White Paper Oros Bridge 5.0 - Sas Institute



Oros® Bridge 5.0 with SAP®:

Interfacing ABC Information

|Table of Contents |

|Using Oros Bridge with SAP to Build an R/3 and Oros Compatible ABC Model 3 |

|Traditional ABC 3 |

|R/3 CO Conceptual Overview 4 |

|With What R/3 Components Does Oros Bridge Interface? 6 |

|It’s Like Learning a New Language 7 |

|Implementation Scenarios 8 |

|Initial model implementation phase 8 |

|Model maintenance phase 10 |

|Providing R/3 Master Data 10 |

|Interfacing CO-CCA with the Resource Module 11 |

|Interfacing CO-ABC with the Activity Module 13 |

|Interfacing CO-PA with the Cost Object Module 14 |

|Interfacing CO-OPA with the Cost Object Module 15 |

|Methods Used to Assign (Allocate) Costs in Oros and R/3 CO 15 |

|Assessment vs. Indirect activity allocation 16 |

|Templates 16 |

|Uploading assignments 18 |

|What’s driving the assignment of cost? 18 |

|Model Calculation, Analysis, and Validation 18 |

|In Conclusion 18 |

| |

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Using Oros Bridge with SAP to Build an R/3 and Oros Compatible ABC Model

The most advanced solution for enterprise-wide Activity-Based Costing/Management (ABC/M) is provided when the benefits of ABC/M in SAP® R/3® are combined with the benefits of Analytic ABC/M in Oros®. To facilitate the sharing of ABC/M data between R/3 and Oros, an interface, referred to as Oros Bridge with SAP, has been developed by ABC Technologies, Inc. and SAP AG to support customers who wish to develop R/3 and Oros compatible ABC/M models. The combined ABC world of SAP R/3, Oros, and Oros Bridge provides a comprehensive solution to enterprise-wide ABC/M.

Many customers are engaged in ABC/M projects using Oros. At the same time, SAP R/3 has been implemented as their Enterprise Resource Planning (ERP) system. The R/3 system provides an ABC/M component that is tightly integrated with the other R/3 components. Having the benefits of R/3 can be a double-edged sword. You can build a tightly integrated system that provides you with lots of information but, of course, it takes longer to build the system and you can’t simply change things without dealing with integrated impacts. Luckily, you can use Oros to jumpstart your model building process and then upload the information to some of R/3 CO components using Oros Bridge. At the same time, you add some necessary R/3 properties to objects, such as cost center standard hierarchy, measures, and secondary cost elements.

Though connections with the ERP environment provide data integrity, it is not easy to build activity models simply for simulations in the R/3 integrated environment. This would risk integrity of the data in the ERP system and could distort the operational database of the R/3 production system. Oros, on the other hand, can handle ABC/M modeling and simulations easily. Oros allows enterprises to be flexible in the assignment of costs for different business scenarios. If you already have invested in putting data in R/3 CO, don’t worry. You can use Oros Bridge to download the data to Oros. When you download data, R/3 objects are matched to Oros objects and some of their custom master data is retained.

Note: Oros Bridge supports different features depending on the R/3 version. For example, indirect activity allocation is not available in R/3 Version 4.0B so Oros Bridge cannot upload assignments as indirect activity allocation cycles. This, however, is available in R/3 Version 4.5+. Similarly, you can interface CO-OPA and Oros Bridge if you have R/3 4.6C+ and Oros Bridge 5.0.

Start simple, then expand as you go

A model is most useful as a living document — one that changes to reflect changing business circumstances. Initially, you can take advantage of the upload and download capabilities of Oros Bridge to create model master data in both Oros and R/3. This means that the data are the same in both places. Once you have the same data in both systems, you can use Oros Bridge to manage changes in Oros or in R/3.

Traditional ABC/M

Activity-Based Costing (ABC) was developed as a practical solution for problems associated with traditional cost management systems. In the early 1980s, many companies began to realize that their traditional accounting systems were producing inaccurate costing information. Traditional cost accounting systems, designed to address the issues of inventory valuation for external audiences, have two deficiencies:

■ The inability to accurately determine actual total product and service costs.

■ The inability to provide useful information to management for purposes of making operating decisions.

As a result, managers of companies selling multiple products and services were making decisions about pricing, product mix, and technology based on inaccurate cost information.

CAM-I Cross

Alternatively, ABC focuses on the activities associated with operating a business. Traditionally, managers asked to cut costs would cut headcount believing it to be the largest cost contributor. Today, people are not the major cost contributors — it’s how activities and people work together that are the contributors. How often have you heard the lament, “We've cut our staff by 20% but the workload has remained the same.” ABC doesn’t eliminate or change costs; it provides data about how costs are actually consumed. To reduce costs using traditional data, you would probably decrease salaries or decrease costs of supplies.

Traditional costing methods really don’t provide enough information required to change the equipment or overhead costs. Using ABC data, you can see how costs are distributed. Once armed with this information, you may be able to eliminate or combine activities, and possibly reduce costs.

ABC allows managers to distribute costs to activities and products much more accurately than conventional accounting methods. Activity costs are passed on to products or services only if the product or service uses the activity. That is, activities consume resources; products and services consume activities. As you measure how activities consume costs, ABC is better able to capture the underlying economics of the company's operations, and the reported activity/product/service costs come to light. In addition, ABC analyzes all activities that exist to support production and delivery of goods and services.

How you assign cost is dependant on business objective

In traditional ABC, the assignment of costs is usually 100 percent absorbed as costs are assigned from resources, to activities, to products and services. To associate costs with products and services, ABC assigns cost to activities based on how activities consume resources. It then assigns costs to cost objects, such as products or customers, based how products or customers consume activities. In this model, all costs are assigned from the resources to activities to cost objects. Each cost is distributed based on its driver and proportion of its driver quantity. All of the costs are aggregated into the final cost objects.

The other way to assign costs is more quantity-based. How much of an activity is required for the output of a cost object and how much of a resource is required for the output of an activity? This method assumes that you know the driver quantities consumed (relationship quantities).

When modeling, you can combine assignment methods, depending on your business objective. Keep in mind that how you decide to analyze ABC, and therefore which approach you adopt, is important to how you use R/3 and build Oros models.

R/3 CO Conceptual Overview

The R/3 module supporting Activity-Based Costing (ABC) is the Controlling (CO) module. CO comprises the functions required for effective internal cost management accounting and includes all functions required for cost and revenue accounting. It is divided into the following components:

Cost Center Accounting (CO-CCA)

The Cost Center Accounting (CO-CCA) component analyzes where costs occur within an organization. Costs are distributed to the originating organizational areas (these areas are broken down into sub-organizational areas). A variety of methods are used to distribute the costs within Controlling (CO). Recording and distribution of costs supports cost controlling and provides the necessary structure and data needed to use with the other CO components.

Activity-Based Costing (CO-ABC)

Traditional cost accounting approaches offer limited choices for monitoring overhead; product cost planning, for example, uses estimated overhead rates to distribute indirect costs to the end products. By introducing tracing factors based on activity quantities, or cost drivers, an organization can distribute overhead resources to products, customers, and other categories based on their originators. The business process is an additional Controlling object for monitoring and control of cross-departmental business processes in addition to functions and products. The Activity-Based Costing component supports more realistic costing. By including ABC in profitability analysis, you create more realistic views of the organization’s cost or profit position.

Profitability Analysis (CO-PA)

The Profitability Analysis component (CO-PA) examines the sources of profits. Profitability analysis is the last step in cost-oriented period accounting where revenues are matched to costs by profit segments. You may define any segment desired — distinguishing between products, customers, sales organizations, distribution channels, business areas, and other units. You then evaluate the segments according to contribution and revenue margins.

Internal Orders (CO-OPA)

The CO-OPA component in R/3 is generally used to plan, collect, and settle the costs of internal jobs and tasks. In cost center accounting allocations, the system allocates plan costs from sender cost centers or business processes to internal orders.

Product Cost (CO-PC)

The integration of the CO-PC component in Oros is beyond the scope of Oros Bridge. The Product Cost Controlling component (CO-PC) determines the costs arising from manufacturing a product or providing a service (direct labor and direct material).

Integrated ABC/M in R/3

Integrated ABC/M in R/3 leverages all of the components within the CO (Controlling) application. CO is reconciled with FI, the SAP financial accounting application, at all times. That is, expenses from FI accounts are posted as costs to the corresponding CO cost elements in CO-CCA. CO-CCA outlines the resources that are then consumed by processes (activities) defined in the CO-ABC component. These processes are either consumed by products (CO-PC) or directly by market segments (CO-PA). Process costs of a product are automatically transferred to the corresponding market segment in CO-PA when the product is sold. Thus costs are fully integrated in the R/3 production system. “Integrated” in the SAP world means that costs are transferred and not kept at the source.

Oros Modeler Conceptual Overview

The basis of an Oros model is its three modules — Resource, Activity, Cost Object. As its name implies, the Resource Module contains company’s resources. Resources are the costs that are incurred as the result of activities performed. Activities performed are contained within the Activity Module. Products, services, customers, and so on, are built in the Cost Object Module to define dimensions used for profitability analysis.

Each module consists of a hierarchy defined by logical groupings of centers, accounts, and cost elements. Centers contain other centers and accounts. Accounts contain cost elements. Centers not only help you define hierarchical relationships between objects in a module but also allow costs to roll-up. Rolling up costs creates cost pools. Accounts are usually grouped into centers based on similar functionality and represent types of resources, activities, or cost objects.

The major differences between the makeup of the modules are the cost elements. Cost elements, in Oros, represent a cost. Resource costs are usually derived from the General Ledger and are entered directly into Resource Module accounts as cost elements and maintained there. Directly entered costs are referred to as “entered cost elements”. The Activity and Cost Object Modules contain other types of cost elements. The type of cost element is dependent on how the cost is assigned to their accounts. No matter the type, account costs are made up within the individual costs of the cost elements.

Note: Oros in this document refers to Oros Modeler, which before version 5.0 was referred to as Oros ABCPlus™.

With What R/3 Components Does Oros Bridge Interface?

The R/3 Controlling module has many integrated components. Currently, Oros Bridge 5.0 communicates with

CO-CCA, CO-ABC, CO-PA and CO-OPA.

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It’s Like Learning a New Language

Oros Bridge acts as the interface or intermediary that translates information from R/3 to Oros and vice versa. The following table identifies how the different R/3 and Oros data structures are mapped to each other. The table also indicates whether Oros Bridge can upload these data structures to R/3 from Oros or download them from R/3 to Oros.

| |What You Can Download and Upload From and To R/3 Using Oros Bridge 5.0 |

| |R/3 Objects |Oros Objects |Download to Oros |Upload to R/3 |

|CO-CCA / |Cost Center Groups |Resource Centers | | |

|Resource Module | | | | |

| |Cost Centers |Resource Centers | | |

| |Activity Types |Resource or Activity Accounts and Attributes | | |

| | | | |Using |

| | | | |Attributes |

| |Cost Element Groups |Resource Accounts | | |

| |Cost Elements |Entered Cost Elements | | |

|CO-ABC / |Business Process Groups |Activity Centers | | |

|Activity Module | | | | |

| |Business Processes |Activity Accounts | | |

|CO-PA / Cost |Characteristics |Dimension Centers and Dimension Attributes Centers| | |

|Object Module | | | | |

| |Characteristic Hierarchy |Dimension Centers and Dimension Attributes Centers| | |

| |Characteristic Values |Dimension Accounts and Dimension Attributes | | |

|CO-OPA / Cost |Internal Order Groups |Cost Object Centers | | |

|Object Module | | | | |

| |Internal Orders |Cost Object Accounts | | |

|Assignments |Cycles (Assessments, Indirect |Resource and Activity Assignments using Shared, | | |

| |Activity Allocations) |percentages, and evenly assigned Drivers | | |

| |Settlement Rules |Cost Object Assignments using any Driver Type | | |

| |Templates (Structured Business |Bill of Costs (only on Oros activity accounts) | | |

| |Process) | | | |

| |Direct Activity Allocations |Resource and Activity Assignments using User | | |

| | |Defined Unique Drivers | | |

| |Assessment Cost Element (type 42) |Attribute | | |

| |Internal Activity Allocation Cost |Attribute | | |

| |Element (type 43) | | | |

|Period Costs |Cost Element Costs |Cost Element Costs | | |

| | |(Cost centers, business processes, internal |Actual and Plan |Plan Only |

| | |orders) | | |

| |Statistical Key Figure Quantities |Resource and Activity Driver Quantities | | |

| |Value Field Quantities |Activity Driver Quantities | | |

| | | |Actual and Plan |Plan Only |

Implementation Scenarios

Oros Bridge offers you many scenarios depending on what you want to accomplish, the version of R/3 you’re using, and what types of R/3 objects you use. Some of the types of things you can do with Oros Bridge include:

■ With CO-CCA already configured, you can use this information to build the Resource Module in Oros. Or, you can use the Resource Module to help configure a standard hierarchy or alternative group in CO-CCA.

■ With CO-ABC configured in R/3, you can download the business process hierarchy to the Activity Module. Oros can be used to build the activity hierarchy that can then be uploaded to CO-ABC as a standard or alternative business process hierarchy.

■ You can download dimensional data from CO-PA to the Cost Object Module. You can also use Oros Bridge to define new R/3 characteristic hierarchies and characteristic values.

■ You can download Internal Orders from CO-OPA to the Cost Object Module as well as upload internal orders.

■ Upload R/3 cycles using Oros cost assignments.

The following scenarios may help jumpstart your thinking about the types of things you want to do.

Initial model implementation phase

Scenario 1 Do you have planned or actual costs on Cost Centers?

This is a straightforward scenario. It assumes that you are only using cost element groups to group cost elements. No activity types are being used. If the cost center does have activity types, you can elect to ignore them on the download. Oros Bridge downloads cost element groups as resource accounts, and any R/3 primary cost elements are downloaded as entered cost elements. Using Modeler, you build your assignments from resource accounts (represented as cost elements groups in R/3 CO-CCA). Once built, period data are added to the model, via Oros Bridge or other sources and calculated. Then assignments and periodic data are uploaded to R/3.

Scenario 2 Do you have costs on Cost Centers with Activity Types?

This scenario assumes that you are using, and want to continue using, activity types in R/3. Oros Bridge allows you to download activity types to either the Resource Module or the Activity Module. Activity types and cost element groups are both characterized in Oros as accounts but are distinguished by different attributes. Activity types are downloaded as accounts with activity type attributes associated with them; cost element groups are downloaded as accounts with cost element group attributes associated with them.

Any unplanned costs that have not been split to activity types are downloaded to the Resource Module as a resource accounts based on their cost element group. This allows you to continue planning your activity type splits in Oros Modeler. Planning the splits in Modeler means that you assign costs from the resource accounts (cost element groups) to either existing or new accounts (activity types) to create the splits. Typically, activity types used in routings are used by the manufacturing industry and thus would be excluded from your ABC model.

Scenario 2A

This scenario assumes that you are using, and want to model, activity types in the Resource Module. In this scenario, you can assign costs from resource accounts (only from those accounts that represent activity types) to other activity type resource accounts, activity accounts, or directly to cost object accounts. If you choose this scenario, any unassigned planned costs can be used to create activity type splits in the Resource Module and uploaded to R/3.

Scenario 2B

One of the questions you need to ask about activity types in R/3 is, “Are they really modeling activities?” The answer to this question affects what you should do when you download activity types to Oros. If you determine that your activity types really are modeling activities, then you have the option of downloading them to the Activity Module as activity accounts. In this scenario, the hierarchies in both the Resource Module and the Activity Module will be the same. You will not really use the Resource Module except to split any unplanned costs. Activity types can be uploaded to R/3 as either activity types with the cost element splits or as a Business Process hierarchy. It is important to note that although activity types may be modeled in the Activity Module, they can still be uploaded to R/3 as activity types. The option of allowing you to use the Activity Module is primarily for ease of use and reporting purposes.

Scenario 3 In R/3, are you utilizing CO-PA or Internal Orders?

When the Internal Orders (CO-OPA) hierarchy is downloaded to Oros, it is uni-dimensional. That is, the accounts are not dimensional. No profitability analysis can be performed; you can only report product costs. On the other hand, when CO-PA information is downloaded to Oros, multi-dimensional accounts are created which allows for dimensional profitability analysis and reporting. This affects the types of assignments you can create and the type of model information you want to report.

Model maintenance phase

Oros Bridge offers a different number of scenarios that you can draw upon to increase the value of your data, whether in R/3 or in Oros. Once a model has been built in Oros using data from R/3, you probably move into a maintenance phase that enables you to do different things than when you were in the initial implementation phase. These scenarios assume that you have a complete model in both Oros and R/3.

Do you want to upload an entire Oros model into a new R/3 period?

You have an existing model in Oros that has been created in conjunction with R/3 so data are the same in both places. Now you have modeled some new ideas on process reengineering and Oros has proved that these changes are worthwhile and need to be implemented in R/3. You can select a new period in R/3 and upload the entire model.

Has your model data changed in one of the supported R/3 CO components or Oros and do you need to sync up the data?

In this scenario, you have made changes in either R/3 or Oros and now your data structures for the same period are out of sync or no longer similar. Oros Bridge allows you to choose whether R/3 or Oros is the master. The master is the model that contains the correct data. You use this master to update the data in the other model. For example, in R/3 you have made changes to the data and now the model data in Oros are different. Selecting R/3 as the master, Oros Bridge updates the model in Oros with the changes.

Providing R/3 Master Data

Objects in an Oros model must typically follow certain rules — sometimes quite stringent ones — in order to be uploaded to R/3 correctly. Why are there rules? Objects in R/3 need to have certain master data — some master data are not optional. Master data fields are properties, or settings, that specific objects in R/3 need to have in order to function. For example, in R/3 some of the master data needed to define a cost center are its name, a company code, and its currency.

In Oros Modeler, attributes are used to supply the needed R/3 master data. For example, attaching a company code attribute to a center provides a cost center’s company code.

The use of attributes ensures that the objects are uploaded with the correct master data.

Interfacing CO-CCA with the Resource Module

In R/3, a hierarchy consists of cost center groups and cost centers. R/3 requires one standard hierarchy that is a tree structure containing all the cost centers in a controlling area. Cost center groups can group these cost centers. You can then create ‘alternative’ cost center groups by combining the groups according to decision-making area, area of responsibility, management area, or groups for allocation and reporting ease. Cost elements can be grouped by cost centers, cost element groups, activity type groups, and so on. In Oros, a hierarchy consists of centers and accounts with accounts being used to combine cost elements.

As a result, Oros Bridge uses cost center groups and cost centers to create the center hierarchy in Oros. Cost element groups are used to determine the cost elements you’re interested in and also to create the cost element hierarchy. Therefore, Oros Bridge downloads the cost element groups as resource accounts along with their cost elements. Activity types (not activity types groups) are used to create accounts and any planned splits are used to create the cost elements.

If you use Activity types in R/3, you have two options in Oros Bridge: 1) you can decide that you don’t want activity type accounts in your model and ignore them or 2) you can download them to Oros as either resource accounts or activity accounts. You may decide to download activity types to the Activity Module if you think that your activity types actually represent activities and, therefore, you want to model them this way in Oros for conceptual ease. Note: activity types downloaded to the Activity Module can be uploaded as activity types or business processes.

In R/3, any cost element that you want to download to Oros must be posted and grouped in a cost element group, whether or not you use activity types. In this example, R/3 cost elements posted to cost center CC1 are also hierarchically grouped by cost element groups. Using Oros Bridge to download this structure, you select an R/3 cost center group which provides information about the cost centers, an R/3 cost element group which provides information about the cost elements and also their hierarchy (which cost element group node they belong to). What happens when you download the information to Oros?

R/3 cost center groups and cost centers are downloaded as centers. R/3 cost element groups are downloaded as Oros resource accounts with the appropriate cost elements. CE700 will not be downloaded to Oros because, although CE700 has been posted to the cost center, it has not been included in any cost element groups.

In this example, as well as having cost elements and cost element groups, you also have activity types used to plan splits. What happens when you download this from R/3 to Oros? In Oros Bridge you select an R/3 cost element group because this determines the cost elements to download and you’ll indicate that you want to download activity types. Although CE700 is planned on an activity type, CE700 is not downloaded because it does not belong to a cost element group. You’ll need to add it to a cost element group to include it in the download. Each activity type is created as an Oros resource account inside the appropriate Oros resource center that represents an R/3 cost center. Note: you also have the option of specifying that any R/3 cost elements not associated with an activity type, but are grouped by the selected R/3 cost element group, be downloaded to Oros resource accounts representing R/3 cost element groups.

Period range selection and cost elements

Oros Bridge allows you to select a single period, or a range of periods, to determine the set of cost elements to download. Your choice determines the cost elements, and hence the costs, downloaded into the Oros model. Note: postings of cost element costs are periodic in R/3, so selecting one period to download means that only those cost elements that have posted costs for that period are downloaded. For example, in R/3 you may have FY1 that includes postings to CE1 and CE2, and FY2 that includes postings to CE1 only. If you select FY2, only CE1 and its costs are downloaded. Using Oros Bridge, you may specify a period range for which to sample cost element cost posting on cost centers. This has the effect of creating entered cost elements in Oros based on historical postings to R/3 cost centers rather than all cost elements for all cost centers.

Oros Bridge downloads resource cost data from R/3 based on a selected R/3 fiscal year and period range. If you decide to select multiple periods, the data are totaled and added to a specified period in Oros.

Interfacing CO-ABC with the Activity Module

Before you can create business processes in R/3, you must define a standard hierarchy. The standard hierarchy is a tree structure used to organize all business processes of a controlling area. The highest node of the standard hierarchy is normally the first business process group that you created. The groups created thereafter make up the remaining nodes of the standard hierarchy. You can structure your processes based on groups for example, reflecting the sequence of events in your firm. A business process group can include additional business process groups or multiple business processes. In addition to business process groups, which are subordinate nodes to standard hierarchies, you can also create alternative business process groups that do not belong to standard hierarchies.

In Oros Bridge, you select the business process group node that contains the hierarchy you want to download. Business process groups are downloaded as centers and business processes are downloaded as accounts.

If you want to begin using CO-ABC in R/3, use Oros to quickly and easily build your activities. After you create your activity hierarchy in Oros, Oros Bridge uploads activity centers to R/3 as business process groups and activity accounts as business processes.

Interfacing CO-PA with the Cost Object Module

CO-PA in R/3 contains the profitability analysis information required to build the Cost Object Module in Oros. Therefore, the CO-PA structure must exist in R/3 before you can use Oros Bridge. When Oros Bridge downloads the selected characteristic hierarchies:

■ Characteristics and characteristic hierarchies are mapped to dimension centers. Oros Bridge allows you to determine the characteristics and characteristic hierarchy to download to Oros. This allows you to limit the set of characteristic values converted to dimension accounts.

■ Characteristic values are mapped to Oros cost object dimension intersection accounts. Intersection accounts in Oros are built using dimension attributes.

■ An Oros attribute hierarchy is created. This attribute hierarchy duplicates the CO-PA characteristic hierarchies, where the combination of text attributes (not the attribute centers) on a cost object account forms the dimension intersections. You use the Oros attribute hierarchy to create new CO-PA characteristic values and characteristic hierarchies.

■ R/3 value fields are downloaded as Oros drivers.

Oros Bridge allows you to download the intersection accounts automatically. Attributes are used to define intersections and, when combined with other intersection attributes (from a different hierarchy), define a multi-dimension intersection. For example, in the illustration, Industrial/Electric account is defined as an intersection because it uses the dimension attributes of Industrial Custs and Electric Distribution. This allows assignments to a specific intersection.

Note: There are two types of characteristics in R/3 — standard characteristics and user defined characteristics; both can be downloaded to Oros. In R/3, standard characteristics use information that comes from master data and from several R/3 modules. Because of this tight relationship to other parts of R/3 you won’t be able to use Oros Modeler and Oros Bridge to create and upload any new standard characteristics, but you can upload new characteristic values into R/3 as user-defined characteristics.

Interfacing CO-OPA with the Cost Object Module

Internal orders in Oros are represented as non-dimensional cost objects. You can either download existing internal orders to the Cost Object Module or you can build them directly in Oros Modeler and upload them. You can assign costs from resources or activities to internal orders. When uploaded, this builds allocation cycles in R/3. You can also create assignments from internal order accounts to other internal order accounts or profitability segments (dimension accounts). This is the equivalent of R/3 order settlement and the building of settlement rules from internal orders to supported settlement receivers.

Methods Used to Assign (Allocate) Costs in Oros and R/3 CO

|Assignment direction supported when interfacing Oros with R/3 CO |

| |CO-CCA |CO-ABC |CO-PA |CO-OPA |

|Resource Module / CO-CCA |Yes |Yes |Yes |Yes |

|Activity Module / CO-ABC |No |Yes |Yes |Yes |

|Cost Object Module / CO-PA |No |No |No |No |

|Cost Object Module / CO-OPA |No |No |No |Yes |

Assignments are used to map the relationships between a “source” account and its “destination” accounts. The source account represents where the cost originates and the destination accounts represent who receives the “assigned costs”. These can be likened to senders and receivers in R/3 CO. In Oros, assigned costs are represented by assigned cost elements. You create assignments between accounts in the same module or between accounts in different modules.

Note: In R/3 you can assign costs directly from the cost centers using cost element, cost element groups, or activity types. Oros, on the other hand, allows assignments only from accounts; assignments from centers are not allowed. Therefore, in R/3, you need to make sure that cost elements are grouped by cost element groups.

In Oros, assignments use drivers and driver quantities to assign costs between accounts. A driver controls the assignment of costs by using driver quantities. In most cases, 100% of the costs in an account is assigned to other accounts. Resource drivers are used to assign costs from resources and activity drivers are used to assign costs from activities. Drivers drive the cost and driver quantities are used to calculate the rate (rate = cost / total driver quantity).

A variety of methods are used to assign costs within R/3 CO. In R/3 CO-CCA, “assessment” and “indirect activity allocation” are available for the assignment of costs to business processes (CO-ABC), dimension cost objects (CO-PA), or to internal orders (CO-OPA). The driver in an assessment cycle and an indirect activity allocation (IAA) cycle is in both cases the statistical key figure (SKF) such as FTE, and # telephone minutes. The SKF is modeled as a driver in Oros.

|R/3 Allocation Methods Supported in Oros Bridge |

|Methods to Support Value-Based |Supported in Oros Bridge |

|Allocations in R/3 | |

|Assessment in planning and in |Yes, using assignments with assessment |

|period-end closing |secondary cost element on source accounts|

|Distribution in planning and in |No |

|period-end closing | |

|Methods to Support Quantity-Based |Supported in Oros Bridge |

|Allocations in R/3 | |

|Direct activity allocation |Yes, using unique drivers to directly |

| |post quantities |

|Indirect activity allocation in plan |Yes, using assignments with internal |

|and actual |activity allocation secondary cost |

| |element on source accounts (R/3 4.5B+) |

|Target=actual allocation |No |

|Template Allocation in Plan and in |No |

|the actual in Cost Object or | |

|Profitability Segment | |

|Template Allocation in Processes/Cost|Yes, using Bills of Costs on activities |

|Centers in Plan and in Actual |only |

If you define an assessment or indirect activity allocation directly from business processes in the CO-ABC component to the profitability segments in the Profitability Analysis component (CO-PA), the value fields (activity driver) in the operating concern serve as the sole tracing factors in addition to percentages. Internal order settlement (CO-OPA) enables you to transfer the costs incurred by an internal order to the appropriate receivers (only CO-OPA using Oros Bridge).

If you define an assignment using user-defined unique drivers, they are uploaded as direct activity allocations (DAA) with quantities. Of the Oros driver definition only the unit is uploaded; the name is dropped. The unit, if not specified in the driver definition, is uploaded as “each”, which you can change in R/3 as needed.

Assessment vs. Indirect activity allocation

The difference between assessment and indirect activity allocation is how costs are allocated (assigned).

Assessment is a method of internal cost allocation by which you allocate (transfer) the costs of a sender cost center or business process to receiver CO objects using an assessment secondary cost element (category type 42). The method works according to the statistical key figures or percentages used. You cannot allocate quantities using the assessment method.

Indirect activity allocation is a method used to determine the input of activity (type) quantities from the sender (cost center/activity type or business process) to receiver CO objects using an internal activity allocation cost element (category type 43). To allocate quantities, you must use indirect activity allocations.

Templates

Oros Bridge supports the use of R/3 Structure Business Process (SBP) templates. In R/3, the use of Template allocations is another method to assign overhead costs. The similar feature in Oros is a Bill of Costs. Bill of Costs provides a convenient mechanism for adding material and unit costs directly to accounts, for bidding on jobs, or for implementing activity accounting. Templates in R/3 are more complicated than Oros Bill of Costs.

In Oros, you can use resource accounts (representing R/3 cost center/activity types) or activity accounts (representing R/3 business processes) as senders in a Bill of Costs. The only destination accounts supported by Oros Bridge are activity accounts. Therefore, the Bill of Cost is used to assign resource costs or activity costs to an activity. R/3 templates support the simultaneous consumption of fixed and variable quantities. Bills of Costs, on the other hand, support fixed (Total option is checked) or variable (Total option is unchecked) quantities only. The quantities are uploaded as fixed or variable depending on your selection in the Bills of Costs.

Uploading assignments

| |R/3 Version |

|R/3 allocation methods supported |4.0B |4.5B |4.6A - 4.6B |4.6C+ |

|Assessment cycles |Yes |Yes |Yes |Yes |

|Indirect activity allocation cycles |No |Yes |Yes |Yes |

|Direct activity allocation |Yes |Yes |Yes |Yes |

|Settlement rules |No |No |No |Yes |

How assignments are uploaded to R/3 depends on the R/3 version and the type of Oros driver used.

When Oros Bridge uploads assignments to R/3, it creates cycles and cycle segments (except those assignments that upload settlement rules and direct activity allocations). An R/3 cycle contains one or several segments describing combinations of senders and receivers that are to be processed together. A cycle, therefore, lists the source and destinations of the assignment. As you can have multiple cycles, the Summary View in Oros Bridge provides you with the names of each cycle created in R/3 so that you can search for and process them or you can name them in Oros Bridge before uploading.

What’s driving the assignment of cost?

Resource drivers are used to assign costs from resources to resources, resources to activities, and resources to cost objects. Activity drivers are used to assign costs from activities to activities and activities to cost objects. Assignments use drivers and driver quantities to calculate assigned costs. A driver controls the costs assigned to each receiver or destination account by using driver quantities. How you define your drivers determines how driver quantities are divided. For example, an Oros driver quantity can be defined as Shared as opposed to Unique. If a shared driver, the driver quantity is shared by all source accounts (senders) assigned to destination accounts (receiver) that use the same Shared Driver. In R/3, the equivalent of a Shared Driver is a Statistical Key Figure (SKF). Therefore, any Oros shared driver assignments are uploaded as assessments or indirect activity allocations with SKFs depending on the source account used.

| |Types of Drivers in Oros |

|R/3 Allocation |Shared Driver |User Defined Unique Driver |Calculated Driver |% (Evenly Assigned or |

|Methods Supported |(Basic or Weighted) |(Basic or Weighted) | |Percentages) |

|Cycles uploaded |Assessment (4.0B+) |None (direct activity |Assessment |Assessment |

| |Indirect activity allocation |allocation, 4.0B+) |Indirect activity allocation |Indirect activity |

| |(4.5B+) | | |allocation |

|Cycle tracing |SKFs (not when used for |Driver information is dropped,|SKFs (not when used for |None |

|factors (drivers) |assignments to dimension |except unit |assignments to dimension | |

|uploaded |accounts) | |accounts) | |

| |Value fields (only when used for | |Value fields (only when used | |

| |assignments to dimension | |for assignments to dimension | |

| |accounts) | |accounts) | |

|Cycle driver |Quantities spread evenly across |Quantities spread evenly |If Total Driver Qty is used in|% values for each selected |

|quantities uploaded|all selected periods |across all selected periods |calculation, uploaded as |period |

| | | |indirect activity allocation | |

| | | |with Inverse Quantity | |

| | | |Calculation | |

| | | |Result of calculation | |

| | | |quantities spread evenly | |

| | | |across all selected periods | |

|Internal order |Settlement rule (4.6C+) |Settlement rule (4.6C+) |Settlement rule (4.6C+) |Settlement rule (4.6C+) |

|settlement |% values for each selected period|% values for each selected |Result of calculation |% values for each selected |

|quantities uploaded| |period |quantities spread evenly |period |

| | | |across all selected periods | |

Model Calculation, Analysis, and Validation

After you have loaded ABC/M information into an Oros model and performed the Oros calculation process to update cost allocations, the model is ready for analysis, budgeting, and simulation activities. Before you load any data structures or data from the Oros model to any of the compatible R/3 components, you should verify the data. In the verification process, Oros Bridge evaluates the model and tests it for any invalid conditions. This process validates the model against the rules that are required to ensure its compatibility with R/3. A report is generated that can be used to make the appropriate adjustments to the model before loading the model into R/3.

In Conclusion

Oros Bridge assumes that the team of people using Oros Bridge and R/3 CO communicates with one another and is cross-trained (at least to the point of understanding basic concepts and objects of each tool). It is also assumed that you know what you want to upload from an Oros model to the particular components within R/3 CO. If you have an existing Oros model, you need to understand what needs to be done in order to prepare the model for R/3 CO. If you have existing information in R/3 CO, you need to understand what can be downloaded to Oros. In all cases, a general understanding and recognition of the strengths of each application is an important ingredient for a successful Oros SAP R/3 interface project.

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WHITE PAPER

* The CAM-I Glossary of Activity-Based Management, edited by Norm Raffish and Peter B.B. Turney, (Arlington: CAM-I, 1991.)

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