Split Valuation in SAP MM

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Introduction

Split valuation in SAP MM is one of the most asked question in SAP MM interviews. It is important for every organization because accounting department always wants to valuate the material as per different criteria. In interviews many time interviewer asks question indirectly and twist the wordings of questions. This article will help you to understand:

  • knowledge in split valuation in SAP MM
  • business examples
  • master data required
  • configuration settings
  • important Fiori apps and
  • the business benefits of this process

Definition

Split Valuation in SAP MM provides a flexibility for business to valuate their stock in different ways in a valuation area (generally valuation area is Plant). It means that a material (or product) can have different values in the same valuation area (or plant).

There can be various reasons of different valuations:

  1. Same material but different status (or condition)
  2. Same material but different origin
  3. Same material but different grades
  4. Same material but produced in-house and external procured

If a material is subject to split valuation, the material is managed as several partial stocks, each partial stock is valuated separately.

Split Valuation – Business examples

Here are few busines examples to build proper understanding of split valuation in SAP MM module. You can get detailed business knowledge on split valuation here in below points:

  • Different status of material
  • Different origin of material
  • Different grades of material
  • In-house produced or externally procured

Different status (or Condition) of material

  • Different status (or Condition) of material: In maintenance department there are lot of spare parts or machines with cobdition good, damage or refurbished. Material is same but condition is different. So the value (or Price) of the spare part or machine with good condition will be different from damaged and refurbished material.
  • For example: An Electric Motor’s material code is M100342. The value (or Price) of M100342 for valuation area (or Plant) 1000 can be 2000 USD for Good condition. 500 USD for a Refurbished condition and 2 USD for a Damaged condition.
  • We can define three valuation types :
    • New,
    • Refurbish,
    • Damage

Different orgin of material

  • Different orgin of material: In the production department there are different types of raw materials which play a pivotal role in product building. These raw material can have origin from overseas or domestic. As per the origin valuation of the raw material can vary.
  • For example: A raw material such as Bituminus coal with material code B178002 is purchased from a domestic supplier at a price of 100 USD per unit and from an overseas supplier at a price of 90 USD per unit. Due to some country specific regulations and rules we cannot buy Bituminus coal from the overseas supplier beyond certain limit. So we have same material but with different values and this difference is due to the origin of the material.
  • Bituminous coal is a middle rank coal between subbituminous and anthracite. Bituminous coal usually has a high heating (Btu) value and is used in electricity generation and steel making in the United States.
  • We can use split valuation by defining two valuations types-
    • Domestic and
    • Overseas

Different grades of material

  • Different grades of material: Material with different grades also results into split valuation. Many plants use the raw material or semi finished goods with different grades. Material can be a coal, steel, concrete or cement.
  • For example: There are three different grades of Ordinary Portland cement available in the market, which are grade 33 (IS:269), grade 43 (IS:8112), and grade 53 (IS:12269). Each grade has its own application in construction industry. As per the grade the price also varies but material is same. So we can capture different prices of this cement for each grade 33, 43 and 53 in form of split valuation. The price of Grade 33 material price is 100 INR per kg. 80 INR and 50 INR per kg for Grade 43 and 53 respectively. So the split valuation allow user to maintain these three price values for same material.
  • We can use split valuation by defining three valuation types-
    • Grade 33
    • Grade 43
    • Grade 53

In-house produced or externally procured

  • In-house produced or Externally procured: Sometimes manufacturer produces semi finshed materials in its own facility and sometime purchased it from a supplier. Material is same but the cost of in house production will be different from externally procured material. So split valuation comes into picture.
  • For example: There is an electrical industrial products manufacturing company. It is producing a industrical switchboard. The switchboard needs many parts such as frame, bus, overcurrent protective devices, sensors, LEDs, instrumentation, enclosures and exterior covers. Sensors can be produced in-house as well as procured externally. In-house produced sensors can be produced at a cost of 10 USD and externally procured sensors may cost 12 USD. As per the demand and supply business will take decision on production and procurement. So the split valuation allow user to maintain these two price values for same material.
  • We can use split valuation by defining two valuation types-
    • In-house
    • External
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