Use Product Costing for Estimates with Multiple-Sourced Material

  • by Gary Fullmer, Solution Architect, MI6 Solutions
  • January 15, 2003
R/3's mixed product costing system offers five options for creating cost estimates with multiple procurement sources. The author demonstrates how to use the functionality, which was not available in a standard R/3 system prior to Release 4.5A.

Have you ever run across this problem in product costing? You are trying to calculate a planned cost for a material that can be procured from multiple sources. For example, you typically use a material that is produced locally on one of your production lines, but at other times you need to purchase the same material from an outside vendor. Naturally, the price of the in-house production differs from the vendor’s price. The problem is how to set up your product cost-estimating system to reflect a costing ratio containing both procurement options.

In another example, you purchase a component part from several different vendors, all with different pricing schedules. Again, how can the R/3 product costing system account for different material pricing schedules from different sources of supply?

The answer is quite simple: R/3’s mixed-product-costing system offers five options for creating cost estimates with multiple procurement sources. I’ll demonstrate how to use the functionality, which was not available in a standard R/3 system prior to Release 4.5A. Refer to Figure 1, which is a screen shot of transaction code CK91N. The drop-down window displays the following procurement options for materials:

  • Purchase Order. Adjusts the material estimate when component materials are purchased from different vendors.
  • Procurement (change involving stocks). Accounts for different lot-size production runs of the same material on the same production version.
  • Production. This selection is more complex. It allows for different production versions — the option described in this article — but it can also account for different bills of material (BOMs) and routings for the same material.
  • Subcontracting. Accounts for the use of different subcontractors and different BOMs and lot sizing.
  • Stock transfer. Sets up the procurement option of the plant-to-plant transfer of materials.

Gary Fullmer

Gary Fullmer is currently associated with MI6 Solutions as a solution architect. Prior to MI6 Gary recently worked for SAP Labs for 13+ years. While at SAP Labs, he spent his first four years as a CO instructor developing and delivering all CO courses offered in the SAP course catalog. For the next six years, he assumed the role of a FI/CO solution manager, where he focused on interfacing with customers for CO, SEM, and FI solutions. During the remainder of his time with SAP, he worked on SAP General Ledger migration techniques, the SAP IFRS adoption model, and SAP’s enhanced financial closing, and continues to consult on these topics. His educational background includes an MBA from Rensselaer Polytechnic Institute, an MS from Utah State University, and a BS from Utah State University.

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