Understanding PP Integration to Product Costing: What Do the Terms "Origin" and "Parameter" Mean?

  • by Lars Sondergaard, Senior Consultant, ICM America LLC
  • November 15, 2002
FI practitioners are often confused by two vocabulary terms in the Production Planning module: origin and parameter. Understanding what they represent will give them a clearer picture of what their integration options are for PP. The author, a PP specialist, defines the two terms and walks the readers through the different places in R/3 where the PP module might find data related to processing time and weight/volume quantities.
Key Concept

 

The goal of this article is to explain two of the most confusing product costing vocabulary words in the Production Planning (PP) module: "origin" and "parameter."

Anyone who has seen the many different R/3 tables used in product costing knows that a lot more than just these two settings are involved. But in my opinion as a PP consultant who has had many a fight over integration options with you FI/CO folks, it is these two terms that most often cause confusion.

The lessons presented here should not take you more than 10 or 15 minutes to read. They might save a new student to product costing many days of bewilderment, and intermediate practitioners of R/3 product costing many hours of pained confusion.

This lesson on the PP module’s "origin" and "parameter" terms will focus as follows:

  • I’ll start with a simple product costing question that has nothing to do with R/3.
  • I’ll then show you screenprints of different places in R/3 where we PP folks have options to place data related to processing time and weight/ volume quantities. This becomes an extra layer of product costing variables that, too often, confuses people trying to learn the topic.
  • Finally, I’ll present my idea on how the most important settings involved in the PP side of product costing should have been arranged onto a single screen, as a way to allow a costing analyst or other curious person to more easily understand what’s going on, and not to get so completely confused due to the currently hidden role of our two friends, the origin and the parameter.

Basic, Everyday Product Costing Question

My first question should be easy for people with good math skills, even if they have never seen an R/3 system. Suppose you have a factory.

To manufacture 500 pieces of finished good M-12345, how much will the direct labor end up costing you?

Too many undefined variables? Maybe I need to supply a bit more information.

Lars Sondergaard

Born in Denmark, Lars Sondergaard has been working with SAP software as an on-site consultant in both Europe and the U.S. since 1995, specializing in all aspects of the PP module and the variant configurator. He is also an avid "catch-and-release" fly fisherman, and semi-professional beer taster.

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