The standard hierarchy usually corresponds to the
organizational structure used in Profit Center Accounting.
The standard hierarchy consists of two types of nodes:
 A profit center area is an end node in the structure which is not the top node. You can
only assign your profit centers to the end nodes of the structure.
 A summarization area groups together profit center data at a higher level. Each node of
the standard hierarchy which is not an end node is a summarization area. You cannot
assign profit centers directly to a summarization area. It merely groups together the
profit center areas and summarization areas which lie below it.
In addition to the standard hierarchy for your controlling area, you can also create alternative
profit center hierarchies -- so-called "profit center groups" -- for use in the information system,
allocations and planning.

In contrast to the standard hierarchy, these profit center groups do not have to contain all the
profit centers in the controlling area. On the contrary, profit center groups let you select only
certain profit centers and reorganize them to allow you more flexibility.

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Step Ref Procedures T. Code Input Output


1 CO-13-01 Creation of Standard Profit Standard
Hierarchy/Group: KCH1 center Hierarchy
group created
2 Change A Profit Center Profit Profit
Hierarchy: KCH5N/ center Center
KCH2 group Hierarchy
changed
3 Display A Profit Center KCH6N/ Profit Profit
Hierarchy: KCH3 center Center
group Hierarchy
Displayed

Gap Analysis
-- NIL --

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BO1- CO- 023


Sub-Process: Planning & Budgeting – Prepare Initial
Plan

Current Scenario / AS IS:

Step SR NO Activity Input Output


CO-14-01 Budget is prepared as per budget manual. Revenue/Exp Initialization of
Prepares revenue and capital budget and this is enditure Budget
prepared for 3 years. details preparation
1. Budget estimate for next year (BE) approach
(At present, BE is prepared for 2006-07)
2. Revised Estimate (RE)-Current year
(At present, RE is prepared for 2005-06)
3. Forecast (FC)- Year after next year
(At present, RE is prepared for 2007-08)
CO-14-02 The budget exercise is bottom-up approach and
prepared from division level to corp. level
CO-14-03 Revenue Budget: - Roll On Plan Revenue
The sales budget is prepared based on roll on details Budget
plan. This plan takes into a/c the existing pending prepared
orders from the customers and the anticipated
orders.
Other budgets like purchase, Inventory,
Manpower, revenue, R&D, FE, budget follows the
sales budget.
CO-14-04 In Capital budget is mainly divided into Project, Civil Capital Budget
1. Project work prepared
2. Augmentation Needs.
Details
Plant&Machinary, Test Instruments,
Infrastructure, R&D
3.Civil Works
New Structures, Miscellaneous Works,
Town ship works

CO-14-05 Cash Budget Cash Flow Cash budget


Projected Cash flow is prepared i.e. Cash Budget prepared

SAP Scenario / TO BE Process:


The planning and budgeting process starts with the setting of the overall planning parameters
and ends with the approved plan and budget being distributed to the cost center managers. This
process is sub-divided into 7 sub-processes as follows:

 Prepare initial plan


 Review draft plan
 Set-up plan overhead cost allocations
 Allocate plan overhead costs

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 Calculate planned activity type prices


 Review preliminary plan
 Finalize plan and budget

SAP distinguishes between planning and budgeting. In SAP, planning is the bottom-up process
of determining the level of expenses for each item of expenditures. Budgeting is the top-down
process of setting the level of allowable expenditures for the cost center. Planning is by
individual account codes (cost elements). Budgeting is in total and at cost center level.

SAP assists in the monitoring of the plan and budget. Hence all plan items are entered into the
system. These planned items can then be cross allocated among the cost centers and internal
orders in Controlling. The allocation rules for these cost centers and internal order costs can be
set-up in the system to be applied consistently over the period of plan and among cost objects.

At BEL, SAP will be set-up to support the planning and budgeting for the cost centers, profit
centers, activity types and internal orders.

BEL proposes to capture plan and budget figures at individual cost center and profit center
levels as well as at individual cost element level for planning. They would like to use Excel to
simulate and finalize the plan and budget figures and then upload the same into SAP. They
would also like to directly do planning and budgeting in SAP by using previous year figures,
whenever necessary.

Prepare Initial Plan


This sub-process starts with the issue of the plan assumptions. These plan assumptions are
contained in a plan and budget package and provide the basis for the total company plan to be
developed. Typically the sales plan is developed for each strategic business unit and agreed.
From these sales plan, the cost centers and profit centers plan can then be developed.
This sub-process covers the preparation of the initial cost center, profit center and internal order
plans. The items to be planned are:

Planning items Cost center Profit Center Internal


order
Activity independent costs Yes Yes
Activity dependent costs Yes -
Activity independent activity inputs Yes Yes
Activity dependent activity inputs Yes -
Activity independent statistical key figures Yes Yes Yes
Revenue Planning - Yes -
Activity types scheduled, capacity and Yes -
prices

Planning for each of these items is entered using input screens. These input screens are
controlled by the planner profile. There is a generic profile SAPALL that can be used to plan for
all these items. BEL intends to use the standard input screens as provided by the SAP system.

The plan can be inputted into the SAP system manually, copied from historical data and re-
valued or prepared in an external spreadsheet and uploaded to the system.

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Step Ref Procedures T.Code Input Output
1 CO-14-01 PREPARE INITIAL KP04 Plan and Set planner
To PLAN: budget profile
CO-14-05 assumptions
Set planner profile
2 Change statistical key KP46/7KE5/ Statistical key Allocation of
figures planning in CCA. KP46 figures, Plan Overheads to
Version, Cost cost centers
centers, Profit
centers
3 Change cost element / KP06 Plan Version, Changes in
activity input planning Cost centers, activity input
Profit centers, plan
Cost Elements.
4 Change activity type / KP26 Plan Version, Using Activity
activity price planning Cost centers, types
Profit centers,
Cost Elements,
Activity types
5 Change cost element / KP06 Plan Version, Changing cost
activity input planning Cost centers, elements/
Profit centers, activity types
Cost Elements,
Activity types
6 Change overall planning KO12 Plan version, Over all plan
Internal orders Changed
7 Change cost/revenue KPF6 Plan Version,
element planning Cost centers,
Profit centers,
Cost Elements,
Activity types
9 Copy planning KO14 Historical Plan Copying plan
Data
12 Create plan revaluation KPU1 Historical Plan Plan
Data revaluation
13 Plan revaluation KSPU SKF, Activity Initial plan
types prepared
Gap Analysis

-- NIL --

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BO1- CO- 024


Sub-Process: Review Draft Plan

Current Scenario / AS IS:

Step SR NO Activity Input Output


CO-15-01 Draft plan of the Budgets are reviewed Initial budget Approved
at division / SBU /Units. details budget from
board of
directors.

SAP Scenario / TO BE Process:


Cost centers: Planning overview: - SAP provides a transaction for viewing all the planned items
for the cost centers. However it only allows the viewing of a single cost center each time.
Nevertheless it is possible to print out the plan for all cost centers using the ‘Execute multiple
time’ function of this transaction
SAP provides a transaction for viewing all the planned items for the internal order. However it
only allows the viewing of a single internal order each time. Nevertheless it is possible to print
out the plan for all internal orders using the ‘Execute multiple time’ function of this transaction

The draft plan reports printed from work steps (1) and (2) are reviewed to identify error and
adjustments.

If no errors are detected and no adjustments are required, then the cost allocations of these
planned cost center costs and internal order costs can commence.

If errors are found, then the original plan entry needs to be changed.
If there are many errors/changes, then the changes can be prepared in a spreadsheet and
uploaded to the SAP system using the plan uploads programs provided. If there are only few
changes, then the changes can be entered directly into the system

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Step Ref Procedures T-code Input Output


1 CO-15-01 Cost centers: Planning KSBL Initial Plan Plan overview at
overview details cost centers
2 Orders: Planning overview KABL Initial Plan Plan overview at
details internal orders

Gap Analysis

-- NIL --

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BO1- CO- 025


Sub-Process: Set-Up Plan Costs for Plan Overheads

Current Scenario / AS IS:


This sub-process is to set-up all the cost allocation templates required to allocate the cost
center and internal order costs as well as profit center revenues. SAP supports various cost and
revenue allocation methods. The most typical cost allocations used are:

 Re-posting of cost center and internal order costs


 Distribution of cost center costs and profit center cost and revenues
 Surcharging of cost center and internal order costs
 Settlement of internal order costs
 Assessment of cost center costs and profit center cost and revenue
 Direct posting of profit center plan figures.

The re-posting of costs, distribution and assessment of costs and revenue are similar except
that cost (revenue) assessment uses an assessment cost element to record the allocation of
costs (revenue) whereas cost re-posting and cost (revenue) distribution uses the original cost
elements to record the allocation of costs (revenue). The difference between cost re-posting and
cost distribution is that the partner object is not captured in cost re-posting.

Step SR NO Activity Input Output


CO-16-01 New process in SAP

SAP Scenario / TO BE Process:


Cost allocation is the transfer of costs among cost centers and internal orders. SAP provides the
following functions to assist in the cost allocations of cost center and internal order costs
 Periodic re-posting of cost center and internal order costs
 Distribution of cost center costs
 Settlement of internal order costs
 Assessment of cost center costs

The activity independent cost center costs for activity type producing cost centers also need to
be allocated to the activity types of the cost center. This is supported by the cost center costs
splitting function of SAP.

It is recommended that:
a) Periodic re-posting be used as an aid to data entry
b) Assessment be used for allocation of cost center and profit center costs
c) Settlement with settlement cost element be used for internal order costs

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Step Ref Procedures T-code Input Output
1 Change cycle for planned periodic re- KSW8 Planned Changed
posting overhead periodic
details reporting
2 Execute planned distribution cycle for cost KSVB Cost centers Distribution to
center cost centers
3 Execute planned distribution cycle for 4KEB Profit center Distribution to
profit center profit centers
4 Change cycle for planned distribution for KSW8 Overheads Overheads
cost center details distributed to
cost centers
Change cycle for planned distribution for 4KE8 Overheads Overheads
profit center details distributed to
profit centers
5 Maintaining Costing sheet KZS2 Base value, Cost sheet
Surcharge
rate, Credit
objects,
Surcharge
cost elements.
6 Planned overhead calculation: cost KSP4 Cost center Cost center
centers wise overhead wise
details overheads
calculated
7 Plan overhead calculation: internal orders KGP2 Internal order Internal order
wise overhead wise overhead
details calculated
8 Cost settlement of planned internal order KO9E Planned Plan
costs (Individual processing) internal order settlement
costs
9 Create planned assessment cycle for cost KSU7 Assessment Planned
center cycle name, assessment
Validity period. cycle to cost
centers.
10 Create planned assessment cycle for 3KE7 Segment
profit center identifier,
Assessment
cost element,
Sender and
receiver
information,
statistical key
figures, activity
quantity and
costs.
11 Execute planned assessment cycle for KSUB Cycle Data Cycle Run
cost center
12 Execute planned assessment cycle for 3KEB Execution Cycle
profit center Processing

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13 Change cycle for planned assessment for KSU8 Cycle Data Cycle Run
cost center
14 Change cycle for planned assessment 3KE8 Cycle Data Cycle
cycle for profit center Processing
15 Splitting of cost center costs to activity Splitting rules, Splitting
types OKES structure
Cost
assignment to
splitting rules

16 Assignment of cost center to splitting OKEW Cost centers Assigning to


structure cost centers

17 Planned cost splitting KSS4 Planned cost Setting up of


details planned costs
to planned
overheads

Gap Analysis

-- NIL --

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BO1- CO- 026


Sub-Process: Allocate Plan Overhead Cost

Current Scenario / AS IS:

Step SR NO Activity Input Output


CO-17-01 New process in SAP

SAP Scenario / TO BE Process:

The typical sequence for cost allocation is:


a) Periodic re-posting of cost center and internal order costs
b) Distribution to cost center / profit center costs / revenues
c) Overhead cost surcharging for cost center and internal order costs
d) Settlement of internal order costs
e) Assessment of cost center / profit center costs / revenue
f) Splitting of cost center costs

However there may be circumstances where this sequence is not followed. In all cases, (e) and
(f) should be the last two cost allocations.

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Step Ref Procedures T-code Input Output


1 Execute planned periodic re-posting KSWB Internal Periodic re-
orders, cost postings
centers
2 Execute planned distribution cycle for cost KSVB Cost center Planned
center costs & Costs
revenues
Execute planned distribution cycle for profit 4KEB Profit center Planned
center costs & Costs
revenues
3 Planned overhead calculation: cost centers KSP4 – Planned over Overhead
heads details surcharges
. of cost
center
4 Plan overhead calculation: internal orders KGP2 Planned over Overhead
heads details surcharges
of Profit
centers
5 Plan settlement (Individual processing) KO9E Settlement Plan
OH Data Settlement
6 Execute planned assessment cycle for cost KSUB Cycle Data Assessment
center of cost
center /
Execute planned assessment cycle for profit center
profit center 3KEB costs /
revenues
7 Planned cost splitting KSS4 Planned cost Allocation of
details planned
overhead
costs

Gap Analysis

-- NIL --

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BO1- CO- 027


Sub-Process: Calculate Planned Activity Type Prices

Current Scenario / AS IS:

Step SR NO Activity Input Output


CO-18-01 New process in SAP

SAP Scenario / TO BE Process:


This sub-process is required to ensure that the quantities of activity planned and the prices
charged are proper. The quantities of activity types produced should be equal to the quantity
required by the consuming cost centers and internal orders. The activity prices must be
accurate to ensure that all the cost center costs of the maintenance cost center are fully
absorbed by the receiving cost centers and internal orders.
This reconciliation is necessary to ensure that the quantity of activity types scheduled by
the maintenance (sending) cost centers matches the quantity consumed by the
receiving cost centers. Any variance between these quantities will lead to erroneous
system calculated activity type prices. If mismatches are detected, the system will
propose the total activity consumed to be adopted as the scheduled level of activity
types. If this is not acceptable, then adjustments are to be entered via Set-up Initial Plan
This price determination will result in activity types consumed being valued and charged
to the consuming cost centers. If the splitting of activity independent cost center costs to the
activity types of the cost center is omitted in the earlier sub-process (Allocate Plan Overhead
costs), then the system will automatically invoke this cost splitting before calculating the activity
type prices.

Step Ref Procedures T-code Input Output


1 Plan reconciliation KSPI Quantity of Planned Prices
activity types
scheduled by
. the cost centers
2 Activity price calculation KSPI Pricing details Calculation of
planned
activity type
prices

Gap Analysis
-- NIL --

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BO1- CO- 028


Sub-Process: Review of Preliminary Plan

Current Scenario / AS IS:

Step SR NO Activity Input Output


CO-19-01 Preliminary Budgets are reviewed at
division / SBU /Units /Corporate Office

SAP Scenario / TO BE Process:


In this sub-process, the plan data entered and cost allocations performed in the previous sub-
processes are reviewed to identify errors and adjustments required. If no adjustments are
required, these plan reports may be presented to senior management for concurrence. If errors
are detected or the senior managers propose changes to the plan, then the previous sub-
processes are used to make changes to the data entered and amend the cost allocation
templates.

This is an iterative process and may be re-processed until senior management is in full
agreement with the proposed plan. Multiple versions of the plan may be kept so as to keep track
of the changes made to the plan.

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Step Ref Procedures T- Input Output


Code
1 The preliminary plan reports are reviewed N/A cost center,
to identify error and adjustments. profit center
and internal
If no errors are detected and no cost center,
order plans
adjustments are required, then the cost profit center
center, profit center and internal order and internal
plans can be presented to the senior order plans
management team for review and
concurrence.

If errors are found, then the original plan Reversal of


entry or the cost / revenue allocations need the original
to be changed. In the event that changes cost /
to cost / revenue allocations are required, revenue
then a reversal of the original cost / allocation
revenue allocation is required.
2 The initial plan and budget are presented N/A - -
to the senior management team for
consideration.
3 Any revision request arising from the N/A
presentation to the senior management
team will be evaluated and the plan
adjusted accordingly.

Gap Analysis

-- NIL --

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BO1- CO- 029


Sub-Process: Finalise Plan & Budget

Current Scenario / AS IS:

Step SR NO Activity Input Output


CO-20-01 Board of directors approves all final
budgets based on the draft budget

SAP Scenario / TO BE Process:


Once the proposed plan is agreed, it has to be transferred to the plan version ‘0’ and locked
from changes. This is the ‘active’ plan version in SAP. The final plan and allocated budget is
then printed out and distributed to the cost center and profit center managers for their
compliance.

Copy planning: - In SAP, plan version ‘0’ is the active plan version. Hence the final cost center
plan has to be copied to plan version ‘0’.
The entry parameters are:
 Source plan (version, plan period, and cost centers)
 Target plan (version ‘0’, plan period and cost centers)

Budget planning: - Once the final cost center plan has been copied to version ‘0’, the allotted
budget can be entered against each cost center.

Copy plan version – Internal orders: - In SAP, plan version ‘0’ is the active plan version. Hence
the final internal order plan has to be copied to plan version ‘0’.
The entry parameters are:
 Internal orders or internal order groups
 Source plan (version and plan period)
 Target plan (version ‘0’ and plan period)

Original budget: - Once the final internal order plan has been copied to version ‘0’, the allotted
budget can be entered against each internal order.

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Step Ref Procedures T-Code Input Output


1 Copy planning KP97 Source Plan, Plan
Target Plan Copying
2 Budget planning KPZ2 Overall cost Budget
center budget planned
3 Copy plan version – Internal orders KO14 Internal Plan will
orders, Source be
Plan, Target Copied
Plan
4 Original budget KO22 Overall Final
internal order Plan &
budget Budget
5 The reports on the cost centers, profit N/A - Reports
centers and internal orders plan and
budget are distributed to the
responsible managers.

Gap Analysis

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BO1- CO- 030


Sub-Process: Set-up Cost Allocation for Actual
Overheads

Current Scenario / AS IS:

Step SR NO Activity Input Output


CO-21-01 New process in SAP

SAP Scenario / TO BE Process:


This sub-process is to set-up all the cost allocation templates required to allocate the cost
center and internal order costs. SAP supports various cost allocation methods. The most typical
cost allocations used are:

 Re-posting of cost center and internal order costs


 Distribution of cost center costs
 Surcharging of cost center and internal order costs
 Settlement of internal order costs
 Assessment of cost center costs
 Assessment of profit center costs and revenues

In most cases the cost allocation methods used for the cost objects are the same for the
planned and actual costs. Indeed the same cost allocation template may be used on both the
planned and actual costs. However there is no restriction in the SAP system to enforce the
same cost allocation method for the planned and actual costs in the cost objects. Nevertheless,
using different cost allocation methods on the planned and actual costs will make cost
comparison between planned and actual difficult and inconsistent.

Cost allocations are the transfer of costs among cost centers and internal orders. SAP provides
the following functions to assist in the cost allocations of cost center and internal order costs
 Periodic re-posting of cost center and internal order costs
 Distribution of cost center costs
 Overhead surcharging of cost center and internal order costs
 Settlement of internal order costs
 Assessment of cost center costs

The activity independent cost center costs for activity type maintenance cost centers also need
to be allocated to the activity types of the cost center. This is supported by the cost center cost
splitting function of SAP.

Sender cost centers and their corresponding receiver cost centers have to be identified
and allocation rules need to be defined and frozen.

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It is recommended that:
 Periodic re-posting be used as an aid to data entry
 Assessment be used for allocation of cost center costs
 Settlement with settlement cost element be used for internal order costs

Periodic re-posting of actual cost centers and internal orders costs


Periodic re-posting allows for the costs posted to a central cost center to be transferred to other
cost centers. This function is useful as a data entry tool for costs, which are allocated to cost
centers and internal orders in a pre-set manner and formula.

This function is typically used for entry of utility charges, telephone and insurance.
Periodic re-posting can only be used to re-post primary costs.
The entry parameters are:
 Periodic re-posting cycle name
 Validity period

For each segment of the cycle, the required information are:


 Segment identifier and name
 Sender and receiver information
 Sender values
 Receiver tracing factor and rule
 Receiver weight-age factor (where appropriate)

Allowable tracing factors are:


 Fixed amounts
 Fixed portion
 Percentage
Variable factors (statistical key figures, activity quantity and costs)

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Step Ref Procedures T. Code Input Output
1 Create cycle for actual periodic re- KSW1 Periodic re-posting Allocation
posting cycle name, Cycle
Validity period
2 Execute actual periodic re-posting KSW5 Posting Data Periodic Re-
Posting

3 Change cycle for actual periodic re- KSW2 Cycle Data All errors &
posting Adjustments
Update to
Step 2
4 Cost distribution of actual cost center KSV1 Distribution cycle Creation of
costs name, actual
Validity period distribution
cycle

5 Execute actual distribution cycle KSV5 Test run for Step 4 Ensuring no
Errors
6 Change cycle for actual distribution KSV2 Error details Clearing the
errors found
in Step 5
(If any)
7 Overhead surcharging for cost centers KS02 Updating Changing
and internal orders costs Overhead rate in cost center
cost center
8 Change internal orders KO02 Updating the ‘Costing
sheet’ field in the
. internal order master.

9 Actual overhead calculation: cost KSI4 Test run for errors Error
centers in cost centers detection
10 Actual overhead calculation: internal KGI2 Test run for errors Error
orders in Profit centers detection
11 Maintain costing sheet KZS2 Over head details Cost Sheet
12 Cost settlement of actual internal KO02 Actual settlement, Changing
order costs Settlement, receivers, internal order
Tracing factor,
Validity period
Settlement type
13 Actual settlement (Individual KO8 Settlement rules Updating
processing) Settlement
rules
14 Change internal order KO02 Internal Order Re-tested
Information after
Updating
Settlement
rules

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15 Cost assessment of actual cost center KSU1 Segment identifier Creating


costs and name, actual
Assessment cost assessment
element, cycle
Sender and receiver
information
Sender values,
Receiver tracing
factor and rule,
Receiver weight-
age factor
16 Execute actual assessment cycle KCU5 Assessment Cycle Error
Information detection in
Assessment
cycle
17 Change cycle for actual assessment KSU2 Errors Rectification
of errors
18 Splitting of cost center costs to activity OKES Splitting rules, Splitting
types Cost assignment to structure
splitting rules
19 Assignment of cost center to splitting OKEW Identified splitting Cost splitting
structure of costs (cost
center wise)
20 Actual cost splitting KSS2 Actual cost
splitting
21 Splitting structure OKES All errors and Rectification
adjustments
identified in step
20
22 Assessment of actual profit center 3KE1 Assessment cycle Create actual
costs and revenues name, assessment
Validity period cycle

23 Execute actual assessment cycle 3KE5 Running Identified


assessment cycle error
in test mode rectification
24 Change cycle for actual assessment 3KE2 Actual cost details Setup cost
allocation for
actual costs

Gap Analysis

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BO1- CO- 031


Sub-Process: Allocation of Actual Overhead Costs

Current Scenario / AS IS:

Step SR NO Activity Input Output

SAP Scenario / TO BE Process:


The typical sequence for cost allocation is:
a) Periodic re-posting of cost center and internal order costs
b) Cost distribution of cost center costs
c) Overhead cost surcharging for cost center and internal order costs
d) Settlement of internal order costs
e) Cost assessment of cost center costs
f) Assessment of costs and revenues in profit center accounting

However there may be circumstances where this sequence is not followed. In all cases, (e) and
(f) should be the last allocation cycles.

Step Ref Procedures T-Code Input Output


1 Execute actual periodic re-posting KSW5 Cost centers periodic re-
& Internal posting
Order costs
2 Execute actual distribution cycle KSV5 Cost centers Reversing
& Internal Cost
. Order costs distributions
and re-running
if required.
3 Actual overhead calculation – cost KSI4 Cost centers Overhead
centers Costs
4 Actual overhead calculation – order KGI2 Internal order Handling over
costs head
surcharging of
internal order
costs &
processed in
‘Production
mode
5 Actual settlement (Individual KO88 Internal Settlement of
processing). Order costs costs and error
rectification

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6 Execute actual assessment cycle KCU5 Assessing actual


cost center overhead cost’
costs in ‘Test allocations.
Mode’’ and
then
processing in
‘Productive
mode’
7 Execute actual assessment cycle 3KE5 Assessing Allocation of
Profit center Actual
costs in ‘Test overhead
Mode’’ and costs
then
processing in
‘Productive
mode’
Gap Analysis

-- NIL --

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BO1- CO- 032


Sub-Process: Product Costing

Current Scenario / AS IS:

Sl.nu Procedure Input Output


CO-01-01 Material Cost: - This calculated as per SRR/SRP Material cost
actual material consumption and
this is captured from all the withdrawals
from stores through SRR (Stores
Requisition Receipt) and SRP (Stores
Requisition Pink)
CO-01-02 Material Overheads: - This is calculated Material Cost Material O/h
based on the predetermined rate on the Rate
material cost. (At present this 4.5%)
CO-01-03 Composite Labour Cost: - Labour Hour Labour Rate
Actual labour hours recorded in each Rate
production cost center* Composite
Labour hour Rate in each production cost
center.
CO-01-04 NMOH (Non-Manufacturing O/Hs): NMOH Rate NMOH
Calculated as per NOMH rate

SAP Scenario / TO BE Process:


Product Cost Planning (CO-PC-PCP) is an area within Product Cost Controlling (CO-PC) in
which you can plan the non order-related costs of, and determine prices for, materials and other
cost accounting objects.

You can use Product Cost Planning to break down the costs of your company’s products, such
As
 Manufactured materials.
 Services
 Other intangible goods

Product Cost Planning comprises the following:

Cost Estimate with Quantity Structure Costing materials that have access to a
quantity structure in PP

Cost Estimate without Quantity Costing materials without a quantity structure


Structure in PP

Price Update Transferring the results of material cost


estimates to the material master
Reference and Simulation Costing Planning new products and services using
base planning objects

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Easy Cost Planning and Execution Services Rapid cost planning without master data within
an ad hoc cost estimate

In order to carry out costing, Product Cost Planning accesses master data in other components,
such as BOMs, routings, and work centers from Production Planning, and cost centers, activity
types, and business processes from Overhead Cost Controlling. Conversely, you can make the
costing results available for other applications. For example, you can use the costing results to
update the standard price in the material master and carry out material valuation using this
price.

Process Description Usage Transaction Code


Material Costing → Cost estimate for Is used to process CK40N - Edit
Edit Costing Run multiple materials mass data and is Costing Run
with BOM and created automatically
routing using Production
Planning data
(product cost
estimate)
Material Costing → Cost estimate for a Is created CK11N – Create
Cost Estimate with material with BOM automatically using
CK13N – Display
Quantity Structure and routing or the Production
Planning data CK33 - Compare
master recipe
(product cost
estimate)
Mark/Release of Customer wants to This document CK20
Standard Cost Estimate Mark standard cost describes the
estimate procedure to Mark a
standard cost
estimate. This
transaction will Mark
in the Future field of
the costing view in the
material master
Material Costing  Transfer of Cost CK24 - Price
Price Update Estimate Results to This transaction will Update
Release of Standard the Material Master post a new standard
Cost Estimate Record to the Current field of
the costing view in the
material master and
update the Financial
accounting general
ledger depending on
inventory Change.
Material Costing → Cost estimate for a Is created using data CKUC - Edit
Cost Estimate Without material without BOM you entered Multilevel
Quantity Structure or manually (unit

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routing costing) or transferred KKPAN – Create


from a non-SAP KKPBN – Change
system KKPCN – Display
CK33 - Compare
Reference and Base Object Cost Is created using data CKUC - Edit Base
Simulation Costing Estimate that you enter Planning Object –
manually (unit Multilevel
costing) KKE1 - Create
Base Planning
Object
KKE2 - Change
Base Planning
Object
KKE3 - Display
Base Planning
Object
KKEB - Revaluate
Base Planning
Object
Easy Cost Planning & Adhoc Cost Is created using a CKCM - Edit
Execution Services Estimate planning form Costing Model
Edit Ad hoc Cost (costing model that CKECP - Edit Ad
Estimate can access the Hoc Cost Estimate
Cost Estimate data in the SAP
Edit Ad hoc Cost system
Estimate

You can use the costing run to process mass data. It enables you to cost, mark, and release
more than one material at the same time.

Every processing step involved in costing with quantity structure is performed by the costing
run, from the same screen.

The cost of the material can be created for a number of reasons including margin analysis,
make-buy decisions, and profitability analysis are among the most common. The costing view
identifies values by material, activities and cost elements. The cost estimate with quantity
structure enables you to calculate the non-order-related cost of goods manufactured and the
costs of goods sold for products, based on the BOMs and routing in the Production Planning
module. The system creates a quantity structure, which is the BOM and routing combination,
using data from the PP master data. You determine what data is selected for costing by means
of the costing variant in Customizing for Product Cost Planning. The system valuates the
quantity structure based on the valuation variant contained in the costing variant in Customizing.

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Step Ref Procedures T-Code Input Out Put


1 Edit Costing Run CK40N Material cost,
(To cost, mark, and release more than one Plant mark,
material at the same time) Details and
releas
e
more
than
one
mater
ial
2 Procedure to cost a material CK11N Material Cost
Create Plant Estim
Details ate
3 This document describes the procedure to KKE1 - cost Base
create a Base Object Planning cost Create object Objec
estimate., which can be used with access Base t
to R/3 or a stand alone spreadsheet. You Planning Plann
can enter a multilevel by entering a base Object ing
cost object cost estimate. cost
KKE2 -
Change estim
Base ate
For change/ Display related Transactions
Planning
need to be used.
Object
KKE3 -
Display
Base
Planning
Object

4 This document describes the procedure to CK24 - Plant, Price


release a standard cost estimate. This Price Material Updat
transaction will post a new standard to the Update details e
Current field of the costing view in the
material master and update the Financial
accounting general ledger depending on
inventory
Change

Gap Analysis

-- NIL --

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