In SAP manufacturing, the “work center” (called a resource in process manufacturing) is the logical place where work happens—on a machine, a group of machines, or by people. Beyond scheduling and capacity, work centers are the unsung heroes of product costing because they hold the formulas that calculate activity quantities (not costs). Those quantities, multiplied by activity prices from controlling, are what flow into your cost estimates and production orders.
This blog is based on a presentation by Tom King at the annual SAP Controlling Financials conference.
Work centers, routings, and the “rule of six”
Work centers live inside task lists, or routings, in discrete industries and recipes in process industries—and drive scheduling, capacity checks, and costing. Each work center can contain up to six standard values and up to six activity formulas (“rule of six”). Standard values are things like Setup, Machine, or Labor, and the standard value key defines which ones are available and in what units. While many teams default to “six values = six formulas,” SAP doesn’t require a 1:1 pairing; a formula can reference any standard value—or none.
Because work centers are time-sliced by validity dates, you can move a work center to a different cost center as of a future date without rewriting history. Remember: when you change a work center’s costing setup, you’ll need to “touch” the routing operation so it picks up the new master data.
Formulas that calculate quantities (not dollars)
A common pitfall is treating formulas as mini price engines (“set activity price to $1 and post dollars directly”). Don’t. Work center formulas produce quantities—hours, minutes, occurrences—using simple operators (add, subtract, multiply, divide) with parentheses. No IF/THEN exists, so design to avoid divide-by-zero and keep units of measure consistent end-to-end (time ÷ time = dimensionless; multiply by a time “constant” if you need the result to be time).
Where do formula inputs come from? From formula parameters you define:
- Routing fields (e.g., base quantity),
- Standard values (the six on the operation),
- Work center constants (e.g., fixed crew size),
- User-defined operation fields (two quantity fields are available),
- Constants (to normalize units).
Tip: avoid using splits in costing formulas. Splits exist to support parallel processing in Production Planning and will unintentionally dilute activity quantities (and therefore cost) for costing purposes.
Model real life—let SAP do the math
You don’t need an offline spreadsheet to figure out machine hours. Capture machine speed, efficiency, setup time, and manning as parameters, then let the formula compute runtime and total labor. Use fixed times for true fixed work (e.g., setup); make variable components lot-size dependent by referencing lot size and base quantity. The advantage is transparency and repeatability in both standard cost estimates and order confirmations.
Activity prices and cost flow
Costs come from activity prices planned on the cost center tied to the work center. During costing, SAP multiplies the activity quantity by the activity price and posts it to the material cost estimate (and later, to orders). You’ll see these as activity items with their cost center and activity type in reports.
Analyze costs by work center in S/4HANA
In S/4HANA, the Analyze Cost by Work Center and Operation app lets you slice plan/actual/variance by work center, operation, activity type, and even drill to orders. Save filters as tiles so supervisors can monitor their area daily. This closes a long-standing gap from ECC by making manufacturing activity variances visible independently from material consumption.
Takeaways
- Work centers (resources) are identical in purpose: they drive scheduling, capacity, and costing.
- Formulas calculate quantities, not costs—keep units consistent and avoid splits.
- Design with the rule of six in mind; use work center constants and user fields to capture real drivers.
- Let SAP compute from speeds, efficiencies, and manning—ditch the offline math.
- In S/4HANA, use the work center analysis app to manage performance where value is created: on the shop floor.
This blog is based on the presentation by TOM KING: " How Work Centers Impact Product Costing" at the SAP Controlling Conference. To access the complete session and more in-depth SAP Controlling content, become an SAP Controlling member. START YOUR TRIAL HERE!
