Re: [sap-log-mm] Customized orders question

Posted by Sap Land Wednesday, 1 June 2011 12:31

Posted by siegsand (Consultant)
on Jun 1 at 3:46 PM

For a situation with materials where you want to capture the actual cost
of the material you only have one choice and that is to use batch
management and separate valuation. Thus each batch of a material received
will have it's own unit cost. When this material is used in a process the
actual batch number used will be part of the ProdOrd. Then the actual
cost will be included in the MFG cost of the product. If more than one
batch of material is required, then the product cost will have a weighted
average based on the amount of each batch used.

The above requires additional business process overhead on goods receipt,
inventory counting, MRP, and Production Order management. Before
considering implementing batch management with separate valuation,
consider all the other business processes that would have to change and if
the extra effort will provide the necessary value to the business.

Another alternative to the above is to change the valuation of the copper
from Standard to Moving Average. This means that each receipt of the
material will be averaged into the inventory. Ex. Inventory Copper is 100
kg at $1.00/kg. Inventory value is $100 and each kg issued is valued at
$1.00. If 80 kg are received at $1.50 / kg, then inventory value is $100
+ (80 x $1.50) = $220 and each kg issued is $220/180 = $1.22. Even though
this is not as high as the last receipt at $1.50, it does accommodate a
rise (as well and a fall) in prices. This alternative would not require
the additional business process of using batch and separate valuation and
thus is a simpler solution to manage.

Siegfried (Sieg) F. Sanders
Managing Consultant
IBM Global Business Services

: www.ibm.com/gbs/assetmanagement

---------------Original Message---------------
From: Marwa_Amin
Sent: Wednesday, June 01, 2011 1:25 PM
Subject: Customized orders question

Please feed me back regarding the process treatment for the following:
We have customized products built using copper components as main components; and as you know that the copper prices are changing every time. When the sales quotation was prepared it was built based on the copper price as of the date of the preparation and with a margin of for example 15%. Now after accepting the order and the material began to be purchased and valued using the average cost the material will be issued on the production order for this sales order with a different cost than the price of the copper at the time of the quotation.
We need to issue this material to production order using the purchase price of the copper not using the average cost.
Please feed me back with the solution for this issue in detailed explanation noting that for the customized order we are of course using make to order scenario.

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