Douglas Volz Consulting Inc January 17 th 2008

Douglas Volz Consulting, Inc. January 17 th, 2008 Make Cost Management Work for You! 17 th January 2008 Douglas A. Volz Douglas Volz Consulting, Inc. Helping clients use Oracle Applications since 1990 www. volzconsulting. com Make Cost Management Work for You! – 1

Douglas Volz Consulting, Inc. January 17 th, 2008 Introduction – There Has to be a Better Way! Make Cost Management Work for You! – 2

Douglas Volz Consulting, Inc. January 17 th, 2008 Introduction ¥ This presentation is mostly for Release 11 i but many topics still apply to Release 12 ¨ Differences between 11 i 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 Make Cost Management Work for You! – 3

Douglas Volz Consulting, Inc. January 17 th, 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) Make Cost Management Work for You! – 4

Douglas Volz Consulting, Inc. January 17 th, 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! – 5

Douglas Volz Consulting, Inc. January 17 th, 2008 Agenda (Continued) ¥ Solve current problems you may have: ¨ ¨ Inventory to G/L Reconciliation ¨ Incorrect cost inputs and how to fix “after the fact” ¨ Managing period close interfaces ¨ ¥ Excess and Obsolete Reporting (Inventory Provision) 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! – 6

Douglas Volz Consulting, Inc. January 17 th, 2008 Agenda (Continued) ¥ Best implementation and data conversion practices for costing ¥ Conclusions ¥ Appendix ¨ High-Level Review for Oracle Cost Management (R 11 i) ¨ Release 12 cost enhancements Make Cost Management Work for You! – 7

Douglas Volz Consulting, Inc. January 17 th, 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 Average Costing) ¥ Data verification audits ¥ Period close snapshots (Release 11. 5. 10) Make Cost Management Work for You! – 8

Douglas Volz Consulting, Inc. January 17 th, 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! – 9

Douglas Volz Consulting, Inc. January 17 th, 2008 Standard Features: Period Open/Close by Org Hierarchy ¥ In Release 11 i 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 Make Cost Management Work for You! – 10

Douglas Volz Consulting, Inc. January 17 th, 2008 Standard Features: Period Open/Close by Org Hierarchy ¥ Define your organization hierarchy: Make Cost Management Work for You! – 11

Douglas Volz Consulting, Inc. January 17 th, 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 Make Cost Management Work for You! – 12

Douglas Volz Consulting, Inc. January 17 th, 2008 Standard Features: Period Open/Close by Org Hierarchy ¥ Open Period Control request Make Cost Management Work for You! – 13

Douglas Volz Consulting, Inc. January 17 th, 2008 Standard Features: Period Open/Close by Org Hierarchy ¥ Close Period Control request Make Cost Management Work for You! – 14

Douglas Volz Consulting, Inc. January 17 th, 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! – 15

Douglas Volz Consulting, Inc. January 17 th, 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! – 16

Douglas Volz Consulting, Inc. January 17 th, 2008 Standard Features: Transaction Value Historical Summary Make Cost Management Work for You! – 17

Douglas Volz Consulting, Inc. January 17 th, 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! – 18

Douglas Volz Consulting, Inc. January 17 th, 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! – 19

Douglas Volz Consulting, Inc. January 17 th, 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! – 20

Douglas Volz Consulting, Inc. January 17 th, 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! – 21

Douglas Volz Consulting, Inc. January 17 th, 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! – 22

Douglas Volz Consulting, Inc. January 17 th, 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 Or download the G/L Summary by Journal Source and Category Report from www. volzconsulting. com ¨ 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! – 23

Douglas Volz Consulting, Inc. January 17 th, 2008 Reporting Extensions: Summarize G/L Account Activity ¥ Sample Layout Make Cost Management Work for You! – 24

Douglas Volz Consulting, Inc. January 17 th, 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! – 25

Douglas Volz Consulting, Inc. January 17 th, 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! – 26

Douglas Volz Consulting, Inc. January 17 th, 2008 Reporting Extensions: Margin Reporting ¥ In Release 11 i 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! – 27

Douglas Volz Consulting, Inc. January 17 th, 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 ¥ The Multi-Org Material Account Distribution Summary Report can be done either as a SQL Report or an XML Publisher Report Make Cost Management Work for You! – 28

Douglas Volz Consulting, Inc. January 17 th, 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 ¥ Download the Purchase Price Variance Report from www. volzconsulting. com to get a SQL report version. ¨ 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! – 29

Douglas Volz Consulting, Inc. January 17 th, 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 ¥ Download the Invoice Price Variance Report from www. volzconsulting. com a SQL report version for your use. ¨ 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! – 30

Douglas Volz Consulting, Inc. January 17 th, 2008 Reporting Extensions: Find High Value Mat’l Transactions ¥ Finding high-value material transaction entries with ease ¥ Standard report does not exist ¥ Download the Find High Value Mat’l Transactions Report from www. volzconsulting. com a SQL report version for your use. ¨ 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! – 31

Douglas Volz Consulting, Inc. January 17 th, 2008 Solve Current Problems You May Have ¥ Solve current problems you may have: ¨ ¨ Inventory to G/L Reconciliation ¨ Incorrect cost inputs and how to fix “after the fact” ¨ Managing period close interfaces ¨ ¥ Excess and Obsolete Reporting 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! – 32

Douglas Volz Consulting, Inc. January 17 th, 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! – 33

Douglas Volz Consulting, Inc. January 17 th, 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 Make Cost Management Work for You! – 34

Douglas Volz Consulting, Inc. January 17 th, 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! – 35

Douglas Volz Consulting, Inc. January 17 th, 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: 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! – 36

Douglas Volz Consulting, Inc. January 17 th, 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: 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! – 37

Douglas Volz Consulting, Inc. January 17 th, 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: 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! – 38

Douglas Volz Consulting, Inc. January 17 th, 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! – 39

Douglas Volz Consulting, Inc. January 17 th, 2008 Sample Reconciliation Spreadsheet and Example Make Cost Management Work for You! – 40

Douglas Volz Consulting, Inc. January 17 th, 2008 What do You do When You Have Many 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 Make Cost Management Work for You! – 41

Douglas Volz Consulting, Inc. January 17 th, 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 the OAUG Discrete MFG Cost Sub-SIG website (http: //discretesig. oaug. org/Cost. Management. htm) or to www. volzconsulting. com. Make Cost Management Work for You! – 42

Douglas Volz Consulting, Inc. January 17 th, 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! – 43

Douglas Volz Consulting, Inc. January 17 th, 2008 Current Problems: Incorrect Cost Inputs ¥ And how to fix “after the fact” ¨ Consider reporting solutions to fix your COGS ¨ Go to www. volzconsulting. com to download old vs. new comparison reports for COGS and inventory value – – One report compares your “As Booked” COGS against the new COGS and gives you a report you can use as a manual journal entry – ¨ You enter the desired new item costs in a simulation cost type 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 – 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! – 44

Douglas Volz Consulting, Inc. January 17 th, 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 Make Cost Management Work for You! – 45

Douglas Volz Consulting, Inc. January 17 th, 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) ¥ Go to www. volzconsulting. com to get a SQL query script for cost rollup flags to see if this is an issue ¥ Mistakes happen when you change the item master but not the cost controls for your items Make Cost Management Work for You! – 46

Douglas Volz Consulting, Inc. January 17 th, 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: – – Averaging invoice costs across multiple inventory organizations – ¨ Changing material overheads across multiple inventory orgs 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! – 47

Douglas Volz Consulting, Inc. January 17 th, 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 Go. Live ¨ 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! – 48

Douglas Volz Consulting, Inc. January 17 th, 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! – 49

Douglas Volz Consulting, Inc. January 17 th, 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! – 50

Douglas Volz Consulting, Inc. January 17 th, 2008 Where to get more information ¥ www. volzconsulting. com ¨ UKOUG/OAUG Presentations by Doug Volz – How to Setup, Use and Balance Your A/P Accrual Accounts – How to Reconcile Your Manufacturing Accounting ¨ SQL Report Examples for Your Use (SQL scripts are free to use providing you acknowledge the author) – 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: //discretesig. oaug. org/Cost. Management. htm ¥ Oracle Cost EBS Public Forum: http: //forums. oracle. com/forums/forum. jspa? forum. ID=414 Make Cost Management Work for You! – 51

Douglas Volz Consulting, Inc. January 17 th, 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, Bearing. Point Consulting Inc. Ludvig Millfors, Senior Manager, Bearing. Point 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 davolz@comcast. net www. volzconsulting. com Make Cost Management Work for You! – 52

Douglas Volz Consulting, Inc. January 17 th, 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 davolz@comcast. net www. volzconsulting. com Make Cost Management Work for You! – 53

Douglas Volz Consulting, Inc. January 17 th, 2008 Appendix ¥ Professional Background for Douglas Volz ¥ High level review for Oracle Cost Management (11 i) ¥ Major Release 12 Enhancements for Cost Management Make Cost Management Work for You! – 54

Douglas Volz Consulting, Inc. January 17 th, 2008 Douglas Volz Professional Background Doug Volz is a Senior Architect and Advisor for Oracle Application projects, with a particular interest in Project and Cost Management. He has 27 years accumulated experience, including 5 years in Oracle Development (co-designing Oracle Cost Management) and 12 years in industry in Cost and Accounting Management positions. His Manufacturing and Cost systems experience covers project management, software design/development, delivery and consulting services, for both Oracle Corporation, and multiple international consulting firms. Prior to his systems career, Mr. Volz also held numerous management accounting positions for telecommunications, defense, and electronics companies. In his consulting roles, Doug has served over 100 clients. Many of these were multi-org, multi-currency with global footprints. Countries include US, Mexico, UK, Netherlands, Belgium, Taiwan, P. R. O. C. , Norway, Japan and Germany. Doug leads the Cost Sub-Committee, for the Oracle Applications User Group for Discrete Manufacturing. He also advises to and participates on the Oracle Customer Advisory Board for Fusion Costing. Core Expertise Experience ¥ Multi-organization, Multi-currency ERP Sample of clients served: ¥ Beckman Coulter (US) ¥ Onninen AS (Norway) ¥ Matsushita (UK, Mexico) ¥ NTL (now Virgin Media) ¥ Idec Izumi (Japan) ¥ Motorola (UK, US) ¥ Logitech (US, Taiwan, P. R. C. ) Implementations ¥ Project Management and Senior Project Advisor ¥ Core manufacturing processes 4 Cost Management 4 Inventory 4 Bills of Material 4 WIP ¥ Systems Integration and Systems Selection ¥ Data Conversions Make Cost Management Work for You! – 55

Douglas Volz Consulting, Inc. January 17 th, 2008 High-Level Review for Oracle Cost Management (11 i) ¥ 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! – 56

Douglas Volz Consulting, Inc. January 17 th, 2008 Inventory Structure Operating Unit Make Cost Management Work for You! – 57

Douglas Volz Consulting, Inc. January 17 th, 2008 Inventory Structure ¥ Global Inventory Organization ¨ ¥ Where items are normally defined Inventory Organization ¨ ¨ Where you track on-hand balances, WIP and daily transactions ¨ ¥ Usually represents a distribution or manufacturing site 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! – 58

Douglas Volz Consulting, Inc. January 17 th, 2008 Costing Methods ¥ Average ¥ Standard ¥ FIFO ¥ LIFO ¥ Periodic Make Cost Management Work for You! – 59

Douglas Volz Consulting, Inc. January 17 th, 2008 Cost Structure Make Cost Management Work for You! – 60

Douglas Volz Consulting, Inc. January 17 th, 2008 Organizational Costing ¥ Costing is by Warehouse or Manufacturing Site (inventory organization) ¨ ¨ Each inventory organization may have multiple cost types (versions) ¨ ¥ Each inventory organization has its own item material, material overhead, resource and resource overheads 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! – 61

Douglas Volz Consulting, Inc. January 17 th, 2008 Cost Elements ¥ You have five available cost elements for each cost type ¨ ¨ Material Overhead (freight in, material handling, etc. ) ¨ Resource (labor, machines, other factors of production) ¨ Outside Processing (subcontracting or outsourcing) ¨ ¥ Material (supplier purchase costs) 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 service 1, service 2, etc. ) ¨ Production Overheads (Factory Burdens, etc. ) Make Cost Management Work for You! – 62

Douglas Volz Consulting, Inc. January 17 th, 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! – 63

Douglas Volz Consulting, Inc. January 17 th, 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! – 64

Douglas Volz Consulting, Inc. January 17 th, 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! – 65

Douglas Volz Consulting, Inc. January 17 th, 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! – 66

Douglas Volz Consulting, Inc. January 17 th, 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! – 67

Douglas Volz Consulting, Inc. January 17 th, 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! – 68

Douglas Volz Consulting, Inc. January 17 th, 2008 Caution ¥ Use separate accounts for each type of system account: ¨ ¨ Inventory A/P Accrual Account ¨ Receiving Account(s) ¨ Expense Purchase Order Charge Accounts ¨ ¥ Expense A/P Accrual Account 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! – 69

Douglas Volz Consulting, Inc. January 17 th, 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! – 70

Douglas Volz Consulting, Inc. January 17 th, 2008 R 12 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 – By Cost Group ¨ Intransit Value Report ¨ Receiving Value Report Make Cost Management Work for You! – 71

Douglas Volz Consulting, Inc. January 17 th, 2008 R 12 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! – 72

Douglas Volz Consulting, Inc. January 17 th, 2008 Release 12 – Major Rewrite for A/P Accruals ¥ Each month’s accrual entries are loaded incrementally ¨ ¨ PO and A/P entries which balance to zero are matched and removed ¨ ¥ No more cumulative loading each month for the Accrual Temp table (no longer temporary) 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! – 73

Douglas Volz Consulting, Inc. January 17 th, 2008 Release 12 – Major Rewrite for A/P Accruals ¥ Summary and Detail Accrual Reconciliation Reports ¨ ¨ Detail reporting with separate headings from report detail ¨ Uses XML Publisher – all reports can be downloaded into Excel ¨ ¥ Summary reporting by account 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! – 74

Douglas Volz Consulting, Inc. January 17 th, 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! – 75

Douglas Volz Consulting, Inc. January 17 th, 2008 End of Presentation Make Cost Management Work for You! – 76