Saturday, February 28, 2009

Product Costing





The flow above describes how product costing (SAP R/3 system) works behind the scenes at the same time that a production order is getting created, confirmed and closed. This is how it works in a discrete manufacturing process without profitability analysis. In the next few days, I will be explaining the differences between the various production processes with and without PA.

Wednesday, February 25, 2009

Forecasting with SAP

Before we start looking into what the technology can offers you, let's understand how forecasting can help your company from a business perspective. Here are some aspects:

- Better relationship with your customers (product availability)
- Better relationship with vendors and of course costs reduction by maintaining long-term supply contracts
- Costs Reduction by lowering raw materials and finish goods inventories
- Better manufacturing planning which also result in cost reduction by optimizing your resources (Machinery and Labor)
- Better costs management

These are some of the main benefits of forecasting. Of course the longer you can forecast the better. 5 years forecast gives you a long-term view in where your company intends to be, but of course yearly and quarterly revisions will be required. There is some confusion in many companies in carrying out the financial forecast separate from their Supply Chain forecast. Would it be doable, of course it is, but would it make sense? Well, this is where the split between finance and logistics starts.

R/3 can help you a lot in improving and monitoring this process from the beginning until the end. But, the same way you can have bad processes utilizing spreadsheets, you can have bad processes using R/3. To help improve this process, bring logistics and finance teams together and let them work hand in hand.

Forecast that changes on a weekly or daily basis, shouldn’t be called forecast and will never bring the results expected.