Douglas Volz Consulting, Inc
May 20th, 2008
Make Cost Management Work for You!
20th May 2008
(Revised 13th February 2016)
Douglas A. Volz
OAUG Discrete MFG Cost Sub-Committee Presentation
Make Cost Management Work for You! – 1
Douglas Volz Consulting, Inc
May 20th, 2008
Agenda

Welcome to Our Session!

Proposed 2008 Schedule - July to December 2008

Introduce the Cost Enhancement List

Costing Tips and Tricks Presentation
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Douglas Volz Consulting, Inc
May 20th, 2008
Proposed 2008 Schedule - July to December 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
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Douglas Volz Consulting, Inc
May 20th, 2008
Cost Enhancement List

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)
Make Cost Management Work for You! – 4
Douglas Volz Consulting, Inc
May 20th, 2008
Make Cost Management Work for You!
20th May 2008
(Revised 13th February 2016)
Douglas A. Volz
Douglas Volz Consulting, Inc.
Helping clients use Oracle Applications since 1990
www.volzconsulting.com
Make Cost Management Work for You! – 5
Douglas Volz Consulting, Inc
May 20th, 2008
Tips and Tricks
Introduction – There Has to be a Better Way!
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Douglas Volz Consulting, Inc
May 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, Inc
May 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, Inc
May 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! – 9
Douglas Volz Consulting, Inc
May 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
Make Cost Management Work for You! – 10
Douglas Volz Consulting, Inc
May 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, Inc
May 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, Inc
May 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
Make Cost Management Work for You! – 13
Douglas Volz Consulting, Inc
May 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, Inc
May 20th, 2008
Standard Features: Period Open/Close by Org Hierarchy

Define your organization hierarchy:
Make Cost Management Work for You! – 15
Douglas Volz Consulting, Inc
May 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, Inc
May 20th, 2008
Standard Features: Period Open/Close by Org Hierarchy

Open Period Control request
Make Cost Management Work for You! – 17
Douglas Volz Consulting, Inc
May 20th, 2008
Standard Features: Period Open/Close by Org Hierarchy

Close Period Control request
Make Cost Management Work for You! – 18
Douglas Volz Consulting, Inc
May 20th, 2008
Standard Features: Mat’l Overhead Absorption Rules

Explicitly say which ones do and do not earn material overhead
Make Cost Management Work for You! – 19
Douglas Volz Consulting, Inc
May 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
Make Cost Management Work for You! – 20
Douglas Volz Consulting, Inc
May 20th, 2008
Standard Features: Transaction Value Historical Summary
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Douglas Volz Consulting, Inc
May 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
Make Cost Management Work for You! – 22
Douglas Volz Consulting, Inc
May 20th, 2008
Standard Features: Data Verification Audits

Found under the MRP/MPS/Planning Responsibilities:
Useful for general item setup verification
Make Cost Management Work for You! – 23
Douglas Volz Consulting, Inc
May 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
Make Cost Management Work for You! – 24
Douglas Volz Consulting, Inc
May 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
Make Cost Management Work for You! – 25
Douglas Volz Consulting, Inc
May 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
Make Cost Management Work for You! – 26
Douglas Volz Consulting, Inc
May 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
Make Cost Management Work for You! – 27
Douglas Volz Consulting, Inc
May 20th, 2008
Reporting Extensions: Summarize G/L Account Activity

Sample Layout
Make Cost Management Work for You! – 28
Douglas Volz Consulting, Inc
May 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)
Make Cost Management Work for You! – 29
Douglas Volz Consulting, Inc
May 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
Make Cost Management Work for You! – 30
Douglas Volz Consulting, Inc
May 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
Make Cost Management Work for You! – 31
Douglas Volz Consulting, Inc
May 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)
Make Cost Management Work for You! – 32
Douglas Volz Consulting, Inc
May 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! – 33
Douglas Volz Consulting, Inc
May 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! – 34
Douglas Volz Consulting, Inc
May 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! – 35
Douglas Volz Consulting, Inc
May 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! – 36
Douglas Volz Consulting, Inc
May 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!
Make Cost Management Work for You! – 37
Douglas Volz Consulting, Inc
May 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.
Make Cost Management Work for You! – 38
Douglas Volz Consulting, Inc
May 20th, 2008
General Reconciliation Principles

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
Make Cost Management Work for You! – 39
Douglas Volz Consulting, Inc
May 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 Report
Note: 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
Make Cost Management Work for You! – 40
Douglas Volz Consulting, Inc
May 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
Make Cost Management Work for You! – 41
Douglas Volz Consulting, Inc
May 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
Make Cost Management Work for You! – 42
Douglas Volz Consulting, Inc
May 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.
Make Cost Management Work for You! – 43
Douglas Volz Consulting, Inc
May 20th, 2008
Sample Reconciliation Spreadsheet and Example
Make Cost Management Work for You! – 44
Douglas Volz Consulting, Inc
May 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
Make Cost Management Work for You! – 45
Douglas Volz Consulting, Inc
May 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
Make Cost Management Work for You! – 46
Douglas Volz Consulting, Inc
May 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
Make Cost Management Work for You! – 47
Douglas Volz Consulting, Inc
May 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! – 48
Douglas Volz Consulting, Inc
May 20th, 2008
Current 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
Make Cost Management Work for You! – 49
Douglas Volz Consulting, Inc
May 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
Make Cost Management Work for You! – 50
Douglas Volz Consulting, Inc
May 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)
Make Cost Management Work for You! – 51
Douglas Volz Consulting, Inc
May 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
Make Cost Management Work for You! – 52
Douglas Volz Consulting, Inc
May 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
Make Cost Management Work for You! – 53
Douglas Volz Consulting, Inc
May 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
Make Cost Management Work for You! – 54
Douglas Volz Consulting, Inc
May 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/
Make Cost Management Work for You! – 55
Douglas Volz Consulting, Inc
May 20th, 2008
Acknowledgements of kind assistance:
People who have contributed to or influenced these materials:
Sharon Widmer, Manager, Hitachi Consulting
Espen Ingvoldstad, Cost Controller, Onninen AS
Vicky Marquez, Manager, Intacct Inc.
Ludvig Millfors, Senior Manager, BearingPoint Consulting AS
Solution 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.com
www.volzconsulting.com
Make Cost Management Work for You! – 56
Douglas Volz Consulting, Inc
May 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.com
www.volzconsulting.com
Make Cost Management Work for You! – 57
Douglas Volz Consulting, Inc
May 20th, 2008
Appendix

High level review for Oracle Cost Management (11i)

Major Release 12 Enhancements for Cost Management

Professional Background for Douglas Volz
Make Cost Management Work for You! – 58
Douglas Volz Consulting, Inc
May 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
Make Cost Management Work for You! – 59
Douglas Volz Consulting, Inc
May 20th, 2008
Inventory Structure
Global
Organization
(Item Master)
Operating Unit
Inventory
Organization
Inventory
Organization
FG
Subinventory
STORES
Subinventory
Locators
Locators
Inventory
Organization
MRB
Subinventory
WIP
Subinventory
Make Cost Management Work for You! – 60
Douglas Volz Consulting, Inc
May 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
Make Cost Management Work for You! – 61
Douglas Volz Consulting, Inc
May 20th, 2008
Costing Methods

Average

Standard

FIFO

LIFO

Periodic
Make Cost Management Work for You! – 62
Douglas Volz Consulting, Inc
May 20th, 2008
Cost Structure
Global
Organization
(Item Master)
Inventory Cost
Organization
Subelements
Matl
Cost
Element
Matl
1
Matl
2
Matl O/H
Cost
Element
Matl
O/H1
Matl
O/H2
Resource
Cost
Element
Res
1
Res
2
Overhead
Cost
Element
O/H
1
O/H
2
Outside
Proc. Cost
Element
OSP
1
Make Cost Management Work for You! – 63
OSP
2
Douglas Volz Consulting, Inc
May 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
Make Cost Management Work for You! – 64
Douglas Volz Consulting, Inc
May 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.)
Make Cost Management Work for You! – 65
Douglas Volz Consulting, Inc
May 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! – 66
Douglas Volz Consulting, Inc
May 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
Make Cost Management Work for You! – 67
Douglas Volz Consulting, Inc
May 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
Make Cost Management Work for You! – 68
Douglas Volz Consulting, Inc
May 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
Make Cost Management Work for You! – 69
Douglas Volz Consulting, Inc
May 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.
Make Cost Management Work for You! – 70
Douglas Volz Consulting, Inc
May 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
Make Cost Management Work for You! – 71
Douglas Volz Consulting, Inc
May 20th, 2008
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
Make Cost Management Work for You! – 72
Douglas Volz Consulting, Inc
May 20th, 2008
Release 12 Cost Enhancements

Inventory Value Enhancements

Period Close Diagnostics

Inventory A/P Accruals

Revenue and COGS Matching
Make Cost Management Work for You! – 73
Douglas Volz Consulting, Inc
May 20th, 2008
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
Make Cost Management Work for You! – 74
Douglas Volz Consulting, Inc
May 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
Make Cost Management Work for You! – 75
Douglas Volz Consulting, Inc
May 20th, 2008
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)
Make Cost Management Work for You! – 76
Douglas Volz Consulting, Inc
May 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
Make Cost Management Work for You! – 77
Douglas Volz Consulting, Inc
May 20th, 2008
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.
Make Cost Management Work for You! – 78
Douglas Volz Consulting, Inc
May 20th, 2008
About Doug
Doug 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
Over 30 Published Papers at:
 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
 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!
Make Cost Management Work for You! – 79
Douglas Volz Consulting, Inc
May 20th, 2008
End of Presentation
Make Cost Management Work for You! – 80