A Hidden Process in the Routing Helps Assign Activities from Multiple Cost Centers to One Operation

  • by Janet Salmon, Product Manager, SAP AG
  • June 15, 2003
Using the example of a quality control process in a fertilizer factory, the author shows how to use business processes in recipes to map activities from different cost centers to one operation. The method also applies for mapping multiple costs center to a network activity if you are using the R/3 Project System module.

Have you ever wondered why some operations in a routing are more easily mapped to cost centers and activity types than others? In my experience, operations that are specifically concerned with assembling or processing materials, such as milling, drilling, and welding, rarely cause problems. The costing department creates activity types and calculates prices for the machine hours, the production department makes sure that the standard times in the routing are accurate, and both departments are happy.

However, if the routing contains non-manufacturing operations, such as procurement or quality control, these operations can cause problems. The reason is that each operation in the routing can be assigned to only one cost center, but non-manufacturing operations often span several cost centers. Take procurement, for example. It is not unusual for procurement to use activities from three cost centers: purchasing, accounts payable, and stores. The same goes for quality control. A complex testing process may involve several different cost centers, but only one is allowed in the operation.

One answer is to create more operations for each stage of testing, but this is usually rejected by production. It owns the routing/recipe and only wants to confirm operations happening on the shop floor. Costing takes the wider view and wants to calculate the true costs of procurement or quality control based on the activities used.

If you have ever found yourself at the center of one of these discussions, let me introduce you to the business process as a way of bundling activities. That way, production won’t notice that the operation is crossing several cost centers. Order confirmation proceeds as usual, but costing can use the process as a means of absorbing activity from several cost centers.

Janet Salmon

Janet Salmon joined SAP in 1992. After six months of training on R/2, she began work as a translator, becoming a technical writer for the Product Costing area in 1993. As English speakers with a grasp of German costing methodologies were rare in the early 1990s, she began to hold classes and became a product manager for the Product Costing area in 1996, helping numerous international organizations set up Product Costing. More recently, she has worked on CO content for SAP NetWeaver Business Warehouse, Financial Analytics, and role-based portals. She is currently chief product owner for management accounting. She lives in Speyer, Germany, with her husband and two children.

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