At one of Turkey's largest chocolate manufacturers, traditional profitability and cost allocation processes moved onto SAP Profitability and Performance Management (PaPM): high-performance calculation on HANA, flexible allocation rules with less development dependency, product-level profitability and what-if simulations.
The client name is withheld at the client’s request.
In manufacturers with a wide product range and complex cost structures, seeing profitability only at company or product group level is not enough. What management really needs is to see quickly which product is how profitable, which cost is allocated to which product and how, and above all how profitability will be affected when cost or business assumptions change.
In the project delivered at one of Turkey's largest chocolate manufacturers, traditional profitability and allocation processes were moved onto SAP Profitability and Performance Management (PaPM), creating a more dynamic financial model. The aim was not just to calculate current profitability, but to build a structure in which finance teams manage allocation rules flexibly and management analyses the financial outcome of different scenarios.
In traditional profitability analysis, cost allocation models become complex over time. When a new product, an organisational change or a new allocation rule appears, changing the existing structure can require:
The business, meanwhile, needs something far more dynamic: questions such as "How does product profitability change if we allocate this expense by production quantity instead of sales volume?" or "If energy costs rise 15%, how much is each product group's margin affected?" need answers quickly, not months later. The project's core aim was a financial model that provides that flexibility.
With SAP PaPM, cost and profitability calculations moved into a modelling structure of connected, visible and manageable steps:
Where traditional setups might need ABAP developments or custom exits for a new allocation or calculation, many business rules in PaPM could be built through modelling. The following became much faster to model:
When many products, sales transactions, cost centres, detailed customer and channel breakdowns and multi-stage allocations are evaluated in one model, calculation times can grow considerably. SAP PaPM's SAP HANA-based calculation engine lets high-volume financial models run with high performance, and its architecture, which uses existing SAP and non-SAP data directly, reduces the need for data replication.
Besides costs that can be assigned directly to a product, manufacturers carry costs that cannot be tied to a single product; the keys used to allocate them directly affect calculated product profitability:
Different allocation logics were modelled on PaPM so that costs flow to the relevant product, product group or other business dimensions; because allocations can be rerun on demand, the financial outcome of model changes is evaluated quickly. The financial result is no longer analysed as "total sales" or "total company profit" but as the revenue–cost–profitability relationship by product, product group and the other breakdowns defined in the model.
Technically, PaPM runs on HANA, integrates with different data sources, models complex allocations and reduces development needs. For the CFO, the value shows up in three places:
PaPM's calculation model is not tied to the data of a single application; it can use existing data models in SAP and non-SAP systems and minimise data replication. The data the profitability model needs was brought in from different sources:
This turns PaPM from a mere SAP finance calculation tool into a performance management layer that brings data from across the organisation into a common financial model.
| Business problem | Managing complex profitability and cost allocation models faster and more flexibly at a manufacturer with high product and transaction volumes. |
|---|---|
| Solution | SAP Profitability and Performance Management – PaPM. |
| Modelling | Cost allocations and financial calculation rules built on PaPM. |
| Technology | SAP HANA-based high-performance calculation. |
| Flexibility | Reduced dependency on custom development for new allocation and calculation needs. |
| Profitability | Detailed profitability analysis by product and other business breakdowns. |
| Simulation | What-if scenarios for alternative cost and business assumptions. |
| Integration | SAP and non-SAP data sources included in the financial model. |
| Management gain | The profitability model evolved from reporting the past into a platform that simulates the financial impact of management decisions. |
Profitability calculations are now modelled on SAP PaPM.
Cost allocation became more flexible; allocation models are easy to change and rerun.
Dependency on custom development for business rule changes was reduced.
The HANA-based high-performance calculation foundation is used.
Different data sources can be used within the same financial model.
Product-level profitability analysis was made more granular.
What-if simulations can be run on alternative assumptions.
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