Refurbishment of Repair Parts at Procter & Gamble Pam Hendrickson Procter & Gamble
Mark W Scott Vesta Partners LLC Premier Sponsor
Platinum Sponsor
Produced by:
billion
P&G’s Billion-Dollar Brands
Procter & Gamble Crest® Duracell®
• • • Downy® • • Dawn®
Approximately 300 brands globally Market in over 140 countries $79 billion in worldwide sales 140,000 employees in 80 countries 140 manufacturing plants in 40 countries
Bounty®
Head & Shoulders®
Iams®
Pampers®
Gillette M3Power®
Olay® Always® Pantene®
Charmin® Pringles® Tide®
Wella®
Braun®
Agenda • • • • • •
Business situation Refurbishment work process Refurbishment costs Internal refurbishment External refurbishment Summary
Business Problem • Refurbishing parts can be less expensive than
• •
always buying new Refurbishment of repair parts can be done internally in a shop or externally at a vendor Need to properly account for the cost of the refurbishment, inventory, and status of the refurbishment
Presentation Objectives • How refurbishment orders can be used for the
• •
internal refurbishment of repair parts How subcontract purchase orders can be used for the external refurbishment of repair parts How costs flow when refurbishment orders and subcontract purchase orders are used to refurbish repair parts
Refurbishment versus Buy New
Considerations 1)
Cost benefit vs. buying new
- as a guideline, repair cost should be no more than 50% of new cost 2) 3)
Skill level in-house for repairs or external vendor availability for repairs Vendor recommendation
4)
Engineering recommendation
Material Master If part is considered repairable, then it is set up as “split-valued” in SAP Split-Valued categories: 1) NEW – reflects quantity of the part in inventory that are new 2) REPAIRABLE – reflects quantity of the part in inventory that are waiting for repair/not fit for use 3) REFURBISHD – reflects quantity of the part in inventory that have been repaired/fit for use
How do you know?
User sees an indicator on SAP shop paper that a part is “R” (Repairable) Valuation category
User returns the broken part to the storeroom
Storeroom Role o Analyze feasibility of repair o Throw away if not repairable o Create: purchase requisition for external repair; or, refurbishment order for internal repair o Send material to the vendor or deliver to repair area o Receive repaired material back into inventory
Maintenance Role – Internal Repair o Insure general task lists exist in SAP for repetitive repairs o Plan and schedule the refurbishment order o Refurbish the part o Return the part to the storeroom o Technically complete the refurbishment order
Refurbishment Costs -Did not properly value inventory -Complex PurReq/PO’s -Cost flow and reports complex
SAP directly supports this method
12
Refurbishment Process Costing Costs to repair expense materials settle to the material master, and become part of the moving average price for a refurbished part Costs to repair capital materials are charged directly to a Cost Center or WBS element
How should refurbished materials be valued? Value of Refurbished Material Capital Part
• • • •
How can(V)this NEW – cost of new CAPITAL - $0 (S) REFURBISHD - $0 (S) REPAIRABLE - $0 (S) S – Standard Cost
Expense Part
be accomplished? • NEW – cost of new (V) • REFURBISHD – cost of repair (V) • REPAIRABLE - $0 (S)
V – Moving Average Price
Refurbishment Process
Refurbishment Order Basic Configuration • Refurbishment order types: o o
PM95 PM96
– refurbishment of expense repair part – refurbishment of capital repair part
• Settlement profiles and allocation structures: o o
PM95 PM96
– to settle costs to the material in inventory – to settle capital repairs to WBS element – to settle expense repairs to a Cost Center
• Default batch into refurbishment order to reduce errors
Refurbishment Order settlement Internal Repair (using Refurbishment Order)
Use PM95 order type Use PM96 order type
Expense Part
Capital Part
Capital Repair • Settle to WBS element Some refurbishments of capital parts are “capital”
Expense Repair • Settle to Cost Center (that returned part to Storeroom) Most refurbishments of capital parts are “expense”
• Settle to material NA
General task list Facilitate the planning of refurbishment work Group 1000025
Rebuild Shop
Group Counter 1
Gearboxes
Operations 0010 Rebuild gearbox model ABC 0020 Rebuild gearbox model XYZ (major) 0030 Rebuild gearbox model XYZ (minor)
2
Clutches 0010 0020
3
Rebuild clutch model 123 Rebuild clutch model 456
Cylinders 0010 0020
Rebuild A1B cylinder Rebuild 1A2 cylinder
Creating Refurbishment Order
Goods Receipt to return Refurbished part to Storeroom • Transaction: IW8W
• Sets DLV system status o o
Can handle serial numbered materials Can handle partial deliveries
Refurbishment Order cost flow
PM95 settles to a Material
PM95
PM96 settles to a Cost Center or WBS element
PM96
Refurbishment Order Cost Flow - Situation Valuation Type
Total Stock
Price Control
Moving Avg Price
NEW
0
V
750.00
REFURBISHD
0
V
200.00
REPAIRABLE
1
S
Standard Price
0.00
150.00 0.00 30.00 10.00 40.00
Refurbishment Order Cost Flow “Goods Issue to Order”
Cost Center “abc”
Confirm TEST Credit 80004700 ($150.00) 3 hours @$50/Hr
80004700 $150.00
Refurbishment Order Debit (charge) 80004700 $150.00 58070100 $40.00
58070100 $40.00
Storeroom Inventory
REPAIRABLE $0.00 Material 1 $30.00 Material 2 $10.00
13701000 ($40.00) Delivery 58099500 ($200.00)
Settlement 58099500 $10.00
Refurbishment Order Cost Flow “Goods Receipt from Order”
Cost Center “abc”
Confirm TEST Credit 80004700 ($150.00) 3 hours @$50/Hr Storeroom Inventory
80004700 $150.00
Refurbishment Order Debit (charge) 80004700 $150.00 58070100 $40.00
58070100 $40.00 REPAIRABLE $0.00 Material 1 $30.00 Material 2 $10.00
13701000 ($40.00) Delivery REFURBISHD Material $200.00
58099500 $200.00 REFURBISHD Order status: DLV
58099500 ($200.00)
Settlement 58099500 $10.00
Refurbishment Order Cost Flow “Order Settlement”
Cost Center “abc”
Confirm TEST Credit 80004700 ($150.00) 3 hours @$50/Hr Storeroom Inventory
80004700 $150.00
Refurbishment Order Debit (charge) 80004700 $150.00 58070100 $40.00
58070100 $40.00 REPAIRABLE $0.00 Material 1 $30.00 Material 2 $10.00
13701000 ($40.00) Delivery
Total: $190
REFURBISHD Material $200.00 REFURBISHD Material ($10.00) 58099500 ($10.00) REFURBISHD
58099500 $200.00 REFURBISHD Order status: DLV
58099500 ($200.00)
Settlement Settlement
58099500 $10.00
Capital material Expense Cost Flow-Situation Valuation Type
Total Stock
Price Control
Moving Avg Price
Standard Price
NEW
0
V
7000.00
REFURBISHD
0
S
0.00
REPAIRABLE
1
S
0.00
150.00
0.00 30.00 10.00 40.00
Capital material Expense Cost Flow “Goods Issue to Order”
Cost Center “abc”
Confirm MECH Credit 80004700 ($150.00) 3 hours @$50/Hr Storeroom Inventory
80004700 $150.00
PM96 Order Debit (charge) 80004700 $150.00 58070100 $40.00
58070100 $40.00 REPAIRABLE $0.00 Material 1 $30.00 Material 2 $10.00
13701000 ($40.00) Delivery 58099500 ($200.00)
Settlement 58099500 $10.00
Capital material Expense Cost Flow “Goods Receipt from Order”
Cost Center “abc”
Confirm MECH Credit 80004700 ($150.00) 3 hours @$50/Hr Storeroom Inventory
80004700 $150.00
PM96 Order Debit (charge) 80004700 $150.00 58070100 $40.00
58070100 $40.00 REPAIRABLE $0.00 Material 1 $30.00 Material 2 $10.00
13701000 ($40.00) Delivery
REFURBISHD Material $0.00
58099500 $0.00 REFURBISHD Order status: DLV
58099500 ($0.00)
Settlement 58099500 $10.00
Capital material Expense Cost Flow “Order Settlement (expense repair)”
Cost Center “abc”
Confirm MECH Credit 80004700 ($150.00) 3 hours @$50/Hr
80004700 $150.00
PM96 Order Debit (charge) 80004700 $150.00 58070100 $40.00
58070100 $40.00 REPAIRABLE $0.00 Material 1 $30.00 Material 2 $10.00
Storeroom Inventory 13701000 ($40.00)
Inventory: +1
Value: $0.00
Delivery
REFURBISHD Material $0.00
58099500 $0.00 REFURBISHD Order status: DLV
58099500 ($0.00)
Settlement Cost Center “xyz”
80022100 $40.00 80022200 $150.00
Settlement
$190 Note: For a capital repair the settlement rule would be a WBS element.
80022100 ($40.00) 80022200 ($150.00)
Summary of Cost Flow • Expense refurbishment: o o
Goods receipt at current moving average price Settlement posts difference between moving average price and cost of refurbishment
• Capital refurbishment: o o o
Refurbished part brought into inventory at zero value Expense refurbishment settles to Cost Center Capital refurbishment settles to WBS element
Results Analysis Key • As minimum, maintenance orders settled at end of month • All costs accumulated in order during the month must settle • What happens if costs have been posted to a refurbishment order but the part has not yet been received by Storeroom? o o
• • • •
Refurbishment order cannot settle! Unless a Results Analysis Key is being used
A “RA Key” should be defined by Finance A default “RA Key” can be assigned to an order type Will settle posted costs to a WIP account When refurbished part received by Storeroom the order can be settled which will clear the WIP account
External refurbishment • Subcontract PurReq/PO o o
Designed for sending material(s) to vendor who then adds value (labor, materials) and returning another material Refurbishment:
Send REPAIRABLE material Vendor adds labor and other materials Returns REFURBISHD material
• Goods issue to vendor o o
o
Transfers REPAIRABLE material to vendor REPAIRABLE material still owned by and on company books Able to track REPAIRABLE materials at vendors
Create Subcontract PurReq Receiving
Sending
• Define material to be sent for Refurbishment. • Define material to be received back after being Refurbished. • Custom screen (ABAP, GuiXT, etc.) can simplify creation and reduce chance of error.
Goods Issue to Vendor • Transfer posting (MB1B) – movement type 541 • Using “Subcontracting Stock Monitoring List” (ME2O)
• Transfers material to vendor, however, still on company books • Available reports show what materials at which vendors.
“SC Stocks per Vendor” report • Transaction: ME2O
To be sent to Vendor
Still at Vendor
• Materials returned from Vendor do not show on report.
Goods Receipt • Note goods receipt of Refurbished material (mvt type 101) and simultaneous “consumption” of REPAIRABLE material sent to vendor (mvt type 543).
Subcontract PO Cost Flow Situation Valuation Type
Total Stock
Price Control
Moving Avg Price
NEW
0
V
750.00
REFURBISHD
0
S
200.00
REPAIRABLE
1
S
Standard Price
0.00 0.00
PO net price
Vendor labor added 130.00 Vendor supplied parts 40.00 REPAIRABLE part 0.00 170.00
Subcontract PO Cost Flow “Goods Issue to Vendor”
Storeroom Inventory GI to Vendor REPAIRABLE $0.00
GI to Vendor (PO)
Vendor “1234”
REPAIRABLE $0.00
Subcontract PO GI to vendor REPAIRABLE $0.00
GR from Vendor REFURBISHD $200.00
Invoice Adjustment ($30.00)
Net price REFURBISHD $200.00
Invoice REPAIRABLE $170.00
Refurbishment REPAIRABLE $0.00 Labor $130.00 Parts $40.00
Subcontract PO Cost Flow “Goods Receipt from Vendor”
Storeroom Inventory GI to Vendor REPAIRABLE $0.00
GI to Vendor (PO)
Vendor “1234”
REPAIRABLE $0.00
Subcontract PO GI to vendor REPAIRABLE $0.00
GR from Vendor REFURBISHD $200.00
Invoice Adjustment ($30.00)
GR from Vendor REFURBISHD $200.00
Net price REFURBISHD $200.00
Invoice REPAIRABLE $170.00
Refurbishment REPAIRABLE $0.00 Labor $130.00 Parts $40.00
Subcontract PO Cost Flow “Invoice posting”
Storeroom Inventory GI to Vendor REPAIRABLE $0.00
GI to Vendor (PO)
Vendor “1234”
REPAIRABLE $0.00
Subcontract PO Refurbishment REPAIRABLE $0.00 Labor $130.00 Parts $40.00
GI to vendor REPAIRABLE $0.00 GR from Vendor REFURBISHD $200.00
Invoice Adjustment ($30.00)
GR from Vendor REFURBISHD $200.00
Net price REFURBISHD $200.00
Invoice adjustment ($30.00)
Net cost: $170
Invoice REPAIRABLE $170.00
Invoice $170.00
Invoice $170.00
External Refurbishment of Capital materials • Similar to Internal refurbishment of Capital material except: o o
Account assignment of Expense repair is Cost Center Account assignment of Capital repair is WBS element
Learnings • Thinking about refurbishment of repair parts • How refurbishment orders can be used for the internal
• •
refurbishment of repair parts How subcontract purchase orders can be used for the external refurbishment of repair parts How costs flow when refurbishment orders and subcontract purchase orders are used to refurbish repair parts
Pam Hendrickson Procter & Gamble
[email protected]
Mark W Scott Vesta Partners LLC
[email protected]
Premier Sponsor
Platinum Sponsor
Produced by:
March 27 – 30, 2011 Hyatt Regency Huntington Beach Resort and Spa Huntington Beach, California
Premier Sponsor
Platinum Sponsor
Produced by: