Fertilizers and Chemicals Travancore LTD: FACT Forward
Fertilizers and Chemicals Travancore LTD: FACT Forward
Fertilizers and Chemicals Travancore LTD: FACT Forward
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BUSINESS BLUEPRINT
CO Product Cost Planning
June 2009
All trademarks that appear in the document have been used for
identification purposes only and belong to their respective companies.
Confidential i
Document Release Note
Document details
BBP_ CO_Product Cost Planning V1.0 SAP ECC 6.0 Business Blueprint for the
process, CO - Standard Costing
Revision details
Please keep them up-to-date using the release notices from the distributor of the
document.
Date: Date:
Purpose
This document depicts the SAP enabled TO-BE version of the business process of FACT.
The document contains how the process under reference will be handled in the TO-BE
SAP scenario along with the business benefits and organisational changes required to
implement the SAP enabled business processes. The document also highlights
customisation requirement as applicable and covers the reporting requirements of FACT
with respect to the process under reference.
These are evolved based on the detailed study of the business processes and functions of
FACT and with the inputs from the series of Business Blueprint Workshops conducted for
this purpose.
Intended Users
This document will help:
The team of FACT to understand and approve the requirements and design of the
proposed application, as adequate for meeting its stated business needs
The SAP team to design and develop the application using the requirements as
the basis, as well as to plan and manage all project resources thereof.
The acceptance testing team to develop test data and to test the application
The maintenance and support team to understand all aspects of the process,
application, and maintain it.
Chapter Description
Confidential iv
References
Blue Print Documents
Note: It is essential that problems with the basic structure of the proposed software be identified
as early as possible, before this document is finalised and signed-off. It may be difficult to
incorporate changes to overcome shortcomings later.
Change Management
Changes to this document, after it has been accepted and signed-off, will be through
appropriate Change Management Procedures, as described in the contract.
6 INTEGRATION/INTERFACE CONSIDERATIONS.............................................................................23
6.1 INTEGRATION CONSIDERATIONS.............................................................................................. 23
6.2 INTERFACE CONSIDERATIONS.................................................................................................. 23
7 REPORTING CONSIDERATIONS..........................................................................................................24
7.1 SAP STANDARD REPORTS...................................................................................................... 24
7.2 CUSTOM REPORTS................................................................................................................. 24
8 DEVELOPMENT CONSIDERATIONS...................................................................................................25
9 AUTHORISATION ROLES......................................................................................................................26
10 DATA MIGRATION...................................................................................................................................27
The total number of pages in this document, including the cover page, is 36.
Confidential vi
List of Abbreviations
Abbreviation/
Expansion
Acronym
BI Business Intelligence
CO Controlling
Customer Customer
FI Financial Accounting
HR Human Resources
MM Materials Management
PM Plant Maintenance
PP Production Planning
PS Project Systems
XI Exchange Infrastructure
BG Bank Guarantee
1.1.1.1Utilities:
The Division treats / produces the following utilities for the use of the division.
A) Raw Water : Division treats water for the use production operations. The
cost element incurred for this operation includes cost of Power and
Chemical
B) De mineralised Water: With the treated water from raw water plant the
division produces de mineralised water for the requirement of Boilers. The
input materials are raw water, chemicals and power.
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share of the captive power is consumed in ammonia plant. The input
material is steam from the steam plant.
1.1.1.2Intermediaries:
The Division produces the intermediary requirements of the Division as well
as the requirements of other Divisions. The Division produces the following
intermediaries.
B) Sulphuric Acid Plant : Sulphuric Acid Plant produces Sulphuric Acid and
Oleum. The Raw material for the products is Sulphur. Some Chemicals
and power also used for the operation. Vanadium Pent oxide Catalysts
are also used for the chemical reaction. The plant also produces low
pressure steam by heat absorption technology and the steam is supplied
to the other plants.
D) Phosphoric Acid Plant : The Division also produces phosphoric acid for
the requirement of the complex fertiliser production. The Raw Materials
for the production of phosphoric acid are Rock Phosphate and Sulphuric
Acid. Chemicals and Power also used for the operation of the plant.
1.1.1.3Finished Products:
The division produces Ammonium sulphate and Factamfos (Ammonium Phosphate
sulphate 20:20:0:13).
1.1.2.1Utilities:
The Division treats / produces the following utilities for the use of the division.
A) Raw Water : Division treats water for the use production operations. The
water is supplied by the Irrigation Department of Government of Kerala.
The cost element incurred for this operation includes cost of Water, Power
and Chemicals.
C) Steam : The Division have two Boiler Plants, one consists of 3 nos of 60
TPH boiler and other plant with one 80 TPH Boiler. The plant produces
steam for the requirement of Captive Power Plant and the process heating.
Furnace Oil is used as the fuel for the production of steam. Apart from
Furnace Oil, power is also used for the running of the plant.
D) Captive Power Plant: The Division is producing power with Steam in
addition to the power purchased from Electricity Board. There are two
captive power plants, one having a capacity of 14 MWH and other with a
capacity of 12 MWH. The 14 MWH plant is having a low pressure steam
recovery unit. Major share of the captive power was consumed in
Ammonia plant. The input material is steam from the steam plants.
E) Intermediaries: The Division produces the following intermediary
products for the requirement of the Division.
F) Ammonia Plant: The ammonia Plant produces Ammonia for the
requirements of Urea Production. The input material for the production is
Naphtha. It also consumes Furnace Oil, Steam, Captive Power and other
Chemicals. Catalysts are also used for the chemical reaction. The plant
also produces Carbon Dioxide as by product.
G) Sulphuric Acid Plant : Sulphuric Acid Plant produces Sulphuric Acid .
The Raw materials for the product is Sulphur. Some Chemicals and power
also used for the operation. Vanadium Pent oxide Catalysts are also used
for the chemical reaction. The plant also produces low pressure steam by
heat absorption technology and the steam is supplied to the other plants.
H) Phosphoric Acid Plant : The Division also produces phosphoric acid for
the requirement of the complex fertiliser production. The Raw Materials
for the production of phosphoric acid are Rock Phosphate and Sulphuric
Acid. Chemicals and Power also used for the operation of the plant.
A) Urea : The division has the facility to produce Urea. The input material
for the urea production are ammonia and carbon Di oxide. It also require
Steam, Power and Chemicals. The operation of the plant is presently
suspended.
Molton lactam is flaked and bagged which is stored inside and outside the
plant.
The method of costing adopted in all the above products are Process
costing.
This is being a continuous process operation; there was direct lobour and
K) Furnace Oil : Procurement from Oil companies and import through Oil
companies
RM :
Plant :Benzene Hydroganation Intermediary
Benzene Input Out Put
(Cyclo Hexane) Cyclo Hexane
Synthasis Gas
Intermediary input
RM : Plant : Oxidation
Castic Soda RM Input Out Put Cyclo Heaxanone (Inter Mediary)
(Anone Plant)
Hydroxilamine
sunphade Plant Output1 Hyam Sulphate (Inter mediary)
RM :
Input (HYAM PLAN)T:
Carbon Dioxide Output 2
Hyam Sulphate
Sulphur dioxide
Preparation
Ammonia
Air Nitric Acid (By Product)
In Put
RM :
In Put Bagged Caprolcatum Out Put Bagged Caprolactum
Bags
Non- Parallel
Start and Refer Process Process
Process Document Connec SAP Decision
end of Proce Activity
Activity tor Syste
process ss (Manual)
m
Present process : Presently the Raw material is valued for the purpose of closing
stock and consumption on the basis of moving monthly average.
Present process :
Presently the Intermediary (Semi Finished) products are valued at average cost up
to the period of the year or for the year. (for eg. The price as on 30th June will be
the average of the actual production costs for the months of April, May and June.)
Finished products are valued either at average cost up to the period of the year \
for the year or market price whichever is less.
Proposed process : As per SAP all Semi Finished and Finished Goods will valued
based on the actual cost for the month.
(Please refer the details in 2.1 Key Design Decision and 2.3 Material Ledger.)
1.3 Business Process Description
Product Cost Planning (CO-PC-PCP):
Prerequisite:
Quantity structure for the material was prepared by PP:
Bill Of Material
Routing
Purpose:
The cost estimate without quantity structure is a tool for planning costs and establishing
prices for materials without reference to quantity structure data from Production
Planning (PP and PP-PI). It is intended for materials with insufficient or no quantity
structure data produced in plants not covered by implementation of Production Planning
module.
Prerequisites:
Material master data with Costing and Accounting Views were created and planning
process for Cost centers / Activity types was proceeded. Valid Cost Estimate without
Quantity Structure should have not been created and saved.
4 Marketing Marketing
No Requirements
1 Preparation of Costing Sheet for the month- Process wise / Element wise (Monthly)
2 Preparation of Costing Sheet up to the month- Process wise / Element wise (Financial
Year)
3 Preparation of Costing Sheet for the quarter - Process wise / Element wise (Quarterly)
9 Projected cost sheet preparation based on the revised ratios \ raw material price.
No Requirements
1 Comparison of the current month actual Product cost with Previous month actual
2 Consumption ratios of various inputs for each product during a specified period.
No Requirements
In FACT, finished and Semi finished product will be valuated in standard Price, By
products at Fixed Standard price.
Requirements/ Expectations :
As and when goods are received from production order the same
should be Valuated as per the criteria decided
Quantitative and value information of all Finished product should be
available.
It should be possible to make Target vs. Actual Comparison in terms of
quantity.
Should be able to calculate Standard Price based on per unit price for
raw material decided at the time of Annual Plan.
Should be able to change standard price per period or per quarter or
half yearly.
Ammonia Sulphate solution is a CO product produced while producing
caprolactum. Costing of Caprolactum and ammonia Sulphate Solution
should be done after taking into account distribution of Ammonia Cost
on Co products, Sulphur Di oxide and Oleum only to Ammonia Sulphate
Solution and other cost only to Caprolactum.
While valuating Finished / Semi finished product Credit of by products
(including steam )coming out in the process should be given to cost of
manufacturing of parent product at pre defined rate ( Market Value ,
transfer price etc).
Valuation of Finished products / Semi finished product should be on
principal of absorption costing
2 Cost Object Controlling Cost object controlling focuses on tracking the actual
6 direct cost costs of production and the period end
closing process.
Olieum (Concentrated
Sulphuric Acid) Nitric Acid
Ammonia Phosphate
(Fatcome Fose / NP) Steam
Ammonium Sulphate
Hyem
Cyclo Hexane
Anon
Caprolactum
Apart from above, By product coming out while manufacturing Sulphuric Acid, Sulphur Di
oxide and olieum is Steam.
Credit of Steam should be given to cost of production of Sulphuric Acid, Sulphur Di oxide
and olieum at predefined rate. Since steam is not a Material but Activity type, its
covered in Cost center accounting and period end closing BBP.
Create
Production Order
Technicaly
Compleet the
production Order
Do the settlement
of Production
Order
Difference of Debit
FI Document
and credit will
transfer to FI
End of the
Process
Material Cost :
Standard price will be calculated based on BOM and recipe for a product.
The above per unit rate will be fed in Material master of RM as Planned
price 1 with a valid starting date.
Operation Cost :
Operation cost / Overheads are computed based on Machine hours / labor Hours
and Factory hours involved in producing each unit of FG/SFG.
Standard Price per hours will be calculated based on Cost planning (Input
and Output planning) done on Manufacturing Line cost centers.
Input Plan : Cost Plan ( Please note : Input planning of cost when done at
manufacturing line cost center will involved plan cost transfer from
Support function and Maintenance cost centers , Credit of Steam cost
coming out of process etc)
In SAP, Standard price calculated are presented in a pre defined structure call
Cost Component structure. This structure is used for analysis and reporting.
In order to derive standard Cost of Co products, rules for distribution of cost are defined in
apportionment structure (with Source structure). These rules are written to meet the requirement of
Cost distribution in some ratio, Cost assignment to certain product.
Since valuation of finished and Semi finished product is based on Absorption costing,
Fixed and variable cost are made eligible for inventory valuation.
2.3.2
No Description
1 All the finished/ Semi Finished / Co By product and raw material will have material master with
respect to plant.
Process Change
1 No existing Method in the system Stock will be valuated real time and COGS will be booked
as and when the goods are delivered to Customer
1 In legacy the Closing stock valuation and Cost of goods sold was always determined at the end of
period / Year. SAP will enable both the function to happen real time.(at standard price)
2 Variance analysis can be done based on target cost calculated using Annual Plan
*High/Medium/Low
If there is any co-product it should mentioned in the BOM and have to put the tick
mark in Material Master Costing View and MRP2.
Once the material master for SFG ot FG created need to run the Product cost to
derive the price of that material.
Work center Work Center name, Description, Cost Center and Activity type
N/A
1 Period wise cost for CK82 Here we can see the report of a material
a material. cost if u run it number of times.
1 NA
1
2 User for changing the price in material master should be identified and should be given
appropriate system authorization. However the changes should be approved by the appropriate
authority.
3 Users for doing standard costing, marking and releasing (after making appropriate changes in
BOM as per source of procurement in AOP) should be identified.
Templates will be created for all the current data. If there are conversions required,
objects developed for the same would be identified in the Chapter 8 of this document.