Overview of Oracle Discrete Costing For MFG v2

Overview of Discrete Costing for
Manufacturing
OAUG MFG Discrete SIG Meeting

November 10, 2010
Douglas Volz
Douglas Volz Consulting
doug@volzconsulting.com
Agenda
Inventory Structure
High Level Review of Oracle Cost System Capabilities

Costing Methods
Oracle Cost Management Structure
Discrete MFG and Costing
Setting Standard Costs
Setting Average, FIFO, LIFO Costs
Month-End Accounting Close
Slide 2
Helping people using Oracle
Applications since 1990
Agenda (Continued)
Release 12 Cost Improvements
Flexible Account Number Assignment
Little Known Cost Features
Slide 3
Inventory Structure
Global
Global Organization (Item Master) Organization
(Item Master)
Inventory Organization
Inventory HDQTRS
Organization Location
Subinventory
Locators
FG STORES MRB WIP
Subinventory Subinventory Subinventory Subinventory
Locators Locators
Helping people using Oracle Slide 4

Complex Financial Entities

Costing Concepts
Costing Methods
Average Costing
Standard Costing
Periodic Costing
FIFO Costing
LIFO Costing

Average Costing
Oracle supports a moving or weighted average cost
The unit cost changes with each receipt transaction
Unit costs reflect the average of the incoming receipts from

purchase order receipts,
purchase order returns
inter-organization receipts
and for manufacturing, for WIP assembly completions
miscellaneous issues may or may not affect the unit cost
All issues occur at the existing average costs
Assembly costs come from the cost of your assemblies built in WIP
You may have indirect costs (material overheads, etc.) as well

Standard Costing
The primary objective of standard costing is to provide a
performance measurement system
Unit costs are set up in advance as an expected cost
Component costs (material costs) are defined using the projected
average acquisition costs, plus any associated indirect costs
Assembly costs are rolled up using bills of material and routings
Standards are reset periodically, depending on how quickly your costs
change
All manufacturing and distribution activities are measured against

the expected costs
Typical variances include:
Purchase Price Variance,
Invoice Price Variance
Manufacturing Variances (material usage, resource efficiency, etc.)

Other Costing Methods
FIFO Costing
FIFO costing values inventory by assuming that the oldest inventory (first in) is
the first to be used or sold (first out), but there is no necessary relationship to
the physical movement of specific items
FIFO supports WIP costing
LIFO Costing
LIFO costing values inventory by assuming that the most recently received
item (last in) is the first to be used or sold (first out), but there is no necessary
relationship to the physical movement of specific items
LIFO supports WIP costing
Periodic Costing
Periodic has dual costing capabilities, using Periodic Costing at month-end and
using transaction-based real-time costing prior to month-end
Periodic supports WIP costing

Cost Structure
Global
Organization
(Item Master)
Inventory Cost
Organization
Outside
Matl Matl O/H Resource Overhead
Processing Cost
Cost Element Cost Element Cost Element Cost Element
Element
Sub-elements
Matl Matl Matl O/H Matl O/H Res Res O/H O/H OSP OSP
1 2 1 2 1 2 1 2 1 2

Organizational Costing
Costing is by Plant or Warehouse (called an inventory organization)
Each inventory organization has its own item material, labor, outside
processing, and overhead costs
Each inventory organization may have multiple cost versions, called Cost Types
You can have any number of cost types that are not active (unimplemented costs)
Each inventory organization can have its own costing method
There is only one Active cost type that is used to record your Subledger
Transactions
Standard costing uses the Frozen cost type, and average costing uses the Average
cost type
Within an inventory organization, all items have the same costing method,
Average, or Standard or FIFO or LIFO or Periodic

Cost Elements
You have five available cost elements for each cost type
Material (supplier purchase costs)
Material Overhead (freight in, material handling, etc.)
Resource (labor, machines, other factors of production)
Outside Processing (subcontracting or outsourcing)
Overhead (Resource and Outside Processing Overhead)
Only use the cost elements you need
But you can have an unlimited number of sub-elements

Material (metal, plastic, etc.)
Material overhead (inter-co profit, in-bound freight, etc.)
Resources (labor, machine groups, etc.)
Outside Processing (subcontract vendor service1, service2, etc.)
Production Overheads (Factory Burdens, etc.)

Oracle Cost Management Interaction

Inventory Costing
Costs Into Inventory/Stores
Purchase costs into Inventory: Material, Material Overhead, etc. costs
For Standard Costing: Purchase Price Variances
More Costing for Inventory Movement

Misc. Account Receipt / Issue
Physical Inventory, Cycle Counts
Consignment (WIP/OSP, purchase consignment)
Subinventory and location transfers
Customer shipments
Internal orders
Project shipments and transfers (PJM)
Logical Transactions (extended supply chain network)
Supports many intercompany scenarios

Internal orders
Internal shipping and billing
Discrete MFG and Costing
All of the Costing Methods support WIP Costing
Timing varies by how your charge to WIP
Backflush, Assembly Pull, etc.
Push
Costs into WIP:

Material Issues
Material Overhead
Earning Resources, Outside Processing and Overheads
Costs out of WIP

Scrap
Assembly Completion
Job Close Variances

Only for Standard Costing

Manufacturing Variance Summary
Costs-Incurred Costs-Relieved Variances
Previous-level costs Previous-level costs

@ actual usage - @ standard = Material usage variance
Resource - Resource = Resource efficiency
Outside processing
Outside processing - Outside processing = efficiency
Overhead - Overhead = Overhead efficiency
Sources of:
Components issued WIP completions
Resources earned @ standard rolled
OSP earned up costs
Overheads earned
Cost Reports and Inquiries
Material Distribution Detail/Summary Reports
WIP Account Detail/Summary Reports
Discrete Job Value
Expense Job Value Report
WIP Value Report
WIP Value Inquiries

Setting Standard Costs
Cost Mass Edits
Item Cost Copies
Cost Rollups (also across the Supply Chain)
Standard Cost Updates
Bills of Material Cost Inquiries and Reports
Pending and Standard Cost Adjustment Reports

Setting Average, FIFO, LIFO Costs
Simulation Costing with Cost Rollups and Mass Edits
Transaction-based updates of Average, FIFO, LIFO costs
Manual cost updates
PO retroactive price adjustments
And if you are clever, using open interfaces for custom

updates

Month-End Accounting Close
Close by Inventory Organization
Month-End Inventory, Receiving, WIP Value Reports
Release 12, close in Inventory

Transfer to G/L using Subledger Accounting (Create Accounting)
Closing Inventory closes Receiving and WIP
Purchasing has its own close (and also closes off Receiving)

Month-End Inventory Value Reports
Inventory Value Report
Intransit Value Report
Subinventory Account Value Report
(disabled in Release 12)
All Inventories Value Report

Receiving Value Report
Receiving Value by Destination Report
(disabled in Release 12)
WIP Value Report

Period Close Value Summary Report
Period Close Reconciliation Report (11.5.10 and 12)
R12 Improvements Period Close Diagnostics
Forms Drilldown
Using the same Inventory Accounting Periods form you can drilldown
to associated forms to view the problem transactions
New workflow to notify of failing transactions
Period Close Pending Transactions Report

Report for transactions holding up the inventory accounting period

Reconciliation Improvements in R12
Inventory Value Reports have an as of date
Inventory Value Report

Receiving Value Report
Intransit Value Report
All Inventories Value Report

Flexible Account Number Assignment
Release 12 Subledger Accounts allows you to extend the standard

oracle setups (all costing methods except periodic)
Subledger Accounting rules govern how the final accounting

entries are created and sent to the G/L
Subledger Accounting Offers Major Improvements
Subledger Accounting Comes with Default Rules

SLA for Product Line Accounting, Variance Recognition
Accounting
Configurations
Subledger
Transactions Journal Entries
GL
Accounting Journal Entries
Program and Balances
Accounting Events Subledger

Balances
Journal Entry Setup
Cost Management SLA

Basic Table Structure for SLA
Module
Enter Transaction(s) Specific One Common
Transaction Accounting
Accounting Subledger Table
Tables
Accounting
Processor
SLA Accounting Tables G/L Tables

Transaction
Accounting Tables
GL_LEDGERS
XLA_EVENTS
Receiving GL_JE_BATCHES
Create XLA_AE_HEADERS GL_
Material Accounting INTERFACE
WIP
GL_JE_HEADERS
XLA_AE_LINES
XLA_DISTRIBUTION GL_JE_LINES
_LINKS

More Release 12: COGS Recognition
In R12 the customer shipment entries go to deferred COGS
Automates the matching of Cost of Goods Sold (COGS) for a sales order
line to the revenue that is billed for that sales order line.
Deferred True
Inventory COGS COGS
1. Customer Shipment 10 10
2. COGS Recognition 10 10

Related R12 BOM Features
Fixed Component Usage Support:
Support for lot-based materials that have a fixed usage regardless of the job
size for discrete WIP jobs, OSFM lot-based jobs and Flow Manufacturing
Component Yield Support:

Flexibility to control the value of component yield factors at WIP job
level. The transaction logic now considers pre-yield BOM quantity per
assembly rather than the quantity inflated by shrinkage.

Standard Features You May Not Be Using
Currency setup
Period open and close by organization hierarchy
Material overhead absorption rules
Transaction Value Historical Summary Report
Period close snapshots
Slide 29
Standard Features: Currency Setup
You can change your item cost decimal precision at any time
Slide 30
Standard Features:
Period Open/Close by Org Hierarchy
You can open and close multiple inventory periods by organization
hierarchy
Define your organization hierarchy using an Human Resources,
Purchasing or Inventory responsibility
Using the Inventory Organization Parameters, Costing tab, make
sure your Transfer to GL settings are all the same for all orgs in
the same organization hierarchy
Slide 31
Standard Features:
Open Period Control request
Slide 32
Standard Features:
Close Period Control request
Slide 33
Standard Features:
Matl Overhead Absorption Rules
Explicitly say which ones do and do not earn material overhead
Slide 34
Standard Features:
Transaction Value Historical Summary Report
Rollback inventory value to any date you choose
Choose which columns of information to view

You have four columns to select
The fifth column on the report is everything else
Useful as a roll-forward audit report
Useful to verify month-end inventory value report balances
Two reports:
Transaction Value Historical Summary (for Standard Costing)
Transaction Value Historical Summary Average Costing
Slide 35
Standard Features:
Transaction Value Historical Summary
Slide 36
Standard Features: Period Close Snapshot
Period close snapshots (Release 11.5.10 onward)
Prior to Release 11.5.10, the inventory period close only stored

summary values by inventory organization and subinventory
(blank subinventories are for intransit)
When you close inventory you automatically store period-end

inventory values and costs by organization, subinventory and
item
Slide 37
Desired Enhancements
Multi-Org Reporting
Multi-Org Material Account Summary Report
Multi-Org Receiving Account Summary Report
Multi-Org WIP Account Summary Report
Multi-Org All Inventories Value Report (with account numbers)
Multi-Org Inventory Value Report (with account numbers)
Multi-Org Receiving Value Report (with account numbers)
Multi-Org Expense Value Report (with account numbers)
Multi-Org WIP Value Report (R12 still has account numbers!)
Slide 38
Summary
Oracle Discrete Costing offers robust, flexible costing
Multiple costing methods are supported
Powerful mass edits, item cost copies and cost update

capabilities
Account classification is much better with Subledger Accounting
As you transact your cost accounting happens automatically
Multi-org reporting is a continuing area of concern

Acknowledgements
Oracle Cost Development
Partners in crime at our clients

Thank You for Your Attendance and
Participation
Douglas A. Volz
Slide 41
Douglas Volz (doug@volzconsulting.com)
Professional Background
Doug Volz is a Senior Architect and Advisor for Oracle Application projects, with a particular interest in
Cost and Project Management. He has 30 years accumulated experience, including 5 years in Oracle
Development (co-designing Oracle Cost Management) and 12 years in industry in Cost and Accounting
Management positions. His Manufacturing and Cost systems experience covers project management,
software design/development, delivery and consulting services, for both Oracle Corporation, and
multiple international consulting firms. Prior to his systems career, Mr. Volz also held numerous
management accounting positions for telecommunications, defense, and electronics companies.
In his consulting roles, Doug has served over 100 clients. Many of these were multi-org, multi-currency
with global footprints. Countries include US, Mexico, UK, Netherlands, Belgium, Taiwan, P.R.O.C.,
Norway, Japan, Italy and Germany.
Doug leads the OAUG Cost Special Interest Group. He also advises and participates on the Oracle
Customer Advisory Board for Fusion Costing.
Core Expertise Experience

Multi-organization, Multi-currency ERP Sample of clients served:
Implementations Beckman Coulter (US)
Project Management and Senior Project Advisor Matsushita (UK, Mexico)
Core manufacturing processes NTL (now Virgin Media)
Cost Management Logitech (US, Taiwan, P.R.C.)
Inventory
Bills of Material Celgene Corporation (US)
WIP NTL (UK, now Virgin Media)
Systems Integration and Data Conversions TCI International (US)
Onninen AS (Norway)

End of Presentation


Overview of Oracle Discrete Costing For MFG v2

Cargado por

Información del documento

Título original

Derechos de autor

Formatos disponibles

Compartir este documento

Compartir o incrustar documentos

Opciones para compartir

¿Le pareció útil este documento?

¿Este contenido es inapropiado?

Copyright:

Formatos disponibles

Overview of Oracle Discrete Costing For MFG v2

Cargado por

Copyright:

Formatos disponibles

Overview of Discrete Costing for

OAUG MFG Discrete SIG Meeting

High Level Review of Oracle Cost System Capabilities

Discrete MFG and Costing

Setting Standard Costs

Setting Average, FIFO, LIFO Costs

Month-End Accounting Close

Flexible Account Number Assignment

Little Known Cost Features

Helping people using Oracle Slide 4

Helping people using Oracle Slide 5

Helping people using Oracle Slide 6

Unit costs reflect the average of the incoming receipts from

All issues occur at the existing average costs

You may have indirect costs (material overheads, etc.) as well

Helping people using Oracle Slide 7

All manufacturing and distribution activities are measured against

Helping people using Oracle Slide 8

Helping people using Oracle Slide 9

Helping people using Oracle Slide 10

Each inventory organization can have its own costing method

Helping people using Oracle Slide 11

Only use the cost elements you need

But you can have an unlimited number of sub-elements

Helping people using Oracle Slide 12

Helping people using Oracle Slide 13

More Costing for Inventory Movement

Supports many intercompany scenarios

Costs into WIP:

Costs out of WIP

Job Close Variances

Helping people using Oracle Slide 15

Previous-level costs Previous-level costs

Resource - Resource = Resource efficiency

Overhead - Overhead = Overhead efficiency

Material Distribution Detail/Summary Reports

WIP Account Detail/Summary Reports

Discrete Job Value

Expense Job Value Report

WIP Value Report

WIP Value Inquiries

Helping people using Oracle Slide 17

Cost Mass Edits

Item Cost Copies

Cost Rollups (also across the Supply Chain)

Standard Cost Updates

Bills of Material Cost Inquiries and Reports

Pending and Standard Cost Adjustment Reports

Helping people using Oracle Slide 18

Simulation Costing with Cost Rollups and Mass Edits

Transaction-based updates of Average, FIFO, LIFO costs

Manual cost updates

PO retroactive price adjustments

And if you are clever, using open interfaces for custom

Helping people using Oracle Slide 19

Month-End Inventory, Receiving, WIP Value Reports

Release 12, close in Inventory

Closing Inventory closes Receiving and WIP

Helping people using Oracle Slide 20

All Inventories Value Report

WIP Value Report

New workflow to notify of failing transactions

Period Close Pending Transactions Report