Real Costing

1. Real Costing Raul Morales Business Development

3. Sugar Historical Prices

4. Corn Historical Prices

5. Coffee Historical Prices

6. Oil Historical Prices

7. Exchange Rate Changes

8. Back to Base

9. We see new external factors affecting business • Globalization – plants in different locations • Exchange rates fluctuations – markets integration are changing exchange rates in real time • Automation – different plants, different productivity • Logistics integration - new routes, several vendor options and cost fluctuations • Energy – oil prices and energy prices are changing • Commodities – raw material price is changing daily • Risk and Hedge Management

10. Learning Points • What is an economic event? • Nature • Date • Amount • Now technology is allowing to register economic events in real time and apply for two important objectives: • Legal requirement, Banks, Stockholders, Government • Monthly, Average or Standard, Not accurate for decision Making • Management decision making process • Real cost, Trustable information

11. Detailed Standard Cost x Real Cost Detailed Monthly Real Cost per Material and Plant Activated SAP Material Ledger Real Raw Material variations Real Labor variations Real Overhead per plant General Manufacturing Costs Multilevel Actual Products Real Finished Products Multicurrency Adjust of planned near of real Global Standard Cost per Material and Plant Month Material Ledger is not activated No Real Raw Material variations No Real Labor variations No Distributed Overhead per plant No General Manufacturing Costs No Multilevel Actual Products Real No Finished Products No Multicurrency No tools to adjust planned

12. Material Ledger/Actual Costing • Carry material prices in Multicurrency and actual costing • Up 3 currencies/valuations • Covers: • Inflation • Exchange Rates • Carry your inventories in 3 different valuations • Legal Valuation • Valuation for reporting • Profit center valuation • Actual Costing calculates an actual price for each material • Valuation using a moving average price results in the following: • Goods receipts are posted at the goods receipt value. • The price in the material master is adjusted to the delivered price

13. ProfitabilityAnalysis Revenue (+) Cogs (-) = GM Overhead (-) =EBITDA MARKETING QUALITY LOGISTICS TECHNOLOGY HUMAN CAPITAL CUSTOMER SERVICE Ohter

14. It is not an ERP activation it is a culture change • Real costing requires: • Material Ledger activation/Actual Cost • Process review – procurement, production, warehouse management, transportation, sales, profitability analysis • Master data review – materials, bill of material, final products, co products, routes • New functionalities activation – material ledger, standard transportation, bill of material, standard warehouses, production orders • Strategic understanding of Supply Chain Process

15. Material Ledger

16. Actual Costing

17. Profitability Analysis

18. Product Costing Planning

19. Actual Cost Component Split

20. Plant Price

21. Material Price Analysis

22. Material Price Analysis

24. Price Analysis

25. Integrating Economic Events • Trustable information for decision making process • Critical information available in real time • Process automation • Focus on process improvement • Scalable for more complex costing models

26. Colombian Coffee • Founded in1927 CoffeeProducersUnion • Non ProfitOrganzation • Consideredthebestcoffeearoundtheworld • Supporting more than 500k families • 1,000 SAP Users • Version 5.0 • New controlling culture, basedon Real Cost and SharedServices

27. Large Corn Ingredients Company • More than 2,000 SAP uses • 10 production plants • Mexico, USA and Canada • Guadalajara Mexico and Chicago • Review current Costing Model • Activating Material Ledger and Product Costing

28. ] • Thank you for participating. +1 404 783 1539 raul.morales@softtek.com