Understanding Split Valuation in SAP

Split valuation in SAP is a crucial functionality for companies that need to differentiate between various types of stock within a single material. This feature is particularly beneficial for businesses dealing with materials that can have different valuations due to factors like origin, quality, and status. In this blog, we will explore the concept of split valuation, its importance, configuration steps, and practical examples to illustrate its application.
Table of Contents

• What is Split Valuation?
• Importance of Split Valuation
• Scenarios for Split Valuation
• Configuration Steps for Split Valuation in SAP
• Practical Examples
• Challenges and Best Practices
• Conclusion

1. What is Split Valuation?

Split valuation allows organizations to manage different valuations for a single material. This means a material can be assessed based on different criteria such as batch, production, procurement, or any other characteristic that impacts its value. For example, the same raw material might have different costs when purchased from different suppliers or produced in-house.

2. Importance of Split Valuation

The primary benefits of using split valuation include:

• Accurate Cost Management: It enables precise tracking of costs associated with different batches or procurement types.
• Inventory Control: Facilitates better inventory management by distinguishing materials based on their valuation.
• Regulatory Compliance: Helps in complying with legal requirements by maintaining accurate financial records.
• Cost Transparency: Provides clear visibility into cost variations, aiding in better decision-making.

3. Scenarios for Split Valuation

Split valuation is useful in various scenarios such as:

• Procurement from Multiple Sources: When a material is procured from different vendors, the purchase price may vary.
• In-House Production vs. External Procurement: Materials produced in-house might have different costs compared to those procured externally.
• Quality Differences: Materials of different quality levels can have different valuations.
• Geographical Differences: Materials sourced from different geographical locations may have varying costs due to transportation, duties, and other factors.

4. Configuration Steps for Split Valuation in SAP

Configuring split valuation in SAP involves several steps. Here’s a detailed guide:

Step 1: Activate Split Valuation

1. SPRO Transaction: Go to transaction code SPRO and navigate to SAP Reference IMG.
2. Path: Follow the path Materials Management -> Valuation and Account Assignment -> Split Valuation -> Activate Split Valuation.
3. Activate: Select ‘Active’ to enable split valuation for the company code.

Step 2: Define Global Types and Valuation Categories

1. Global Types: Define global valuation types which classify the valuation criteria.
2. Path: Materials Management -> Valuation and Account Assignment -> Split Valuation -> Configure Split Valuation.
3. Valuation Category: Define valuation categories which determine the criteria for splitting (e.g., B for batch, O for origin).
4. Assign Types: Assign valuation types to the valuation category.

Step 3: Assign Valuation Categories to Materials

1. Material Master: Extend the material master data to include split valuation.
2. MM01 Transaction: Use transaction code MM01 to create or extend the material.
3. Accounting View: In the accounting view, specify the valuation category defined in the previous step.

Step 4: Create and Manage Valuation Types

1. Valuation Types: Define the different valuation types in the system.
2. Transaction Code: Use transaction code OMW1 to configure valuation types.
3. Assign to Material: Assign these types to the material in the material master record.

Step 5: Post Goods Movements

1. Goods Receipt: Post goods receipts using transaction codes like MIGO and specify the valuation type.
2. Goods Issue: Similarly, for goods issues, specify the valuation type.

Step 6: Reporting and Analysis

1. Reports: Use SAP standard reports like MB51 (Material Document List) and MB52 (List of Warehouse Stocks on Hand) to analyze stocks and valuations.
2. Customization: Customize reports as needed to provide detailed insights into split valuation.

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5. Practical Examples

To illustrate split valuation, let’s consider a few practical examples:

Example 1: Procurement from Different Vendors

• Scenario: A company procures raw material X from two vendors, A and B. Vendor A offers a price of $10 per unit, while Vendor B offers $12 per unit.
• Configuration:
  • Define valuation category ‘O’ for origin.
  • Define valuation types ‘A’ for Vendor A and ‘B’ for Vendor B.
  • Assign the valuation category ‘O’ to material X.
• Process:
  • When posting a goods receipt for material X from Vendor A, specify valuation type ‘A’.
  • For Vendor B, specify valuation type ‘B’.
• Outcome: Material X will have separate stock accounts with different valuations.

Example 2: In-House Production vs. External Procurement

• Scenario: Material Y is both produced in-house and procured externally.
• Configuration:
  • Define valuation category ‘P’ for procurement type.
  • Define valuation types ‘In-House’ and ‘External’.
  • Assign the valuation category ‘P’ to material Y.
• Process:
  • For in-house production, specify valuation type ‘In-House’ during goods receipt.
  • For external procurement, specify valuation type ‘External’.
• Outcome: Material Y will be tracked separately based on its procurement type.

Example 3: Quality Differences

• Scenario: Material Z is categorized into ‘High Quality’ and ‘Low Quality’.
• Configuration:
  • Define valuation category ‘Q’ for quality.
  • Define valuation types ‘High’ and ‘Low’.
  • Assign the valuation category ‘Q’ to material Z.
• Process:
  • During goods receipt, specify whether the material is ‘High’ or ‘Low’ quality.
• Outcome: Stocks of material Z will be valued differently based on quality.

6. Challenges and Best Practices

While split valuation is highly beneficial, it comes with certain challenges:

• Complexity: The configuration can be complex and requires careful planning.
• Data Maintenance: Ensuring accurate data entry and maintenance is crucial.
• Training: Staff must be adequately trained to handle split valuation processes.

Best Practices:

• Thorough Planning: Plan the valuation criteria and categories meticulously.
• Testing: Perform extensive testing in a sandbox environment before going live.
• Regular Audits: Conduct regular audits to ensure data integrity.
• Training: Provide comprehensive training to all relevant personnel.

7. Conclusion

Split valuation in SAP is a powerful tool for companies looking to manage their inventory with greater accuracy and control. By allowing different valuations for a single material, businesses can achieve better cost transparency, improved inventory management, and enhanced regulatory compliance. Proper configuration and management of split valuation can lead to significant benefits, making it an essential feature for many organizations.

By following the configuration steps and best practices outlined in this blog, companies can effectively implement split valuation in SAP and leverage its full potential to optimize their inventory and financial management processes.