Q&A questions answered by ERPfixers expert Fixers Rogerio Faleiros & Paul Ovigele.
Q: Is Material Ledger needed in order to move to SAP S/4HANA?
A: Material Ledger is compulsory with S/4 HANA Finance, but Actual Costing is not. When most people refer to Material Ledger, they are talking about Actual Costing, and not Parallel Currencies/Valuation. With S/4 HANA you should configure any additional currencies that you have, in the Material Ledger.
Q: How long does a Material Ledger project take?
A: This varies from company to company. It also depends on how many plants are being activated. In my experience it has taken between 6 weeks and 4 months. It is important to copy your production system into a sandbox and do several test iterations before going live with ML. This is where most of the time is spent. Once you are comfortable with the results you will find that the live run can be done within a short window.
Q: Does material ledger work with materials valued at moving average price?
A: Yes it works very well, the ML setup, requires a customizing set and a material master data set. If the ML is active and you have a material with moving average as price determination, the behavior of the system will be the same as a company without material ledger. the advantage on that is to get the ML reports active also for the moving average materials, such as ckm3.
Q: Why does Material Ledger not distribute some variances?
A: There are several reasons for this, some are:
1) No quantity in material when the price difference arrives
2) The price limiter quantity blocks the price difference to be absorbed by the material
3) Missing customizing for transfers
4) Invoice without goods receipt
these are some cases.
Q: Can we use Material Ledger without Actual Costing?
A: Yes, Material Ledger can be used for parallel valuation, parallel currencies and transfer pricing, without the need for actual costing.
Q: What is the best where are you to get unit cost reports from ECC?
A: There are several reports in SAP to support the actual unit cost. With material ledger "on" a quick report is s_P_99_410000062. also you can build own reports using KKML functionality that is a drill down reports for material ledger, similar to what you get with CO-PA.
Q: Hoping to understand which countries require use of material ledger such as Brazil?
A: I use to say that is not that material ledger is required, but actual costing is required. So in this list I would add, Turkey, Russia, some latin American countries. One of the main goals of material ledger is actual costing. but another big functionality is reporting. So many companies are using ML for reporting purposes. Another functionality is to have multiple material ledgers, it can be for legal requirements or even management.
Q: Which version of S/4HANA makes Material Ledger activation required?
A: Certainly the latest version of S/4 HANA (1610) makes Material Ledger required. Note that this does not mean that you need to activate actual costing. Making material ledger required means that during the conversion to S/4 HANA, the ML tables will be activated and you can use parallel currencies/valuation. If you already have Actual Costing, this will also be activated, but it is not compulsory if you do not have it.
Q: Do I really need ML active for S4 1511 or greater? I am using S4 Simple Finance / Central Finance to create a global ledger for my many other SAP ERP’s. This S4 will “consolidate” the financial information... there will be absolutely no MM movements in it.
A: Yes the ML is active by default in S4. this is to bring reporting functionality to MM. the idea is if your company does not require or use actual costing, ML will act like in ECC when you have ML for materials V2 or S2. It will add the reporting functionality but no ML posting will happen.
Q: In the case you mentioned to use to create a global ledger to consolidate other companies, ML will not impact your need.
A: Yes you can use ML is one plant andnot in another. ( ML Setup is by valuation area and not by company. This is what will happen:
If you transfer from one plant to another ( both with ML) you can set ML to carry the price differences from one plant to another.
If you transfer from one plant with to another without, a price difference will be posted in the Key OBYC-AUM.
So no big issue in having ML in one site and no ML in another. The loss is that in the site without ML you will not have ML reporting functionalities such as CKM3 and KKML0.
Q: Can you use material ledger in some companies but not in other companies and still perform intercompany direct shipments or plant transfer? other companies use standard cost.
A: Yes you can use ML is one plant andnot in another. (ML Setup is by valuation area and not by company) this is what will happen.
If you transfer from one plant to another ( both with ML) you can set ML to carry the price differences from one plant to another.
If you transfer from one plant with to another without, a price difference will be posted in the Key OBYC-AUM.
So no big issue in having ML in one site and no ML in another. The loss is that in the site without ML you will not have ML reporting functionalities such as CKM3 and KKML0.
Q: Do we need to close Process Orders before activating ML (in a productive system) and then reopen them?
A: It is advised by SAP to close Process Orders before activating material ledger. The reason is because process order tables are not converted to ML tables ( the way PO history tables are). therefore, if you do not close a process order before activating ML, you could have some inconsistencies relating to parallel currencies/valuation. Please note however, that based on some specific client requests, I have successfully activated ML without closing all orders. Consider this to be a "Best Practice" advice, as opposed to one which is absolutely required.
Q: What do you think are few specific key things that we need to keep in mind while using ML pertaining to the type of Price Control - ML with MAP vs SP.
A: It depends on what you are using ML for. If you want to use it for parallel currencies/valuation as well as actual costing, then you definitely need the materials (semi-finished and finished) to be valued at standard cost (this is because moving average price is already a type of actual cost). If you are only using ML for parallel currencies/valuation, then you can have the materials valued at MAP only.
Q: What is the most important improvement in SAP when i update my system from ECC 6.0 eph4 to Hana S4 in costing and ML?
A: There are several improvements: First it is much faster (of course!). Also, the steps of single level PD, multilevel PD, Revaluation of Consumption, and WIP revaluation, are all just one executable step. Also, the "Not Distributed" differences calculation logic has been vastly improved. And it is easier to update the standard cost with the latest calculated ML price.
Q: To start the ML function from existing single currency MM-setup, how will the group or LC2 values be assigned? Using the Fx-table (OB08) or other method?
A: The currency definition of ML is OMX2. you can choose from company code and controlling area currency, the FI currency it will take from the currency you have defined for the company code, in new GL from additional currencies for company code. you can also set different currencies in the customizing. It is important that at least one currency is shared across all legal entities you want to set up material ledger. Usually as best practice we set one of the currencies as the client currency, because this currency is shared in all.
Q: Can ML-AVR be used or USGAAP reporting? Is it only a management reporting tool or can be used for accounting?
A: Yes, ML AVR (Alternative Valuation Run) can be used for US GAAP reporting. In fact, one of its key strengths is to calculate a separate Actual Cost for a separate accounting principle (such as IAS vs. US GAAP). It can be used for both management and financial reporting. For example you can use it to "smooth out" the varying actual prices over several months, or you can use it to update a separate CO version. You have the choice of whether you want the results to be posted to FI or not.
Q: Is Material Ledger & Standard Costing mutually exclusive? i.e. If material A is using Std Costing, then material A could NOT be used for ML?
A: For the material ledger setup there are 2 main steps:
1) Customizing the valuation area for material ledger
2) The second you define in the material master data, which material would be relevant for material ledger.
The materials relevant for material ledger must be set as Standard and price determination = 3 that means level and multilevel. if you set it to = 2, it will show in ML reports, but all price differences ML will not consider. You will have the same as a company running the system without ML with price determination Standard. the gain you have in this scenario is that you can still using the ML reports for these materials. It Will show all value flow for the material.
For material with "V" no change as well, same behavior with or without, with the benefit of getting the ML reports also for the "V" material when material ledger is active.
Q: Would the previous question on process orders apply similarly to production orders?
A: Yes, the question on process orders applies similarly to production orders as well. As mentioned, it is a recommendation from SAP to close the orders, but from personal experience (some customers kept orders open for several months at a time) I have found that you can leave the orders open. I would recommend that, as part of your testing you make sure that orders are settled as normal after your first ML conversion.
Q: Is ML-WIP step relevant in a ML-AVR run?
A: It depends. If you are using AVR to calculate actual costs for a different version (i.e. a different accounting principle) then all the steps that are relevant in your normal ML run should be relevant in your AVR run. Note however, that even in a normal ML run, you may not find it necessary t use the WIP revaluation. In some countries it is required, but from a management reporting perspective, it may not be.
Q: Any standard reports to help in reconciliation of GL with ML?
A: When you are converting to ML, one of the critical steps is to make sure that the G/L and ML are reconciled. The are tools in the conversion process to make sure that this is the case (CKMADJUST, for example). However, if you remember that ML is simply a subsidiary ledger for Material Movement transactions, then you will realize that if MM is reconciled to the G/L, then ML is also reconciled to the G/L. I would recommend 2 reports: the standard one is MB5L, and the newer one is FAGL_MM_RECON.
Q: I use Group Valuation and simply defined Company Code as my partner for Partner Cost Component Split. I also activated an additional controlling area currency cost component split for the Legal Costing Variant. I would like to compare Group Valuation.
A: One good option you have is to create a KKML0 report, with an enhancement to bring cost component split. and with this you can define one column of the report for one currency and second column for another currency. Standard way is only in ckm3n one by one.
Q: Can we change CCS (add more CC) in a live ML/AC environment?
A: Yes you can change it. It is always a good point of discussion. A change in CCS is ok if you follow some recommendations. For example, if your cost component is called ZA and you want to add more components on that. It is not ok to change the Za component. What you must do is:
1) Create a new CCS with validity date in the beginning of the period.
2) Calculate a new STANDARD for all products you have to be released in the new period
3) Settle all production order, that means no wip to following month
4) Leave both CCS active. the date you define in validity will be used by SAP which CCS is valid
5) When a new period is open in MMPV SAP will update the table CKMKEV with the CCS that will be used in each period. so if you open the period an later send the customizing it will fail
6) You DON'T need to delete old data, doing this way you will keep your history
Q: If we use actual costing and the ML-active how much processing time to most companies add to the month-end jobs? Assuming we are using this for a consumption inventory (purchased items only) rather than manufacturing?
A: This really depends on how many materials/plants you have in your system. To give a rough guide (although every company is different), a client of mine (with mainly purchased materials) has around 100,000 materials in around 20 plants, and the ML run takes around 4 hours to complete.
Q: If using the Actual Costing process today for Brazil, Russia, and Turkey, will the month-end closing steps continue to be necessary or will those types of activities happen real-time?
A: If I understand correctly, I think you are asking whether any allocations that usually happen at the end of the month will happen in realtime with Material Ledger activated. If that is the case, the answer (for the most part) is no. Material Ledger does not eliminate the need to run assessments, settlements, etc. at month end. In fact it relies on this data in order to do a complete calculation. Please note that you can run material ledger before the the month end as long as you do not execute the "Post Closing" step. That way you can get a "feel" for where you will be at the end of the month. However, the information will not be complete until all the month end activities have taken place.
Q: If we convert to the ML does all PO creation need to be stopped until the conversion. Or if the inventory is frozen-locked from processing can service order PO still be processed?
A: Hi, in the process of activating ML, you will need a cutover at least to convert the data. one of the steps it to run CKMSTART. SAP will convert the data for ML, Purchase orders, Production orders, Order history, historical tables, and other. it will be necessary a maintenance in the master data after conversion that is part of the cutover. But this is not a stop for ML implemantation. Meaning companies with large amount of data without ML can also acitvate ML without risk of loosing data.
Q: Will this conversion impact all MM-active plants or only the selected plants?/companies converting to the ML?
A: Only in the plants you select in ckmstart. the others no. You need to wait until the data is converted to work again with the plant. By default when you set a plant live in ckmstart SAP sets the materials that were S, to S2 that means not relevant for level multilevel (No ML relevant). The post processing step is to change the materials from 2 to 3 so ML will also record price differences for the materials.
Q: If we want to activate a ML for and new MM-setup, company and plant, how much time does testing take?
A: If a plant is not already on SAP and they want to go to ML, then there is no conversion needed, therefore you only need to test the ML functionality itself. Again this varies depending on the company, but I would allow 1 - 2 weeks of testing.
Q: Do either of our speakers have experience for Oil and Gas clients running the MM?
A: Yes we have worked with oil and gas material ledger. there are some specific functionalities, such as Distribution of usage variances and another add-ons as well that will require a little bit more time for the project, because it depends how you are using oil and gas. But the ML works fine with oil and gas as well. The restriction for ML is for retail companies, but also for this there are some workarounds.
Q: Can you clarify the comment about ML with Moving Average and Price Determination "2" is the same as not using ML at all? We do this and do see a difference - a separate ML document is generated the records "variances" for the adjustment in the moving average.
A: Yes it is the same, you see the ML posting because SAP automatic calculate the new moving average for the product. it is a posting in and out, to make the Moving average. The separated ML document is because in the customizing it was defined as ML document. But you can also define this document as price difference. The important part is that Moving average without ml = moving average with ML. the advantage is to use the reports for ML when ML is active.
Q&A questions answered by ERPfixers expert Fixers Rogerio Faleiros & Paul Ovigele.
Author: Rogerio Faleiros
Rogerio is an independent SAP consultant specializing in controlling functionality. He has worked with SAP technology for more than 10 years, implementing controlling solutions in the food processing, chemical, construction and agribusiness industries. Roger has been working with IFRS and integration with product costing and material ledger minimizing the impact of the changes in SAP for companies in different locations.He has participated in rollouts in several countries such as United States, Germany, Switzerland, Italy, Turkey, UK, France, Spain, Egypt, UAE, India Sweden and Finland. Rogerio has an MBA in IT from Getulio Vargas Foundation and is a frequent presenter providing training for new consultants in Brazil. Rogerio is the author of Configuring Controlling in SAP ERP.