Value Chain Transparency in SAP Finance Shows Where Money Is Actually Made

A session at the recent SAPinsider Las Vegas 2026 highlighted limitations in how SAP systems present intercompany financial data across multinational operations.

The session, Demystifying the Intercompany Value Chain: Achieving True End-to-End Transparency, examined how finance teams can reconstruct value chains to gain visibility into cost and margin at product level. It was led by Tobias Fausch, CIO and VP Solution Advisory, EXA AG, and Vanda Reis, Associate Partner at IBM.

The session focused on the gap between SAP’s role as a system of record and the end-to-end, product-level view of intercompany value creation that organizations need to more accurately assess profitability, transfer pricing, and compliance.

Why a Legal Entity Focus Misses Where Money Is Made

SAP organizes financial data around legal entities. But value creation, as it relates to margin, transfer pricing, and compliance, does not always follow those boundaries.

“The legal entity view is not comprehensive enough,” Fausch said, arguing that it can show stable performance at the entity level while obscuring cost and margin across the full chain. He added, “If you look at legal entities, the world is OK, but you are missing the full picture,” particularly when trying to understand where profit is created or eroded.

A more complete view captures how products move through intercompany supply chains in practice. Products move through multiple production stages across countries, with inputs sourced from different suppliers and priced under varying conditions.

Intercompany scenarios such as tolling, drop shipment, and buyback introduce additional layers, while costs accumulate across materials, manufacturing, logistics, FX, and customs. Data inconsistencies, including material number breaks and unit-of-measure differences, further complicate how those relationships are tracked.

The result is a reporting structure that captures transactions but not their connections.

Finance teams can see entity-level results, but they cannot easily trace how those results relate to product-level profitability across the chain. As Fausch framed it in the session, the issue is not only where results are reported, but “where do you make money and why.”

How Value Chain Reconstruction Connects Cost and Profit

The approach can be implemented through EXA AG’s Global Value Chain (GVC) solution, which reconstructs value chains from transactional data. It starts by extracting postings from SAP systems, then harmonizing data across entities and matching intercompany relationships to build a product-level view.

Fausch described this as tracing activity “up and down the entire value chain, from the factory to affiliates, sales, and headquarters,” rather than relying on entity-level reporting.

At the core is a global bill of materials derived from transactions, which connects production, intercompany transfers, and external sales into one view and allows costs to be calculated at each step. Costs are typically rolled up using a weighted average method, which smooths cost fluctuations while propagating changes along the value chain.

In some cases, such as FIFO-based inventory environments, alternative approaches may be applied, where inventory layers are evaluated sequentially but aggregated when passed forward to avoid cost volatility across entities.

Intercompany profit remains embedded in inventory and carries forward until the product is sold externally, shaping how consolidated margin is calculated.

The model can also support scenario analysis by adjusting variables such as price or currency to assess how changes affect cost and profitability across the chain. This allows finance teams to test how external conditions, including supplier changes or tariff impacts.

The system is built to work within SAP environments, with reporting exposed through SAP GUI and SAP Fiori interfaces, and can incorporate non-SAP data through interface layers.

As Fausch noted, the approach can “work with ugly systems,” but still depends on extracting and harmonizing data before a usable value chain can be constructed.

What This Means for SAPinsiders

• Margin is misread and delayed across the value chain. Entity-level reporting can show stable performance while margin shifts across intercompany steps and remains embedded in inventory. This delays recognition and obscures where profit is actually created, requiring cost and profit to be traced across the chain.
• Finance workflows are constrained by data relationships. Transaction data exists, but relationships between transactions are not explicitly defined in standard SAP structures. Reconstructing those links changes how finance teams analyze cost, shifting effort from reconciliation toward understanding value creation.
• Scenario analysis becomes critical in volatile environments. Accurate scenario modeling depends on understanding how cost moves through the value chain. As regulatory demands expand and global trade conditions shift, finance teams need to assess how pricing, FX, and sourcing changes affect margin across jurisdictions.