Post on 11-Apr-2017
AMERICAS’ SAP USERS’ GROUP
Transfer Prices: Transfer Prices: Conceptual Overview Conceptual Overview & Project Report& Project ReportThomas Kaiser, SAP-AG WalldorfRoy Brown, Polaroid Corporation
1999 ANNUAL CONFERENCE & VENDOR FAIR
May 16 - 19, 1999Dallas Convention CenterDallas, Texas
Copyright 1999
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
Polaroid CorporationPolaroid Corporation Global Imaging Company
$2 Billion in Annual Revenue Major Product Lines
Instant Photographic Cameras & Film, Digital Hardware & Software, Conventional Films & Polarizing Filters & Lenses
Key Markets Amateur & Professional Photography, Industry,
Graphic Arts, Science, Medicine, Government & Education
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
Polaroid CorporationPolaroid Corporation To Service these Markets
Sales Offices & Distributors in all Major Regions: Americas, Europe & Asia Pacific
Seven major Manufacturing Centers United States Mexico Europe Asia
Eight Major Distribution Centers Worldwide
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
Polaroid CorporationPolaroid Corporation Operational Characteristics
Make to Stock Inventory Replenishment Drop Shipments to Customers
3 Manufacturing Types Repetitive, Process & Discrete
3 Primary Businesses Commercial: Imaging & Digital Consumer: Film & Cameras New Business: Polarizer, Graphic Imaging, ID
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
Polaroid Profit Center Polaroid Profit Center StructureStructure
Pro-TechPhoto RetailCommercial DigitalBusiness Imaging
CalifTexas
ID
Other Commercial
NegativeChem Ops
Components
Enshede IndUS Indust
Industrial Hardware
Manufacturing
Product Dev
Commercial
Consumer CoreKidsConsumer DigitalOther Consumer
US CameraEnschede
Camera
US IntegralEnshede FilmBattery
Intergral Film
Manufacturing
Product Dev
Consumer
PGIHeliosHolographyTech PolarizerSunglassesOther NBManufacturingProduct Dev
New Business
Corporate G&ACorporate OtherResearchMFG Dev
Other
Polaroid Corp
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
Polaroid SAP Global Polaroid SAP Global ProjectProject SAP 4.0B Module Implementation
PP: Distribution Requirements Planning MM: Manufacturing Planning &
Production and Procurement SD: Order Fulfillment & Logistics Finance
Financial Accounting Controlling
Reporting Special Purpose Ledger, SIS & LIS
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
Polaroid SAP Global Polaroid SAP Global ProjectProject SAP 4.0B Finance Modules
Financial Accounting GL, AR, AP & Asset Accounting
Controlling Cost Center Accounting, Product Costing,
PA, Internal Order Mgmt. Enterprise: PCA
– Future Plans: Consolidation Material Ledger & Parallel Valuations
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
Polaroid SAP Project Polaroid SAP Project TeamTeam Global Structure: 200+ full time members
Product Definition (Material Master) Global Supply Chain- Sales/Distribution Manufacturing Purchasing Finance Reporting Basis RICE Development Group
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
Polaroid SAP Project Polaroid SAP Project ScheduleSchedule Global Phase Implementation
1/99: Global Supply Chain, US Logistics & Finance, Digital & Optics Manufacturing
4/99: Chemical Coating Manufacturing 7/99: Europe Manufacturing &
Sales/Marketing (Commissionaire) 8/99: US Manufacturing Assembly Plants 10/99: Canada, Puerto Rico, Latin America &
Mexico 1/2000: Japan 4/2000: China
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
Polaroid Tax StrategiesPolaroid Tax Strategies Transfer Pricing & Inter-company Processing
Patent & Trademarks owned by Parent Co. Buy & Sell between “unrelated” parties globally
Contracts with foreign manufacturers & distributors Contracts in Europe: Commissionaires, July 1999
Movement of Materials: Invoicing with Transfer Prices using Cost Plus Methods
Use Foreign Tax Credits to maximize Net Income Consolidate Inter-company Profits but eliminate for Financial &
Management Reporting
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
Polaroid Transfer Price Polaroid Transfer Price StrategiesStrategies Materials Shipped between Polaroid Legal
Entities in Different Countries Require TPs Consistent with 3rd Party Pricing Must Meet Arms Length Test Applicable to Materials & Services
Legal Entities Must Earn Reasonable Profits to be Competitive and Achieve Corporate Goals Compliance with Local Tax Laws
Monitor Statutory & Internal Reporting by Business Unit
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
Polaroid Transfer Price Polaroid Transfer Price CharacteristicsCharacteristics Complex Billing Chains
Europe– 3 Manufacturing Sub Contractors for main billing “ HUB ”– Contracting CV, sells onto European Business Center
» CV, a Distribution Center Direct Ships to Customer– International Business Center Sells to European Subs &
these Subs become Commissionaires in July– European Subs sell to their Customers
Non-Europe– Contracting CV Sells to Foreign Subs while their
Manufacturers Direct Ships to Foreign Subs– PolCorp Buys from Manufacturers and Sells to Marketing
Subsidiaries
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
Polaroid European Polaroid European CommissionaireCommissionaire
•
•
Physical Product Flow:Commissionaire
Manufacturing
Plant
(US or Europe)
European Distribution
CenterShip to Europe
D.C.Ship to
CommissionaireHub
HUB
ContractingManufacturing
PlantVale Enschede
Polaroid IBC
Polaroid -Contracting
CV
Commissionaire
Ship to EndCustomer
Third PartyCustomer
I-CTransfer
price
Non Contracting
Manufacturing Plant
Non Europe
Transfer price
Legal Product Flow:
I-CTransfer
price
Customer
I-CTransfer
priceStops at IBC
TransferI-C
Price to CustomerLess
Commission Fee !
Invoice @ SalesPrice
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
Polaroid Inter-company Polaroid Inter-company ProcessesProcesses Business Requirements
Simplify & Standardize the Processes Globally Incorporate Better Controls & Procedures Automate Transactions in the Process Accounts between Supplier & Receiver Always in
Balance– Track & Value In-transit Inventories
Reduce/Eliminate Invoicing Errors Minimize Paper Flow Global Visibility of Transactions, Postings &
Account Balances by Company Code Centralize Operations Where Feasible
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
Polaroid Transfer Price Reporting Polaroid Transfer Price Reporting NeedsNeeds Business Requirements
Include Inter-company Profit for Local Statutory Reporting– Use Actual YTD Variable, Month End Exchange Rate
Exclude Inter-company Profit for Management Reporting– Use Annual Standard Budgeted Exchange Rate
Track & Value Inter-company Profit through the Entire Billing Chain for– Internal & External Reporting Eliminations and – Tax Filings
Automate Management Reporting – Provides “Report Card” Results for GMs and Controllers– Manual eliminations performed today
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
Polaroid Transfer Pricing in Polaroid Transfer Pricing in SAPSAP Two Orders Used in fully Integrated Modules
Stock Transport Orders NB Purchase Orders– Inventory Replenishment at Distribution Centers
Sales Orders– Drop Shipments to Customers
Primary SAP Tools DRP -> Purchase Requisitions MM Procurement SD Logistics Product Costing & Material Ledger Parallel Valuations
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
Polaroid Transfer Pricing in Polaroid Transfer Pricing in SAPSAP
DRP & MRP
Convert PR to PO
Ship Materials
Create Billing
Create ARReceive Goods
Create AP
Net AP & AR
Std Cost & Transfer PricingIn-transit InventoriesManagement ReportingCustoms & DutiesAccount Reconciliations
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
SupplierPolcorp US
ReceiverPolaroid Japan
ManualInvoice Creation:
Db. I-C ARCr. I-C Sales
In-transit: Quantity & $
ManualGoods Receipt:
Db. Inventory (Available)Cr. GR/GI Clearing
Automatic Invoice Verification:
Db. GR/GI ClearingCr. Vendor (IC AP)
PO Invoice Receipt
3 Way Match: Auto Settle
ManualGoods Issue:
Db. COSCr. Invty
Shipment
CC 130 CC 155
EDI-IDOC
New Acctg.Document:(trigger GR > reverse effect)
Db. In-Transit ClearingCr. In-transit
(via batch program)
New Acctg. DocumentDb. In-transit Invty
Cr. In-transit Clearing(via batch program)
Polaroid Model: Inter-company Polaroid Model: Inter-company ProcessingProcessing
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
Polaroid Experiences with Polaroid Experiences with TPTP It Works!!
Use with Stock Transport Order NB Purchase Orders across Company Codes It Simplifies & Automates Inter-company Profit Tracking & Invoice
Verification Use with Sales Orders: Drop Shipments to a 3rd Party Customer
Ship from one CoCd Distribution Center to another CoCd and its Customer Buying CoCd Invoices 3rd Party Customer and is also Inter-company
Invoiced by Selling CoCd Puerto Rico & Europe exclusively use Drop Shipments
LG
US cc130
LG
LG
LG
LG
Raw MaterialLaborO.H.C
Semi-FinishedProduct
FinishedProduct
Shared ServiceCenter- UK
Sales OrderGerman Customer
Enschede cc 110 CV cc 120 IBC cc 125 Subsidiary cc 106
Production Order Production Order DRP Requisition
Mfg.Cost $1.00
Purch TP N/A
Margin $1.27
Sell TP $2.27
Mfg.Cost $1.36
Purch TP $ 2.27
Margin $ 0.09
Sell TP $3.72
Mfg.Cost $N/A
Purch TP $ 3.72
Margin $ 1.88
Sell TP $5.60
Mfg.Cost $N/A
Purch TP $ 5.60
Margin $ 0.85
Sell TP $6.45
Mfg.Cost $N/A
Purch TP $ 6.45
Margin $ N/A
Customer Price.
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
Polaroid Example: Parallel Polaroid Example: Parallel ValuationsValuations
US E’de CV IBC Cust
Mfg. Cost w/o Margin $1.00 $2.36 $2.36 $2.36 $2.36Inter-Co. Profit N/A 1.27 1.36 3.24 4.09Mfg. Cost w/ Margin $1.00 $3.63 $3.72 $5.60 $6.45Freight . 50Landed Cost $6.95
Worldwide Standard Cost:Mfg W/O Profit $2.36Freight .50
$2.86Germany’s P&L Reporting:3rd Party Sale:1 unit =$10.00Expense = $2.00
Group Valuation Legal ValuationSales $10.00 $10.00Cost of Sales 2.86 6.95
Local Margin 7.14 3.05
Expense 2.00 2.00
Local Profit $5.14 $1.05
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
Polaroid: SAP Parallel ValuationsPolaroid: SAP Parallel Valuations
L 0,6.-G 0,6.-
L 1.-G 1.-
L1.-G1.-
2.27.-
1.-
US CC130CCtr 0,4.-
L 2,27.-G 1.-
L 3,63.-G 2,36.-
L3,63.-G2,36.-
Enschede CC110 CCtr 1,36.-
Stock Stock
Stock
StockProd.Order Prod.Order
3,72.-
2,36.-
L 3,72.-G 2,36.-
CV CC120
L 5,60.-G 2,36.-
IBC CC125
5,60.-
2,36.-L 6,45.-G 2,36.-
Germany CC106
6,45.-
2,36.-10.-
10.-
Stock
StockStock
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
Sales revenue
Cost of gds mfd
Prod.variance
Overhead
Polaroid: Inter-company Sales (Enschede Polaroid: Inter-company Sales (Enschede --> CV--> CV))
Legal $3.72
Group 2.36
Legal 3.63
EXAMPLE: Value fields
Group -
Legal -
Group .02
Legal .02
Group $2.36
For both valuation approachesthe cost components are available
Expenses: Assume $.02
Operating Profit
Group $1.34
Legal $ .07
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
Sales revenue
Freight
Cost of gds mfd
Prod.variance
Overhead
Polaroid: Final Sales to German Polaroid: Final Sales to German CustomerCustomer
Legal $10.00
Group 2.36
Legal .50
Legal 6.45
EXAMPLE: Value fields
Group 0
Legal 0
Group 2.00
Legal 2.00
Group $10.00
For both valuation approachesthe cost components are available
Expenses: in our example 2.-
Group .50
Operating Profit
Group $5.14
Legal $1.05
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
Polaroid Experiences with Polaroid Experiences with TPTP A Key Business Requirement
Yet in SAP Invoice Chaining
Polaroid’s Billing Models are different from Shipping Models Invoicing Party or Several Invoicing Parties sit between the
Sending & Receiving Company Codes– Materials do not flow through these billing parties and their plants in SAP
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
Polaroid Next StepsPolaroid Next Steps Pilot Parallel Valuations during 1999
NB Orders Sales Orders Commissionaire
Implement in Fiscal Year 2000 Expand Material Ledger Functionality
Product Costing– Analyze & Track Actual Costs by Production Step
Help Walldorf with Reporting Robustness, Simpler QA checks, Synchronize with Material Master Data Corrections & Price Variance Expansion: Multi-source
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
Polaroid Functionality Polaroid Functionality Needs:Needs:
Invoice Chaining Multi-source Costing Functionality (in 4.6
release) Consolidation: Automatic Inter-company
Profit Elimination (in 4.6 release)
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
PolaroidPolaroid
Appendix
1999 ANNUAL CONFERENCE & VENDOR FAIR
AMERICAS’ SAP USERS’ GROUP
Copyright 1999
FIFI
Sample posting: Sale of products between company codes
KeyL - LegalG - GroupP - PrCtr
Cost of sales
L 50.-G 40.-
Acc. Receiv.L 150.-G 150.-
Revenues
L 130.-G 40.-
Sales taxL 20.-G 20.-
Billing document
Goods issue
Stock
L 50.-G 40.-
Stock
L 80.- G 40.-
GR / IR
L 80.- G 40.-
I/ C Profit L G 90.-
I/C ProfitL G 90.-
Price diff.L 50.-G
Sales taxL 20.- K 20.-
SupplierL 150.-K 150.-
Goods receipt
Invoice receiptGR / IRL 80.- G 40.-
Posting Logic in FIPosting Logic in FI