Activity Accounting: An Activity-Based Costing Approach, James A. Brimson
Activity-Based Costing: Making It Work for Small and Mid-Sized Companies, Second Edition, Douglas T. Hicks
Activity-Based Information Systems: An Executive’s Guide to Implementation, Mohan Nair
Activity-Based Management: Arthur Andersen’s Lessons from the ABM Battlefield, Second Edition, Steve Player and David Keys, editors
Activity-Based Management for Service Industries, Government Entities, and Nonprofit Organizations, James A. Brimson and John Antos
Activity-Based Management in Daily Operations, John Miller
Driving Value Using Activity-Based Budgeting, James A. Brimson and John Antos with contribution by Jay Collins
Guide to Cost Management, Barry J. Brinker, editor
We dedicate this book to our mentor, Anton van der Merwe, without whom we would never have learned as much as we have, nor recognized the most important lesson in life.
Additionally, we dedicate this book to our families for their love, patience, support, and encouragement.
Copyright © 2001 by Dawn J. Sedgley and Christopher F. Jackiw. All rights reserved.
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Given SAP’s dominance in the enterprise resource planning (ERP) market, many companies and their managers encounter SAP AG applications in some form or another. Of those organizations, some utilize Activity-Based Costing/Management concepts to perform more accurate cost assignments or drive performance initiatives. Managers are then faced with trying to determine how Activity-Based Costing can be incorporated into the SAP environment. We have written this book to help business managers understand the capabilities of the SAP R/3 business application to support Activity-Based Costing, Management, and Budgeting. This book is not intended as a primer in Activity-Based Costing (ABC): many such conceptual introductions have already been written. In order to bring the focus on the application of ABC concepts to an SAP R/3 environment, it is assumed that the reader has knowledge of the ABC framework.
This book is divided into three parts: the conceptual foundation, the capabilities of SAPABC, and integration with other tools. Part One consists of Chapters 1 through 4 and covers the basic conceptual fundamentals to lay the foundation for detailed discussions.
The conceptual foundation begins with Chapter 1, addressing the shortfalls of ABC and introduces the Resource Consumption Accounting philosophy (RCA). This philosophy is heavily incorporated into the design of the SAP Controlling (CO) module, which contains SAP’s ABC functionality. The chapter also establishes the differences between ABC and RCA and provides support for the use of both approaches to support management costing needs. Chapter 2 expands the foundation to include analysis of the differences between the two main types of tools that support ABC concepts. Addressed are the core conceptual and technical differences between stand-alone ABC modeling tools utilized to support ABC and an “integrated” ABC tool.
Although it is assumed that the reader understands the basic concepts of ABC principles, we do not assume the reader has any familiarity with the SAP R/3 application. Therefore, Chapter 3 provides the reader with a basic understanding of SAP R/3, specifically the Controlling module, including the CO-ABC component.
Since there is relatively little information available on the subject of ABC within SAP, many misconceptions abound as to its capabilities and maturity. Chapter 4 chronicles the evolution of ABC within SAP R/3. This chapter is useful for managers to determine what overall capabilities are available within the
given release of SAP R/3 their organization either currently utilizes or is considering implementing.
Part Two, the capabilities of SAP ABC, provides several chapters that detail the integrated ABC capabilities with each individual area within the SAP Controlling module. Chapters 5 through 9 are structured in a similar manner. Each chapter addresses the main functionality highlights of the individual area of focus, the information flows, sample key business decisions to be supported, implementation guidelines or considerations, and ends with a summary table to be utilized as a reference.
Part Three utilizes the same chapter structure to address the combined capabilities of SAP R/3 ABC with the Oros modeling tool (Chapter 10) and the SAP Strategic Enterprise Management (SEM) application (Chapter 11).
The creation of a book is a combination of many people’s thoughts and efforts. We recognize that many individuals helped with the completion of this project. We would like to thank the contributors listed individually here. Without their support of this project, taking time to painstakingly review chapters for quality and correctness of content, and providing their subject matter expertise, this endeavor would never have been possible. Their efforts are well received, greatly appreciated, and forever remembered.
We also thank all the clients and friends who repeatedly asked for this book to be written and inquired (nagged) as to its progress on a regular basis. We appreciate the significant support throughout the years made by: Kelly Kirwan, Gloria Marcinko, Elizabeth Martin, Sandra Otto, Tammy Schmeeckle, Samantha Walsh, and Kathleen Wilhide. Additionally, we thank Sheck Cho, Alexia Meyers, and John Wiley & Sons for all their hard work in bringing this book to completion.
The following contributors were interviewed and regularly contacted to cover the subject matter contained within this book. These interviews and conversations were for the purpose of gathering information from the key SAPABC representatives, or experience implementers, as to the importance and most beneficial functionality within their respective areas of expertise. We take this opportunity to thank them and make known their contributions to this book.
Mr. van der Merwe is a director in the Management Consulting Practice of Price-waterhouseCoopers. He provided conceptual content and reviewed and edited each chapter in this book. Mr. van der Merwe is well versed in advanced costing philosophies and the application of those concepts within organizations, especially through the use of SAP software. He has extensive experience in the implementation of the German cost management approach in both service and manufacturing industries. He has been a speaker at cost management forums on the subjects of Activity-Based Costing and the German approach to cost management. Mr. van der Merwe has additionally coauthored several works on Resource Consumption Accounting. His academic qualifications include a diploma in mechanical engineering, a Baccalarius Commerci (B. Comm) in Economics and Transportation Economics, and a Master’s in Business Leadership (MBL/MBA), all from the University of South Africa. The latter included a thesis that entailed an international research project into 180 companies in seven countries that implemented the German cost management approach.
Mr. von Zimmermann is currently a development product manager of a new accounting software application with SAP AG located in Walldorf, Germany. He has been with SAP AG for over 10 years and was responsible for the development of the SAP CO-ABC module. Mr. von Zimmermann edited several chapters, greatly lending his expertise to the content of this book, especially for Chapters 5 and 6. Mr. von Zimmermann received his diplomas in Computer Science and Business Administration from the University of Hamburg.
Mr. Rapp, Diplom-Wirtschaftsingenieur, is a development architect with SAP AG in Walldorf, Germany. He has been developing cost management concepts and solutions in SAP’s ERP software for nearly five years. He is responsible for managing the joint venture development of the interface called the Bridge from ABC Technologies’ Oros software to SAP R/3. He has also been conducting training and providing consulting expertise to international clients on implementing advanced cost management solutions, with a specialization on the banking industry. Since 1998 he has been a member of the Consortium for Advanced Manufacturing-International’s (CAM-I) cost management symposiums, contributing to the Activity-Based Planning and Budgeting interest group. Mr. Rapp graduated from the University of Karlsruhe, Germany, in 1996 with a diploma in finance and industrial engineering. His remarks and thoughts are portrayed throughout this book and especially within Chapters 8 and 10.
Mr. DuPont also graciously provided his knowledge, experience, and expertise for Chapter 10. Mr. DuPont is cofounder of ABC Technologies Inc. and the manager of the European Development Center for ABC Technologies Inc. He has been a key developer and visionary for the Oros modeling software capabilities for 12 years. He received a B.Sc. degree in Electrical Engineering from the University of Ottawa, Canada, in 1984.
Mr. Funke has over 13 years of professional experience in cost management and accounting and has been employed by SAP AG, Walldorf, Germany for over 10 years. During his SAP career, Mr. Funke has held positions for consulting, product costing development, and various product manager roles. These product manager roles began with product costing, then to cost management, and to his current position as product manager of the Strategic Enterprise Management (SEM) and Cost Management (CO) applications. His knowledge and insight in the area of product costing were extremely useful for Chapter 7. Mr. Funke received his degree in Economics from the University of Bonn.
Gero Maeder, Ph.D., is an application developer at SAPAG, Walldorf, Germany. He started working for SAP in 1997, responsible for different components of SAP’s R/3 software, such as Executive Information Systems and Business Planning. He has been involved with the SAP SEM application development since its inception. His core competency focuses on embedding ABC Technology’s Oros software package within SEM-BPS as well as the dynamic simulations capabilities of Powersim. Mr. Maeder’s thoughts and comments greatly increased the accuracy of Chapter 11. He graduated from the Technical University of Ilmenau, Germany, in 1992 in Electrical Engineering and received a Ph.D. in Engineering Sciences from Technical University of Ilmenau in 1996.
Mr. Simon is a principal consultant for Alta via Consulting, specializing in the implementation of the SAP CO module involving financial and cost management processes. He has been consulting with clients in financial and cost management concepts for over five years, in industries ranging from automobile manufacturing to communications to airline maintenance and repair operations. The primary focus of his experience is in the implementation of advanced cost management concepts utilizing SAP. His work includes process reengineering, resource consumption analysis, Activity-Based Costing, and establishing performance metrics. Recently he has been involved with the creation of integrated planning tools using SAP’s Sales and Operations Planning and ABC functionality for an uneven-demand environment. Mr. Simon edited several of the chapters in this book, providing keen observations on ways to make the subject matter more easily understood. He graduated from Northwestern University with a B.A. in Economics in 1985 and from the University of Michigan with an MBA in 1991.
Mr. Bittner, M.S., is a member of the mySAP.com workplace team at SAP AG, in Walldorf, Germany, where he is responsible for the coordination of SAP’s user role development activities. Prior to this, he had more than six years of experience in the area of cost management as a project manager of an Activity-Based Costing implementation in the automotive industry and as the ABC product manager at SAP AG. Mr. Bittner’s original background is physics, with practical experience in the design of integrated circuits. In addition to editing Chapter 4, he has coauthored several articles about the electrical characterization of semiconductors and is a key contributor to the book The E-Business Workplace: Discovering the Power of the Enterprise Portals (John Wiley & Sons).