SAP S/4 HANA : CO Product Costing flow for ETO Scenario

Engineer-to-Order (ETO) product costing flow in SAP S/4 HANA, which is often associated with the Project Systems (PS) module due to its project-oriented nature.

ETO is a strategy where products are manufactured based on each specific customer's requirements. It involves unique designs and specifications for every order, requiring close integration of sales orders, design, manufacturing, and costing.

A) ETO Production Process with Production Order

1. Project Creation: Upon receiving a sales order, a Work Breakdown Structure (WBS) element is auto-generated. This is achieved by having a standard project template with predefined WBS elements and networks.

2. Design Phase: This includes designing the BOM (Bill of Material) and Routing, which lay out the materials required and the production steps, respectively.

3. Production Order Creation: A production order is generated with reference to the WBS. This production order gets its BOM and routing from the ETO product.

4. Goods Issue: Materials required for production are consumed. This process reduces inventory and books the costs to the production order.

5. Activity Confirmation: The labor hours and machine hours used in the production process are confirmed, recording the actual time taken for each operation.

6. Goods Receipt: Once the production is completed, the finished goods are received into stock. This results in capitalizing the finished product's cost.

7. Variance Calculation: Differences between planned and actual costs are determined.

8. Settlement: The costs accumulated on the production order are settled to the WBS element.

9. Billing & Revenue Recognition: Once the product is delivered to the customer, billing is done. The revenue is captured at the WBS level.

10. Results Analysis (RA) Key Calculation: Determines profit/loss by comparing the revenue against the costs.

11. COPA Settlement: The profitability of the order is analyzed by settling the data to Controlling Profitability Analysis (COPA).

B) ETO Production Process without Production Order

1. Project Creation: Similar to the above process, a WBS element is auto-generated upon receiving a sales order using a standard project template.

2. Work Centers & Activities: Define work centers for different activities like machining, labor, etc.

3. Goods Issue: Materials are issued directly to the WBS element, thereby reducing inventory and booking costs to the WBS.

4. Activity Confirmation: Labor and machine hours are confirmed directly against the network activity.

5. Results Analysis (RA) Key Calculation: Determines profit/loss by comparing the revenue (from billing) against the costs accumulated at the WBS element level.

6. COPA Settlement: The profitability is analyzed by settling to COPA.

Conclusion: In ETO scenarios, the SAP Project Systems (PS) module's integration with Controlling (CO) and Logistics (LO) is crucial. Whether with a production order or without, it's essential to maintain transparency of costs and revenues associated with each project. SAP's ability to link these elements ensures accurate cost tracking and profitability analysis for ETO scenarios.