Global Value Chain

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GLOBAL VALUE CHAIN

Overview

A global value chain refers to the processes involved in the production and distribution of goods and services on a global scale. The global value chain represents the interconnected network of activities – from sourcing materials to production to delivering final products to consumers – that span many different countries and involve multiple companies and systems. Understanding complex value chains is no easy task for the central controlling, sales, product development, and supply chain management divisions of multinational enterprises (MNEs), who struggle to answer questions such as:

  • What are my overall material, manufacturing, logistics, and other costs for some or all end products?

  • How can I break down the costs at each stage of a value chain in order to analyze and optimize processes?

  • How much of our intercompany (IC) profit resides in inventories?

  • Where exactly are the inefficiencies in the system?

  • Which end products will be affected and by how much if prices of certain sourced materials or production costs change in a plant?

  • How should I deal with auditors demanding detailed reports in response to stringent local and global compliance requirements?

In today’s digitally connected world, we may well assume that all MNEs have their global value chains completely under control, and can answer the aforementioned questions and take important decisions in a timely manner. Apparently, however, this is not the case. While piecemeal information is available, MNEs find it difficult to visualize end-to-end (E2E) value chains for their end products. They do not always have all the value chain-related information they need, for instance, which materials were sourced in which plants and in what quantities, what value-adding activities took place, what were the margins when the semi-finished goods were shipped to other entities, and finally what was the group cost when an end product was sold to a customer. The reasons for this may include, for example:

  • Multiple ERP systems are running in various geographies

  • Ongoing IT transformation for example move to S/4HANA

  • Master data challenges

  • Lack of process harmonization across entities

  • Supply chain changes due to product mix changes or changes in sourcing or production processes

  • Ongoing changes due to mergers and restructuring of businesses

  • The main reason, however, is the lack of a software solution capable of tackling all the above challenges and bringing transparency and clarity to highly complex globalized value chains for all products.

EXA’s game-changing Global Value Chain (GVC) solution does exactly that. It helps you to unlock the full potential of your company’s data and processes. Take charge of your decision-making process by leveraging high-quality data and insights and pave the way for unprecedented growth and success. Don’t miss out on this opportunity to transform your business – with our proven GVC solution!

Solution highlights include:

  • Tight integration with all your SAP systems – no need to worry about the number of systems, their releases, and geographic boundaries

  • Data harmonization even when facing master data challenges between systems

  • Full transparency of E2E value chains (from the procurement of raw materials, production, logistics at various plants in various countries, to the final sale of products) at the most granular level, in other words, at any and every stage of the value chain

  • Cost rollup across entities and systems

  • Calculation of consolidated standard costs (based on standard costs) and global product margin

  • Calculation of consolidated actual costs (derived from actual transactions)

  • Clear understanding of your cost drivers for each product

  • Financial decision support for “make or buy” scenarios

  • Calculation of unrealized profits in inventory in various entities

  • 360-degree product view – a global bill of materials for each product with the option to drill down to any and every production step

  • Whatif scenarios – simulation capabilities to understand the potential impact of changes in procurement costs, activity costs, logistics costs, exchange rates, etc.

GVC

Features

GVC automatically retrieves data from all connected SAP ERP systems while ensuring that no context information is lost, even in complex processes, such as cross-company sales, drop shipments, tolling, stock in transit, and so on. It also ensures that the value chains calculated in GVC can be reconciled with the information in the local ERP systems at any time. Thanks to the intelligent integration in GVC, master data breaks between the ERP systems can be easily identified and corrected.

  • One system providing detailed insight on all your value chains

  • Standard connectors to read relevant finance and logistics information from source systems from SAP R/3 to SAP S/4HANA

  • Data harmonization even when facing master data challenges, such as material number breaks, UoM breaks, or business partner breaks in IC transactions 

  • Value chains fully in sync with pieces of information in underlying ERP systems

  • Group cost, unrealized profit in inventory, and other valuable information can be fed into downstream reporting systems

  • File interfaces for non-SAP ERP systems that allow pieces of value chains from non-SAP ERP systems to be added

Standard product costs and IC relations are used to determine the global value network for all products sold. The quantity structures and cost contributions for the respective level are derived from the calculations. For better transparency, the costs are mapped to a global cost structure according to their origin. Using GVC, you can map relations across system boundaries. On the basis of this quantity and cost structure, the costs are rolled up E2E for each material (material-plant combination), from the raw material through production to sales. The global cost structure therefore enables you to analyze group production costs for each material along the value chain. Furthermore, based on the integrated comparison against local costs, you can calculate and report the included IC profit at each level. GVC also supports the calculation of group production costs in the context of make-to-order production.

  • Consolidated cost is based on standard costs

  • GVC uses weighted average approach to calculate cost

  • Option to consider opening inventories and the last valuation and include historical cost and FX impact

  • E2E value chain is determined based on IC relations and, if required, transaction data is leveraged to establish relations

  • Cost transparency at material level (for each material-plant combination including semi-finished materials), allowing you to drill down from group, company code, and plant to individual product

  • Cost component split tracking for all components is maintained in the underlying ERP systems along the value chain

  • Costs in local and group valuation

  • Option to also calculate / consider work in progress and stock in transit at product level

The global value network is created based on the transactions actually posted in the ERP systems. In this case, the quantity structures are obtained from the material documents, which are then mapped to the GVC structure. The costs are also derived from the actual documents. In addition to the actual purchase and production costs, they also contain the related variances. These variances, together with the costs along the global value network, are also rolled up across IC and system boundaries. GVC Actual Costing thus allows you to perform a profitability analysis for all products sold, taking into account any variances within the global value network. Furthermore, similar to the consolidated standard costs, the intermediary profit shares can be read off at each stage and for each material along the value chain.

  • Consolidated cost is derived from the actual transactions in the underlying ERP systems

  • Weighted average algorithm is used to calculate material in stock

  • E2E value chain is determined based on IC relations and, if required, transaction data is leveraged to establish relations

  • Cost transparency along with the related variances at material level (for each material-plant combination including semi-finished materials), allowing you to drill down from group, company code, and plant to individual product

  • Variance and revaluation effects are made transparent at business process and material level

  • Actual costs are provided in local and group valuation

IC profit is the profit made when one group entity sells to another entity of the same group (IC). The IC profit is generated at the selling entity and is the difference between the revenue and the local cost at this entity. At the end of the reporting period, all IC (also unrealized) profit is calculated and rolled up along the value chain and is visible in every business process. For the consolidation process, the IC profits are mainly relevant in the following areas:

Profit in inventory: Value of the IC profit for global materials that are held in stock in the various companies (in the financial value chain)

Profit on stock in transit: The IC profit for goods shipped but not yet received by the IC receiver needs to be considered from the inventory perspective for all materials traded between the companies

Profit on goods sold externally: The IC profit generated when goods are sold to the market.

GVC can be used to calculate UPI at any point of a value chain.

  • UPI can be tracked both in local and group currency

  • With its weighted average costing approach, you can track UPI at any point of the value chain

  • You can drill down on UPI from organization level to company code, to plant, and ultimately to product level

  • The approach in group currency not only considers the impact of historical FX rates, which is kept in the opening balance when converting from local added value to group currency, but also considers the historical cost of materials and activities

  • In comparison, the UPI in local currency only considers the impact of the historical cost

  • Option to also calculate / consider work in progress and stock in transit at product level

  • Display changes in the UPI between two periods using GVC

On the basis of the derived global value network, GVC also derives an end-to-end bill of materials (global BOM) for each material, regardless of the plant or company code within the organization. Besides information on the quantities of raw materials consumed, a global BOM also contains information on the services consumed. Thus, you can analyze the distribution of intermediate profits within the participating companies in detail. Furthermore, the global BOM provides an overview showing which activities are involved in the production of which materials.

  • End-to-end view of all materials containing details on the consumed raw materials, activities, and freight

  • Drill down on costs and profits at each level of the value chain

  • Development of costs and profits over a period with details on the sources of change (purchase price, quantity difference, and FX impact)

  • Where-used reports to determine which materials are consumed in which products

  • An end-to-end global BOM for each material containing all relevant details on quantities, costs, etc. at each stage

Global value network and, in turn, global BOMs allow you to run what-if analysis and can cover various scenarios that can help businesses make important decisions in a timely manner. These include not only simple scenarios such as the impact of changes in raw material prices or activity prices, but also scenarios such as required quantities for forecasted sales in markets. Furthermore, GVC could be used to determine the costs of new products where the new product is derived from an existing product and uses some of its components along with some new components and value-added activities for which information would need to be provided.

  • Impact of raw material (or externally procured materials) on final products

  • Impact of activity price changes in a plant on final products

  • Impact of exchange rate changes on final products

  • Procurement planning based on forecasted sales

  • Cost estimate of a new product

There’s no need to worry about the security of your data. EXA GVC is an SAP Addon, which means that it enjoys the exact same security as your other SAP applications. The same goes for other features, such as single sign-on or SAP roles. 

  • Single sign-on with existing SAP users 

  • SAP roles and authorizations in line with your GRC strategy 

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