CONTENTS

1. Objectives 2. Benefits of Profitability Analysis 3. What is CO-PA 4. Integration 5. Planning 6. Reporting 7. Assumptions

OBJECTIVES

Objective
To provide an overview of Profitability Analysis (CO-PA) To understand the flow of actual data from other SAP R/3 Modules to CO-PA To introduce the Planning features in CO-PA To introduce the Reporting features in CO-PA

BENEFITS OF

PROFITABILITY ANALYSIS

Benefits of Profitability Analysis

To extend the capabilities of SAP to better analyse profitability of STH products by different dimensions Provide MKT and Management with a tool for better product management Basis for decisions in pricing, customer selection, policies on terms, quantity control, choice of distribution channel, and marketing

Benefits of Profitability Analysis

Up-to-the-minute

reporting up-to-the-minute analysis of profitability up-to-the-minute analysis of sales management analysis of any segments of the business (products,customers, sales districts and any combination of these and other characteristics) analysis of organisational units (such as sales organisations or business areas)

WHAT IS CO-PA

Why CO-PA?
Sub-module of SAP R/3 CO (Cost Controlling) Module Flexible reporting tool to analyse companys profit and losses Freely defined slices and dices of analysis Freely defined structure of P&L sheet to match the companys requirements

Key Terminology
Operating Concern - CO-PA reporting environment. - Complex of CO-PA configuration tables and data repositories Characteristics - Criteria/Dimension for analysis of a companys profits

Key Terminology (Contd)

Value

Fields - P&L Reporting Lines

Profitability Segments - A unique combination of characteristic values which forms a multidimensional segment.

Aims of Profitability Analysis

Typical Questions in CO-PA

Market

Billing documents

Customer

Company

Product

Which are the largest and fastest growing customers ? How have sales and contribution margins changed in the last period for each product? What are my worst and best performing sales organisations in different regions ?
Region

Sales Division

Profitability Analysis

Product Groups

FFB CPO PK A B C Export-1 Export-2 Local

Customer

Creation of An Operating Concern

Operating Concern
Attributes Data Structures

Controlling Area

Controlling Area

Company Code

Company Code

Company Code

Characteristics
Distribution Channel

Customer

Product

Components that make up the views of profitability

Fixed Characteristics

User-Defined Characteristics

Profitability Segment
Distribution Channel Customer

Export

Product

ABC

CPO

Unique combination of characteristic values

CO-PA Concepts
Characteristic
What is to be evaluated? Examples: Industry Group, Product Group, Product Type, Product, Customer, Customer Group, etc

Characteristic Value
A characteristic value is a specific value of a characteristic. Examples: Customer : Customer A, Customer B Product Group: FFB, CPO, PK Customer Group: Export, Local

Profitability Segment
A profitability segment is a unique combination of characteristic values of characteristics. Examples: 1) Customer A, CPO, Local 2) Customer B, PK, Local

Value Fields
Sales Rebates Discounts

Numerical values that are reported for each profitability segment

Returns Depreciation

Overhead Costs

Value Fields

CO-PA Integration Chart

S D Sales order Delivery Billing CO-PA

Gross sales Sales Deductions

Production PP-PC order CCA Group

Standard COGS Prod..Variances S&D Costs Fixed Distribution

G/A

Distribution

Internal Order Advert. Campaign

FI

FI document

Advertising Promotions G&A Other Income/Loss

An operating concern represents an organisational unit of a company. Each operating concern contains certain attributes and a data structure. The characteristic determine the content of the operating concern. An operating concern consists of a number of fixed characteristics and up to 50 user-defined characteristics. The value fields contain the transaction data of costing-based CO-PA.

Organisational Elements Summary

Reporting Dimensions
What are the reporting dimensions required by ABC? How to determine the dimensions? Are they available in the Standard SAP Master Tables? Eg. Material Master : Material Group Customer Master : Customer Group Can they be derived from existing master data fields? Eg. Material Number -> Species

INTEGRATION

25

Population of CO-PA
SD CCA

FI

PA

PC

External Data Entry

Direct Input

Integration Model
SD Billing Documents Sales Quantity Sales Revenue Sales Deductions Product Costing CO-PC Standard Cost of Products Valuation CO-PA Estimate Sales and Administration Overhead Costs

Profitability Analysis
CO-PA

Manual CO-PA Postings

Profitability Segments Key Figures

External Data Transfer

Cost Centers CO-CCA Departmental Costs Administrative

Orders & Projects CO-OPA Direct/Indirect Costs Production Variances

Financial Accounting FI Direct Costs

Example : SD Interface

SD Interface : Concerns

Pre-requisites :

GL Account Posted From SD

field status group : profitability segment required cost element category = 11/12

Efforts :

Create New Accounts For SD Postings

Derivation Rules

Customer Hierarchies

Valuation

Characteristic Derivation & Valuation

Direct Posting From FI

Make to Stock Production Variance

Two Types of Profitability Analysis

Costing Based Transferred to Value Fields . Fictitious costs are permitted Capture Product Costing Info Short term up-to-date information . Less Resource Intensive

Account Based Transferred to cost and revenue Accounts Reconciled with FI No Product Costing Info. Same as in FI (data transferred when posted in Financial Accounting) More Resource Intensive

Data Flow in Costing-Based Profitability Analysis

Data Flow in Account-Based Profitability Analysis

PLANNING

39

Planning

Online (Manual) Planning

Parallel versions (multiple plan versions) Flexible design of individual planning layouts Planning of profitability segments : Bottom-up strategy Copy, change and re-organise (delete) plans Perform top-down distribution Transfer of planned overhead costs to CO-PA Transfer of planned PA to SOP

Automatic Planning Functions

Planning Integration

Bottom Up Planning

Top Down Distribution

Prod. Grp:Plywood Plywood-123
Plan 2000 : 110.00 Credit : -110.00

Prod. Grp:Plywood Plywood-ABC

Plan 2000 : 220.00 Credit : -220.00

Cust. Grp : Local

Act 1999 : 3 pcs Plan 2000 : 33.00

Cust. Grp : Local

Act 1999 : 3 pcs Plan 2000 : 33.00

Cust. Grp : Local

Act 1999 : 3 pcs Plan 2000 : 33.00

Cust. Grp : Local

Act 1999 : 20 pcs Plan 2000 : 220.00

Planning Rules Characteristics

Product Group Product Customer Group

Char. Value
Plywood *

Distr. Level

REPORTING

43

Architecture of Drill Down Reporting Characteristics Key Figures

Forms Drill Down Report Create Change Execute Print Excel

Word Email

Building A Profitability Report

Sales Revenue - COGS Gross Margin
- Indirect Expenses Total Profit Margin

Billing Documents/FI Billing Documents/FI

Cost Center/Internal Orde Assessments

Functions in Drill Down Reporting

Plywood

Types of Report
Actual Report Plan/Actual Reports
Act/Bud/LY By Period Brand Results MTD (Act/Bud/LY)

Budget Report

Product/Country Reports
Brand Results by Country Brand Results by Product

Reporting Dimensions

Sample Report -By Product/Country

ASSUMPTIONS

49

Assumptions
Reporting Dimensions (Characteristics) will be based on fields already defined in the system Re-conversion of existing material masters, if required, is specifically excluded

Summary

Goals of CO-PA

up-to-the-minute analysis of profitability up-to-the-minute analysis of sales management analysis of any segments of the business (products,customers, sales districts and any combination of these and other characteristics) analysis of organisational units (such as sales organisations or business areas) basis for decisions in pricing, customer selection, policies on terms, quantity control, choice of distribution channel, and marketing

Summary (Contd)

Costing-based vs Account-based CO-PA

Costing-based CO-PA and account-based CO-PA. Costing-based CO-PA allows the presentation of results by comparison of posted revenues and sales deductions with imputed costs and sales deductions. Account-based CO-PA allows the presentation of results in accounts (by omitting the use of costing based values), which ensures the ability to reconcile with FI

Summary (Contd)

Areas of Concerned

Integration points require significant cross-functional team cooperation Early research minimizes problems later Table size and reporting performance must be managed

Accuracy of the Dimension Info

Are the dimension info available for the following reporting figures? - SD [Sales Revenue, Std COGS, Discounts, etc] - CO-PC [Production Variances]
Material Related Customer & Material Related

- Cost Center Overhead [Administration Cost, Salary, etc] - Direct FI Postings [Other Expenses, Miscellaneous]
User-Defined update which characteristics?