r12 toi opm-cost

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Copyright © 2006, Oracle. All rights reserved.

Release 12 Transfer of InformationOracle Process Manufacturing

Oracle Process Manufacturing CostingFunctional Overview

Oracle Process Manufacturing Costing

This TOI will be made available to CUSTOMERS, PARTNERS and EMPLOYEES.

Internal – only information should be added after the “Additional Information for Employees” Title Slide.

You should provide speaker notes for each slide. These notes should expand on your slide and provide more detail, explanation or examples.

This is the generic title slide – substitute the following for their appropriate values:• Release Number (eg. 11i10, R12.0, Family Pack x)• Product Family (eg. Oracle Financials, Oracle Supply Chain Management)• Topic/Product Name (eg. Oracle General Ledger, Oracle Demand Planning, Procure to Pay)• Session Title – if a project spans more than one presentation, use this to indicate the sub-project

covered in this presentation. (eg. Cash Positioning, Tax Reporting, Profile Option Change Tracking)



Release Overview

OPM Costing has been enhanced to work with the Common Inventory model that replaces OPM Inventory in Release 12. In addition, the Oracle Subledger Accounting application replaces the OPM Manufacturing Accounting Controller

The following set of slides describe the new and changed features for OPM Costing in Release 12. OPM Costing has been enhanced to work with the Common Inventory model (commonly known as Inventory Convergence). In addition to this, with the introduction of Oracle Subledger Accounting application, the Manufacturing Accounting Controller is now obsolete.



New and Changed Features forOPM costing

• Changes related to Inventory Convergence– Organization Structure– OPM Costing to skip Discrete Organizations– Support for transfers from Process Organizations to

Discrete Organizations– Impact on Cost Types

• Sub Ledger Accounting (SLA) replaces OPM Manufacturing Accounting Controller (MAC)

• Support for new transactions– Deferred Revenue recognition– Global Procurement and Drop Shipments

In Release 12, OPM Inventory module has been phased out and will be replaced by Oracle Inventory. Oracle Inventory application has been enhanced to include all process-specific features.

The OPM Costing applications has been suitably enhanced to operate seamlessly with Oracle Inventory. The changes to the Costing application can be classified under

-Changes to Organization Structure

-Changes made to ensure that all transactions in a process enabled organization are ignored by Oracle Discrete Costing

-New support for transfer of material from Process to Discrete organization and vice versa

-Changes to the Costing engines to support transactions in the new converged Inventory model

The other significant change to the OPM Costing application is the uptake of the Sub Ledger Accounting, commonly referred to as SLA, which will replace the Manufacturing Accounting Controller application, commonly referred to as MAC. We would see how the SLA application provides a superset of capabilities offered by MAC



OPM Costing in Converged InventoryAgenda

• Introduction– Description– Benefits

• Setup and Process– How to set up the feature– How to use the feature

• Dependencies and Interactions• Summary

For OPM Costing, we will describe the feature and its benefits operating in a Converged Inventory model, walk through the set ups and use of functionalities and identify dependencies and interactions.



OPM Costing in Converged Inventory Description

• The OPM Inventory application has been converged with Oracle Inventory

• OPM Costing application has been changed to work with this common Inventory model

• Transactions in Process enabled organizations alone will be considered by OPM Costing

• The organization structure used earlier by OPM replaced with the organization structure used across the E Business suite

As described earlier, Oracle Process Manufacturing Inventory has been replaced with Oracle Inventory and hence all applications that used to refer to the OPM Inventory have been modified to refer to Oracle Inventory. The process-specific features in OPM Inventory have been incorporated in Oracle Inventory. As a result of this, OPM Costing has been modified to cost all transactions in a Process Enabled organization in Oracle Inventory. All transactions created in a Process enabled organization will be ignored by Oracle Costing and will be costed only by OPM Costing.

The Organization structure used across E Business suite is now applicable for all process enabled organizations. To ensure compliance with the organization structure, the costing entities that were at the OPM Company (such as Cost Roll Up and Actual cost calculation) has now been mapped to the Legal Entity level.



OPM Costing in Converged Inventory Description

• Nomenclature changes to reflect Industry standard terminologies

• Standard Cost, Actual Cost, and Lot Cost processes changed to look into Oracle Inventory data

• Lot Costing supports new transactions— Lot Split— Lot Merge— Lot Translate

To ensure standardization and easier understanding, some of the terms used by OPM Costing has been changed. We would look at them in the subsequent slides.

The costing engines and processors have been changed to work in the converged Inventory.

OPM Lot costing engine has been enhanced to support new Inventory transactions – Lot Split, Lot Merge and Lot Translate.



OPM Costing in Converged Inventory Organization structure

With Release 12, OPM organizations will use the same organization structure used across Oracle E-Business suite. The graphic shown here shows the OPM organizations structure in Release 11i and the new organization structure in Release 12. For more details on the organization structure, please refer to the TOI for Inventory.



11i Terminology 12 Terminology

OPM Costing in Converged InventoryTerminology changes

PM Batch Detail (Actual costtransaction view)

Production Batch

Burdens Overheads

Percentage Burdens Percentage Overheads

Cost Method Cost Types

PCO account COGS account

Based on customer feedback, some of the non-standard terminologies have been replaced with industry standard terminologies. The changes are:

•Cost Method will now be referred to as Cost Types. •Burdens will now be referred to as Overheads. •Consequently Percentage Burdens will now be termed as Percentage Overheads•In the Actual Cost Transaction View, one of the source types, PM Batch Detail, has been renamed as Production Batch•The PCO account will now be called COGS (cost of goods sold)



OPM Costing in Converged Inventory Benefits

• Increased solution footprint– Support for new transactions and modules such as

Advanced Dropship, Consigned Inventory • Improve usability

– Better usability through sharing common set ups and terminologies

The benefits that can be realized through Release 12 OPM costing are:

-With the adoption of the common Inventory model, OPM costing supports a wider solution footprint with support for new transactions such as Global Procurement and Advanced Dropship and Consigned Inventory

-One of the focus of the enhancements in Release 12 has been to improve the usability of the application with changes to reduce redundant set ups and through use of industry standard terminologies



Setup and Process

Transfers between Process and Discrete Organizations

In the following slides, we would discuss the set up and process for costing transfers between Process and Discrete Organizations.



OPM Costing in Converged Inventory Transfers between Process and Discrete

Organizations• Provides an ability to cost material transfers between

Organizations that use different Costing methods• Transfers between Process and Discrete organizations

will use Transfer Price• Transfer price derived from price list set up in the

Shipping Networks form• Transfer applies to both inter-org transfers with or

without internal orders• New Interorg Profit account created to record profits

from such transactions

With the converged inventory model, it is possible for customers to transfer material between process and discrete organizations. Since both organizations use different costing engines, such transfers will now use a transfer price. The transfer price is derived from the price list set up in the Shipping Networks form. Both Inter-Organization transfers and transfers through Internal orders are supported.

The difference between the item cost in the shipping warehouse and the transfer price is captured in the new Interorg Profit account.



OPM Costing in Converged Inventory Setup –Profile Options

• INV: Use Advanced Pricing for Inter org Transfers– Profile option to specify if Advanced Pricing is to be used

for transfers between organizations

Use Price List from Inter-Organizations parametersNo

Use Advanced pricingYes

DescriptionProfile Value

A new profile called “Use Advanced Pricing for Inter org Transfers” has been created to provide flexibility to users to either use the Advanced pricing or use the price as specified in the Inter-organization parameters.

The valid values for the profile are

Yes: Use Advanced Pricing

No : Use Price List from Inter-Organization parameters



OPM Costing in Converged Inventory Setup – Transfer Price

<Enter slide note> New Inter

Org Profit account

Transfer Price List

Navigation:

-Inventory : Setup : Organizations : Shipping Networks

The Shipping Networks form is used to create relationships between Inventory Organizations. When you create a shipping network between a Process and a Discrete Inventory organization, you can enter the Price List to be used and also define an Inter-organization Profit Account to track the profit generated from transfers at the shipping organizations.



Setup and Process



OPM Costing in Converged Inventory Setup – Cost Types

Lot Cost is now a independent cost method

Navigation:

-OPM Financials : Setup : Cost Types

The cost type form is used to define the various cost types that you would like to use to cost items. The Lot Cost, which was a cost method under Actual Costing is now a separate Cost method in Release 12.



OPM Costing in Converged Inventory Cost Calculation

• Cost Roll up, Actual Cost Process, and Lot Cost Process will be run for a Legal Entity

• Resource costs stored at a legal entity level or at each organization

The costing entities that were mapped to an OPM Company are now mapped to the Legal Entity in Release 12. Cost Rollup, Actual Cost process and Lot cost process will be run for all organizations under a legal entity. Similarly the resource costs will now be stored for a legal entity. All organizations under this legal entity will use the same cost in case of global resources. Users also have the flexibility to store the costs for each organization.



OPM Costing in Converged Inventory Setup – Resource Costs

Cost captured at

a Legal Entity level

Navigation:

-Process Financials : Resource Costs

The resource costs form is used to capture the cost of running a resource which is used to calculate the cost of items. The costs can be stored at a legal entity level or for each organization.



OPM Costing in Converged Inventory Setup – Cost Calendars

• A calendar code can now be assigned to several cost types

• Cost period status codes– Open– Closed– Frozen– Never Opened (New)

In Release 12, you can associate the same cost calendar to several cost types. This eliminates the necessity to define different cost calendars for each cost type that you define. A new period status called “Never Opened” has been added in Release 12



OPM Costing in Converged Inventory Setup – Cost Calendars

Navigation:

-Financials : Setup : Cost Calendars

Setting up a Cost Calendar is a 3 step process.

Step 1: Define a Calendar code with periods

Step 2 : Assign it to Cost Types and Legal Entities

Step 3: Set up period statuses

The screen shot shown above is the step 1 – Defining a Cost Calendar code with period start dates and end dates



OPM Costing in Converged Inventory Setup – Assign Cost Calendars

Navigation:

-Financials : Setup : Cost Calendars : Assignments

Assigning the cost calendars to cost types is the next step of the set up. The cost calendar code can be shared across several combinations of Cost Types and Legal Entities. This screen shot shows that the Cost Calendar 0612 is being shared by 3 different cost types STD, CUR and STDD



OPM Costing in Converged Inventory Setup – Period Statuses

Period Status

Navigation:

-Financials : Setup : Cost Calendars : Assignments : Period Status

Setting the Period Status is the next step. The valid options are• Open• Closed• Frozen• Never Opened which is a new Period Status



OPM Costing in Converged Inventory Setup – PO Special charges

• PO Special charges replaces OPM Acquisition costs• Option to include costs in Item cost or expense• Each code is attached to a Cost Component and

analysis code to track and analyze charges

PO Special Charges functionality replaces the Acquisition Costs functionality in Release 12. The PO special charges functionality can be used to enter additional charges such as Freight, Tax. These charges can be added to the cost of the item or charged as an expense. The charge code is attached to a Cost Component and analysis code to track and analyze the cost incurred



OPM Costing in Converged Inventory Setup – PO Special charges

Navigation:

-OPM Financials : Setup : Cost Factor

This screen shot shows the definition of the Cost Factor which defines the charges that need to be added. The Allocation can be based on

-Quantity

-Value

-Volume or

-Weight

The cost can be either included in the item cost or can be expensed



OPM Costing in Converged Inventory Other new features

• Support accounting of consigned inventory• Support Global Procurement and Drop Shipments• Support Deferred Revenue recognition

The following transactions are now supported in a process enabled organization:

-Consigned Inventory

-Global Procurement and Drop Shipments

-Deferred Revenue recognition



Dependencies and Interactions

The next slide would discuss the dependencies and interaction points for OPM Costing



OPM Costing in Converged Inventory Dependencies and Interactions

• Oracle Process Manufacturing– New Product Development, Process Execution

• Other applications– Oracle Inventory, Purchasing, Shipping

OPM Costing integrates with several applications in the OPM family and other Oracle Applications. The dependencies and interactions are with:

OPM Applications

-New Product Development for Formulas and Recipes

-Process Execution for Batches information

Other Oracle Applications

-Oracle Sales and Shipping

-Oracle Purchasing and Receiving

-Oracle Inventory



OPM CostingSubledger accounting (SLA) replaces Manufacturing

Accounting Controller (MAC)• Introduction

– Description– Benefits

• Dependencies and Interactions• Summary

The following slides describe the uptake of Subledger Accounting by OPM Costing. We would look at a brief overview and the benefits. We would then look at how SLA differs from MAC and the fact that all the capabilities in MAC are now available with SLA in Release 12.



Subledger Accounting Replaces MACDescription

• OPM Manufacturing Accounting Controller (MAC) is replaced by Oracle Sub Ledger Accounting (SLA)

• SLA is an intermediate step between subledger products and the Oracle General Ledger.

• SLA provides common data model and UI across subledgers

• Please refer to the functional overview of Subledger Accounting for more details on SLA functionality

In Release 12, OPM MAC is replaced by Oracle Subledger Accounting, commonly know as SLA. SLA provides a common data model and User Interface across various subledgers, , replaces various disparate 11i setups, providing single source of truth for financial and management analysis. This ensures a single source of truth for all financial and management analysis.

SLA, like MAC, is an intermediate step between OPM costing and Oracle General Ledger. All transactions that are costed are picked up by SLA and it creates the necessary journals which is stored in a common data model.

For more details on the capabilities of SLA, please refer to the SLA functional TOI.



Subledger Accounting Replaces MAC Benefits

• Improved analysis– All the financial data is available in a single subledger

and hence provides a single source of truth• Increased usability

– Standard user interface for subledger applications across several financial applications

With the uptake of Subledger Accounting by OPM, users can enjoy the following benefits:

-Since Subledger Accounting provides for a single source of truth for all financial applications, it helps users by providing tools to do better analysis and better decision making

-By using a common application across several applications, users have to spend lesser time in training and leads to better usability



Subledger Accounting Replaces MAC

OPM Costing engine generates cost

MAC processestransactions

and creates journals

Completed material and resource transactions

OPM Costing with MAC

OPM Costing engine generates cost

SLA processes these events to create journal entries

Completed material and resource transactions

OPM Costing with SLA

Cost Preprocessor creates

accounting events

The graphic shown here shows the costing and accounting process with MAC and how it is different with the introduction of SLA.

When OPM Costing used MAC, the following were the steps followed:

-The completed material and resource transactions were picked up the costing engine from various sources such as Production, Purchasing, Inventory etc

-Based on these transactions and the costing method, the costing engine would create the cost records for items

-MAC would then use these costs to create journals for all the transactions

With the introduction of the SLA, the process would be very similar:

- The completed material and resource transactions are picked up the costing engine from various sources such as Production, Purchasing, Inventory etc

-Based on these transactions and the costing method, the costing engine would create the cost records for items

-The cost preprocessor would then create accounting events based on the transactions and cost records

SLA would then pick up these events to create the necessary journal entries



Subledger Accounting Replaces MAC Equivalent functionality in SLA

Journal Line Types (JLT)Account TitlesApplication Accounting Definitions (AAD)Accounting Template

(SLA) SourcesAccount Mapping AttributesAccount Derivation Rules (ADR)

Priorities and Account Mapping

Test Accounting Builder (TAB)Test Mapping

Use GL set upsOPM Currency, OPM Ledger, OPM Exchange Rates

Comments

Event ClassSub-EventEvent EntityEvent

Process CategorySource

SLAOPM MAC

The next 2 slides identifies the equivalent functionality in SLA for each of the functionality available in MAC in release 11i.

-The Source in MAC is called Process category in SLA

-The equivalent of an Event in MAC is a Process Category in SLA

-A Sub-Event in MAC is called an Event Class in SLA

-Account Titles are called Journal Line Types

-The Application Accouning Definitions in SLA is an equivalent to Accounting Template in MAC

-Account Mapping Attributes are called SLA Sources

-Priorities and Account Mapping is available through Account Derivation Rules, commonly known as ADRs

-The Test Mapping functionality is achieved through Test Accounting Builder in SLA

The following setups are now obsolete and are replaced with equivalent functionality available in General Ledger to ensure consistency

-OPM Currency



Subledger Accounting Replaces MAC Equivalent functionality in SLA

Is retained and has been modified to use SLA repository

Detailed Subledger Report

SLA supports multiple representations at the same time.

-

Comments

Supports multiple valuation methods

Run Subledger for multiple valuation/cost methods for a ledger.

Accounting Pre-ProcessorSubledger Program

Draft and Final AccountingTest and Actual Subledger Accounting

SLAOPM MAC

•The Test and Actual Subledger Accounting in MAC is available through Draft and Final Accounting functionality in SLA

•The functions performed by Subledger process will be carried out by the Accouting Pre-Processor

•SLA supports multiple valuation representations of the subledger at the same time thus providing the ability to run simulations with various cost methods

•The Detailed Subledger report is retained in the same format but has been changed to pick data from the SLA repository



Subledger Accounting Replaces MAC OPM example with MAC

Order Management

Shipping

Customer Returns(RMA)

Internal Order Shipments

Shipping (OMSO)

SOURCE EVENT SUBEVENT

The following slides show an example of a business process and the terminologies used in OPM MAC and SLA. The example used is the shipping process.

In OPM MAC, the Order Management module was called the Source and the Event is called Shipping. The code used was OMSO. This event had 3 sub events

-Shipping

-Internal Order Shipments and

-Customer Returns (RMA)



Subledger Accounting Replaces MAC OPM example with SLA

Order Management

Shipping

Customer Returns(RMA)

Internal Order Shipments

Shipping (OMSO)

EVENT ENTITY EVENT CLASSES EVENT TYPES

Lets look at the same example and the terminologies used in Release 12:

The Order Management module is now called the Event Entity while Shipping (OMSO) is now called the Event Class. The erstwhile sub-events – shipping, internal order shipments and RMA are now called Event Types.



Summary

Summing up



OPM Costing in Converged Inventory Summary

• OPM costing has been modified to work in a common Inventory model

• All transactions in a process enabled organization will be costed by OPM Costing

• Subledger Accounting application used by OPM to generate journal entries in Oracle General Ledger

Benefits

• Support for newer transactions• Stream-lined set ups increasing usability• Subledger Accounting provides a single source of truth for all accounting and costing information

We saw that the OPM costing application has been modified to work with the common Inventory model. We also discussed the fact that all transactions in a process enabled organization would be costed by the OPM Costing engine. The Manufacturing Accounting Controller application has been replaced by Oracle Subledger Application to create journal entries and pass them on to Oracle General Ledger.

The above functionalities would help customers realize the following benefits:

-Increased footprint through support for new transactions

-Better usability through stream-lined set-ups

-A Single source of truth for all costing and financial data through the use of Subledger Accounting



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