Use Driver-Based Planning to Assign Your Service Costs

  • by Janet Salmon, Product Manager, SAP AG
  • July 15, 2007
Most organizations use assessment cycles to assign the expenses planned on their service cost centers to their profitability segments so they can ensure that they have all relevant plan values in Profitability Analysis (CO-PA). The template function allows you to replace some of these assessment cycles with a more causal cost assignment that uses rules to determine how much activity you use to serve each market segment and what cost center resources you employ to provide these activities. This causal relationship makes for more accurate cost plans that better reflect the effort to perform the business the organization plans to do.
Key Concept

Whereas driver-based planning has been a best practice in the manufacturing industry for many years, it is increasingly being used in service environments to plan the number of activities that you need to perform so you can serve a particular market segment and assign the appropriate resource costs to these activities.

Many users are familiar with using the drivers in a sales plan to derive a production plan and the amount of activities required to manufacture that product based on the routings or recipes for these materials. With that, they then determine the costs of those activities based on the expenses per cost center. However, most users don’t realize that you can use a template, which resembles a very flexible routing, to have the system calculate the amount of activity required to perform various service operations.

I’ll use the example of a configuration activity you can perform in the sales order to adapt the product to meet the needs of the end customer. This configuration activity is outside of the operations in the routing or recipe and is used solely to plan the extra costs incurred in adapting the product for the end customer. The production activities in this example are assigned via the routing or recipe.

This type of allocation is useful for handling activities that are not generally included in the routing, such as cleaning or quality control in a manufacturing environment, and for handling activities, such as customer care or invoice processing in a service environment. In both cases, the result is a better view of how costs are absorbed by products and services. You also gain a better understanding of what drives cost center expenses. I captured the screenprints in SAP ERP Central Component (ECC) 6.0, but the functions have been around since R/3 Release 4.6 and you can test drive the example in any SAP IDES system.

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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