X55 Scen Overview EN AU

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Scenario Overview BP Mining V1.600 : 

Scenario Overview BP Mining V1.600 X55: Operational Cost Panning

X55 - Cost Planning: 

X55 - Cost Planning Highlights: Typical cost center & cost element set-up for an open cut mine incl. auxiliary cost centers, cost allocation 1 Truck assigned to 1 cost center, detailed planning per truck, settlement to hauling cost center Cost Center, Equipment & Product Cost Planning CO-ABC technology incl. Template allocation Integration: Maintenance costs from Maintenance Cost Budgeting planned on cost centers (X73) Mine Production integration (X50, X52) Planned utilization for equipments (e.g. trucks) derived from mine production planning (X40) (no technical integration) Cost Actuals (X56) Process Overview: Commodity: All / Open Cut Mining of ore is a very cost intensive process. Operating costs in mining consist of the amortization of the capital costs of the equipment and mine establishment, and the operating cost itself. As an example, costs for a truck are planned in detail. This includes e.g. planning of Labor to operate, Fuel, Lubricants, supplies like tyres. Overhead costs from canteen, HR cost centers etc. will be allocated based on defined cost drivers like headcount, no. of PC’s. Costs will be aggregated to planned costs for the fleet / hauling cost center. Costs are planned for the period of typically a month for the cost centers, equipments and finally the standard costs for a ROM produced at the mine.

Budget Cycle and Operational Costing in Mining : 

Budget Cycle and Operational Costing in Mining

Costing in Mining - Main Motivation Driver: 

Costing in Mining - Main Motivation Driver Special requirement in Mining is the ability to see detailed operating costs of each equipment This is in addition to the standard requirement to see the overall production cost per ton of output Hypothesis is: The usage of the equipment is the KEY cost driver in the production cost.

Business Requirements in Costing : 

Business Requirements in Costing The challenge is … Continuous capital investments and optimal utilization of the assets drives the daily business in mining operations. Capital asset productivity and economies of scale are major factors of how mining executives make decisions and manage processes in the mine. The speed of financial transactions at the operational level is of utmost importance. In operational costing the mining financial analyst is the “guardian of the assets”. System Solution MySAP ERP Financials helps to process and interpret operational costs and financial data, improves the competitiveness and lowers costs in a constantly changing environment. Operational Costing in Mining and the Maintenance Cost Budget is a solution which allows users to support business planning, forecasting and the collection of the actual costs.

Costing and Decision Support : 

Costing and Decision Support Costing provides information and predictions for the decision model and answers the following questions: What is the amount of the cost of goods manufactured and the cost of goods sold? What is my marginal cost? How are the costs broken down? For example, how do the material costs compare to the wages? How could the production process be improved? Which organizational unit affects the product costs the most? In which mine can the product be manufactured the cheapest? What effect have machine depreciation and energy costs had on my product (primary costs)? RESULT is full cost transparency required for the management of the equipment in Mining

Slide7: 

What are relevant Information for Decision Support ? The relevant information are the predicted future costs and revenues that will differ among the alternatives given by the controllers. Relevant information are always a prediction of the future, not a summary of the past. Historical data have no direct bearing on a decision. An information that will remain the same regardless the alternatives for a decision is irrelevant for decision support. A B

Costing is part of the End to End Business Planning & Period End Closing in order to feed the Profitability Analysis: 

Costing is part of the End to End Business Planning & Period End Closing in order to feed the Profitability Analysis P&L Revenue Freight charges Gross revenue Quantity discount Customer discount Sales deductions Net revenue Variable COGS Contribution margin 1 Fixed COGS Contribution margin 2 Sales and marketing costs Administrative costs Contribution margin 3 Cost Components Cost of Goods Sold (COGS) Material Labour Energy var. Maintenance Energy fix Sundry indirect costs and overheads Material Labour Energy var. Maintenance Energy fix Sundry indirect costs and overheads Costing provides information like Cost of Goods Manufactured (COGM) for Decision Support Information from Costing are pulled by the requirements in Decision Support

Example of a closed E2E Planning Cycle with CO integration: 

Example of a closed E2E Planning Cycle with CO integration Activity prices (Plan) $ Cost Centre Planning Operating Profit Planning Product Cost estimate Demand Planning Ensuring Supply Costing Planning Scope Step 1: Sales Plan Step 2: Production Plan BW-BPS APO-DP CO-PA APO-SNP/PP-DS PP (SOP, MRP, LTP) PP-PI (SOP, MRP, LTP) CO-OM (CCA, ABC) PS CO-PC CO-PA BW Financial Analytics

Example of a closed Planning Cycle with Costing CO (sequence) : 

Example of a closed Planning Cycle with Costing CO (sequence)

Example of a closed Planning Cycle (relevant SAP products) : 

Example of a closed Planning Cycle (relevant SAP products) Detailed Sales Plan Master data maintenance CO-OM Logistics Requirements planning CO-PC Inventory accounting Variance reporting CO-PA FI COGS Materials quantity - Machine H - Labour H - Energy Costing area - Planning - Storage ... Maintenance Scope of this scenario

Value Flow Proposal Scenario A (CO-OM) : 

Value Flow Proposal Scenario A (CO-OM) CC6000 Human Resources CC6005 Medical Care CC6010 Canteen CC6020 Laundry CC6030 Personnel Dev. CC6040 Works Council CC8000 Finance & Control CC3000 Administration CC6003 Maintenance (Technical Labour) CC1000 Drilling CC1005 Blasting CC1010 Bogging CC1015 Loading CC1020 Hauling CC4020 Lubrication CC4010 Fuel CC4000 Power Production Electricity CC6050 Buildings CC5020 QA CC5030 WH Nickel CC5040 Geol. Plan Prod. support CC9000 Procurement Cooperate Services PM Personnel Services Auxiliary Cost Centers Main Cost Centers Assessment based on head count (No. PCs for IS/IT) Cycle BP1000 (Plan) BP1010 (Actuals) Assessment based on square meters Template Allocation (Env, SBP) based on engines fuel consumption rate Truck 1 Truck 2 Template Allocation Template Allocation (Env. SBP) based on machine hours ABC Allocation to CO-PC based on appropriate cost drivers e.g. - No. Batches, - Mat. expenses, Output ABC Template BP1000 (Env. 001/009) IAA settlement Assessment based on head count CC7000 IS/IT Cycle BP1000 (Plan) BP1010 (Actuals) OH surcharge 10% based on fuel CC6004 Labour Pool Information Pool: Operational Cost by Equipment

Conversion Capacity utilization into Cost Drivers: 

Conversion Capacity utilization into Cost Drivers Operating hours Production Planning Financial Cost Planning mySAP Financials Meters drilled Dry blasting holes Wet blasting holes Cost Output Drivers Fuel Tires Cost Input Drivers Utilization of Equipment Op. Supplies Direct labour Maintenance Energy # of tires Life time of tire # of op. supplies Life time of op. supplies Electricity usage of equipment Production rate of equipment Maintenance hours (preventive maintenance) Conversion output drivers into input drivers Production Planner Mining Financial Analyst Material& Capacity Requirements Planning 1 3 Complete Mining Cost Budget mySAP Financials Production Plan mySAP SCM

FAQ: Why a Cost Center per Truck ?: 

FAQ: Why a Cost Center per Truck ? Key idea is to have a separate cost controlling object for operational costs per major equipments like trucks Current practice with many customer is to use one cost center per major equipments like trucks. The business requirement can be realized using either cost centers or business processes. A key benefit of this concept lies in the usage of the cost allocation template from the activity based costing application. The Business Process object offers some enhanced next practice reporting options over the cost center object for this case, however more complex to set-up and less common today.

Key Assumptions: 

Key Assumptions The cost drivers for the equipment are more or less stable over time and therefore are predictable. In our concept the cost drivers can be predefined in the system to drive cost allocations. The technique used to predefine cost drivers is the Activity Based Costing Technique. The core concept of ABC deployed is the Allocation Template. In the following we will show how this can be done for the different cost components. Today cost drivers for operational costing are determined outside the system and loaded as statistical key figures.

Operational Cost Budget - Summary : 

Operational Cost Budget - Summary What does change? The key driver for operational cost planning are the operating hours. Operational cost planning can be done automatically once the relevant information are maintained by equipment. In case of similar equipments the master data can be copied. Is this a lot of work to set up? Is that more complex than setting up an Excel Costing? What are the benefits of an E2E Costing in Budget? All business areas will be integrated throughout the process, with outputs from one area either providing input to, or driving the process within another. A single set of volumes and common strategies and objectives will be agreed upon and used throughout the entire organization (this is the "one-number" principle). Costing process for planning will not begin until the volumetric demand/capacity plan has been approved against high level strategic targets. The simulation functionality has been captured within the process

Transaction Process Flow 1 / 3: 

Transaction Process Flow 1 / 3 KP27 Display Activity Type Planning Data (Truck Fleet) (Diplay for demonstration purposes, maintain in real world) KP04 Select Planner Profile KP46 Plan Statistical Key Figures KP27 Display Planned Activity Rates (Drill, Blast, Load, Haul, Crush) (Diplay for demonstration purposes, maintain in real world) KP27 Display Planned Activity Rates (Labor, Fuel, Energy) (Diplay for demonstration purposes, maintain in real world) KSUB Run Plan Assessment Cycles for Overheads KP46 Plan Statistical Key Figures for Fuel and Energy Costs KPPS Plan the Costs of Fuel and Energy KP07 Plan Primary Costs

Transaction Process Flow 2 / 3: 

Transaction Process Flow 2 / 3 ----- Plan Maintenance Costs – MCB (in X73) KSP4 Plan Lubrication Costs KP46 Planning Operating Supplies, Tires KP06 Plan Operative Labour Costs KPT6 Formula Planning for Planned Truck costs KSUB Developing Weighted Average Haul Truck Rate KSPI Plan Price Determination

Transaction Process Flow (Product Costing) 3 / 3: 

Transaction Process Flow (Product Costing) 3 / 3 MM03 View Standard Cost prior to costing process CK11N Create the Standard Cost Estimate CK40N Mark Standard Cost Estimate for Future Price MM03 View Standard Cost after Releasing CK40N Release Standard Cost Estimate

Copyright 2007 SAP AG. All Rights Reserved: 

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