Hex 2151

Oracle Process Costing Solution

Industry : Manufacturing

Product : Oracle Process Manufacturing

Date: 11/13/2013
Presenter: Sachin Utage

Agenda
Objective OPM High Level Integration General Concept Process Costing Solution Process Manufacturing Costing Flow Cost Logic Production Variance

Account Creation & Period Closing

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Objective

Understand the Process costing Solution Use Sub-ledger Accounting and Processes in Process Costing Leverage Process Costing Solution

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OPM High Level Integration

Cost Analysis Integrated Intelligence Productivity

Planning Discrete

Mixed Mode Flow CTO ETO MTS

Real-Time WIP Visibility Model Shop Floor

Subcontractors

Product Lifecycle Mgmt

Warehousing / Transportation

Planned Orders Schedule Changes Material Substitutes Resources Substitutes

Process
Sample

Lot-Based
Analyze Adjust

Suppliers Quality Management

Asset Maintenance

Lot / Serial Genealogy Tracking, Electronic Signatures

Demand Schedules Sequencing Configured Order

Service

MES APIs, Direct Access

Production Status Material Availability Mfg Capacity Schedules/Changes Ship Notices Invoices/Payments

Partner Collaboration
Customer
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Enterprise Shop Floor

Subcontractors

Suppliers

Process Manufacturing Blocks

Analysis Costing

Product Development

Process Execution

Process Planning

Regulatory Management

OPM MES

Quality Inventory

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Process Costing

Analysis Costing

Product Development

Process Execution

Process Planning

Regulatory Management

OPM MES

Quality Inventory

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Process Costing Solution

Enables you to : Optimize profits and margins Capture precise product costs Facilitate proactive cost management Assure proper accounting of resources & materials

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Key Features
Support Multiple Simultaneous costing methods Flexible costing elements Transfer from Process to Discrete Unlimited costing: Calendars Periods Classes / Types Analysis codes

Co-product & Byproduct costing Costing engine independent of, but tightly linked to the General Ledger

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OPM Costing Flow

Oracle Inventory

Purchasing

Order Management

GMD, GME

Cost Setup

Calculate Cost

Store Costs

SLA

Oracle GL

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Organization Structure Changes

Parent Company OPM Company Ledger

Legal Entity

Operating Unit

Plant or Lab

Inventory Org OPM Warehouse Subinventory Locator

Locator

11.5.10
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Release 12
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OPM Industry Standard Terminologies

11i Terminology 12 Terminology

Cost Method

Cost Types

Burdens

Overheads

Percentage Burdens

Percentage Overheads

PM Batch Detail (Actual cost transaction view)

Production Batch

PCO account Cost Component Class Usages: Cost Detail FM Route - Burdens

COGS account

Material Resource - Overhead

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OPM Costing

Material

Acquisition Overhead

Resource Indirect

Actual

Standard

Lot

Cost Development

Monitoring

Allocation

Analysis

Valuation

PWAC

PMAC

LAC

PPAC

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Actual Cost Averaging Algorithms

Perpetual Weighted Average (PPAC)

Period Moving Average (PMAC) Period Weighted Average (PWAC) P-n P-2 P-1 Current Period (P)

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Actual Costing Logic - PWAC

The PWAC cost is calculated based on this logic: [Batch costs + Value of Incoming Transfers+ Value of Receipts+ Cost Adjustment Value + GL Expense Allocations] [Product Yield +Transfers + Receipts +Average Cost Adjustment Quantity]

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Actual Costing Logic - PMAC

The PMAC cost is calculated based on this logic:

[(Prior Period Cost * Prior Period Closing balance) +Batch costs + Value of Incoming Transfers+ Value of Receipts+ Cost Adjustments Value + GL Expense Allocations] [Prior Period Closing Balance + Product Yield +Transfers + Receipts +Average Cost Adjustment Quantity]

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Actual Costing Logic - PPAC

The PPAC cost is calculated based on this logic: [(Prior Period PPAC Cost * Prior Period PPAC Quantity) +Batch costs + Value of Incoming Transfers+ Value of Receipts+ Cost Adjustments Value + GL Expense Allocations] [Prior Period PPAC Quantity + Product Yield +Transfers + Receipts +Average Cost Adjustment Quantity]

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Actual Costing Logic Last Invoice & Transaction

Last Invoice Cost from most recent invoice in the period for the raw material
Last Transaction Cost from the most recent invoice or receipt in the period for the raw material

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Simultaneous Multiple Cost Methods

Effectively compare costs by using various methods

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Costing Definition

Ability to define different Cost types Ability to define different type for Raw Material & Products Lot Cost Type

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Cost Component Classes

The unit cost of an item is usually broken down into several buckets that can be attributed to the various sources that form the basis of the cost, for detailed tracking and analysis purposes. Cost Component Classes are used to identify the individual buckets or component costs that make up the total cost, for example, direct material costs, freight costs, labor costs, production or conversion costs and so on. They are classified into elements or usage Material Resource Overhead Expense Allocation Standard Cost Adjustment Type
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Cost Analysis Code & Component Group

Component Group Lets you collect specific material or resource component costs for category grouping Eg: material cost, resource cost Can also be used for custom reporting and Analysis

Cost Analysis Code Cost component class can be further broken down using cost analysis code for more granular tracking

Used to group component costs from multiple cost component class types to provide an alternate view of the total cost
Eg: define direct or indirect analysis codes for each cost component

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Cost Granularity
Item

CW

999A
Organization Calendar Period

2013/ACT/BUD/WHAT IF/FUTURE Q1/DAY 1/WEEK 1/YEAR STND/ACT/LOT

Cost Type

Element

MATL/PKG/RESOURCE
Analysis Code

VALUE-ADD
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Production Batches Accounting Flows

Production batch has 4 steps Release Step completion (resources) Completion (materials) Close

Accounting entries: Release: Inventory to WIP Step completion: RCA (absorption account) to WIP Completion: WIP to inventory Close: variance calculation

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Production Variances - Material

Usage Variance (USG) occurs when the actual ingredient quantity is different from the cost formula scaled quantity Substitution Variance (SUB) occurs when actual ingredients used and the cost formula ingredients are different Yield Variance (YLD) occurs If product quantity is different If new products are yielded If some product yields missing

Closing Variance (CLS) is used to clear out the WIP entries created
in batch release and complete events

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Production Variances - Resource

Resource Usage Variance occurs when the actual resource usage

is different from the scaled formula resource usage

Resource Substitution Variance (RSV) occurs when the actual resources used and the costing formula resources are different Resource Manning Variance (RMV) occurs when the actual resource count is different from the costing formula resource count

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Subledger Accounting
OPM Costing with SLA
Completed material and resource transactions
Define Journal Line Types

Journal Entry Descriptions

OPM Costing engine generates cost

Account Derivation Rules

Journal Lines Definitions

Cost Preprocessor creates accounting events SLA processes these events to create journal entries

Application Accounting Definitions Subledger Accounting Methods Assign Application Accounting to the Ledger

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How Does Oracle Create Journal Entries

1. Allocation Process 2. Cost Update Process Preliminary

3. OPM Sub ledger Pre Processor

Costing

4. Cost Update Final

5. Create Accounting
6. Transfer to the GL

Transactions from OPM, INV, PO, OM etc

General Ledger SLA Definitions

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Cost Update Process

The Cost Update Process copies the OPM cost from costing to the GL Item Cost to be used in generating the journal entries

Costing

Act / STD/ Lot Cost

Item Cost Legal Entity Calendar Period Cost type

GL Item Cost

GL Item Cost X Transaction Qty

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OPM Subledger Pre Processor Update

Transaction Quantity

GL Item Cost

Journal Template

Transactions from OPM, INV, PO, OM etc

The Sub ledger Pre Process calculates the currency value of the transaction(s)

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How does Oracle create Journal Entries

Order Management (Shipping): COGS Inventory: Adjustments and Transfers of Inventory

The Create Accounting process builds and assigns account code combinations to the journal templates

Purchasing: Receiving receipts and returns

OPM Production: Capitalization of Inventory

Other Financials Subledgers - Payables - Receivables - Assets - Projects - Etc

Subledger Accounting Engine: Processes all transactions and produces balanced journal entries ready to be interfaced to the General Ledger

OPM Costing: Inventory reValuation

SLA Definitions

General Ledger

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Account Creation & Period Closing

Complete & Close POC Steps & Production Batches Complete Sales Shipment & Close AR Complete Inv. Adjustments Complete Purchasing, Receiving and Close AP

Make Actual Cost Adjustments

Run Inventory Close Processing (Preliminary)

Run GL Expenses Allocation Process

Run Actual Cost Process

Enter/ Modify Expenses Allocation

Run Cost Update Preliminary

Run Test Subsidary Ledger

Transfer Sub Ledger Journals to GL

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Run Final Cost Update & Subsidary Ledger Update

Run Inventory Close Process (Final) & Close Cost Period

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MAC To SLA Transformation

OPM MAC Source Event Sub-Event Account Titles Accounting Template Account Mapping Attributes Priorities and Account Mapping Test Mapping OPM Currency, OPM Ledger, OPM Exchange Rates Test and Actual Subledger Accounting Subledger Program Draft and Final Accounting Accounting Pre-Processor Supports multiple valuation methods SLA Process Category Event Entity Event Class Journal Line Types (JLT) Application Accounting Definitions (AAD) (SLA) Sources Account Derivation Rules (ADR) Test Accounting Builder (TAB) Comments

Use GL set ups

-

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

Detailed Subledger Report

SLA supports multiple representations at the same time.

Is retained and has been modified to use SLA repository

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Procurement Accounting Flows

1. Enter PO: Accounting Impact Nil 2. Enter a receipt: -------------Debit --------Inventory Receiving Account (ISP) -------------Credit-------- AP Accrual Account 3. Inspect and Accept: Accounting Impact Nil 4. Delivery to stock: -------------Debit ---------Inventory Account -------------Credit --------Inventory receiving account (ISP) -------------Debit ---------Purchase Price Variance (PO-Unit Cost) 5. Enter PO Matched Invoice - Out Side OPM -------------Debit ---------AP Accrual Account -------------Credit --------Supplier Liability Control Account 6. Enter payments against the invoice Outside OPM -------------Debit ---------Supplier Liability Account -------------Credit --------Cash / Bank Account
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Inventory Accounting Flows

1. Miscellaneous Receipts, Account Receipts, Account Alias Receipts ----------Debit --------Inventory ----------Credit -------Inventory Adjustment Expense 2. Miscellaneous Issues, Account Issues, Account Alias Issues ----------Debit -------- Inventory Adjustment Expense ----------Credit -------Inventory 3. Inventory Org transfer : -Direct Transfer -In transit Transfer The two transfer are supported in Same OU and across OU.

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Production Batches Accounting Flows

1. Batch Release ----------Debit --------WIP ----------Credit -------Inventory 2. Step certification ----------Debit --------WIP ----------Credit -------RCA 3. Batch Certification ----------Debit --------Inventory ----------Credit -------WIP 4. Batch Close ----------Debit / Credit ------WIP ----------Credit / Debit ------CLS
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Order Management Accounting Flows

1. Sales Order : No Accounting Impact 2. Ship items -----------Debit ---------Deferred COGS -----------Credit --------Inventory 3.1 Enter invoice when customer is Billed In AR Module -----------Debit ---------Receivables -----------Credit --------Deferred Revenue 3.2 When Portion of Revenue is recognized In AR Module -----------Debit ---------Deferred Revenue -----------Credit --------Revenue 3.3 Additional Entry in OPM to reflect earned revenue -----------Debit ---------COGS -----------Credit --------Deferred COGS 4.1 RMA Returns (Before revenue recognition) -----------Debit ---------Inventory -----------Credit --------DCOGS 4.2 After portion of revenue recognized -----------Debit --------- Inventory -----------Credit --------- Deferred COGS -----------Credit -------- COGS
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OPM LCM Integration Overview

The objective to use the accurate landed costs in OPM cost calculations and accounting Support of Landed cost for all receiving transactions Receive, Deliver Correction, Return Landed cost by Cost components Item cost details consists of component wise cost in OPM Support Actual Landed Costs Item, freight, charge invoices
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Support LC adjustments in Actual cost Process Support LC Adjustments in Lot Cost Process GMF: Landed Cost Adjustments Transfer Method to Inventory In Actual Costing with Apply whole LC Adjustment to Inventory Apply LC Adjustment based on the Period Opening Bal Post LC Adjustment journal entries in OPM Accounting PreProcess
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Process Costing Solution

Enables you to : Optimize profits and margins Multiple cost methods: standard, actuals, lot Capture precise product costs Co-products, unlimited cost elements, cost allocations

Facilitate proactive cost management

Cost monitoring, cost analysis Assure proper accounting of resources & materials Flexible account mapping, sub-ledger flow, drilldowns

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Hexaware Overview: Key Facts

224
Active Clients served worldwide (Sep 13)

Delivery Centers
Mumbai Chennai Nagpur Pune Coimbatore Bengaluru
New Jersey Dallas Mexico Singapore

8,950
Employees globally (Sep 13)

Industry Recognitions

53
Million dollar clients (Sep 13)

35
Offices worldwide

364
$ mn Revenues in CY 12

Certifications
CMMI Level 5, ISO 9001 & ISO 27001, SAS 70 Type II, ISO 20000
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Awarded the prestigious Golden Peacock Award for Excellence in Corporate Governance Listed on Forbes Asias 200 Best Under a Billion List Winner of the prestigious UK Oracle User Group PeopleSoft Partner of the Year Award for the year 2012 Winner of the Information Mastermind Award 2012, by IDG Listed among the Top 100 Innovative service Provider by Global Services 100 Listing Ranked among leading IT service providers in International Association of Outsourcing Providers (IAOP) Global Outsourcing 100 list. Winner of BPO Excellence Awards 2012- 2013 [Subsidiary : Caliber Point] Winner of the EMC Transformers Award for its Cloud and Disaster Recovery (DR) implementation Recognized and awarded the Best in Corporate Responsibility Practice award by Indy's Awards Received the prestigious CIO100 Award, by IDG.

Golden Peacock Award

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Oracle @ Hexaware

Oracle PeopleSoft Seibel CRM Siebel

CRM Oracle E-Business Suite E-Business Suite Technology

Technology

Oracle Tools/J2EE

E-Business Suite
o Over 100+ Projects worldwide One of the earliest to implement Oracle R12

PeopleSoft
o o #1 offshore PeopleSoft partner PeopleSoft development partner before the acquisition

Business Intelligence
o Voted as one of the leading BI services vendor by Gartner Over 100+ BI customers

Technology
o SOA, Portals, Mobility, Composite Apps, Legacy Modernization Fusion Ready

Executed over 600 projects for 150+ customers 2500+ trained Oracle consultants Expertise across Human Capital Management, Finance, Supply Chain, Manufacturing and CRM
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Thank you

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