Deloitte Workshop - Leaf Process

© All Rights Reserved

2 views

Deloitte Workshop - Leaf Process

© All Rights Reserved

- Cos Mart
- Practice Problem 1_ Partial Foods _ Week 5 Practice Problems _ CTL
- stocktaking procedures
- 5s Steps - Rockman 171[1]
- Inventory Management V1.0
- Accounting for Inventories FRS 102
- Introduction
- Inventory Management
- Draft Resolution About RJ Reynolds Dis Solvable Tobacco Products
- Supply Chain Projekat 2 Mcdonalds
- Controller or Accounting Manager or Sr Financial Analyst
- Suprabha Ind Ppt
- Oracle Inventory Fundamentals
- Site ion
- Chapter 4
- UNIT IV DQ4-1, DQ4-2, P4-1
- 20120912 module 1 practice questions uploaded
- workscitedpage
- Iso
- Whats Your OTB Purchase Planning Made Easy.17143105

You are on page 1of 84

TO BE – Leaf Processes

Lausanne, 08 August 2013

LEAF (Introduction)

Packed tobacco in different types and from different origins used/(blended) to

manufacture of cigarettes and semi-finished products during the budget period.

The packed leaf cost is the price reflected in the Worldwide Leaf System (WLS) used

as reference to calculate leaf consumption price.

2

LEAF (Introduction)

Sample of Leaf types:

Burley – is a light air-cured tobacco that is majority produced in Brazil, Malawi

and Argentina.

Flue Cured - tobacco that is high in sugar which is processed through hanging

in curing barns.

Oriental – is a sun-cured, highly aromatic, small-leafed variety that is grown

mainly in Turkey and Greece.

Homogenized tobacco (Cast Leaf and Recon): tobacco dust, fines, stems, by-

products, etc. that are finely ground, that may be mixed with a binding agent,

and that are cast, extruded and/or rolled into a flat sheet of uniform thickness

and quality

3

Agenda

Leaf Budget assumptions flow

Leaf Budget Calculation

Actual values posting

Reporting & Variance Analysis

Due to Currency Calculation

Leaf variance analysis Models

4

Purpose of the SVC Leaf budgeting

Provide the most accurate Leaf cost estimate (SVC rate) for every product

The standard cost of Leaf is calculated by combining leaf assumptions

The computed SVC rate is input to SAP (P1) & GMRB, where multiplied by

the volume of the product provides the SVC cost of the product

FA027654 ML812

Target weight 634 [g] Primary Yield 104 %

Secondary Yield 96 % Blend formula

Factory Yield 99.8 %

Leaf price

L33Z Burley US 8.3 % 4.2 $

L417 Burley MW 2.4 % 3.8 $

L22J FC US 1.8 % 7.1 $

….. …… ….. …..

Finished Good Blend 100%

FA027654 ML812

MARLBORO (RED) KS BOX 20 SUMSTONE

Blend assumption

Purchase Crop

Inventory

Price Mix

5

OB cycle – Key assumptions list

Element Description Responsible System

Production Volumes Product Volume by product code (for both finished and Ops Planning (C&FP or OVF (Excel)

semi-finished goods) local)

Target Weight (BOMs) Bills of materials for each manufactured finished and semi- Product Development Excel

finished product

Yield Primary & Secondary Yield targets by Blend Affiliate Ops Planning Excel

Blending Blend Allocation of blends to finished goods products PD Blending WLS

Assumptions

Blend Formulas Leaf recipes showing the usage of Leaf TMCs by blend PD Blending WLS

Leaf Price LPP Prices LPP forecasted prices by TMC Leaf Planning WLS

Leaf Inventory Leaf inventory held by Affiliates and PMIM Ops Finance & PMIM P1

Leaf Charges Additional charges e.g. admin, warehousing Ops Finance Excel

X-rates X-rates assumptions to convert leaf price from purchasing Ops Finance GMRB

to functional currency

Leaf Expense* All expenses related to Leaf Warehousing Cost Center in Leaf Logistics/SC LBPF/Excel

the affiliate (e.g. Warehousing cost, transportation, etc.)

Productivity initiatives** Cost reduction initiative assumptions , included in other Inputs by Ops, Excel

assumptions (BOMs, Yield, Blend Assumptions) calculated by Ops

Finance

* Leaf Expense budget consolidation follows the same approach as Conversion Cost

** Productivity initiatives will be covered in separate session

6

OB cycle calendar

Source: Ops Finance OB 2013 calendar

New FA codes 8-20 Jun 19-31 Jul 29 -4 Sept

Shipment Volume 26-27 Jun 2-18 Aug 4-14 Sep 5-16 Nov

26-27 Jun

Inventory Targets 2-17Aug 19 - 25 Sep

Targets setting

Budgeting cycle 1 Budgeting Cycle 2 Budgeting Cycle 3 Last Volumes input (used for RF)

7

Process Flow

Budget Budget Reporting &

Actuals posting

Assumptions Calculation Variance Analysis

Production

Volume / OVF

Budget BOM

Avg Blend Formula Currency

Blend Formula

\

Blend Assumption

Actual Yield (Usage)

Price

Yield

Specification

LPP Price

Leaf Budgeting

• SVC Rates • SVC Usage

Crop Mix

• SVC Deviations • SVC Deviations

Currency

Productivity PCUs

Initiatives

8

Process Flow

Budget Budget Reporting &

Actuals posting

Assumptions Calculation Variance Analysis

Production

Volume / OVF

Budget BOM

Avg Blend Formula Currency

Blend Formula

\

Blend Assumption

Actual Yield (Usage)

Price

Yield

Leaf Budget Price Actual Leaf Price

Leaf Price

Specification

LPP Price

Leaf Budgeting

• SVC Rates • SVC Usage

Crop Mix

• SVC Deviations • SVC Deviations

Leaf charges

Currency

PCUs

Productivity

Initiatives

9

Blending assumptions – AS IS process

Blending Assumptions:

Blend assumptions & Blend Formulas.

• These assumptions are managed in WLS by PD (Blending)

• Each blending assumptions are managed at FA code /production center (entity) level

• Both assumptions have steps (time bound versions)

Production Center : TR( PHILSA) Production Center : TR( PHILSA)

Step 1 Step 2

Blend Brand Brand Name

TMC Details % Inclusion % Inclusion

ML812 FA027654 MARLBORO (RED) KS BOX 20 01-2013 03-2013

ML812 FA027655 MARLBORO (RED) KS SOF 20

L33Z Burley US 8.3 % 5.3 %

ML812 FA027978 MARLBORO FLAVOR MIX KS BOX 20

ML812 FA032880 MARLBORO (RED UPGRADE) KS BOX 20 L417 Burley MW 2.4 % 1.6 %

L22J FC US 1.8 % 2.8 %

….. …… …..

100% 100%

FA027654

L33Z 8.3 % 8.3 % 5.3 % 5.3 % 5.3 % … 5.3 %

FA027655 Blend

L417 2.4 % 2.4 % 1.6 % 1.6 % 1.6 % … 1.6 %

FA027978 ML812

L22J 1.8 % 1.8 % 2.8 % 2.8 % 2.8 % … 2.8 %

FA032880

… … … … … … … …

100% 100% 100% 100% 100% … 100%10

Blending assumptions – AS IS process

Blend assumptions & Blend Formulas are

• Managed in WLS by PD (Blending)

• The impact of Changes in blending assumptions are reviewed mainly during the LPP Process

LPP combines series of assumptions including volumes, inventories and current blending to plan

Leaf purchases per TMC and entity. As an outcome Leaf Blend formulas are reviewed as well.

Process

Assumptions Source

Current Leaf Inventories P1

Deliverables

Previous LPP balances WLS

Purchase plans by TMC & entity (Production Center)*

Planned Production Volume OVF + RF outcome TMC purchases allocation to entities

Current Blending assumptions WLS Reviewed Blend Formulas*

Target weight PLM Reviewed Blend Assumptions

Yields Affiliate input * Only for main LPP review

Month Volume source Scope

July OVF1 Blend Formulas & Assumptions adjustment and Price Forecast SVC preparation

Nov OVF2 Full LPP calculation, used for purchases

Main LPP

Jan OVF3 Revised LPP, based on Dec inventories

Revised, optional

11

LPP calculation

LPP Calculation schema

LPP balances (TMC) Target Weight

Inventories (LOT) Volume (OVF) Assumptions

(TMC) Forecast

Forecast Formulas

Stock rupture

report

Target Duration

Adjustment Plan

TMC allocation to

destination entities

12

Blend Assumptions - challenges

blends are later reviewed during LPP but changes are not always reflected in SVC

The LPP is performed based on the OVF production volume, while not all product

changes are reflected in the OVF, e.g:

- new product codes,

- resourcing not always reflected.

Manual adjustments are performed instead based on discussions with Affiliates.

No governed process exist to further review the assignments.

e.g. OVF volumes were sometimes understated in EEMA Affiliates, which led to bigger

consumptions of older leaf crops.

13

Blending assumptions

LPP Timing alignment

Assumption May Jun Jul Aug Sep Oct Nov

New FA codes 8-20 Jun 19-31 Jul 29 -4 Sept

Shipment Volume 26-27 Jun 2-18 Aug 4-14 Sep 5-16 Nov

26-27 Jun

Inventory Targets 2-17Aug 19 - 25 Sep

Enable reflecting of latest LPP assumptions, In SVC by aligning timing & automation

Prerequisite – available OVF assumptions

Benefits:

• Increased SVC accuracy due to reflecting latest assumptions

• Automatic refresh of inputs at each budgeting cycle triggering SVC recalculation

14

Inventory allocation review

Central process to review TMC assignment by entities.

- Resourcing Potential Actions:

- Footprint change Trigger - Adjust TMC purchases by entity

review

- Drive inventory transfers between affiliates

- OVF final calculation

Benefits:

• TMC crops assignment to entities in line with production volume requirements

• Balancing the crop mix usage by Affiliates

15

Process Flow

Budget Budget Reporting &

Actuals posting

Assumptions Calculation Variance Analysis

Production

Volume / OVF

Budget BOM

Avg Blend Formula Currency

Blend Formula

\

Blend Assumption

Actual Yield (Usage)

Price

Yield

Leaf Budget Price Actual Leaf Price

Leaf Price

Specification

LPP Price

Leaf Budgeting

• SVC Rates • SVC Usage

Crop Mix

• SVC Deviations • SVC Deviations

Leaf charges

Currency

PCUs

Productivity

Initiatives

16

Yield – Operations KPIs

Current Process :

• Yield assumptions are gathered manually by Affiliate Ops Planning at blend/cutfiller level of details

• Gathered inputs @ blend/cutfiller level are used for leaf consumption calculation

• Results are aggregated cutfiller/from blend total factory level of details and submitted to IRVA

Leaf

Prepare a Aggregate consumpiton

Get current Provide KPI Approve KPI

template for results to

KPI results inputs targets Input KPI targets

OB inputs total factory

to IRVA

Challenges:

• No common system repository of yield assumptions

• Yield inputs are used for LPP &SVC budgeting and reported to IRVA – no process to align the 3 inputs

• Yield inputs are not always phased

17

Yield – Operations KPIs

• Use yield inputs for leaf consumption calculation

• Apply appropriate data management (versioning, locking etc.)

Calculate Leaf

Assumptions inputs to Yield to total IRVA

consumption

input @ blend GSVC factory

GSVC system

Version control, locking, phasing

WLS

Ops Planning Leaf Planning/Blending Ops Finance

Yield Blend Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Primary Yield [%] ML901 103.2 103.2 103.3 103.3 103.3 103.3 103.3 103.3 103.4 103.4 103.4 103.4

Secondary Yield [%] ML901 95.1 95.1 95.1 95.1 95.1 95.2 95.2 95.2 95.2 95.2 95.2 95.3

Benefits:

• Common official repository of yield inputs @ blend and aggregated level of details

• Discipline and control of provided data thanks to locking & versionning

• “One source of truth” of KPIs in GSVC budgeting , LPP and IRVA

18

Process Flow

Budget Budget Reporting &

Actuals posting

Assumptions Calculation Variance Analysis

Production

Volume / OVF

Budget BOM

Avg Blend Formula Currency

Blend Formula

\

Blend Assumption

Actual Yield (Usage)

Price

Yield

Leaf Budget Price Actual Leaf Price

Leaf Price

Specification

LPP Price

Leaf Budgeting

• SVC Rates • SVC Usage

Crop Mix

• SVC Deviations • SVC Deviations

Leaf charges

Currency

PCUs

Productivity

Initiatives

19

Leaf Price components – AS IS

Current Process :

• Price of consumed Leaf consist of 2 component groups:

• The Leaf price (LPP Price) – paid to the Vendor or Vertically Integrated Affiliate

• Additional charges added to the Leaf purchase price in the value chain

Component Description

Leaf Warehousing Warehousing Costs occurring while storing

2.5% leaf in a PMIM or Affiliate warehouse

Leaf Warehouse Expenses (LWE)

Import Duties 4.0% Import duties Duties paid for imported Leaf (according to

local legislation

ROCE* 5.0%

ROCE* Return on capital invested on PMIM Leaf held

Freight 3.0% for Affiliates

Crop Protection Agency (CPA) 0.3%

2.7% Freight costs Costs of shipping Leaf from to PMIM and

Leaf Admin charges

consecutively to the Affiliate

82.5% Leaf Admin incl. CPA Leaf Administration charges applied to all Leaf

Price

held by PMIM Tolling

(Vendor/VI)

Leaf Price Leaf Price paid to the vendor or VI Affiliate,

planned as part of the LPP price forecast

20

Leaf value chain

All Leaf are going to be used from inventory and will contain below cost elements

The Leaf price budgeting aims at predicting the final cost at the time of consumption

Sample Leaf Value chain flow : Leaf Purchased via PMIM and consumed in local Affiliate

PMIM Affiliate (e.g. PM CR)

Non-

Vendor/ Bonded

Virtual Plant Bonded Primary

VI Affiliate Warehouse

Warehouse

ROCE* 5.0%

Freight 3.0%

Crop Protection Agency (CPA) 0.3%

Leaf Admin charges (FME) 2.7%

Price 82.5%

(Vendor/VI)

21

Leaf Price data sources

Current Process :

• The aim of Leaf price budgeting is to predict the final price of consumed Leaf,

the starting point of the analysis is to get Leaf price of

• Purchases (LPP)

• PMIM Inventory

• Local inventory.

• For each source different expenses would be added to obtain the consumption cost

• Currency exposure will be different for each Leaf source

X-rate X-rate

(EUR/BRL) (EUR/CZK)

Leaf Leaf Export Import Local

LPP Price LPP Price ROCE

+ To

+

Purchases (BRL) (EUR)

+ To

PMIM + Admin + WHS + (EUR) Price

PM CR

Duties

(CZK)

+ WHS

(CZK)

= Consumed

Leaf

(EUR) (EUR) (CZK)

(EUR) (CZK) (CZK)

X-rate

(EUR/CZK)

Leaf Leaf Export Import Local

PMIM PMIM Leaf inventory price (EUR)

+ + ROCE

+ To

+ + Consumed

Admin

(EUR)

WHS

(EUR)

+ (EUR) Price

(CZK)

PM CR

Duties

(CZK)

WHS

(CZK)

= Leaf

(CZK) (CZK)

Import* Local

Local + + Consumed

Inventory

Duties

(CZK)

WHS

(CZK)

= Leaf

Inventory already includes previously occurred costs (PMIM price, ROCE, admin etc. (CZK)

*Leaf can be already stored in the non-bonded warehouse thus already contain import duties Data source Leaf Controlling

PMIM (Leaf Controlling) Ops Affiliate

Local Finance

22

Currency (exchange rate assumptions)

Current Process :

• When perform Leaf price budgeting the price assumptions need to be converted to local currency

in which the Leaf is going to be consumed

• Depending on the source of budgeting assumptions the currency exposure will vary

Local Affiliate

Purchases PMIM

(e.g. PMPSA)

BRL EUR CHF

Currency exposure

currency exposure exposure

LPP Price Purchasing Yes Yes

(e.g. BRL)

PMIM Inventory EUR No Yes

Local Inventory Local (e.g. CHF) No No

23

Leaf Price & Inventory - challenges

Visibility

• Inventory extracts provide only the final inventory value, without possibility to

split by cost components (freight, admin charges, warehousing etc.)

• No visibility of the currency in inventory impact

Manual Process

• The process of gathering leaf price information is manual and prone to mistakes

• The data gathering process from data extraction, communication (from PMIM to

Affiliates) and usage for budget computation is fragmented

24

Leaf Price & Inventory

• Reporting solution to split Inventory by cost components – for budgeting, actuals &variance analysis

• Price assumptions to be transmitted to GSVC from WLS, potentially from GLS for VI Leaf

• Leaf charges to be provided as an input to GSVC

• Currency assumptions to be transmitted from GMRB

Inventory USD EUR CHF

P1 value

decomposition

Purcha s e Pri ce 4.11 2.95 3.63 LWE

CPA 0.01 0.01 0.01

Duties

• Decompose Leaf Lea f a dmi n 0.13 0.09 0.11

Frei ght - 0.09 0.11

Inventory into ROCE - 0.26 0.33

ROCE

components Loca l Frei ght - 0.04 0.08 Freight

• Calculate Duti es 0.21 CPA

Tota l Lea f Pri ce 4.25 3.44 4.48

purchasing & Purchasing x-rate in inventory Leaf Admin

Transfer to Affiliate x-rate

transfer currency EUR/USD = 1.39 EUR/CHF = 1.23

Leaf Purchase

WLS Price Price

(Vendor/VI)

Leaf Purchase

GLS Price (VI)

Leaf Charges

GMRB X-rates

GSVC system

Benefits:

• Increased visibility of the Leaf inventory price components – required also for indirect taxation

• Possibility to track the Leaf price evolution, including currency impact

• Base for the Leaf Price & currency variance analysis 25

Crop Mix Assumptions – AS IS

Current Process :

• The crop Mix assumption are showing the expected consumption mix between different crop years

• Leaf is mixed from different crop years within one TMC to achieve

• Crop mix will have a financial impact on Affiliates using the valuation method by LOT

Main reason for applying the crop mix:

TMC1 5% 20% 25% 30% 20% • Mixing the leaf from different years

TMC2 12% 13% 35% 25% 15% to achieve product consistency

(Managing Tar/Ni/CO level in blend)

TMC3 10% 10% 40% 30% 10%

TMC5 18% 17% 30% 20% 15%

… Financial impact for Affiliates using

The valuation method by LOT.

Inventory Purchases (LPP)

Using Leaf from different years will have

An impact on final TMC price

Process

Extract Leaf Review Use crop mix

P1 inventory by mix

inventories proposal for budgeting

TMC/crop year distribution

26

Crop Mix- challenges

Definition

Different understanding and application of what a crop mix is.: Crop Mix vs. LPP Mix

Definition Description

LPP Year Year for which the Leaf was planned to be purchased

Manual process

• The crop mix calculation is entirely done in Excel, no system repository of budgeted data.

• Difficulty of performing Due to crop mix Variance Analysis

• Usually one crop mix assumption is kept for the entire year, although new leaf coming from

new purchases will not be consumed as of the first day of the year

• In case when Affiliates calculate the new LPP availability the transportation time from

PMIM warehouse is not always taken into account

Leaf arrival to PMIM Leaf usage in the Affiliate

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

27

Crop Mix – process & system approach

• Include crop mix assumptions in GSVC system

• Have a phased crop mix approach, driven by arrival date and transportation time

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2010 Inventory 30% 30% 30% 30% 30% 30% 30% 30% 30% 21% 21% 21%

2011 Inventory 40% 40% 40% 40% 40% 40% 40% 40% 40% 28% 28% 28%

2012 Inventory/LPP 30% 30% 30% 30% 30% 30% 30% 30% 30% 21% 21% 21%

2013 LPP 0 0 0 0 0 0 0 0 0 30% 30% 30%

Propose Leaf Review crop

for SVC

crop mix mix

WLS Arrival dates budgeting

GSVC system

Version control, locking, phasing

Leaf Blending Ops Management Ops Finance

Benefits:

• Consistent global approach for crop mix calculation

• Standard process supported by system solution

• Base for Due to Crop Mix variance calculation

28

Process Flow

Budget Budget Reporting &

Actuals posting

Assumptions Calculation Variance Analysis

Production

Volume / OVF

Budget BOM

Avg Blend Formula Currency

Blend Formula

\

Blend Assumption

Actual Yield (Usage)

Price

Yield

Specification

LPP Price

Leaf Budgeting

• SVC Rates • SVC Usage

Crop Mix

• SVC Deviations • SVC Deviations

Currency

Productivity PCUs

Initiatives

29

Leaf Assumptions – information flow– AS IS

Blending WLS Formulas & formula Steps to

assumptions monthly data

Extract Leaf

arrival dates

(DoR)

Extract LPP

Add leaf charges Add x- Leaf

LPP Prices WLS price (current

& previous LPP)

(Admin, ROCE etc.) rates Package

Calculate

Leaf

consump-

Leaf Charges GMRB tion

Price

P1 Add leaf charges

Inventory Inventories (Admin, ROCE etc.) rates

P1 Duties

Inventory Inventories

Local

WHS

Leaf Assumptions – information flow

Data Integrity

The entire data gathering process is Excel based, no common repository of Blending

& Price information used for budgeting,

(e.g. missing TMC prices, Blend formulas discrepancies vs. P1/current blends)

Process Workload

The leaf assumptions from various systems and Functions are collected

and consolidated manually via Excel files and templates, causing higher workload

31

Leaf Blending & LPP Price information

• Integrate assumptions with source systems (WLS, P1, GMRB)

• Store extracted data in dedicated system modules

• Build validation logic checking data integrity (e.g. if all codes have blends, price within range etc.)

• Apply data control mechanisms (versioning, locking etc.)

• Refresh inputs at each budgeting cycle

Release inputs

WLS Run validation reports,

for SVC

check data consistency

calculation

Release inputs

Run validation reports, Perform SVC

P1 for SVC

check data consistency calculations

calculation

GMRB check data consistency for SVC

calculation GSVC system

Update inputs at Version control, locking, phasing

each budgeting cycle

Leaf Planning/ Blending PMI Leaf Controlling Affiliate Ops Finance

Benefits:

• Automatic refresh of inputs at each budgeting cycle triggering SVC recalculation

• Process streamlining by eliminating excel steps

• Discipline and control of provided data thanks to locking & versioning

• System validation rules increasing data integrity Common repository of blending information

• used for budgeting

32

Leaf Assumptions Gathering – system landscape

WLS WLS WLS P1 GMRB

Blend Formulas

Leaf LPP Prices Direct Shipments Leaf Inventory X-rates Leaf SVC

Blend Assumptions

BOM Leaf

PLM Crop Mix Duties Yield

Target weight Charges

DM

DM Prices OPF % increase BOMs DM SVC

Wastage

Shipment Production

Inventory targets

Volume Volume

System functionalities:

• Dedicated modules for each budgeting assumption

• Possibility to perform inputs phasing

• Validation mechanisms x-checking integrity data during submission (completeness & accuracy)

• Refresh of inputs during each budgeting cycle, driving budget recalculation

• Discipline and control of provided data thanks to data versioning & locking

• Central, official repository of assumptions enabling reporting and variance analysis

• SVC calculation logic linked to the assumptions list

33

Agenda

Leaf Budget assumptions flow

Leaf Budget Calculation

Actual values posting

Reporting & Variance Analysis

Due to Currency Calculation

Leaf variance analysis Models

34

Process Flow

Budget Budget Reporting &

Actuals posting

Assumptions Calculation Variance Analysis

Production

Volume / OVF

Budget BOM

Avg Blend Formula Currency

Blend Formula

\

Blend Assumption

Actual Yield (Usage)

Price

Yield

Specification

LPP Price

Leaf Budgeting

• SVC Rates • SVC Usage

Crop Mix

• SVC Deviations • SVC Deviations

Currency

Productivity PCUs

Initiatives

35

Budget Calculation

Current Process :

• The purpose of the Leaf Budgeting is calculating the Leaf Price per Volume (e.g. per ‘000 cigs)

for each sellable Finished and Semi-Finished product

• The calculation is performed by combining gathered assumptions in 2 major steps:

• Leaf consumption calculation (average Blend Formula)

• Leaf price calculation

Target Weight LPP Prices Arrival dates

Volume Formulas Assumptions Inventory inventory

Crop Mix

(valuation by LOT)

Yield

Freight

Exchange rates

Admin Charges

consumption Other Charges Budget Leaf price

Leaf

(by TMC) by TMC

consumpion Budget Leaf Price

Leaf Budget

Avg Blend (SVC Rate and

Deviation) Standard price

Formula

By TMC

(costing BOM)

Leaf SVC

36

Leaf Consumption/Average Blend formula

Current Process :

• The process aims at calculating the average Blend Formula (Leaf “BOM”) for each Blend, consists of 3 steps:

a) Cut-filler consumption calculation [Cut-filler kg by Blend]

b) Tobacco Laydown calculation [Leaf kg by TMC]

c) Average Blend Formula calculation [Leaf inclusion by TMC]

FG Production Volume

Target Weight Blend Assumptions

(OVF)

Cut-filler in FG

Secondary Yield

(SF OVF) consumpion

to Primary steps

by TMC Formula

b)

Tobacco Laydown IS ET Monthly Blend

by TMC (incl. IS ET) Formula

Average Blend

c) Formula

37

Leaf Price calculation – AS IS

Current Process :

• The Budgeted Leaf Price is calculated by combining inventory & purchase prices taking into planned usage

• First a monthly price is calculated, later it’s weighted by leaf usage to obtain the average budget price

• The Calculation approach is influenced by the inventory valuation method

Moving Average Price (MAP) Crop Year Mix

• The price of the Leaf is calculated as a moving • The crop year mix approach the price within

average of the Leaf inventory by TMC. one TMC differs by crop year

• All LOTs in within the TMC have the same price • In order to calculate the budget leaf price a mix

• The price of Leaf is influenced by new Leaf purchases between crop years needs to be assumed

Affiliates having Moving Average by TMC valuation Affiliates having Actual by LOT valuation

Current year

Leaf inventory Current year usage

purchases

Crop year mix

(AC by LOT Next year usage (arrival dates)

valuation)

Leaf usage

[kg&value]

(@TMC)

38

Leaf SVC & SVC Deviation calculation – AS IS

Current Process :

• The Leaf standard rate is computed by combining tobacco consumption and budget price

including Yield & weight assumptions

• Additional forecasted deviations may be planed e.g. due to phasing

TMC Avg price ML234 Tobacco Inclusion

consumption rate

TMC1 5.00

TMC1 100 10%

TMC2 5.00

TMC2 250 25%

TMC3 7.00

TMC3 250 25%

TMC4 6.20

Yields TMC4 400 40%

Yield Yield Yield

Blend (ML234) Value

ML234 105% 95 % 99.75%

cost per kg dry blend 5.98

Target weight CF cost after Secondary kg 6.15 Leaf

FA code Weight SVC rate

Cost per ‘000 cigarettes 4.30

FA0001 700

J F M A M J J A S O N D

Leaf cost’ 000 4.00 4.00 4.40 4.40 4.30 4.30 4.30 4.30 4.40 4.40 4.40 4.40

Prod Volume 100 100 120 80 80 90 100 100 100 100 100 100

Avg Leaf rate 4.30

Leaf SVC Deviation -30 -30 12 8 - - - - 10 10 10 10 39

Budget Calculation - challenges

Manual process

• Budget calculation, incl. crop mix performed in Excel, which lead to mistakes

• The calculation model is fragmented (separate Excel spreadsheets used),

refreshing assumptions requires manual checking each of calculation steps

• Calculation in Excel requires additional effort to prepare files, running calculations,

checking results

• Calculation models fragmentation and decentralization makes simulations

difficult and time consuming (e.g. sensitivity analysis due to currency)

40

Leaf Budgeting

• Build a calculation model based on predefined formulas to calculate SVC & Deviations

• Calculation models to be standard and centrally governed

Yield

Target weight Blend Assumptions

(multicurrency)

Leaf Inventory

(multicurrency)

SAP P1

Crop Mix

Leaf consumption

X-rates (Avg Blend Formula) Leaf SVC rate

Leaf Charges

(multicurrency) GMRB

Direct Shipments

Duties Leaf SVC deviation

GSVC system

System functionalities:

• Centrally governed calculation model, standard calculations for Affiliates

• Multicurrency calculation (transactional, functional, reporting) based on sourced data

• Budget re-calculation after assumptions change

• Calculation performed In monthly buckets , SVC Deviation calculation due to phasing

41

Leaf Budgeting – simulation capabilities

Blend Formulas

Blend Assumptions

Yield

BOM

Target weight Leaf consumption

(multicurrency) Leaf SVC rate

Leaf Inventory

(multicurrency)

Crop Mix

EUR/USD USD/BRL USD/RBL

X-rates

Leaf Charges

(multicurrency)

Leaf Price Leaf SVC deviation

Direct Shipments

Duties

System functionalities:

• Integrated calculation model will enable simulation capabilities and “ what if” analysis

• Simulations will be possible at Affiliate/Regional/ and total PMI level

42

Budget Calculation benefits

Benefits

• Budget calculation standardization and streamlining

• Considerable data preparation & calculation workload reduction

• System validation rules increasing data integrity

• Discipline and control of provided data thanks to locking & versioning

• Assumptions and calculation results visibility for Affiliates/Regions/PMI

• Automatic refresh of inputs at each budgeting cycle triggering SVC recalculation

• Simulation and what if analysis capabilities

43

Product Components Usage (PCU) calculation

Current Process

• PCUs are showing the usage of Intercompany purchased supplies in FG production

• PCU is a GMRB table, maintained by Production Center for these IC purchased supplies

(Filters, Cut Filler etc.).

• PCU is used for supply volume calculation as part of the I/C profit elimination

Example - PCU

TABAQUEIRA PM CR Market

Czech Republic

BBS production FG production, filter usage

• TABAQUEIRA sells BBS to • Once the FG is sold on the

• PM Cr. purchases the BBS

PM CR. Intercompany market, based on the PCU,

and uses for production

• Income received from the the related supply volume

• PM Cr. inputs IC supply to

transaction is calculated

PCU and adds usage

Process

FG Production Center input PCU based on Blend Formula information and semi-finished products sourcing (OVF)

PCUs input

Blend Formulas OVF SF

generation

Challenges

• Heavy workload required (maintaining supplies)

• Consequence of wrongly maintained supply could have high financial impact

44

PCU calculation

• Base PCU computation on SF production volume & Blend formulas

• Build validation logic checking data integrity (e.g. if all I/C purchased supplies have PCUs)

• Apply data control mechanisms (versioning, locking etc.)

• Refresh inputs at each budgeting cycle

Blend Formulas

Blend Assumptions

PCUs GMRB

Production

Volume

GSVC system

Benefits:

• Considerable data preparation workload reduction

• System validation rules increasing data integrity

• Automatic refresh of inputs at each budgeting cycle triggering SVC recalculation

• Process streamlining by eliminating excel steps

• Discipline and control of provided data thanks to locking & versioning

45

Agenda

Leaf Budget assumptions flow

Leaf Budget Calculation

Actual values posting

Reporting & Variance Analysis

Due to Currency Calculation

Leaf variance analysis Models

46

Process Flow

Budget Budget Reporting &

Actuals posting

Assumptions Calculation Variance Analysis

Production

Volume / OVF

Budget BOM

Avg Blend Formula Currency

Blend Formula

\

Blend Assumption

Actual Yield (Usage)

Price

Yield

Specification

LPP Price

Leaf Budgeting

• SVC Rates • SVC Usage

Crop Mix

• SVC Deviations • SVC Deviations

Currency

Productivity PCUs

Initiatives

47

Actual Posting – setting standards in SAP

Current Process :

• PMI applies the standard costing methodology, following that approach:

• Standard rates per products (SVC rate) and materials (Leaf Prices) are computed during budgeting

• Before new calendar year standard rates are uploaded to SAP and used for materials valuation

• PMI currently uses a “quantity based” standard calculation in SAP, meaning that the

• The SVC rates per product are recalculated in SAP

• A reconciliation needs to be done to ensure alignment of rates with budget calculation

Beginning of year:

Actual Process

Budget Process Loading standards

to SAP

Standard

Standards are maintained

Leaf Budget Price by TMC Standard Price by TMC in functional currency only

Yield Assumptions

Quantity

based

SVC rates = SVC rates standard

calculation

Reconciliation,

Ensuring matching budget rates

and SAP calculated standards

48

Actual Posting – Deviations Posting

Current Process :

• When actual transactions occur:

• Leaf goods issue to Primary

• Leaf usage in the Manufacturing process

SAP compares the actual price and usage with standards and posts the difference into deviation accounts

Actual Process

Actual purchase price is compared vs. the Standard price by TMC As part of month-end

The difference in costs is posted as Purchase Price Deviation process

deviations

NOTE: Purchase price deviation includes the Due to currency deviation, Granularity @

TMC/LOT

are capitalized to the

as standards are maintained in the functional currency. Balance sheet for

1 month

Costing BOMs Manufacturing (Usage)

Actual Usage

Deviation After that period

deviations are

released to P&L

Actual usage is compared with standard usage.

The difference in costs is posted as Manufacturing Deviation

Granularity @

Blend, TMC/LOT

Challenges:

• Currency deviation is not posted separately by SAP – needs to be manually isolated in Excel

• Despite having granular data in SAP deviations are not allocated to products based on usage 49

Actual Posting – Deviations Allocation

Selling

Purchasing Manufacturing (Real Usage)

FG/SFG

Finished/Semi-

Finished Good

Leaf in Whse Leaf Goods Cut-filler

@ MAP Issue @ Std Cutfiller

Usage

Leaf Price Deviation FG/SFG

Deviation: Standard

- Currency

- Price Loose Cost

Loose cig

cigarettes Usage

Deviation

FG/SFG

Deviation

Packed

cigarettes

Deviation:

Cutfiller Loose cig FG/SFG

- Currency

- Price

+ Usage + Usage = Deviation

FG/SFG 2

Deviation Deviation

FG/SFG 3

Allocation by Volume (in GMRB)

Challenges:

• Deviations are currently not allocated to products based on purchasing & usage information

• Deviations are posted as one number to GMRB, allocated by volume to products (not in line with cost drivers)

50

Actuals posting – deviation analysis

Current Process :

• As part of month-end activities Affiliate perform the SVC Deviation analysis based on SAP data

• The purpose of this analysis is to further understand sources of deviations and bridge to Variance Analysis

Purchase Price Deviation

Deviation reports

Produced quantities of finished

Purchase price deviation Usage deviation values by and semi-finished goods

posting by material Material & produced SF/

(LOT/TMC) Finished Good Production BOMs used in the

Manufacturing process

Budget assumptions Price and Currency deviations split

Split of manufacturing

Deviations into driven by:

- Specification changes

- Usage (yield)changes

Challenges:

• Manual process to analyze deviations, prone to mistakes

• Considerable workload spent on the process (extracting reports, data crunching, aggregation etc)

51

Actual posting - challenges

• The manual process results in heavy workload 2 084 man-days*

Area Activity EU EEMA Asia LA&C Total PMI

Generating SAP reports 143 86 176 166 571

Leaf Deviation Analysis 153 84 80 107 424

Deviation

Analysis DM Deviation Analysis 363 96 116 113 688

CC Deviation Analysis 162 72 74 93 401

Total Deviation Analysis 821 338 446 479 2 084

• Deviations allocated to products/markets based on volume in GMRB, which not

always in-line with cost drivers

• Providing accurate real/actual costs of products might require manual reworks

* Man-days statistic based on Affiliates’ survey

52

Actuals Posting – proposal

• Automatic deviations allocations to products based on material consumptions

• Actual product cost calculation

• Actual product cost decomposition reports

product cost decomposition

Automatic deviations

Leaf Goods allocations Actual cost

Issue Allocation to Actual

Consumptions costs of decomposition

By materials products

Manufacturing FA123456.01

Process Order Material Ledger Cut filler

Settlement Closing Process TMC…

DM Make/Pack

Filter

Allocation to Acetate tow…

Selling Goods Inventory Cig. Paper…

By materials

53

Actual

• Activating ML in SAP will also enable actual reports, e.g. Leaf actual consumptions

and Leaf actual prices by materials and products

• Can be used as source of actuals information for variance analysis purpose in GSVC

FA123456.01 Standard Actual Deviations

Qty: 1,000 Qty Price Value Qty Price Value Qty Price Value

Blend 0.650 5.38 3.50 0.700 5.03 3.52 (0.050) 0.356 (0.02)

TMC 1 0.300 5.00 1.50 0.330 4.85 1.60 (0.030) 0.152 (0.10)

TMC 2 0.250 6.00 1.50 0.260 5.38 1.40 (0.010) 0.615 0.10

TMC 3 0.100 5.00 0.50 0.110 4.73 0.52 (0.010) 0.273 (0.02)

Actual Leaf

Actual BOMs Actual Yield

Prices

54

Agenda

Leaf Budget assumptions flow

Leaf Budget Calculation

Actual values posting

Reporting & Variance Analysis

Due to Currency Calculation

Leaf variance analysis Models

55

Process Flow

Budget Budget Reporting &

Actuals posting

Assumptions Calculation Variance Analysis

Production

Volume / OVF

Budget BOM

Avg Blend Formula Currency

Blend Formula

\

Blend Assumption

Actual Yield (Usage)

Price

Yield

Specification

LPP Price

Leaf Budgeting

• SVC Rates • SVC Usage

Crop Mix

• SVC Deviations • SVC Deviations

Currency

Productivity PCUs

Initiatives

56

SVC Variance Analysis - overview

Current Process :

• The SVC variance analysis is performed in 2 steps, followed by a reporting process

• GMRB Variance Analysis splitting the variance into volume, currency & cost

• Affiliate Variance analysis further explaining the cost difference

• Based on GMRB • Provides further split of

gather Affiliate variance

submission the GMRB due to Cost to

analysis reports

• Splits the total cost business drivers

• Gathers comment on key

variance between 2 data • Covers productivity

business drivers

versions to Currency, initiatives analysis

• Is a source for

Volume, Cost, Other • Enables GMRB re-classes

management reporting

(Acquisitions) after analyzing Actual

(Flash report, OMT

• Operates on product results

presentation)

concatenates

57

GMRB Variance Analysis - overview

Current Process – GMRB Variance Analysis

GMBR splits the total variance between 2 periods into 4 drivers, based on submitted inputs.

• Due to Currency - based on currency split & current exchange rates

• Due to Volume/Mix - based on volumes aggregated to product concatenations

• Due to Cost - based on SVC & SVC Deviation submissions.

Current Reference

- = Variance

Period Cost Period Cost

Cost

Currency Volume/Mix Other

(Real Variance)

Codes Code

Variances run in GMRB

OB vs. PY OB, OB vs. RF PY AC vs. OB, AC vs. PY RF vs. OB, RF vs. PY

58

Current Stage

Current Process – Affiliate Variance Analysis

• The purpose of the Affiliate Variance Analysis is to further split the “Due to Cost” variance calculated

by GMRB to cost drivers predefined in MCR template

• Affiliates split the cost into manufacturing & productivity and track productivities execution

variance

Business Drivers

MCR Template:

Price Development Sourcing

Opportunity Purchases Footprint Initiatives

Formula/ Spec. Changes Manufacturing Performance

Prior Year Deviation Spec Rationalization

Other Processing Technology

59

Affiliate Variance Analysis - overview

need to be combined in Excel coming from different sources:

• SVC Deviation reports <- manually analyzed in Excel based on P1 extracts

• Productivity tracking files <- manually updated Excel templates

• OB assumptions files <- Excel based/GSPS flat files (also in Excel)

The levels of granularity used by the GMRB and Affiliates are different, resulting in

reconciliation issues

GMRB Variance Analysis Concatenations (grouping of product attributes)

Affiliate data FA codes

• Budgeting Assumptions

• Deviation Reports

Due to the manual process the workload of local Variances is very high

Total workload: 2 583man-days for OB/AC&RF

60

Affiliate Variance Analysis - overview

Cost Variance

ISLE Variance Analysis by

Production Center, Account (3.2 Mio) Price Deviation

Material Group Cost Variance

Leaf Price Leaf Price Deviation by Leaf Price Malawi (0.2 Mio)

Deviation by TMC excluding currency Deviation by

TMC Origin

Spec Deviation

FA group Cost Variance

Process order Blend (0.6 Mio)

Leaf Spec & Usage by Leaf Spec & Yield

settlement Optimization

FA code, Blend by FA code, blend

reports

Spec Changes (1.2 Mio)

Yield Deviation

Initiative Value

Leaf Productivity tracking Blend DM Cost Variance

FTD 0.3 Mio

files ML001 (0.5 Mio)

Blend Optimization (0.6 Mio) Price Malawi (0.2 Mio)

FTD 0.3 Mio Price Brazil (1.0 Mio)

61

Challenges

Data Accuracy

The levels of granularity used by the GMRB (based on concatenations)

and Affiliates (based on FA codes) are different, resulting in reconciliation issues.

Alignment

Variance Analysis needs to be performed by Affiliates to reconcile with GMRB

variance analysis results. That gap is driven mainly by:

a) Different product structure

(GMRB uses concatenations vs. FA codes used for budgeting)

a) Not using transactional data by GMRB for Due to Currency calculation

b) GMRB Variance analysis setups

(e.g. allocating deviations to costs, allocating SF goods variance to volume

Process Workload

As a consequence, Affiliates’ variance analysis and reconciliation is done in Excel.

Due to the manual process the workload

62

Variance Analysis

Automate Variance Analysis in GSVC based on budget and transactional data

• Gather actuals data at detailed level from SAP (e.g. material, vendor etc.)

• Compare actuals with the budget assumptions already available in GSVC

• Enable a more flexible analysis with its drill down and slice and dice functionalities in GSVC

Budget Actuals

GSVC SAP P1

Budget Assumptions: Actuals:

- Blend Formulas - Actual Blend

- Yield KPI - Actual Yield

- Leaf prices (split by - Actual Leaf Prices (split by

price components) price components)

- Price

• Drill down, slice & dice capabilities

GSVC

63

Leaf Variance Analysis Model

FG

DM CC

Leaf

development Mix/Inv Mix

Sourcing maintenance

productivity

Freight Spec

Logistic rationalization

Duty

initiatives

Processing

Leaf Warehouse technologies

Others (CPA, Leaf Admin)

Leaf initiatives

• By leaf type & origin 64

Agenda

Leaf Budget assumptions flow

Leaf Budget Calculation

Actual values posting

Reporting & Variance Analysis

Due to Currency Calculation

Leaf variance analysis Models

65

Process Flow

Budget Budget Reporting &

Actuals posting

Assumptions Calculation Variance Analysis

Production

Volume / OVF

Budget BOM

Avg Blend Formula Currency

Blend Formula

\

Blend Assumption

Actual Yield (Usage)

Price

Yield

Specification

LPP Price

Leaf Budgeting

• SVC Rates • SVC Usage

Crop Mix

• SVC Deviations • SVC Deviations

Currency

Productivity PCUs

Initiatives

66

Due to currency calculation

Currency variance – Cost Variance between 2 periods resulting from purchasing exchange rate differences

Example

Purchases in EUR Functional currency USD

Vendor Affiliate

• Affiliate purchases 1 000 units of a products at the price of 5 EUR during each year

• Purchased goods are used to produce finish goods sold on final market

• The purchase price does not change between years

• Although the exchange rates varies between periods

Year 1 : Purchase of 1000 units @ 5 EUR EUR/USD 1.20 COGS= 1000*6.00 USD = 6 000 USD

Year 2 : Purchase of 1000 units @ 5 EUR EUR/USD 1.30 COGS = 1000*6.50 USD = 6 500 USD

67

PMI Leaf Currency methodology

Methodology alignment for Leaf currency calculation

Multilevel supply chain Leaf usually purchased by PMIM Tolling , held on inventory for ~ 12 month

and resold to the manufacturing Affiliate

Long Inventories Leaf is held on inventory for long periods (up to several years), thus the

currency effect is released to P&L with long delay

Multiple shipments

PMIM Tolling Affiliate (e.g. PMPSA)

Vendor/

VI Affiliate Avg. 12 month inventory Avg. 3 month inventory

Current Status:

• most Affiliates besides PMIM do not include original purchasing currency changes in Due to currency (treated as price)

• Only PMIM Tolling & Affiliates having direct shipments reflects the original purchasing currency variances

- Last currency variance (PMIM?) - For entire PMI?

- Entire value chain currency variance ? - For Affiliates?

Challenges:

• Align approach on what is the currency variance

68

Currency Variance

Currency variance – definition alignment (how far should we go back?)

• Original vs. purchasing currency

Multiple shipments

PMIM Tolling Affiliate (e.g. PMPSA)

Vendor/

VI Affiliate Avg. 12 month inventory Avg. 3 month inventory

only to last selling

party:

Leaf Price Variance - Vendor for PMIM

- PMIM for Affiliates

*Extraction of the original purchasing currency from the system is to be validated during the

technical design phase. 69

Due to Currency Computation

Current Process – Due to Currency (Currency Split)

• The official source of currency variance is GMRB

• GMRB does not have the information about the underlying transactional currency information.

It uses instead currency split to calculate the Due to Currency variance.

Currency split table showing the percentage currency exposure of purchased raw material (DM, Leaf).

The table is maintained by account (SVC and Deviation accounts)

Leaf Budget Currency exposure

GMRB 4510 – Leaf SVC EUR 80

Calculation by account

4510 – Leaf SVC USD 20

Split is input based on OB assumptions, but not updated in the Actual periods during the year.

The currency split is further used by GMRB to translate the SVC costs to underlying

purchasing currencies and based on that calculate the Due to Currency variance.

70

Current Stage

Currency Split - challenge

• Because of inventory duration there is a timing differences between the purchases

and the release of SVC

• In case of Exchange rates fluctuation that may lead to discrepancies

• Significant differences vs. the Due to Currency need to be re-classed

X-rate = 41 RUB/EUR X-rate = 38 RUB/EUR to calculate due to

Purchase of 10 mio kg of currency

Finish goods sale,

Leaf @ 10 EUR/kg SVC posting

Inventory

January April

In order to calculate the “real” Due to currency effect Affiliates need to either:

Analyze purchasing data to retrieve the currency variance

Recalculate the Due to Currency taking into account the average inventory duration

71

Due to Currency - challenges

Data Accuracy

The variance generated by the currency split may differ from transactional data

because GMRB does not store purchasing/transactional currency info

Process Workload

Calculating and validating the impact of historical/purchasing currency in

the deviation is a manual process requiring effort from Affiliates, Regions, PMI

Alignment

No system solution or standard approach to automatically identify the

transactional currency info on Actuals. Affiliates commonly derive high level

assumptions to compare budget vs. actual purchasing currency rates

(e.g. average the X-rates over the last 3-4months, depending on leaf duration)

72

Due to Currency computation

Automate Currency calculation based on transactional data

• Gather budget assumptions in transactional currency in GSVC & translate using budget

exchange rates

• Gather actual transactional data from SAP P1

• Perform Variance Analysis in GSVC by comparing the budget & transactional data,

Due to Currency result to be sourced to GMRB

Thus, removing the need for currency split

Actuals

OB

SAP P1

GSVC

Actuals:

Budgeting Assumptions: - Transactional purchasing data

- Inventory in Affiliate/purchasing currency (in transactional and Affiliate currency)

- Planned purchases in purchasing currency - Actual exchange rates

- Budget exchange rates

Removing currency split

73

Due to Currency computation example

Base period (AC 2010)

Price - Price

Purchase Purchase x-rate transfer transferred x-rate Transfer to Consumption

Volume mix price currency (EUR/USD) to PMIM currency Value (EUR/CHF) PMP SA currency value

2008 1,000.00 33% 5.00 USD 1.25 4.00 EUR 4,000 1.35 5.40 CHF 5,400

2009 1,000.00 33% 5.00 USD 1.30 3.85 EUR 3,846 1.30 5.00 CHF 5,000

2010 1,000.00 33% 5.00 USD 1.35 3.70 EUR 3,704 1.25 4.63 CHF 4,630

Total 3,000 100% 5.00 USD 1.30 3.85 EUR 11,550 1.30 5.01 CHF 15,030

Average original purchasing currency by TMC Average transfer currency by TMC

Volume mix price currency (EUR/USD) to PMIM currency Value (EUR/CHF) PMP SA currency value

2009 1,000.00 33% 5.00 USD 1.30 3.85 EUR 3,846 1.30 5.00 CHF 5,000

2010 1,000.00 33% 5.00 USD 1.35 3.70 EUR 3,704 1.25 4.63 CHF 4,630

2011 1,000.00 33% 5.00 USD 1.40 3.57 EUR 3,571 1.20 4.29 CHF 4,286

3,000 100% 5.00 USD 1.35 3.71 EUR 11,121 1.25 4.64 CHF 13,915

Average original purchasing currency by TMC Average transfer currency by TMC

Original Affiliate

74

Agenda

Leaf Budget assumptions flow

Leaf Budget Calculation

Actual values posting

Reporting & Variance Analysis

Due to Currency Calculation

Leaf variance analysis Models

75

Process Flow

Budget Budget Reporting &

Actuals posting

Assumptions Calculation Variance Analysis

Production

Volume / OVF

Budget BOM

Avg Blend Formula Currency

Blend Formula

\

Blend Assumption

Actual Yield (Usage)

Price

Yield

Specification

LPP Price

Leaf Budgeting

• SVC Rates • SVC Usage

Crop Mix

• SVC Deviations • SVC Deviations

Currency

Productivity PCUs

Initiatives

76

TO BE solution

Leaf Price Variance: FG

Further decomposition

DM CC

of price to drivers. Leaf

development* Mix/Inv Mix

Sourcing maintenance

productivity

Freight Spec

Logistic rationalization

Duty

initiatives

Processing

Leaf Warehouse technologies

*Maintain variance analysis at AS IS

Others (CPA, Leaf Admin) granularity—per leaf type origin, Leaf initiatives

• By leaf type & origin TMC, etc. 77

Price Decomposition

Decompose only the significant components and group/bucket together the small leaf

cost items.

Budget Actual

Decompose leaf cost component to Maintain PO Conditions

SAP P1 GSVC

drivers Condition Leaf Cost

Cost Component Type

Purchase Price XX Purchase Price

Freight XX Freight

Duty XX Duty

ROCE versus XX ROCE

Others (CPA, Leaf Admin,WHS, etc) XX Others (CPA, Leaf Admin, WHS, etc)

VA

Leaf Price Deviation Amount By TMC/Lot

Purchase Price xx

Freight xx

By type/Origin

Duty xx

ROCE xx By plant

By Purchase Order

Total Leaf Price Deviation xx

VA Model

78

Leaf Price Variance

- Due to Crop Year FG

- Mix/Inventory Mix DM CC

Leaf

development Inventory Mix

maintenance

Freight Sourcing Spec

productivity rationalization Blend

Duty Averaging

Logistic Processing

Leaf Warehouse technologies

initiatives

Others (CPA, Leaf Admin)

Leaf initiatives

• By leaf type & origin 79

Crop Year Mix -

Automatically calculate Due to Crop mix using budget & transactional data

Budget Actual

Per TMC SAP P1

GSVC

Leaf consumption report grouped by

TMC/crop year

Crop Year Crop Mix Price (EUR) Value Crop Year Crop Mix Price (EUR) Value

Y-3 (2009) 20 % 3.00 60.00 Y-3 (2009) 25 % 3.00 75.00

Y-2 (2010) 30 % 3.50 105.00 Y-2 (2010) 20 % 3.50 70.00

Y-1 (2011) 30 % 4.50 135.00 Y-1 (2011) 15 % 4.50 67.50

Y (2012) 20 % 5.00 100.00 Y (2012) 40 % 5.00 200

Average price by TMC 4.00 400.00 Average price by TMC 4.13 413.00

By TMC

By type/Origin

By plant GSVC 80

Process Flow

Budget Budget Reporting &

Actuals posting

Assumptions Calculation Variance Analysis

Production

Volume / OVF

Budget BOM

Avg Blend Formula Currency

Blend Formula

\

Blend Assumption

Actual Yield (Usage)

Price

Yield

Specification

LPP Price

Leaf Budgeting

• SVC Rates • SVC Usage

Crop Mix

• SVC Deviations • SVC Deviations

Currency

Productivity PCUs

Initiatives

81

Leaf Production Variance:

Enhancing variance analysis of FG

Leaf Usage & Spec deviation in

DM CC

GSVC. Leaf

development

Sourcing maintenance

productivity

Freight Spec

rationalization *Maintain

Logistic

Duty variance analysis

initiatives

Processing at AS IS

Leaf Warehouse technologies granularity—per

blend, FA code, etc

Others (CPA, Leaf Admin)

Leaf initiatives

• By leaf type & origin 82

Leaf Production Variance Analysis

• Perform variance analysis in GSVC by gathering actuals data at the detailed level

from SAP (per process order, blend formula, TMC, lot, etc). These will be compared

with the budget assumptions already available in GSVC.

• GSV tool will enable a more flexible analysis with its drill down and slice and dice

functionalities. The standard deviation reports in SAP are static.

Spec Deviation Usage Deviation

SAP P1

GSVC

Blend Maintenance Secondary Yield

Target Weight

By blend code, process order, etc

83

Backup

84

- Cos MartUploaded bymasadhussain
- Practice Problem 1_ Partial Foods _ Week 5 Practice Problems _ CTLUploaded bySrinivasa Raghavan
- stocktaking proceduresUploaded byLissa Juan
- 5s Steps - Rockman 171[1]Uploaded bycoolmith
- Inventory Management V1.0Uploaded byDivyang Patel
- Accounting for Inventories FRS 102Uploaded byKam Yin
- IntroductionUploaded bychandu_1020
- Inventory ManagementUploaded bywintoday01
- Draft Resolution About RJ Reynolds Dis Solvable Tobacco ProductsUploaded byNick
- Supply Chain Projekat 2 McdonaldsUploaded byAlen Delić Deela
- Controller or Accounting Manager or Sr Financial AnalystUploaded byapi-77747008
- Suprabha Ind PptUploaded bySaquib Javed
- Oracle Inventory FundamentalsUploaded bypulluri1234
- Site ionUploaded byRamesh Choudhary
- Chapter 4Uploaded byAyoob Ansari
- UNIT IV DQ4-1, DQ4-2, P4-1Uploaded byEvita Fernando
- 20120912 module 1 practice questions uploadedUploaded byapi-183915506
- workscitedpageUploaded byapi-242339437
- IsoUploaded byraj
- Whats Your OTB Purchase Planning Made Easy.17143105Uploaded byramjee prasad jaiswal
- j fisher - resume 2015-updatedUploaded byapi-340122719
- Supervisory Administrative FunctionUploaded bynur hidayah
- 0012Uploaded byRahul Rahatal
- 72374609 Solutions Solution Manual09Uploaded byRia
- QuestinnaireUploaded byJamal Babi
- Assignment 2 or (1)Uploaded byShubakar Reddy
- RatiosUploaded byiceman2167
- Aggregate production planning for a continuous reconfigurable manufacturing process.pdfUploaded byDiego Cortez Granados
- 100.pdfUploaded byVandana Bhvya Arora
- Scm ProjectUploaded byashish

- Final Fund Accounting Study ManualUploaded byAnonymous pQsvSk
- Deloitte Workshop - MasterData OverviewUploaded byTùng Lâm
- Deloitte Workshop - Leaf ProcessUploaded byTùng Lâm
- Deloitte Workshop - Leaf ProcessUploaded byTùng Lâm
- 016 - LBPF - UC - General InputUploaded byTùng Lâm
- SVC Project OverviewUploaded byTùng Lâm
- Deloitte Workshop - LPEUploaded byTùng Lâm
- Deloitte Workshop - TPUploaded byTùng Lâm
- 137 - PMRU - SS - Unit Volume InputUploaded byTùng Lâm
- 000 - LBPF - Process MapUploaded byTùng Lâm
- 134 - PMRU - UC - Headcount Manager by PositionUploaded byTùng Lâm
- 066 - PMRU - UC - Salary and Wages Variance Analysis ReclassificationUploaded byTùng Lâm
- 090 - Lbpf - Uc - Mc ReportUploaded byTùng Lâm
- Economic Trade Sanctions and OFACUploaded byTùng Lâm
- Finance Standard a-137 Accounting for PPEUploaded byTùng Lâm
- Hop Dong Cctg PpfUploaded byTùng Lâm
- 006 - Lbpf - Uc - Svc RatesUploaded byTùng Lâm
- VF1 - 31.12.2014 - BudgetUploaded byTùng Lâm
- 7 - Actual Costing - Summary of as is vs to BE Solution for LA BS AffiliatesUploaded byTùng Lâm
- Income Tax Approach Memo FinalUploaded byTùng Lâm
- Income Tax Detailed StepsUploaded byTùng Lâm
- GMRB End User ManualUploaded byTùng Lâm
- Foreign Currency FinalUploaded byTùng Lâm
- lec10Uploaded bySumon Mon
- 3. FAQ AUDITsoftUploaded byTùng Lâm
- 1. 2015 - AUDITsoft - For New CommersUploaded byTùng Lâm
- Abbreviations Budget and ReportingUploaded byTùng Lâm
- Clove Account Part of DIM v.1Uploaded byTùng Lâm

- Fakture - Obracuni 2014Uploaded bysvetlana
- 8.pdfUploaded byKevin Che
- 1Uploaded byTrần Hoa
- 134a_04_06ABaldwinExampleUploaded byAnkit Lakhotia
- Seminar Soc Podjet Oecd ReportUploaded byChris Seven
- 01Verizon-2004Uploaded byHira Humayun
- 22 SBI Annual Report 2072Uploaded byNirmal Shrestha
- The Ontology of Money by Geoffrey Ingham - TWILL #14Uploaded byEdward Hill
- The monetary policy of the ECBUploaded bydodge666
- MasterCoin SpecificationUploaded byonbitcoin
- 123902069 Hedging Strategy for GM to Manage Competitive Currency ExposureUploaded byjigarsampat
- Results for the year ended December 31, 2016 [Company Update]Uploaded byShyam Sunder
- ThesisGOLD INVESTMENTS AND SHORT- AND LONG-RUN PRICE DETERMINANTS OF THE PRICE OF GOLDUploaded byAmanullah Khan
- ACCA F5 Revision NotesUploaded byclmc83
- UclUploaded bySriharsha Reddy
- gurciqUploaded byAnonymous 3tPcGunh
- The LongviewUploaded byRalph Buchholzer
- Is There Really a Renminbi Bloc in Asia?Uploaded byADBI Publications
- Nexus - 0804 - New Times MagazineUploaded bymufonnexus
- Chapter 9 Lecture SlidesUploaded byAnonymous aCotU1E
- 2011_BIS.pdfUploaded byMohamed Zayed
- Roses DigbyUploaded bySharul Islam
- Asset and Liability Management BS1Uploaded byAmit Naik
- Autocall Certificate With Memory Effect on DowUploaded byapi-25889552
- European Unity on the RocksUploaded byCharters and Caldecott
- airline.finance.pdfUploaded byMini Thomas
- merger.pdfUploaded byAnonymous Feglbx5
- Ed5 IM - Solutions ManualUploaded bySammy Ben Menahem
- Business Travel Expense Reimbursement WCS UKUploaded byJyotshna Dhand
- Chapter 1 SolutionUploaded byRicha Joshi

## Much more than documents.

Discover everything Scribd has to offer, including books and audiobooks from major publishers.

Cancel anytime.