Control Manufacturing Cost Even when Production Planning Runs in a Non-SAP System

  • by Sanjay Wagh, Vice President, Elephanta Technology, Inc.
  • July 24, 2013
See how to configure your SAP system to use CO production order functionality and learn tips about completing processes and transactions with this functionality.
Key Concept

A CO production order is an internal order that is used to capture plan and actual manufacturing costs. Its functionality is similar to other manufacturing orders, such as production or process order. However, the main difference between the CO production order and other production orders is that other production orders use bills of materials (BOM) and routings to determine plan and actual manufacturing costs, whereas a CO production order determines plan costs and actual manufacturing costs without using BOM or routings data.  CO production order functionality allows you to implement manufacturing cost control processes in a situation in which CO, Financial Accounting (FI), and materials management (MM) processes run on the SAP system but production planning and shop floor control run on a non-SAP system. 

Sometimes organizations implement only Financial Accounting (FI), Managerial Accounting (CO), and materials management (MM) processes in their SAP systems. They continue using non-SAP systems for production planning and shop floor control. As a result, manufacturing transactions for goods issued and goods received are performed in the non-SAP system.  

When production planning is not implemented in an SAP system, quantity structure master data is not available in the SAP system. That includes bills of materials (BOMs) and routings, the valuation of which is critical for planning manufacturing costs. Also, transactions relevant to manufacturing costs, including goods issues, confirmations, and goods receipts, run in the non-SAP system. Because of a lack of this data in the SAP system, it is not possible to control manufacturing costs using normal manufacturing orders. In this situation, CO production order functionality provides features that can be used to implement a manufacturing cost control solution. 

Sanjay Wagh

Sanjay Wagh has 28 years of professional experience in manufacturing, banking, and consulting in global companies. Sanjay started as a product engineer and corporate finance specialist and seamlessly transitioned to a consultant, assisting other companies in implementing software systems. Sanjay combines his experience in manufacturing and finance with consulting experience to help clients design and implement business processes using best practices in a cost-efficient, risk-free manner with a long-term perspective. Sanjay has 16 years of SAP software implementation experience in the areas of FI and CO along with several end-to-end SAP project life cycles. He has participated in conducting requirements gathering and business blueprinting workshops, realization, testing, end-user training preparation and delivery, and post-implementation support. He is a certified SAP solution consultant.

See more by this author


No comments have been submitted on this article. 

Please log in to post a comment.

To learn more about subscription access to premium content, click here.