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Supply Chain Cost Rollup Overview an Oracle White Paper by Laura Z. Miller

SC_COST ROLLUP

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Page 1: SC_COST ROLLUP

Supply Chain Cost Rollup Overview

an Oracle White Paper

by Laura Z. Miller

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Supply Chain Cost Rollup Overview

Supply Chain Cost Rollup enhances the existing Assembly Cost Rollup process. Thefunctionality of this process became available in Oracle Applications Release 11.5.2.The rollup process can be used to create a global standard cost for items.

The rollup process uses the Bill of Distribution (BOD) and Sourcing Rules that are defined inMRP. Now the application will allow the direct computation of rollup costs when assembliesare made with components from other organizations. Partial sourcing of components fromdifferent organizations can also be performed. This process supports using organization-specificmarkup costs. Each item can have a different Bill of Material (BOM) in different organizationsand be included in the rollup.

The Bill of Material is the representation of components that are used for an assembly or a sub-assembly. The BOM does not included sourcing rules information that may exist for theseindividual components. If there are multi sourcing rules on the BOM, these are not used by theAssembly Cost Rollup but are used by the Supply Chain Cost Rollup. For the Supply ChainCost Rollup, the Bill used is called the Supply Chain Bill of Material which combines the existingconcept of the BOM as well as including the Supply Chain sourcing rules that exist.

The Supply Chain Cost Rollup can be performed for items specifically belonging to oneorganization or for all organizations included in the Supply Chain. This rollup uses a cost typethat is multi-org and updateable.

Since items can be made or bought in an organization, these costs can be captured in a rollup.If the items are made in an organization, the cost of the items is determined by rolling up thecosts and then using the sourcing rules percentages that are in place. Items that are built in otherorganizations of the Supply Chain will have their cost calculated first in the owning organization,and then the percentage weights are used when bringing the costs over to the organizationperforming the rollup. The rollup cost can show the cost breakdown as computed by thevarious sources in the supply chain.

For Buy items, which have partial sourcing rules, the costs rows will get re-weighted every timethe supply chain cost rollup is performed. This means that every time a supply chain cost rollupoccurs, the starting buy cost will be different at the start of the next rollup process. The costtype for buy items should be flagged as multi-org but does not need to be flagged asupdateable.

There is an option of using a Buy Cost Hook. If this is used then the Buy Cost Type is ignoredfor the preferences listed in the hook. This hook is used to allow customization capabilities inregard to vendor information. The retrieval of purchase costs of the vendor, the shipping site,and the shipping method can all be taken into account by use of the Buy Cost Hook.

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The details of item sourcing rules for the Supply Chain Cost Rollup are entered using OracleMRP functionality. There can be a set of Sourcing Rules established or a Bill of Distributionthat is used to compute the Supply Chain costs. The navigation for these setups is included inthe Cost Management responsibility for ease of use.

Navigation Path: Cost > Supply Chain Costing

Markup costs related to any inter-org transfer of items are also included in the Supply ChainCost Rollup. By default, markup costs are retrieved from InterOrg Parameters. Theseparameters must be setup prior to running the Rollup. If the markup cost hook is being used inthe rollup, the InterOrg Parameters are disregarded.

The Markup Cost Hook can be used to capture more costs for the rollup. This allows the userto create customizations to capture markup costs for ‘transfer from’ other organizations that arein the Supply Chain.

The system will track cost details with source organization/vendor visibility. Costs will bemarked with the original source organization/vendor and the related allocation percentages thatcontribute to the final assembly cost.

The Supply Chain indented report provides all cost information for the Rollup. All costs fromprior Supply Chain Rollups used in the latest rollup are considered to be previous level costs.When running the rollup, a snapshot of the MRP sourcing rules is used. No loops can exist inthe BOM or BOD otherwise the rollup will not compute the costs.

The following is the list of steps required to perform a Supply Chain Cost Rollup:

1 - Setup rollup and buy cost types

Two types are necessary:Rollup Cost Type: This parameter is as used in assembly cost rollup; costs areread from and written to this cost type during the rollup.

In the Rollup Cost Type, setups include the user-defined costs and the “Based OnRollup” flags for the items. The user-defined costs are applied over and above theweighted average of all sources for a particular item in an organization.

The cost of an item in a particular organization will be recalculated only if its “Based OnRollup” flag is set to Yes in the Rollup Cost Type. Otherwise, the item cost will betaken as is from the Rollup Cost Type.

Buy Cost Type: This parameter holds the costs to be used that are setup aspurchase costs. All costs from this cost type will be taken as is, with no rollup donewithin the Buy Cost Type.

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Both Rollup Cost Type and Buy Cost Type should be Multi-Org and the Rollup CostType must be Updateable. If the Buy Cost Hook is used, then the Buy Cost Type isdisregarded; the buy costs will be populated by the Buy Cost Hook instead.

2-Setup Buy Cost Hook (optional)

This provides the user customization capabilities in regard to vendor information. TheBuy Cost Type holds the default buy cost for purchased items specified in the MRPsourcing rules.

The Buy Cost Hook can be customized to provide vendor level visibility for purchasecosts. Parameters that can be utilized include:

p_rollup_idp_assignment_set_idp_item_idp_organization_idp_vendor_idp_site_idp_ship_method

3-Setup Interorg Parameters

The Supply Chain Cost Rollup uses transfer costs in these parameters as themarkup charge for interorg transfers. These parameters must be set prior to running arollup. If a Markup Cost Hook is defined then these parameters are disregarded

4-Setup Markup Cost Hook (optional)

This allows the user to create customizations of the markup costs for “transfer from”other organizations that are in the Supply Chain. If desired, the Markup Cost Hook canbe customized to provide custom markup costs for “Transfer From” other organizationsin the Supply Chain ONLY.

5-Setup Transportation Cost Hook (optional)

This allows the user to create customizations to capture transportation cost for “TransferFrom” other organizations that are in the Supply Chain. If hook is not used, the defaultsetting in the Inter-Org Shipping Networks will be used.

6-Setup Sourcing Rules

Setup the MRP Assignment Set with sourcing rules/BOD reflecting the Supply Chainstructure to rollup the cost on

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7-Run Supply Chain Cost Rollup

The following parameters are using in the process:

Supply Chain Cost Rollup Parameters:

Parameter Options Required?Cost Type YBuy Cost Type YOrganization NAssignment Set NConversion Type YRollup Option Full cost rollup, Single level cost

rollupY

Report Type Detail Indented, Consolidated YMaterial Detail Yes, No YMaterial Overhead Detail Yes, No YRouting Detail Yes, No YReport Number of Levels YEffective Date YInclude UnimplementedECOs

Yes/No Y

Alternate Bill NAlternate Routing NEngineering Bills Yes/No YSpecific Item NCategory Set NSpecific Category NItem From NItem To N

Once the process is launched, a snapshot of the MRP Sourcing Rules/Bill of Distribution isperformed. This information is taken from data entered in MRP. This snapshot has the existingstate of relevant information.

The snapshot data is then taken from MRP_SOURCES_V and placed inCST_SC_SOURCING_RULES. If any sourcing rules exist in MRP_SOURCES_V, the codethen verifies that the sum of all sourcing percentages for a particular item/org will sum to 100.

The markup_percent column in the CST_SC_SOURCING_RULES table will be populatedfrom the interorg shipping network, MTL_INTERORG_PARAMETERS, if the markup hookis not used

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The Supply Chain Bill of Materials Explosion of each assembly then takes place. This logic isthe same as the Assembly Rollup code but is modified to track the item/org combination insteadof tracking the item only. Also the explosion will take the sourcing rules that were captured viathe snapshot

The Supply Cost Rollup Report is re-runnable for particular Supply Chain Rollup previouslyperformed, identified by rollup_id. This is the report that is printed when the Cost Rollup is runwith the “Cost Rollup – Print Report” option. It first calls the rollup processor, then generatesthe report using the data generated in CST_SC_BO_STRUCTURES. It resembles the BOMIndented Cost Report for regular assembly rollup, with additional data displayed to designatethe supply chain cost sources.