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Make Cost Management Work for You! – 1
Douglas Volz Consulting, IncMay 20th, 2008
Make Cost Management Work for You!
20th May 2008
Douglas A. Volz
OAUG Discrete MFG Cost Sub-Committee Presentation
(Revised 13th February 2016)
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Douglas Volz Consulting, IncMay 20th, 2008
Welcome to Our Session! Proposed 2008 Schedule - July to December 2008 Introduce the Cost Enhancement List Costing Tips and Tricks Presentation
Agenda
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Douglas Volz Consulting, IncMay 20th, 2008
June 17th
Summer Break (no meeting in July or August) September 23rd (Oracle OpenWorld is also during this time) October 21st November 18th
December -- No Meeting
Proposed 2008 Schedule - July to December 2008
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Douglas Volz Consulting, IncMay 20th, 2008
The objectives are:– The goal is to compile a list of cost enhancements– Help each other by describing how we currently deal with these limitations– Pass this information to Oracle Development as a source of ideas for future
releases. This list will be discussed during the June 2008 session as a group
discussion (everyone gets to describe their own enhancements) Enter your enhancement ideas into the Cost Enhancement List and send to
davolz@comcast.net (or use the Cost email list costmgmt@solutionbeacon.net)
Cost Enhancement List
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Douglas Volz Consulting, IncMay 20th, 2008
Make Cost Management Work for You!
20th May 2008(Revised 13th February 2016)
Douglas A. VolzDouglas Volz Consulting, Inc.
Helping clients use Oracle Applications since 1990
www.volzconsulting.com
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Douglas Volz Consulting, IncMay 20th, 2008
Tips and TricksIntroduction – There Has to be a Better Way!
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Douglas Volz Consulting, IncMay 20th, 2008
Introduction This presentation is mostly for Release 11i but many topics
still apply to Release 12 Differences between 11i and 12 will be discussed
The objective is to find out about better ways to control cost and inventory and better ways to report profits
Get suggestions on standard features you may not be using
Learn about report and program extensions that add significant value
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Douglas Volz Consulting, IncMay 20th, 2008
Agenda Get suggestions on 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 Sharing costs (when using Standard Costing) Data verification audits Period close snapshots (Release 11.5.10)
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Douglas Volz Consulting, IncMay 20th, 2008
Agenda (Continued) Simple reporting extensions that add significant value:
Summarize G/L account activity by journal source and category
Check inventory period close status by operating unit Margin reporting extensions Multiple inventory organization reporting for:
– Inventory value– Material accounting entries
Purchase price variance reporting – for standard costing Invoice price variance reporting – for all costing methods Finding high-value material transaction entries with ease
Make Cost Management Work for You! – 10
Douglas Volz Consulting, IncMay 20th, 2008
Agenda (Continued) Solve current problems you may have:
Excess and Obsolete Reporting (Inventory Provision) Inventory to G/L Reconciliation Incorrect cost inputs and how to fix “after the fact” Managing period close interfaces Common item master & cost data setup issues for the Cost
Rollup Better “what-if” cost simulation capabilities
Cost mass edits
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Douglas Volz Consulting, IncMay 20th, 2008
Agenda (Continued) Best implementation and data conversion practices for
costing Conclusions Appendix
High-Level Review for Oracle Cost Management (R11i) Release 12 cost enhancements
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Douglas Volz Consulting, IncMay 20th, 2008
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 Sharing costs (when using Standard Costing) Data verification audits Period close snapshots (Release 11.5.10)
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Douglas Volz Consulting, IncMay 20th, 2008
Standard Features: Currency Setup You can change your item cost decimal precision at any time
Change the extended precision to your requirements Used by the Cost Processor and all reports showing item
costs
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Douglas Volz Consulting, IncMay 20th, 2008
Standard Features: Period Open/Close by Org Hierarchy In Release 11i you can open and close multiple inventory
periods by organization hierarchy Define your organization hierarchy using an Human
Resources Responsibility, or, if HRMS is not installed use an 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
See the next slides for screen shots
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Douglas Volz Consulting, IncMay 20th, 2008
Standard Features: Period Open/Close by Org Hierarchy Define your organization hierarchy:
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Douglas Volz Consulting, IncMay 20th, 2008
Standard Features: Period Open/Close by Org Hierarchy Inventory Organization Parameters, Costing tab: Transfer to
GL setting has to be the same for all inventory organizations
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Douglas Volz Consulting, IncMay 20th, 2008
Standard Features: Period Open/Close by Org Hierarchy Open Period Control request
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Douglas Volz Consulting, IncMay 20th, 2008
Standard Features: Period Open/Close by Org Hierarchy Close Period Control request
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Douglas Volz Consulting, IncMay 20th, 2008
Standard Features: Mat’l Overhead Absorption Rules
Explicitly say which ones do and do not earn material overhead
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Douglas Volz Consulting, IncMay 20th, 2008
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
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Douglas Volz Consulting, IncMay 20th, 2008
Standard Features: Transaction Value Historical Summary
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Douglas Volz Consulting, IncMay 20th, 2008
Standard Features: Sharing Costs Under limited circumstances this feature can be quite useful
Gives you the ability to share standard costs across a network of inventory organizations
Useful if you do not track separate freight and duty costs by inventory organization
You set the Costing Organization on your Organization Parameters screen, Costing Tab, when you define your inventory organization
Note: only works for Standard Costing
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Douglas Volz Consulting, IncMay 20th, 2008
Standard Features: Data Verification Audits Found under the MRP/MPS/Planning Responsibilities:
Useful for general item setup verification
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Douglas Volz Consulting, IncMay 20th, 2008
Standard Features: Data Verification Audits Run the “All Audits” to get:
For bills of materials: Components with zero usage quantity
Costed items not assigned to the costing category set For standard costing: Costed items with no frozen costs Items that have incorrect summary costs: Identify items
whose summary costs do not agree with the detailed cost information
And many more non-costing related data audits
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Douglas Volz Consulting, IncMay 20th, 2008
Standard Features: Period Close Snapshot Period close snapshots (Release 11.5.10)
Prior to Release 11.5.10, the inventory period close only stored summary values by inventory organization and subinventory (blank subinventories are for intransit)
In Release 11.5.10, stores period-end inventory values and costs by inventory organization and subinventory for each individual item
Release 11.5.10 also automatically runs at period close a detailed Period Close Reconciliation Report that compares the cumulative onhand values against the cumulative accounting values
Use the Period Close Reconciliation Report to find discrepancies between your onhand perpetual values and your cumulative accounting values
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Douglas Volz Consulting, IncMay 20th, 2008
Simple Reporting Extensions Simple reporting extensions that add significant value:
Summarize G/L account activity by journal source and category
Check inventory period close status by operating unit Margin reporting extensions Multiple inventory organization reporting for:
– Inventory value– Material accounting entries
Purchase price variance reporting – for standard costing Invoice price variance reporting – for all costing methods Finding high-value material transaction entries with ease
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Douglas Volz Consulting, IncMay 20th, 2008
Reporting Extensions: Summarize G/L Account Activity
How to quickly find a summary of monthly activity by G/L journal source?
Use one of the standard G/L journal lines reports Usually too much information
Ask doug@volzconsulting.com for a sample SQL report for the G/L Summary by Journal Source and Category Report Tailor it for your requirements, you can use it as a SQL
Report, or Your IT staff could put it in XML Publisher to make it multi-
currency and easier to download into Microsoft Excel Free for use but please acknowledge the author in your
documentation
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Douglas Volz Consulting, IncMay 20th, 2008
Reporting Extensions: Summarize G/L Account Activity
Sample Layout
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Douglas Volz Consulting, IncMay 20th, 2008
Reporting Extensions: Summarize G/L Account Activity Other useful ideas for summarizing G/L activity:
You can create Lookup Codes, codes that list your inventory or margin accounts
Take the code example from G/L Summary by Journal Source and Category Report and add logic to it to limit the accounts by lookup code (from mfg_lookups in this example)
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Douglas Volz Consulting, IncMay 20th, 2008
Reporting Extensions: Check Inventory Period Close Status
Check inventory period close status by operating unit Useful when you have many inventory orgs to close
No longer need to check each inventory org one-by-one
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Douglas Volz Consulting, IncMay 20th, 2008
Reporting Extensions: Margin Reporting In Release 11i you run the Load Margin Analysis program for
each month Puts that month’s sales and COGS into a Margin Summary
table Your IT staff can build queries for custom reporting The underlying table is: CST_MARGIN_SUMMARY
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Douglas Volz Consulting, IncMay 20th, 2008
Reporting Extensions: Multiple Inventory Orgs Reports
Multiple inventory organization reporting for: Inventory value Material accounting entries
Recommend two custom reports: Multi-Org All Inventory Value Report Multi-Org Material Account Distribution Summary Report
The Multi-Org All Inventory Value Report uses the existing Oracle*Reports code, and adds an Operating Unit or Organization Hierarchy Parameter(s) to it (or get the White Paper from the Inventory Reconciliation presentation for sample SQL code)
The Multi-Org Material Account Distribution Summary Report can be done either as a SQL Report or an XML Publisher Report (or get the White Paper from the Inventory Reconciliation presentation for sample SQL code)
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Douglas Volz Consulting, IncMay 20th, 2008
Reporting Extensions: Purchase Price Variance
Purchase price variance is the difference between your PO unit prices and your Standard Frozen Costs
However the standard Oracle report is difficult to use Ask doug@volzconsulting.com for a sample SQL Purchase
Price Variance Report from www.volzconsulting.com. (Note: this version is from Release 11i, due to changes in Release 12, this version may not work in Release 12.) Tailor it for your requirements, you can use it as a SQL
Report, or Your IT staff could put it in XML Publisher to make it multi-
currency and easier to download into Microsoft Excel Free for use but please acknowledge the author in your
documentation
Make Cost Management Work for You! – 34
Douglas Volz Consulting, IncMay 20th, 2008
Reporting Extensions: Invoice Price Variance
Invoice price variance is the difference between your PO unit price and your A/P invoice actual cost
However the standard Oracle report is difficult to use Ask doug@volzconsulting.com for a sample Invoice Price
Variance Report. (Note: this version is from Release 11i, due to changes in Release 12, this version will not work in Release 12.) Tailor it for your requirements, you can use it as a SQL
Report, or Your IT staff could put it in XML Publisher to make it multi-
currency and easier to download into Microsoft Excel Free for use but please acknowledge the author in your
documentation
Make Cost Management Work for You! – 35
Douglas Volz Consulting, IncMay 20th, 2008
Reporting Extensions: Find High Value Mat’l Transactions Finding high-value material transaction entries with ease Standard report does not exist Request the Find High Value Mat’l Transactions Report by sending
an email to doug@volzconsulting.com for a SQL report version for your use. (Note: this version is from Release 11i, due to changes in Release 12, this version will not report any accounting information from the Release 12 Subledger/SLA Accounts.) You select the minimum absolute transaction value to search for
– The report brings back the entire material transaction Tailor it for your requirements, you can keep it as a SQL Report,
or Your IT staff could put it in XML Publisher to make it multi-
currency and easier to download into Microsoft Excel Free for use but please acknowledge the author in your
documentation
Make Cost Management Work for You! – 36
Douglas Volz Consulting, IncMay 20th, 2008
Solve Current Problems You May Have Solve current problems you may have:
Excess and Obsolete Reporting Inventory to G/L Reconciliation Incorrect cost inputs and how to fix “after the fact” Managing period close interfaces Common item master and cost data setup issues for Cost
Rollup Better “what-if” cost simulation capabilities
Cost mass edits
Make Cost Management Work for You! – 37
Douglas Volz Consulting, IncMay 20th, 2008
Current Problems: Excess and Obsolete Reporting Oracle Inventory only has a Slow Moving Inventory Report So unfortunately you should consider a custom solution Parameters and decisions to consider:
What is a new item – so you exclude it from the analysis Do you want to include your MRP/ASCP planning as a
source of future demand? How many months of transaction history should you
consider? And don’t forget to include your corporate excess and
obsolete provision policies (amount to reserve based on forecasted usage)
Note: U.S. Sarbanes-Oxley requirements can turn this into a very complex solution!
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Douglas Volz Consulting, IncMay 20th, 2008
Current Problems: Inventory to G/L Reconciliation Basic reports to use, when to run, timing considerations Sample spreadsheet What to do when you can’t reconcile Better ways to reconcile multiple inventory organizations
For the latest presentation on inventory reconciliation get the 2014 Inventory Reconciliation presentation from http://www.volzconsulting.com/resources.html.
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Douglas Volz Consulting, IncMay 20th, 2008
Use the following formula:Prior cum. balance + monthly accounting activity = month-end cumulative G/L balance
Also compare above formula to cumulative report balances If you do not balance, check for manual G/L journal entries
and entries from other subledgers In Release 11.5.10, there is a new month-end balances/value
table that holds the item quantities and values in detail, thereby eliminating report cut-off issues This information is populated when you close the
inventory accounting period But there is limited reporting from this information
General Reconciliation Principles
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Douglas Volz Consulting, IncMay 20th, 2008
How to Balance the Receiving Valuation Accounts Use the Receiving Value Reports to get the month-end
balances Use the Receiving Account Distribution Report for monthly
increases to the Receiving Valuation Account Use the Material Distribution Summary Report for monthly
decreases to the Receiving Valuation Account If using outside processing you would also run the WIP
Account Summary ReportNote: in R11i, the quantities and values for the Receiving Value Reports are
“on demand” – they must be run at the correct time, after the period is closed and before the new accounting period has transactions
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Douglas Volz Consulting, IncMay 20th, 2008
How to Balance the Inventory (Stores) Valuation Accts.
Use the Inventory Value Reports to get the month-end balances
Use the Transaction Value Historical Summary Report – also called the “Rollback Report” to get a prior balance for subinventories (only)
Use the Period Close Value Summary Report, for a double check
Use the Material Distribution Summary Report for monthly totals
Note: in R11i, the quantities and values for the Inventory Value Reports are “on demand” – they must be run at the correct time, after the period is
closed and before the new accounting period has transactions
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Douglas Volz Consulting, IncMay 20th, 2008
How to Balance the Intransit Valuation Accounts Use the Intransit Value Reports to get the month-end
balances Choose Yes for the option “Only Display Inventory You
Own” Use the Material Distribution Summary Report for monthly
totals
Note: in R11i, the quantities and values for the Intransit Value Reports are “on demand” – they must be run at the correct time, after the period is
closed and before the new accounting period has transactions
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Douglas Volz Consulting, IncMay 20th, 2008
How to Balance the WIP Valuation Accounts Use the WIP Value Report to get the month-end balances
(No cut-off issues) Choose the option to include closed jobs
Use the WIP Account Summary and Material Distribution Summary Reports for monthly totals
Note: the quantities and values for the WIP Value Reports are stored by accounting period, you may run these any time after period close as
needed.
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Douglas Volz Consulting, IncMay 20th, 2008
Sample Reconciliation Spreadsheet and Example
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Douglas Volz Consulting, IncMay 20th, 2008
What do You do When You Have Several Organizations?
Using standard reports may be too time-consuming Four or more reports needed to reconcile each inventory
organization Several firms with multiple inventory organizations have
created a Multi-Org Inventory Reconciliation Report Using stored month-end balances available in 11.5.10 (or
11.5.9 plus patches) Directly compare the General Ledger account balances to
the stored month-end perpetual values Helps to quickly spot problems Get the White Paper from the Inventory Reconciliation
presentation for sample SQL code
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Douglas Volz Consulting, IncMay 20th, 2008
What do You do When You Can’t Reconcile? Reasons
Report cut-off issues Incorrect misc. inventory transactions Disabling a code combination during the month Subledger miscodings Manual GL journal entries Back-dated transactions from external system feeds Miscoded purchase orders
For a detailed presentation on reconciliation, go to http://www.volzconsulting.com/resources.html
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Douglas Volz Consulting, IncMay 20th, 2008
Current Problems: Incorrect Cost Inputs Two issues:
How to prevent incorrect cost inputs And how to fix “after the fact”
How to prevent incorrect cost inputs Consider custom reports or alerts to compare current cost
with PO unit prices If using Standard Costing, activate an existing alert for
items with no costs (you may have to modify it to ignore old items)
Use item status control to prevent transactions before the item is ready to be used
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Douglas Volz Consulting, IncMay 20th, 2008
Current Problems: Incorrect Cost Inputs And how to fix “after the fact”
Consider reporting/SLA solutions to fix your COGS Request SQL report samples, ask
doug@volzconsulting.com for old vs. new comparison reports for COGS and inventory value– You enter the desired new item costs in a simulation cost type– One report compares your “As Booked” COGS against the new
COGS and gives you a report you can use as a manual journal entry
– The second report requires the Release 11.5.10 month-end inventory snapshot and compares the simulation cost type against the month-end inventory value
More complex solutions have also been done, including:– Creating a program that creates sub-ledger COGS entries to fix
the existing COGS transactions (yes, even in Release 12 and SLA!)
– Including the ability to fix transactions as long as the G/L is still open (and inventory is closed)
Make Cost Management Work for You! – 49
Douglas Volz Consulting, IncMay 20th, 2008Current Problems: Managing Period Close
Interfaces Until you get to Release 12, Oracle does not provide good
overview reporting for your period close interfaces Consider writing a custom report that reviews your major
inventory, WIP and other financial period close interfaces See How in the Dickens Do I Handle Those Month-End Interfaces?
For detailed information on creating a custom report – http://www.volzconsulting.com/resources.html
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Douglas Volz Consulting, IncMay 20th, 2008
Current Problems: Item Master and Cost Setup Issues
Common item master and cost data setup issues for the Cost Rollup Make items where the assembly is set to not be rolled up Buy items that are not included in the cost rollup Buy items set to be rolled up (may double up your costs) Bills of materials with no components (will roll up to a zero
cost) Differences between the summary and detail cost table
settings for:– Rollup source type (detailed cost table)– Rollup flag (summary cost type)
Mistakes happen when you change the item master but not the cost controls for your items
Request SQL report samples, ask doug@volzconsulting.com
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Douglas Volz Consulting, IncMay 20th, 2008
Current Problems: Cost Mass Edits Better “what-if” cost simulation capabilities
Since Release 10 Oracle Cost Management allows you to create custom Cost Mass Edits
Common ones include:– Changing material overheads across multiple inventory
orgs– Averaging invoice costs across multiple inventory
organizations– Taking the last cost (instead of an average invoice or PO
cost) Standard PL*SQL templates exist, create a PL*SQL new
package and register it in:– Concurrent program definitions– CST_MASS_EDITS– It will survive upgrades (but may need revisions)
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Douglas Volz Consulting, IncMay 20th, 2008
Implementation and Conversion Cost Practices Use the Cost open interfaces
Essential for Standard Costing Used for your material overhead rates for other costing methods
Use miscellaneous receipts to bring in your inventory quantities Do this in the month prior to GoLive If you use average costing you can also bring in your material
costs– And do a Average Cost Update to bring in your material
overheads
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Douglas Volz Consulting, IncMay 20th, 2008
Implementation and Conversion Cost Practices After conversion, reconcile by inventory organization
For both onhand values and item costs
Convert your year-end Legacy costs into a simulation cost type Use it at the following year-end to compare inventory values Excellent baseline for your inventory values – use it to convince
management and auditors that the costs are relatively unchanged
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Douglas Volz Consulting, IncMay 20th, 2008
Conclusions Adding a few custom reports can save lots of time Take another look at the standard features listed here Release 12 has major enhancements to consider (see
Appendix) A/P accrual functionality has been rewritten All inventory value reports can be run after month-end Revenue and COGS Matching
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Douglas Volz Consulting, IncMay 20th, 2008
Where to get more information UKOUG/OAUG Presentations by Doug Volz
(http://www.volzconsulting.com/resources.html)– (R11i) How to Setup, Use and Balance Your A/P Accrual Accounts– (R12) A/P Accruals for Release 12 (OAUG Cost Management SIG)– (R11i) How to Reconcile Your Manufacturing Accounting– (R11i and R12) Reconcile Your Inventory to G/L Balances With Ease, From 1 to
1,000 Inventory Organizations! SQL Report Examples for Your Use
(SQL scripts are free to use providing you acknowledge the author … also note these are old samples from Release 11i, just send an email to doug@volzconsulting.com)
– G/L Summary by Journal Source and Category– Invoice Price Variance Report– Purchase Price Variance Report– Inventory Value Report by Org– Recosting and “what-if” reporting for COGS– WIP Value Summary by Org
OAUG Discrete MFG Cost Sub-SIG: http://costmgmt.communities.oaug.org/
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Douglas Volz Consulting, IncMay 20th, 2008
Acknowledgements of kind assistance:
People who have contributed to or influenced these materials:Sharon Widmer, Manager, Hitachi ConsultingEspen Ingvoldstad, Cost Controller, Onninen ASVicky Marquez, Manager, Intacct Inc.Ludvig Millfors, Senior Manager, BearingPoint Consulting ASSolution Beacon, Alicia Hoekstra, Public Vision Databases:
http://www.solutionbeacon.com/tools_vision.htm
Douglas Volz Consulting, Inc.
Helping clients use Oracle Applications since 1990
US Cell: +1 510 755-7050 doug@volzconsulting.comwww.volzconsulting.com
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Douglas Volz Consulting, IncMay 20th, 2008
Thank You for Your Attendance and Participation
Douglas A. Volz
Douglas Volz Consulting, Inc.
Helping clients use Oracle Applications since 1990
US Cell: +1 510 755-7050 doug@volzconsulting.comwww.volzconsulting.com
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Douglas Volz Consulting, IncMay 20th, 2008
Appendix High level review for Oracle Cost Management (11i) Major Release 12 Enhancements for Cost Management Professional Background for Douglas Volz
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Douglas Volz Consulting, IncMay 20th, 2008
High-Level Review for Oracle Cost Management (11i)
Inventory Structure Costing Methods Oracle Cost Management Structure Organizational Costing Cost Elements Cost Sub-Elements Major Cost Accounts in the System Setup Integration with General Ledger
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Douglas Volz Consulting, IncMay 20th, 2008
Inventory Structure
FG Subinventory
STORES Subinventory
MRBSubinventory
WIP Subinventory
Locators Locators
Global Organization(Item Master)
Inventory Organization
Inventory Organization
Inventory Organization
Operating Unit
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Douglas Volz Consulting, IncMay 20th, 2008
Inventory Structure Global Inventory Organization
Where items are normally defined Inventory Organization
Usually represents a distribution or manufacturing site Where you track on-hand balances, WIP and daily
transactions Unless you are using Project Manufacturing, the lowest level
for costing goods and planning material requirements Subinventory
Physical or logical location to store your inventory goods Generally defined to represent main stores as well as
stocking points on the production floor Locator
Usually a physical area in a storeroom
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Costing Methods Average Standard FIFO LIFO Periodic
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Douglas Volz Consulting, IncMay 20th, 2008
Cost Structure
Inventory CostOrganization
GlobalOrganization(Item Master)
MatlCost
Element
Matl O/HCost
Element
ResourceCost
Element
OverheadCost
Element
Outside Proc. Cost Element
Matl1
Matl2
Matl O/H1
Matl O/H2
Res1
Res2
O/H1
O/H2
OSP1
OSP2
Sub
-el
emen
ts
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Douglas Volz Consulting, IncMay 20th, 2008
Organizational Costing Costing is by Warehouse or Manufacturing Site (inventory
organization) Each inventory organization has its own item material,
material overhead, resource and resource overheads Each inventory organization may have multiple cost types
(versions) You can have any number of cost types that are not active
(unimplemented costs) Each inventory organization can have its own costing method
You set the costing method by organization Within an inventory organization, all items have the same
costing method, Average or Standard or FIFO or LIFO or Periodic
Your costing method defines the “Active” cost type; it is used to transact to your General Ledger
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Douglas Volz Consulting, IncMay 20th, 2008
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)
And 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.)
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Douglas Volz Consulting, IncMay 20th, 2008
Major Cost Accounts in the System Setup Inventory Parameters Shipping Network Subinventory Setup (mainly used for standard costing) WIP Accounting Classes Receiving Options Purchasing Options Order Types and COGS
Make Cost Management Work for You! – 67
Douglas Volz Consulting, IncMay 20th, 2008
GL Integration with Inventory and Work In Process Inventory Period Calendars vs. GL Period Calendars Concept of shared chart of accounts and set of books Interim GL transfers and transfer options (summary vs.
detail) GL to Inventory drill-down capabilities, online and via reports Period close processing in Oracle Inventory, and Journal
Import in Oracle General Ledger
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Douglas Volz Consulting, IncMay 20th, 2008
Inventory Periods Vs. General Ledger Periods Every GL Set of Books has its own Financial Calendar Purchasing, Payables, Receivables have their own calendar
by Operating Unit Inventory and WIP share the same financial calendar but
have one for each Inventory Organization This means that you have to open and close each inventory
period in each inventory organization, separately from the GL, Purchasing, Payables and Receivables
Note: if you close Inventory, or Purchasing or General Ledger, you cannot do a PO Receipt or Return or OSP Receipt or Return
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Douglas Volz Consulting, IncMay 20th, 2008
Interim GL Transfers and Transfer options (summary vs. detail)
You can transfer when you want to within the accounting period
You can transfer to the General Ledger in detail or in summary
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Douglas Volz Consulting, IncMay 20th, 2008
GL to Inventory Drill-Down Capabilities, Online and Via Reports
Since Release 10 there has been reporting drill-down capability
The GL Journal Header stores the inventory org code in the Journal Batch Name, and the Inventory GL Batch ID
Run the Material Account Distribution, WIP Account Distribution Reports by GL Batch ID, to get the appropriate entries you find in the General Ledger.
In Release 11.5.9 + patches and 11.5.10 you can transfer to GL in detail, summarize when you run journal import, AND have drill-down capability from Oracle General Ledger.
Note: Due to the transaction volumes, it is not useful to drill-down for large accounts, from the G/L back into the material accounting or WIP accounting details. So if you do use the online drill-down capabilities,
please be careful or you will “hang” your session.
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Douglas Volz Consulting, IncMay 20th, 2008
Period Close Processing in Oracle Inventory What Happens?
Transfers entries in summary or detail to the GL Interface table
Marks the entries in the Inventory and WIP subledger as been transferred (cannot do it twice!)
Creates a GL Batch Id for the respective entries, and for the GL Journal Batch Header
Prior to Release 11.5.10, stores summary values by inventory organization by subinventory (blank subinventories are for intransit)
In Release 11.5.10, stores period-end inventory values and costs by inventory organization by subinventory by each individual item
Release 11.5.10 also creates a detailed Period Close Reconciliation Report that compares the cumulative onhand values against the cumulative accounting values
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Caution Use separate accounts for each type of system account:
Expense A/P Accrual Account Inventory A/P Accrual Account Receiving Account(s) Expense Purchase Order Charge Accounts Other inventory, WIP and price variance accounts
Teach your Payables staff to not use the A/P Accrual Account – it should be always assigned automatically
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Release 12 Cost Enhancements Inventory Value Enhancements Period Close Diagnostics Inventory A/P Accruals Revenue and COGS Matching
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R12 Inventory Value Reports Enhancements The following reports can now be run with an As-of Date:
Inventory Value Report – By Subinventory Inventory Value Report – By Cost Group Elemental Inventory Value Report – By Subinventory Elemental Inventory Value Report – By Cost Group All Inventories Value Report All Inventories Value Report – By Cost Group Intransit Value Report Receiving Value Report
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Douglas Volz Consulting, IncMay 20th, 2008
R12 Period Close Diagnostics Drilldown from Pending Transactions form to transaction
details forms, that allows users to more quickly view the details of the transactions that are preventing period close
Diagnostic report (in XML Publisher) showing all transactions holding up period close
System Alert messages and e-mail notifications to users in case of costing errors to ensure timely resolution of erred transactions and prevent panic at period end
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Release 12 – Major Rewrite for A/P Accruals Each month’s accrual entries are loaded incrementally
No more cumulative loading each month for the Accrual Temp table (no longer temporary)
PO and A/P entries which balance to zero are matched and removed
Much better performance and less tablespace too Separately define what are valid A/P Accrual Accounts
Easier to exclude invalid PO and A/P entries Matching is done at the PO distribution level (effectively at
the PO Release level if using PO Releases)
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Douglas Volz Consulting, IncMay 20th, 2008
Release 12 – Major Rewrite for A/P Accruals Summary and Detail Accrual Reconciliation Reports
Summary reporting by account Detail reporting with separate headings from report detail Uses XML Publisher – all reports can be downloaded into
Excel Separate reports for matching vs. non-matching
miscellaneous entries (A/P, Inventory entries) Ability to do mass A/P Accrual Write-Offs
Write-offs use SLA (sub-ledger architecture) and now create journal entries
Can do write-offs at the PO distribution level Much better write-off reporting for both matched and
unmatched entries
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Release 12 – Revenue and COGS Matching 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. Prior to this enhancement, the value of goods shipped from
inventory was expensed to COGS upon ship confirm, despite the fact that revenue may not yet have been earned on that shipment.
This enhancement synchronizes the recognition of revenue and COGS in accordance with the recommendations of generally accepted accounting principles.
Cost Processor now transfers the balance from the deferred account to the COGS account in the same proportion of revenue recognized for an order line. – Oracle Receivables publishes a business event when the
revenue recognition percentage changes. – Oracle Cost Management subscribes to this event and adjusts
the balances in the deferred and actual COGS accounts, ensuring that the COGS percentage equals the revenue recognition percentage.
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Douglas Volz Consulting, IncMay 20th, 2008
About DougDoug Volz is a Senior Architect and Business Advisor for Oracle EBS projects, specializing in Cost Management and Intercompany processes. He has over 35 years of accumulated experience, including 5 years in Oracle Development (co-designing Oracle Cost Management), 20 years implementing Oracle EBS in multiple countries and 12 years in industry for 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 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 and intercompany accounting requirements. Countries included US, Mexico, UK, Netherlands, Belgium, Taiwan, PRC, Norway, Japan, Italy, Switzerland and Germany.
Doug was recognized as the 2014 OAUG Member of the Year. He leads the OAUG Cost Management Special Interest Group (since 2007) and freely gives out valued business advice to his SIG members and to the Oracle community at large. Doug also presents at OAUG Collaborate, UKOUG and Oracle OpenWorld conferences. In addition he advises and participates on Oracle Customer Advisory Boards and frequently meets with the Oracle Cost Development teams.
Core Expertise Multi-organization, Multi-currency Global
Implementations Cost Accounting Business Solutions for Discrete &
Process Cost Accounting Intercompany and Profit in Inventory Inventory and A/P Accrual Reconciliation Project Management and Senior Project Advisor Core manufacturing and distribution processes
Cost Management Inventory Bills of Material WIP
Over 30 Published Papers at: Go to www.volzconsulting/resources.com
A/P Accruals for Release 12 and 11i Change Your Cost Methods Cost Management & Subledger Accounting Costing Tips and Tricks Discrete and Process Costing Integration EAM Costing Inventory Reconciliation Profit in Inventory Solutions Transaction Interfaces for Period Close And many, many more!
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Douglas Volz Consulting, IncMay 20th, 2008
End of Presentation