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ORACLE PROCESS MANUFACTURING

OVERVIEW

Oracle Process Manufacturing enables firms to better


manage batch production involving variable ingredients,
scalable recipes and flexible routings to satisfy unique
specifications typically found in chemicals, food and
beverage, life sciences, pharma and natural resources.
Oracle Process Manufacturing (OPM) allows multiple cost
methods that provide complete visibility of plant operations
Major Difference Between Discrete and
Process Manufacturing

By Definition, Discrete Manufacturing is for an


Organization where the Finished products can be
disassembled once again into Raw Materials and Process
Manufacturing is an Irreversible process where the
Finished goods cannot be converted back in to the Raw
Materials.
Major Difference Between Discrete and
Process Manufacturing – Continued...

System wise the following are the major differences


between OPM and Discrete Organizations

 In an OPM Organizations there will be no Material


Distributions, unlike in a discrete Manufacturing
Organization.

 Accounting entries will be created only based on the Sub


ledger Accounting Method, and Process Manufacturing
Financials SLA gives a wide range of sources to choose
from, to customize the SLA to satisfy the client
requirements
Major Difference Between Discrete and
Process Manufacturing – Continued...

 The Process Manufacturing Organization will have only


Standard Costing enabled at the Organization parameter
level. However the costing methods (Standard, Actual or
Lot) can be specified in the OPM Financials and different
costing methods can be followed for the same transaction
and check the accuracy of the costing.

 GL Expense Allocation is a major feature included in


OPM, which allows the Admin and other Expenses from
the GL to flow into the item costs which in turn will be
calculated in the COGS. Thus the COGS will include the
material cost as well as the Actual Expenses incurred
during a period.
Modules to be Seen in this Presentation

 OPM Formulator

 OPM Process Engineer

 OPM Production Supervisor

 OPM Financials

OPM Costing
OPM Sub ledger Accounting
Prerequisites for Implementing OPM

The Following modules needs to be implemented before or


at the time of implementing OPM.

 Oracle General Ledger

 Oracle Inventory

 Oracle Purchasing(Optional)
SCENARIO TO BE IMPLEMENTED
THROUGH PROCESS MANUFACTURING

The Scenario now which we are going to run through is the


Production of a Juice (Minute Maid Apple – 1 Litre)

The company has a production capacity to produce 1000


bottles of the juice daily.

 The Production runs everyday from 12: 00A.M in the


Morning to 12: 00 A.M of the next day
SCENARIO TO BE IMPLEMENTED
THROUGH PROCESS MANUFACTURING
- Continued
1 Litre of the packed Juice consumes the following products

1 Litre Water
250 Mg Sugar
100 Ml Apple Juice Concentrate
1 Litre water bottle
They have two resources which are used to make juice from
the Above products

Mixing Machine
Operator
SCENARIO TO BE IMPLEMENTED
THROUGH PROCESS MANUFACTURING
- Continued
The Purchase Prices for the ingredients are as follows

1 Litre Water
= Rs.5/

1 KG Sugar = Rs.45/-

1 Litre Juice Concentrate = Rs.90/-

1 Bottle with Label = Rs.2/-

The Mixing Machine incurs a cost of Rs. 5/- per hour and
the Operator incurs a cost of Rs.40/- per hour

In addition to this the company also spends Rs. 5,00,000/-


per month as Rent for the premises, Rs.50,000/- for EB
SCENARIO TO BE IMPLEMENTED
THROUGH PROCESS MANUFACTURING
- Continued
ITEM/RESOURCE QTY Per QTY Per Per Total Per Unit Value
Unit Month/ Unit Value for Production
Total Cost = Total
Resource Value/30,000
Usage

Water 1 Litre 30000 Litre 5 1,50,000 5

Sugar 250 Gm 7500 KG 45 3,37,500 11.25

Concentrate 100 Ml 3000 Litre 90 2,70,000 9

Bottle 1 Ea 30000 Ea 2 60,000 2

Total Material Cost 27.25

Mixing Machine 720 Hrs 5 3,600 0.12

Operator 720 Hrs 40 28,800 0.96

Total Resource Cost 1.08

Admin Over Heads 1,00,000 3.33


SETTING UP ORACLE
PROCESS MANUFACTURING
The First step in implementing OPM is defining an
Inventory Organization as a Process Manufacturing enabled
Organization in the Organization Parameters. This is an
irreversible setup.
Create the Following Responsibilities and assign the
profile options for the Responsibilities

 OPM Product Development Security Manager

 Formulator

 Process Engineer

 Production Supervisor

 OPM Financials

 OPM ALL (Only for the Setup User)

The OPM All Responsibility Menu will contain all the


menus of the above said responsibilities
Define the Product Development Parameters for the
Organization classified as OPM Enabled Organization here.
Enter the Process Execution parameters for the Organization
While Defining the Item Master, enable the
attributes in the process Manufacturing tab.
Define two Default Cost Component Classes
with Usages as Material for one and Over Head
for the other
Define Cost Analysis Code
Define Cost Types and Specify, the Cost Method
Create the OPM Cost Calender similar to the GL
Calender and assign the Legal Entity, and cost
Method here. The Same Legal entity can have
multiple cost types assigned to it.
Define Fiscal Policies for the Legal Entity and
assign the Cost types for the Legal entity. More
than one Cost types can be assigned to a Legal
Entity here
Define Activity codes to be used for the
Production here
Define the Resources as a Generic Resource first
Assign the Resource Created as a Plant Resource
Define Formulas

Formulas are nothing but the Composition of the Items given


as Input and the Items coming out of a batch

The Formula in OPM allows By Product Recovery as well as


Co- Product Recovery.

In case of Co-Product Recovery the, the cost of the Co-


Product will automatically be calculated based on the Cost
Allocation factor. The Co- Product can be Included in the
Product Tab Itself.

Thus the Formula Contains the End Product and the quantity
produced, the Ingredients and their quantity required to
produce the quantity of the finished goods, and also the
quantity of By Products or Co-Products recovered, if any.
Define Formulas – Continued...
Define the Operations to be used, assign the
activity created and then assign the resources
required to do the activity
Define a Process Routing and assign the
Operations to it
Create a Recipe, assign the formula and Routing
and then create Validity Rules for both
Production Use and Costing
ORACLE SUBLEDGER ACCOUNTING
Scenario to be tested through Sub-Ledger
Accounting

In the above said scenario the finished goods produced is the


Juice and it contains four ingredients, three of which are
normal Raw Materials, and the water bottle is a packing
Material.
In case of discrete Manufacturing Organization whenever we
receive any type of materials the Inventory valuation will
be done only on the Material account given in the
Inventory Organization parameters. Thus all the stock,
whether it may be a finished good or Raw Material or
Packing Material will be present only in a single account
Scenario to be tested through Sub-Ledger
Accounting- Continued...

This can be changed to various accounts based on the


categorization of the Items

When we purchase a Raw Material, the Raw Material


Account will be debited instead of the Inventory Material
Account.

When we purchase a Packing Material, the Packing Material


Account will be debited instead of the Inventory Material
Account.

When we Issue a raw Material or packing Material for


Production, the Corresponding Account will be credited
instead of a single Inventory Material Account
Scenario to be tested through Sub-Ledger
Accounting- Continued...

When the job is completed and the product is obtained, then


the Finished goods account will be debited.

In case of any Intermediate products, then the Item can be


categorized as an Intermediate product and the valuation
will be done only for the account.

Also a wide variety of Customer requirements can be


satisfied through the Sub ledger Accounting
Customizations.
Scenario to be tested through Sub-Ledger
Accounting- Continued...

Material Quantity Quantity Quantity Purchase Valuation


Per Unit Consumed Consumed Price/Item
/Produced /Produced Cost
per day per Month

Water 1 Ltr 1000 Ltr 30000 Ltr 5 / Ltr 1,50,000

Sugar 250 Gms 250 KG 7500 KG 45 / KG 3,37,500

Concentrate 100 Ml 100 Ltr 3000 Ltr 90 / Ltr 2,70,000

Total Raw 7,57,000


Material

Bottle 1 Ea 1000 Ea 30000 Ea 2 / Ea 60,000

Total 60,000
Packing
Material

Finished 1000 Ltr 30000 Ltr 49.99 / Ltr 14,99,999


Goods
SETTING UP ORACLE
SUBLEDGER ACCOUNTING
To obtain the category wise accounting the
Process Item Cost Category feature can be used.
The Items will be categorized according to their
usage and assigned to the Corresponding Item
Cost Category in the Item Master.
While defining the Account Derivation rules,
provide the condition for each account based on
the Item Cost category.
Define the Default Process Cost Class
Category
Assign the Item to the Corresponding cost
Category
Create Account Derivation Rules based on the
Item Cost Category
Provide the Conditions. In the Condition call
the Process Cost Class by choosing the source
as Item Cost Category
Create our Own Sub Ledger Accounting Method, Application
Accounting Definition, Journal Line definition for the events
which we need to map through Customizations. In this way we
can customize the events which want to edit and use the standard
feature for the rest of the events. Assign the ADR Created to the
Journal Line Definition Created. Assign the Journal Line
Definition created to the Events in the Application Accounting
Definitions and assign the Application Accounting Definition to
the Sub-Ledger Accounting Created and assign the Sub ledger
Accounting Method created to the General Ledger.
Create a Custom Journal Line Definition for all the transactions
which are to be entered in the System
Assign the ADR to the Journal Line Definition
Assign the Journal Line Definition to the Event
in the Application Accounting Definition
Assign the Application Accounting Definition to
the Sub ledger Accounting Method
Assign the Sub ledger Accounting method to the
General Ledger
Run the Request Validate Application Accounting

definitions to validate all the events


Check the output of the Request to see whether
all the Events completed without error
TRANSACTION FLOWS
To Create a New Batch, Create a Document.
Enter either the recipe or the Quantity to be
produced in creating the document
Release the Batch
Transact the Material
Release the Batch Step
Enter the Actual Resource Usage and Actual
Quantity produced in the Resource under the
Activities
Complete the Batch Step
Close the Step
Complete the Batch
Close the Batch
These are the steps to create and complete a
Batch.
The same procedure will be repeated every day
and the batch details will be entered for the entire
production.
Now the Cost of the Item will contain the
Resource as well as Material Cost.
To include the GL Expenses for the period,
Values are entered and posted in the GL Module
SETTING UP GL COST ALLOCATION
Create a GL Cost Allocation Code
Enter the Account Range to be captured in the
Expense Name
Assign the Item with each and every possible
Account Code combination of the Expenses to be
allocated
In the Cost Information field enter the
Component Class( Define a Cost Component
Class with Usage as GL Cost Allocation) and the
Cost Analysis Code
CHECKING THE GL COST
ALLOCATIONS
Post some values in the GL Accounts defined for
the GL Actual Cost Allocation. This can be
entered through a Payable invoice or a manual
Journal Voucher
Run the Program called OPM Cost Allocation
Run the Actual Cost Process from the OPM
Financials Responsibility
Check the Item Cost once the Actual Cost Process
Completes. The Slide initially which displays the
Manual calculation of the Item Cost is attached in the
next slide once again for Reference
Manual Cost Sheet of the Item- Shown earlier in
the presentation
ITEM/RESOURCE QTY Per QTY Per Per Total Per Unit Value
Unit Month/ Unit Value for Production
Total Cost = Total
Resource Value/30,000
Usage

Water 1 Litre 30000 Litre 5 1,50,000 5

Sugar 250 Gm 7500 KG 45 3,37,500 11.25

Concentrate 100 Ml 3000 Litre 90 2,70,000 9

Bottle 1 Ea 30000 Ea 2 60,000 2

Total Material Cost 27.25

Mixing Machine 720 Hrs 5 3,600 0.12

Operator 720 Hrs 40 28,800 0.96

Total Resource Cost 1.08

Admin Over Heads 1,00,000 3.33

EB - Bill 50,000 1.66


RESULTS FOR SUBLEDGER ACCOUTING
METHOD CUSTOMIZATIONS
Run the “Cost Update” from the OPM Financials
Responsibility.
Run the OPM Accounting Pre-Processor, by
Choosing Actions → Submit Process
Create the Accounting Entries by submitting the
Create Accounting Request
In the Journals Created we can see the Amounts
in the Raw Material and the Packing Material
Accounts
The SLA expected results desired earlier is
shown here for reference

Material Quantity Quantity Quantity Purchase Valuation


Per Unit Consumed Consumed Price/Item
/Produced /Produced Cost
per day per Month

Water 1 Ltr 1000 Ltr 30000 Ltr 5 / Ltr 1,50,000

Sugar 250 Gms 250 KG 7500 KG 45 / KG 3,37,500

Concentrate 100 Ml 100 Ltr 3000 Ltr 90 / Ltr 2,70,000

Total Raw 7,57,000


Material

Bottle 1 Ea 1000 Ea 30000 Ea 2 / Ea 60,000

Total 60,000
Packing
Material
Q&A
THANK YOU