Refurbishment Order

8/21/2019 Refurbishment Order

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Produced by:Platinum SponsorPremier Sponsor

Refurbishment of Repair Partsat Procter & Gamble

Pam HendricksonProcter & Gamble

Mark W ScottVesta Partners LLC



billionP&G’s Billion-Dollar Brands



• 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

Procter & Gamble

Braun®

Wella ®Pantene®

Dawn®

Downy®

Gillette

M3Power®

Pringles®

Olay®

Tide®Always®

Bounty®

Charmin®

Duracell®

Head &Shoulders®

Iams®

Pampers®

Crest®



Agenda

• Business situation

• Refurbishment work process

• Refurbishment costs

• Internal refurbishment

• External refurbishment

• Summary



Business Problem

• Refurbishing parts can be less expensive thanalways buying new

• Refurbishment of repair parts can be done internallyin a shop or externally at a vendor

• Need to properly account for the cost of therefurbishment, inventory, and status of therefurbishment



Presentation Objectives

• How refurbishment orders can be used for theinternal refurbishment of repair parts

• How subcontract purchase orders can be used forthe external refurbishment of repair parts

• How costs flow when refurbishment orders andsubcontract purchase orders are used to refurbishrepair parts



Refurbishment versusBuy New

Considerations1) Cost benefit vs. buying new

- as a guideline, repair cost should be no more than 50% ofnew cost

2) Skill level in-house for repairs or external vendor availability for repairs

3) 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 inventorythat are new

2) REPAIRABLE – reflects quantity of the part ininventory that are waiting for repair/not fit for use

3) REFURBISHD – reflects quantity of the part ininventory 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)

User returns the broken

par t to the storeroom

Valuation category



Storeroom Role

o Analyze feasibility of repairo 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 – InternalRepair

o Insure general task lists existin SAP for repetitive repairs

o Plan and schedule therefurbishment order

o Refurbish the part

o Return the part to thestoreroom

o Technically complete therefurbishment order



Refurbishment Costs

12

-Did not properly value inventory-Complex PurReq /PO’s

-Cost flow and reports complex

SAP directly supports this method

R f bi h t P



Refurbishment Process -Costing

Costs to repair expense materials settleto the material master, and become partof the moving average price for arefurbished part

Costs to repair capital materials arecharged directly to a Cost Center or WBSelement

H h ld f bi h d



How should refurbishedmaterials be valued?

How can this be accomplished?

Value of Refurbished Material

• NEW – cost of new (V)

• CAPITAL - $0 (S)• REFURBISHD - $0 (S)

• REPAIRABLE - $0 (S)

Capital Part Expense Part

• NEW – cost of new (V)

•

REFURBISHD –

cost of repair (V)• REPAIRABLE - $0 (S)

S – Standard Cost V – Moving Average Price



Refurbishment Process

R f bi h t O d B i



Refurbishment Order BasicConfiguration

• Refurbishment order types:o PM95 – refurbishment of expense repair part

o PM96 – refurbishment of capital repair part

• Settlement profiles and allocation structures:o PM95 – to settle costs to the material in inventory

o PM96 – to settle capital repairs to WBS element – to settle expense repairs to a Cost Center

• Default batch into refurbishment order to reduce errors



Internal Repair(using Refurbishment Order)

• Settle to WBS element Some refurbishments of capital

parts are “capital”

• Settle to Cost Center (thatreturned part to Storeroom) Most refurbishments of capital parts

are “expense”

Capital Repair Expense Repair

C a p i t a l P a r t

E x p e n s e P a

r t

NA

• Settle to material

U s e P M 9 5 o r d e r t y p e

U s e P M 9 6 o r d e r t y p e

Refurbishment Order settlement



General task list

Facilitate the planning of refurbishment work

Group1000025 Rebuild Shop

Group Counter1 Gearboxes

Operations0010 Rebuild gearbox model ABC0020 Rebuild gearbox model XYZ (major)0030 Rebuild gearbox model XYZ (minor)

2 Clutches0010 Rebuild clutch model 1230020 Rebuild clutch model 456

3 Cylinders0010 Rebuild A1B cylinder0020 Rebuild 1A2 cylinder



Creating Refurbishment Order

G d R i t t t



Goods Receipt to returnRefurbished part to Storeroom• Transaction: IW8W

• Sets DLV system statuso Can handle serial numbered materials

o Can handle partial deliveries



Refurbishment Order cost flow

PM95 PM96

PM95 settlesto a Material

PM96 settles to aCost Center orWBS element



Refurbishment Order Cost Flow - SituationValuationType

TotalStock

PriceControl

Moving AvgPrice

StandardPrice

NEW 0 V 750.00REFURBISHD 0 V 200.00

REPAIRABLE 1 S 0.00

0.0030.0010.0040.00

150.00



Refurbishment Order Cost Flow“Goods Issue to Order ”

Refurbishment Order

Debit (charge)80004700 $150.00

58070100 $40.00

Delivery

58099500 ($200.00)

Settlement

58099500 $10.00

StoreroomInventory

13701000 ($40.00)

Confirm

TEST3 hours@$50/Hr

58070100 $40.00

80004700 $150.00

REPAIRABLE $0.00Material 1 $30.00Material 2 $10.00

Credit80004700 ($150.00)

Cost Center“abc”

R f bi h t O d C t Fl



Refurbishment Order Cost Flow“Goods Receipt from Order ”

Refurbishment Order

Debit (charge)80004700 $150.00

58070100 $40.00

Delivery

58099500 ($200.00)

Settlement

58099500 $10.00

Confirm

TEST3 hours@$50/Hr

Credit80004700 ($150.00)


58070100 $40.00

80004700 $150.00


58099500 $200.00

REFURBISHDOrder status: DLV

StoreroomInventory

13701000 ($40.00)

REFURBISHDMaterial $200.00



StoreroomInventory

13701000 ($40.00)


REFURBISHDMaterial ($10.00)

Refurbishment Order Cost Flow“Order Settlement”

Refurbishment Order

Debit (charge)80004700 $150.00

58070100 $40.00

Delivery

58099500 ($200.00)

Settlement

58099500 $10.00

Confirm

TEST3 hours@$50/Hr

Settlement

58070100 $40.00

80004700 $150.00


58099500 $200.00


58099500 ($10.00)REFURBISHD

Credit80004700 ($150.00)


Total: $190



Capital material Expense Cost Flow-SituationValuation 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

0.0030.0010.0040.00

150.00



Capital material Expense Cost Flow“Goods Issue to Order ”

PM96 Order

Debit (charge)80004700 $150.00

58070100 $40.00

Delivery

58099500 ($200.00)

Settlement

58099500 $10.00

Confirm

MECH3 hours@$50/Hr

58070100 $40.00

80004700 $150.00


Credit80004700 ($150.00)


StoreroomInventory

13701000 ($40.00)



StoreroomInventory

13701000 ($40.00)


Capital material Expense Cost Flow“Goods Receipt from Order ”

PM96 Order

Debit (charge)80004700 $150.00

58070100 $40.00

Delivery

58099500 ($0.00)

Settlement

58099500 $10.00

Confirm

MECH3 hours@$50/Hr

Credit80004700 ($150.00)


58070100 $40.00

80004700 $150.00


58099500 $0.00




StoreroomInventory

13701000 ($40.00)


Capital material Expense Cost Flow“Order Settlement (expense repair)”

PM96 Order

Debit (charge)80004700 $150.00

58070100 $40.00

Delivery

58099500 ($0.00)

Settlement

80022100 ($40.00)80022200 ($150.00)

Confirm

MECH3 hours@$50/Hr

Settlement

58070100 $40.00

80004700 $150.00


58099500 $0.00


80022100 $40.0080022200 $150.00

Credit80004700 ($150.00)


Cost Center“xyz”

Note: For a capital repair the settlementrule would be a WBS element.

$190

Inventory: +1

Value: $0.00

S f C t Fl



Summary of Cost Flow

• Expense refurbishment:o Goods receipt at current moving average price

o Settlement posts difference between moving average price and cost ofrefurbishment

• Capital refurbishment:

o Refurbished part brought into inventory at zero valueo Expense refurbishment settles to Cost Center

o Capital refurbishment settles to WBS element

R lt A l i K



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 refurbishmentorder but the part has not yet been received by Storeroom?o Refurbishment order cannot settle!

o 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 canbe settled which will clear the WIP account

E t l f bi h t



External refurbishment

• Subcontract PurReq/POo Designed for sending material(s) to vendor who then adds value (labor,

materials) and returning another material

o Refurbishment:

Send REPAIRABLE material

Vendor adds labor and other materials

Returns REFURBISHD material

• Goods issue to vendoro Transfers REPAIRABLE material to vendor

o REPAIRABLE material still owned by and on company books

o Able to track REPAIRABLE materials at vendors

C t S b t t P R



Create Subcontract PurReq

• 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.

Sending

Receiving

G d I t V d



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

• Materials returned from Vendor do not show on report.

Still at Vendor

To be sent to Vendor

G d R i t



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 -



Subcontract PO Cost Flow -Situation

Valuation Type Total

Stock

Price

Control

Moving Avg

Price

Standard Price

NEW 0 V 750.00

REFURBISHD 0 S 200.00 0.00

REPAIRABLE 1 S 0.00

0.00170.00

130.0040.00

Vendor labor added

Vendor supplied parts

PO net price

REPAIRABLE part

S b t t PO C t Fl



Subcontract PO Cost Flow“Goods Issue to Vendor ”

Subcontract PO

GI to vendorREPAIRABLE $0.00

Net priceREFURBISHD $200.00

InvoiceREPAIRABLE $170.00

Storeroom InventoryGI to VendorREPAIRABLE $0.00

GR from VendorREFURBISHD $200.00

Invoice Adjustment ($30.00)

REPAIRABLE $0.00Vendor“1234”

RefurbishmentREPAIRABLE $0.00

Labor $130.00Parts $40.00

GI to Vendor (PO)

S b t t PO C t Fl



Subcontract PO Cost Flow “Goods Receipt from Vendor”

Subcontract PO







REPAIRABLE $0.00


Vendor“1234”



GI to Vendor (PO)

Subcontract PO Cost Flow



Subcontract PO Cost Flow “Invoice posting”

Subcontract PO







Invoice$170.00

Invoice adjustment ($30.00)

REPAIRABLE $0.00


Vendor“1234”



GI to Vendor (PO)

Invoice$170.00

Net cost: $170

External Refurbishment of



External Refurbishment ofCapital materials

• Similar to Internal refurbishment of Capital material

except:o Account assignment of Expense repair is Cost Center

o Account assignment of Capital repair is WBS element

Learnings



Learnings

• Thinking about refurbishment of repair parts

• How refurbishment orders can be used for the internalrefurbishment of repair parts

• How subcontract purchase orders can be used for theexternal refurbishment of repair parts

• How costs flow when refurbishment orders and subcontractpurchase orders are used to refurbish repair parts




Pam Hendrickson

Procter & Gamble

[email protected]

Mark W Scott

Vesta Partners LLC

[email protected]




March 27 – 30, 2011Hyatt Regency Huntington Beach Resort and Spa

Huntington Beach, California

Refurbishment Order

Documents

Transcript of Refurbishment Order