How to optimise your supply chain using SAP HANA Product Cost Forecast

22 October 2014

Meggie Kelly

Meggie Kelly

Consultant

Approaching the final stages of implementing SAP HANA Product Cost Forecast and Simulation, it’s time to share. Product Cost Forecast and Simulation (PCFS) is the tool that allows you to model predicted raw material cost based on cost drivers and currency movements. 

PCFS should be seriously considered by any business that buys raw materials and uses a Bill-of-Materials. It will give you a level of understanding of your product costs and raw material spend that you have never had before. Why does that matter? 

With the answer at your fingertip, you can optimise your supply chain in a number of ways

Share your raw material forecast more widely

Transparency of forecasted raw material consumption is a vital component for any supply chain optimisation. Whether you use the insight to enable strategic purchasing or simply optimise your raw material stock either will pay back.

Analyse the impact of raw material substitution

Swapping one raw material out in favour of another can impact your bottom line. With a few enhancements, PCFS lets you forecast the profit impact of raw material substitution. You can simulate the substitution throughout the whole range of finished goods or just for specific items.

Build or buy?

Complex components can be difficult to source, so understanding future consumption is key input to a build or buy decision.

So how does it work?

Here is the recipe in simple terms:

  1. Take your forecast periods
  2. Model your price drivers
  3. Add your Bills of Materials for finished goods
  4. Add a starting price for your raw materials
  5. Take your sales forecast of finished goods
  6. Now press the button

These calculations can crash SQL based forecasting tools. The SAP HANA based PCFS can not only cope, but returns the results so fast, that price modelling and simulations are really at your fingertips.

What does it take to build?

The solution itself requires a SAP BW on HANA environment to run on. The SAP Product Cost Forecast and Simulation functionality is delivered as HANA-Optimised Business Content in BW and assumes CO-PC.

Secondly, the solution can leverage the standard costing BOMs from SAP ECC through the standard extractors. Once the standard content is activated and the data added, consider the outputs and customise to your needs.

Altogether, this could take weeks rather than months.

Also to consider, the solution is designed to be source system agnostic. In a recent example we implemented PCFS using data from 8 different source systems and not one of the source systems using CO-PC, with just a few weeks of build time.

Where can I find more detailed technical information about SAP Product Cost Forecast and Simulation?

For a more comprehensive summary look at Is SAP’s Product Cost Forecast and Simulation tool SAP HANA’s best kept secret?

And read Six key takeaways: Experiences with Product Forecast and Simulation, the new SAP HANA Optimised Business Content by George Campbell-Kelly.

There is also a great post on the SCN written by Guido Eichmann and Rolf Sieberg, from SAP - Product Cost Forecast and Simulation – a driver-based approach and it is worth reading the Product Cost Forecast & Simulation (SAP HANA-Optimized) help documentation.

PCFS should be seriously considered by any business that buys raw materials and uses a Bill-of-Materials. It will give you a level of understanding of your product costs and raw material spend that you have never had before.

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Bluefin and SAP S/4HANA - welcome to the one horse race