In the automotive industry, managing costs accurately is critical to maintaining profitability and competitiveness. Product costing—the process of determining the total cost involved in manufacturing a product—is a cornerstone for automotive companies to optimize pricing, control expenses, and streamline production. SAP provides robust tools to calculate product costs effectively, enabling automotive manufacturers to gain precise insights into the costs of components, assemblies, and finished vehicles.
Product costing in the automotive sector involves capturing all costs associated with producing a vehicle or its components. This includes direct costs such as raw materials and labor, as well as indirect costs like overhead, tooling, and logistics. Accurate costing helps automotive companies make informed decisions on product design, sourcing, and pricing strategies.
SAP’s product costing functionalities are integrated within the SAP ERP and SAP S/4HANA systems and specifically support complex automotive manufacturing processes including variant configuration, subcontracting, and repetitive manufacturing.
Cost elements categorize and track expenses in product costing. These typically include:
In automotive manufacturing, costs are assigned to various cost objects such as:
SAP uses BOMs and routing data to accumulate costs:
SAP allows the creation of a cost estimate for a product variant using historical prices, planned prices, or standard prices for materials and activities.
SAP performs a cost roll-up, aggregating all direct and indirect costs into a single product cost estimate.
Multiple costing versions can be maintained to simulate different scenarios (e.g., best case, worst case, planned vs. actual).
Automotive products often come in many variants and configurations (different engines, trims, options). SAP’s Variant Configuration integrates with product costing to calculate costs dynamically based on the selected features, ensuring precise cost visibility for every possible vehicle configuration.
Automotive manufacturing frequently involves subcontractors. SAP tracks subcontracting costs separately, integrating them into the overall product cost to provide a comprehensive cost picture.
For high-volume, repetitive production lines, SAP uses repetitive manufacturing costing methods, calculating costs per time period rather than per order, improving efficiency in cost tracking.
Product costing is vital for automotive companies to maintain competitiveness in a highly cost-sensitive market. SAP’s comprehensive costing tools empower manufacturers to calculate and analyze product costs with precision, supporting strategic decision-making and operational efficiency. By leveraging SAP for product costing, automotive businesses can better control expenses, optimize pricing, and enhance profitability in an increasingly complex industry landscape.