The document provides an overview and agenda for a presentation on discrete costing for manufacturing in Oracle Applications. It discusses inventory and cost structures, costing methods like standard and average costing, setting costs, month-end processes, and improvements in Oracle Release 12. The presentation aims to help attendees understand Oracle's cost management capabilities and how to implement discrete manufacturing costing.
Advance Supply Chain Management : Holistic Overview with respect to an ERP an...Rahul Guhathakurta
Advance Supply Chain Management : Holistic Overview with respect to an ERP and Inventory Control Systems
Inventory System Design
Inventory Costs
Independent vs. Dependent Demand
Basic Fixed-Order Quantity Models
Basic Fixed-Time Period Model- we will omit.
Economic Production Quantity Model- we will omit.
Single Time Period Model- we will omit.
Quantity Discounts-also known as price break models.
Advance Supply Chain Management : Holistic Overview with respect to an ERP an...Rahul Guhathakurta
Advance Supply Chain Management : Holistic Overview with respect to an ERP and Inventory Control Systems
Inventory System Design
Inventory Costs
Independent vs. Dependent Demand
Basic Fixed-Order Quantity Models
Basic Fixed-Time Period Model- we will omit.
Economic Production Quantity Model- we will omit.
Single Time Period Model- we will omit.
Quantity Discounts-also known as price break models.
DSCI-303
Operations Management
1
Sessions 15 & 16
1
What and why of inventory..
Input process
Inventory
Output process
Rate of supply from input process
Rate of demand from output process
Inventory
2
2
Inventory helps..
Maintain independence of operations
Meet variation in product demand
Allow flexibility in production scheduling
Provide a safeguard for variation in raw material delivery time
Take advantage of economic purchase-order size
3
4
Inventory considerations..
Inventory = stacks of money sitting on forklifts, on shelves, and in trucks and planes while in transit
For many businesses, inventory is the largest asset on the balance sheet at any given time
Inventory is often not very liquid
It may be a good idea to try to get the inventory down as far as possible
4
Inventory affects ROA (Return on Assets)
5
Return on Assets
Profit
Total assets
Revenues Costs
Working capital + Fixed assets
=
=
Ability to supply from stock
Obsolescence, damage, loss
Cost of funding inventory
Storage costs
Ordering costs
Amount you owe suppliers
Amount customers owe you
e.g. Automotive parts distributor
e.g. Local retail store
Single-stage inventory system
Suppliers
Suppliers
Stock
Sales operation
Central depot
Distribution
Local distribution point
Sales operation
Two-stage inventory system
Single-stage, two-stage, multi-stage inventory systems
6
e.g. Television manufacturer
Suppliers
Input stock
Stage 1
WIP
Stage 2
WIP
Stage 3
Finished goods stock
Multi-stage inventory system
6
A multi-echelon inventory system
Yarn producers
Cloth manufacturers
Garment manufacturers
Regional warehouses
Retail stores
7
7
Inventory Models
The single-period model
Used when we are making a one-time purchase of an item
Multi-period models
Fixed-order quantity model
Used when we want to maintain an item “in-stock,” and when we restock, a certain number of units must be ordered
Fixed–time period model
The item is ordered at certain intervals of time
8
The Single-Period Inventory Model
Consider the problem of deciding how many newspapers to order for a news stand
Too few papers: run out of stock, lose associated profit
Too many papers: have left over inventory, lose the amount paid on the left over papers
Probability of over/under-stock is different for each order quantity
Numbers involved drive the final order quantity..
9
The Multi-Period Models
Fixed–order quantity model
Also called the Economic Order Quantity model / Q-model
Event triggered (stock falling below certain level)
Fixed–time period model
Also called the periodic system / periodic review system / fixed-order interval system / P-model
Time triggered
10
The Multi-Period Models - comparison
11
EOQ model: Inventory over time
Time
Instantaneous deliveries of Q per period
Q
D
Inven ...
Ops 571 final exam guide (new, 2018) you have been called in as a consultant ...never1239
For more course tutorials visit
www.tutorialrank.com
1.
Which of the following is a measure of operations and supply management efficiency used by Wall Street?
Dividend payout ratio
Receivable turnover
Current ratio
Financial leverage
Earnings per share growth
MSBI online training offered by Quontra Solutions with special features having Extensive Training will be in both MSBI Online Training and Placement. We help you in resume preparation and conducting Mock Interviews.
Emphasis is given on important topics that were required and mostly used in real time projects. Quontra Solutions is an Online Training Leader when it comes to high-end effective and efficient IT Training. We have always been and still are focusing on the key aspect which is providing utmost effective and competent training to both students and professionals who are eager to enrich their technical skills.
Ops 571 final exam guide (new, 2018) you have been called in as a consultant ...ramuaa124
For more classes visit
www.snaptutorial.com
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Which of the following is a measure of operations and supply management efficiency used by Wall Street?
Dividend payout ratio
Receivable turnover
Current ratio
Financial leverage
Earnings per share growth
You have been called in as a consultant to set up a kanban control systemramuaa130
For more course tutorials visit
Uophelp is now newtonhelp.com
www.newtonhelp.com
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Which of the following is a measure of operations and supply management efficiency used by Wall Street?
Dividend payout ratio
Receivable turnover
Current ratio
Financial leverage
Earnings per share growth
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DSCI-303
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Sessions 15 & 16
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What and why of inventory..
Input process
Inventory
Output process
Rate of supply from input process
Rate of demand from output process
Inventory
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Meet variation in product demand
Allow flexibility in production scheduling
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1. Overview of Discrete Costing for
Manufacturing
OAUG MFG Discrete SIG Meeting
November 10, 2010
Douglas Volz
Douglas Volz Consulting
doug@volzconsulting.com
2. Helping people using Oracle Applications since 1990
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
3. Helping people using Oracle Applications since 1990
Agenda (Continued)
Release 12 Cost Improvements
Flexible Account Number Assignment
Little Known Cost Features
Slide 3
4. Helping people using Oracle Applications since 1990 Slide 4
Inventory Structure
Global Organization (Item Master)
Inventory Organization
Subinventory
Locators
FG
Subinventory
STORES
Subinventory
MRB
Subinventory
WIP
Subinventory
Locators Locators
Global
Organization
(Item Master)
Inventory
Organization
HDQTRS
Location
5. Helping people using Oracle Applications since 1990 Slide 5
Complex Financial Entities
Corporate
Consolidated
Ledger
Secondary
Ledger
Primary
Ledger
Legal Entity
Operating
Unit
Inventory
Orgs
Corporate Consolidated Ledger
(USD)
USA PL
(USD)
Other
LEs
US OU
CORP
LE
Item
Master
(ZZZ)
Switzerland
Org
Korea OU
Switzerland
(CHE) LSP’s
LSP’s
European
SLs
ORG
Korea
Switzerland
OU
US Dist.
Centers
US LSP
Orgs
Swiss Dist.
Center
Asia-Pac
OUs
Asia-Pac
Dist. Centers
Europe Dist.
Centers
Europe
LSP Orgs
Other
European
OUs
Korea LE Asia-Pac
LEs
Swiss LE
Other
European
LEs
Korea
(KRW)
Asia-Pac
LEs
Swiss PL
(USD)
European PL
(USD)
6. Helping people using Oracle Applications since 1990 Slide 6
Costing Concepts
Costing Methods
Average Costing
Standard Costing
Periodic Costing
FIFO Costing
LIFO Costing
7. Helping people using Oracle Applications since 1990 Slide 7
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
8. Helping people using Oracle Applications since 1990 Slide 8
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.)
9. Helping people using Oracle Applications since 1990 Slide 9
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
10. Helping people using Oracle Applications since 1990 Slide 10
Cost Structure
Inventory Cost
Organization
Global
Organization
(Item Master)
Matl
Cost Element
Matl O/H
Cost Element
Resource
Cost Element
Overhead
Cost Element
Outside
Processing Cost
Element
Matl
1
Matl
2
Matl O/H
1
Matl O/H
2
Res
1
Res
2
O/H
1
O/H
2
OSP
1
OSP
2
Sub-elements
11. Helping people using Oracle Applications since 1990 Slide 11
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
12. Helping people using Oracle Applications since 1990 Slide 12
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.)
13. Helping people using Oracle Applications since 1990 Slide 13
Oracle Cost Management Interaction
GENERAL
LEDGER
ACCOUNTS
PAYABLE
PURCHASING
FIXED
ASSETS
ACCOUNTS
RECEIVABLE
INVENTORY
ORDER
ENTRY
WORK IN
PROCESS
Shipment
Transactions
Invoice
Info
BILL OF
MATERIAL
MRP
SERVICE
Repair
RMA's
S/O Requirements
WIP Supply
to MRP
MRP Release
to WIP
ENGINEERING
COST
MANAGEMENT
BOM's/Routings for Roll Up
Costs
Values
Trans
ENG Items
planned in
MRP
WIP Consumption &
WIP Completions
Asset
Additions
Invoices/
Payments
Asset Cost
Accum Depr
Depr Exp
PUR provides PO's
and Receipts
Delivery
Trans
Invoices/
Cash Receipt
Trans
INV Receipt
Trans &
Exp Accr
Items
BOM's
Items from BOM's
Matl Requirements
Inventory/
WIP Trans
Values Trans
Values INV
Stds Adj
Misc Trans
for Warranty
Repair Parts
CASH
MANAGEMENT
(Bank Recon)
14. Helping people using Oracle Applications since 1990 Slide 14
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
15. Helping people using Oracle Applications since 1990 Slide 15
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
16. Helping people using Oracle Applications since 1990 Slide 16
Manufacturing Variance Summary
Costs-Incurred Costs-Relieved Variances
Previous-level costs
@ actual usage
Previous-level costs
@ standard
Material usage variance
Resource efficiency
Resource Resource
Overhead efficiency
Outside processing Outside processing
Outside processing
efficiency
Overhead Overhead
Sources of:
• Components issued
• Resources earned
• OSP earned
• Overheads earned
• WIP completions
@ standard rolled
up costs
=
-
=
=
=
-
-
-
17. Helping people using Oracle Applications since 1990 Slide 17
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
18. Helping people using Oracle Applications since 1990 Slide 18
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
19. Helping people using Oracle Applications since 1990 Slide 19
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
20. Helping people using Oracle Applications since 1990 Slide 20
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)
21. Helping people using Oracle Applications since 1990 Slide 21
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)
22. Helping people using Oracle Applications since 1990 Slide 22
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
23. Helping people using Oracle Applications since 1990 Slide 23
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
24. Helping people using Oracle Applications since 1990 Slide 24
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
25. Helping people using Oracle Applications since 1990 Slide 25
SLA for Product Line Accounting, Variance Recognition
Transactions
Accounting Events
Cost Management SLA
Accounting
Configurations
Subledger
Balances
Subledger
Journal Entries
Accounting
Program
Journal Entry Setup
GL
Journal Entries
and Balances
26. Helping people using Oracle Applications since 1990 Slide 26
SLA Accounting Tables
Enter Transaction(s)
Transaction
Accounting Tables
Accounting
Processor
XLA_AE_HEADERS
XLA_AE_LINES
XLA_DISTRIBUTION
_LINKS
XLA_EVENTS
Module
Specific
Transaction
Accounting
Tables
Create
Accounting
G/L Tables
GL_LEDGERS
GL_JE_HEADERS
GL_JE_LINES
GL_JE_BATCHES
One Common
Accounting
Subledger
Table
GL_
INTERFACE
Receiving
Material
WIP
Basic Table Structure for SLA
27. Helping people using Oracle Applications since 1990 Slide 27
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.
“True”
COGS
1. Customer Shipment 10
10
2. COGS Recognition
Deferred
COGS
Inventory
10
10
28. Helping people using Oracle Applications since 1990 Slide 28
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.
29. Helping people using Oracle Applications since 1990
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
30. Helping people using Oracle Applications since 1990
Standard Features: Currency Setup
You can change your item cost decimal precision at any time
Slide 30
31. Helping people using Oracle Applications since 1990
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
32. Helping people using Oracle Applications since 1990
Standard Features:
Period Open/Close by Org Hierarchy
Open Period Control request
Slide 32
33. Helping people using Oracle Applications since 1990
Standard Features:
Period Open/Close by Org Hierarchy
Close Period Control request
Slide 33
34. Helping people using Oracle Applications since 1990
Standard Features:
Mat’l Overhead Absorption Rules
Explicitly say which ones do and do not earn material overhead
Slide 34
35. Helping people using Oracle Applications since 1990
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
36. Helping people using Oracle Applications since 1990
Standard Features:
Transaction Value Historical Summary
Slide 36
37. Helping people using Oracle Applications since 1990
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
38. Helping people using Oracle Applications since 1990
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
39. Helping people using Oracle Applications since 1990 Slide 39
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
40. Helping people using Oracle Applications since 1990 Slide 40
Acknowledgements
Oracle Cost Development
Partners in crime at our clients
41. Thank You for Your Attendance and
Participation
Douglas A. Volz
Slide 41
42. Helping people using Oracle Applications since 1990 Slide 42
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
Multi-organization, Multi-currency ERP
Implementations
Project Management and Senior Project Advisor
Core manufacturing processes
Cost Management
Inventory
Bills of Material
WIP
Systems Integration and Data Conversions
Experience
Sample of clients served:
Beckman Coulter (US)
Matsushita (UK, Mexico)
NTL (now Virgin Media)
Logitech (US, Taiwan, P.R.C.)
Celgene Corporation (US)
NTL (UK, now Virgin Media)
TCI International (US)
Onninen AS (Norway)
43. Helping people using Oracle Applications since 1990 Slide 43
End of Presentation