Work center mapping

[former_member216878]

Dear Guru`s,

I`m a CO consultant and has very little knowledge of PP module. I`m facing difficulties to find out how many work centers should be created,below is the scenario:

It`s a chemical manufacturing industry and PP module is already implemented with make to stock scenario with Process orders. 1 Plant is consider as 1 work center. The process flow is below"

RW1 and RW2 is inserted in a reactor and with the process called "chlorination" FG1,FG2,FG3 are the output we get. Now these 3 FG`s is inserted in a Column and with the process called as Distillation FG1 is removed from the combination of FG1,2,3 again with the same distillation process but in different Column FG2 is removed from the remaining combination of FG2,3 and again with the process called "Crystallization" the last FG3 is removed in different column.  The activities performed are water,labour,steam and power. Attached is the flow chart diagram of the process.

Now my confusion is :

• How many work centers should be created so that I can get the exact cost of FG1,2,3.
• In current scenario 1 work center is created for 1 plant.Is it the right approach.
• What all activities I should consider as Activity types in CO module.

Please help...

Regards

Nitisha

[Former Member]

Hi,

As per business process first you should be ask as CO person from BPO (business process owner),

1) Is management want cost capturing entire process from start to end with 1 work center in 1  

plant ?

2) Or else want each process steps through define other work center as you have described in flow chart.

If they want entire process cost collectively so no need to create other work center as PP prospective,

but they want each process wise costing then need to create other work center.

  second requirement regarding activity cost in CO, as PP concern during process what cost they want to capture ( mostly direct cost capture) like labor, power, water, steam ( in PP side called "standard value key" and "activity type " in CO side, so need to ask which activity type client want to take in process cost ( cost which is coming from process direct), as per my concern labor, power come in direct activity , as you said "steam" consider as raw material, check "steam" if they maintain in bill of material so it will capture through raw material consumption in process order. next "water" as you said consider in plant cost.

In conclusion if any activity which capture in process directly which need to be assign with work center also, if we create new work center and  indirect activity ( which does not include direct in process) consider as overhead.

So take input from PP guys also because after PP activity fix then CO role will start.

Best regards,

Amit  Awasthi.

[former_member216878]

Hi Amit,

Thanks for the quick and helpful reply...

For work center as you suggested I`l ask customer how they want to proceed.

You are right steam is consider as raw material and maintained in  BOM. For rest of the direct cost and indirect cost it is booked against plant cost center but not at process order in current scenario.

Is their any way out that how can include both direct and indirect cost in material??

Regards

Nitisha

[rupesh_brahmankar3]

Hello Nitisha,

Please consult your PP consultant on it, only creation of work center don't matter, but also routing / mater recipe operation sequence and BOM structure does matter. However creating only one work center for a plant doesn't make any sense. As per the process you need to have different work centers particularly for  Chlorination, Distillation, Crystallization. In master recipe you can have one different phases for the operation. You can have maximum six activities per work-center, as per beusiness requirment you can define your activities like machine, labour,steam and power etc.

Best Regards,

R.Brahmankar

[former_member216878]

Dear R.Brahmankar,

Thanks for your prompt reply...really appreciated...

From your reply work center part is little bit clear but for activity I still have doubt.

Logic provided by business for 1 work center for 1 plant is that their production process is continuous process that`s why they cannot consider more then 1 work center. Considering business process should I suggest work centers as Distillation,Crystallization and Chlorination or it`s better to keep 1 wc for 1 plant.

Activities like labour,water,steam,power,machine are not booked against process orders,business don`t consider it as expense for producing material rather they book the labour,water and power cost at plant level against plant cost center and steam is considered as raw material as they produced it internally and purchase it also.

Please guide me with this scenario that what should I consider for activity types.

Regards

Nitisha

[rupesh_brahmankar3]

Hello Nitisha,

Logic provided by business for 1 work center for 1 plant is that their production process is continuous process that`s why they cannot consider more then 1 work center. Considering business process should I suggest work centers as Distillation,Crystallization and Chlorination or it`s better to keep 1 wc for 1 plant.

If business is happy with one work center and they are able to get desires output by using one work center then its fine.  There is no thump rule for creation of work centers it is as per the business requirements.

Activities like labour,water,steam,power,machine are not booked against process orders,business don`t consider it as expense for producing material rather they book the labour,water and power cost at plant level against plant cost center and steam is considered as raw material as they produced it internally and purchase it also.

Please guide me with this scenario that what should I consider for activity types.

What is the business requirement here? If they are posting activities at plant level against the cost center and they are fine reporting structure no need change anything. Why you want to reengineering the the entire process in terms of work centers and activity types?

Best Regards,

R.Brahmankar

[former_member216878]

Hi R. Brahmankar,

I need to calculate Standard cost estimate for materials for which I need material component price which I`l get thru BOM but for activity prices i`m not clear how to calculate it because of the current config. in PP no activity cost is consumed at process order level,all cost/overheads are booked at plant level. That is the reason I`m searching for the best way out so that i can add overheads in materials.

Regards

Nitisha

[rupesh_brahmankar3]

Hello Nitisha,

If you want to calculate standard price for secondary cost element, you need to have activity maintain in work center and  duration in operation. First create new parameters for labour,water and power in OP17.

Assign it to your standard value key in OP19. Define formula in OP21. Assign it to work center define acivity duration in your operation and rate in KP26. Then run the standard cost estimate in CK11n and check the price. Test this in your quality system and check with business if it address there requirement.

Best Regards,

R.Brahmankar

[former_member216878]

Hi R Brahmankar,

If only 1 work center is used for whole plant and fg`s are produced in multi stages then will I be able to calculate correct activity price for fg`s..... How does work center effects costing.

Please share your views as it will help me a lot in finalizing the solution..

Regards

Nitisha

[rupesh_brahmankar3]

Hello Nitisha,

Yes one work-center can also work you have to add all the activities on that work center and operation duration accordingly. If you have SFG products in-between you can use same work-center in that product routing/recipe too. Please test the same and come back.

Best Regards,

R.Brahmankar