Index
A. Business Case
1) Creation of Items
2) Setting up Selling Price for an Item
3) Define Customer
4) Creation of Sales Order
5) Enter Item Costs
6) Define Resources
7) Define Departments
8) Define Routing (CPU Sub assembly)
9) Define Bill of Materials (BOM) CPU Sub assembly
10) Define Routing (Dell Computer)
11) Define Bill of Materials (BOM) (Dell Computer)
12) Define Suppliers
13) Enter Purchase Requisitions
14) Create Purchase Orders
15) Enter Receipts (Inventory Receipt)
16) Auto-create Supplier Invoice
17) Create, View Invoices and Make Payments in Payables
18) Payments Reconciliation
19) Create, Release, Complete, Close Discrete Job for CPU Subassembly
20) Create, Release, Complete, Close Discrete Job for Dell Computer
21) Sales Order Booking, Releasing, Ship Confirm the Finished Goods
22) Run Auto invoice
23) View Sales Invoice, Create Receipt, Remittance and view Account Balances
24) Receipt Reconciliation
Business Process Flow in Oracle Applications
Case Study:
Dell Computers is manufacturing Computers based on the Orders received
from the Customers.
Dell Computer has received an Order from IBM Corporation for supply of
Dell Computers. Dell computer Purchases Raw materials from two suppliers
for manufacture of Dell Computers.
Motherboard, Floppy Drive, Compact Disc Drive is purchased from
Flextronics Inc for manufacture of CPU subassembly.
Monitor, Mouse, Printer is purchased from HP Incorporated for manufacture
of Dell Computers. For the purchases made from HP Incorporated, Dell
computer Uses Self billing to make payment to the supplier.
The Cost Prices and the Process of Manufacturing is detailed below.
Assumptions:
1. It is assumed that for this cycle all the Basic set up required in Oracle
Applications is in order. (i.e) Business group, Set of Books, Operating
Unit, and Inventory Org.
Business Group – Vision Operations
Set of Books – Vision Operations
Legal Entity – Vision Operations
Operating Unit – Vision Operations
Inventory Org – M1-Seattle Manufacturing
2. Basic Set up required in Application Modules like (PO, INV, AP,
MFG, OM, AR & CM) are in place.
3. For this exercise, we are using Standard Costing which is set in the
Inventory Org – M1- Seattle Manufacturing
Dell Computers is Manufacturing Slim Computers and their Manufacturing Process is as follows
Dell Computer
(M) Finished Goods
Assembly Department
10 Hours @ 40 USD per Hour
Monitor
(P)
500 USD
Mouse
(P)
100 USD
Printer
(P)
900 USD
CPU (Sub Assembly) (M)
Mother Board
(P)
1000 USD
CD Drive
(P)
750 USD
Floppy Drive
(P)
250 USD
Soldering Department
10 Hrs to 10 USD per Hour
Fixing Department
4 Hrs @ 125 USD per Hour
P – Stands for Purchased Item
M – Stands for Manufactured Item.
Overheads Apportionment for this Product for each of the Department is as Follows
Soldering Department - 250 USD
Fixing Department- 400 USD
Assembly Department - 350 USD
The Purchase cost of a CPU Sub Assembly Item is as follows
CPU (Sub Assembly)
Mother Board1000 USD +
CD Drive750 USD +
Floppy Drive250 USD
--------------
Purchase Item Cost 2000 USD
=========
Manufacturing Cost of CPU Sub assembly is as follows
Purchase Item Cost is
Operations Cost
Soldering Dept Cost 100 USD
Fixing Dept Cost500 USD
2000 USD
600 USD
Departmental Overheads650 USD
--------------
Manufacturing Cost of CPU3250 USD
========
The Purchase cost of a CPU Sub Assembly Item is as follows
CPU (Sub Assembly) 2000 USD
Mouse100 USD
Printer900 USD
Monitor500 USD
--------------
Purchase Item Cost3500 USD
=========
Manufacturing Cost of CPU Sub assembly is as follows
Purchase Item Cost is
Operations Cost
Soldering Dept Cost 100 USD
Fixing Dept Cost500 USD
Assembly Dept Cost 400 USD
Departmental Overheads
Manufacturing Cost of Dell Computer
3500 USD
Variable cost of an Item
1000 USD
1000 USD
--------------
5500 USD
========
6000 USD
Fixed Cost Apportionment
Selling Price of Dell Computer is
1. Creation of Items
First, We will create Purchased, Subassembly and Finished Goods Items
Entering details in Master Item form for the Purchased Item Floppy Drive
Navigation Path
Manufacturing and Distribution Manager
Inventory Items Master items
Double Click on Master Items Form
Organization Window will pop up.
Choose M1- Seattle Manufacturing Inventory Organization.
Enter Item Name and Description as Floppy drive and save the item.
Click on Tools Screen and choose copy from Icon from the List of Menu
Choose the Template Purchased Item from the List of Values and Click OK.
Oracle Provides 16 seeded Templates.
Click on Apply Button First and then Done Button to copy the Attributes of
Purchases Item Properties.
You will find in the Field User Item Type Field is shown as Purchased Item
and we will see all the other Tabs to ensure is the Item Properties have been
copied or not.
Click on Inventory Tab
Ensure the check Boxes of Inventory Item, Stockable, Transactable and
Reservable check boxes are enabled.
Click on Bill of Material Tab
Click on Asset Management Tab
Click on Costing Tab and check the following
a) Costing Enabled check box is checked or Not.
b) Include in Rollup check box is checked or not. This is required to
include the Item cost of this item in Cost roll up of finished goods.
Click on Purchasing Tab and enter the List Price Field Value 250.This Price
will default when we create Purchase Requisition or Purchase Order for this
Item. Ensure the Purchased, Purchasable check boxes are enabled or not.
Click on Receiving Tab
Click on Physical Attributes Tab
Click on Right arrow to view the other Tabs
Click on MRP/MPS Planning tab
Click on Lead Times Tab
Click on Work in Process Tab
Click on Order Management Tab and ensure Customer ordered, Customer
Orders enabled, Shippable, OE Transactable, Returnable check boxes are
enabled.
Click on Invoicing Tab and ensure Invoiceable Item and Invoice enabled
check boxes are enabled.
Click on Service Tab
Click on Web Option Tab and Click on Save Button
Similarly, We need to Define Purchased Item Using Purchased Item
Template for Compact Disc Drive, Mother Board, Monitor, Printer and
Mouse Respectively. You need to enter the Purchase Price Value in the List
Price Field of Purchasing Tab and save it.
Next, We need to assign this Item to M1-Seattle Manufacturing
Organization
Click on Tools Menu and click on Organization Assignment
Click on Assigned Check Box for M1- Seattle Manufacturing Inventory Org
and save it.
Similarly, after defining Purchased Item using Purchased Item Template for
Compact Disc Drive, Mother Board, Monitor, Printer and Mouse
Respectively, You need to enter the Purchase Price Value in the List Price
Field of Purchasing Tab and save it. Also we need to assign all the items
defined to M1- Seattle Manufacturing Inventory Org.
Next, we need to define the CPU Sub Assembly Item using Sub assembly
Template and complete the same Process as above. Click on OK button to
enable Costs on Roll up basis.
The CPU Subassembly Item will have the User Item Type as Subassembly
Item
Assign this item also to M1- Seattle Manufacturing Org as explained above.
Note: - We do not enter the List Price for this item, as it is a manufactured
item. Therefore the Cost for this Item is sum of all the Purchased Item and
Operations cost involved in manufacturing this product.
We will define the Finished Goods Item Dell Computer as above using the
Finished Goods Item Template.
Note: - We do not enter the List Price for this item, as it is a manufactured
item. Therefore the Cost for this Item is sum of all the Purchased Item and
Operations cost involved in manufacturing this product plus the cost of CPU
subassembly item.
Go to Tools menu and Copy from option choose Finished Goods Template
and click Apply button. A Note will Pop up for Rollup of Cost, click OK
and click on Done Button.
Assign the Finished Goods Item Dell computer also to M1-Seattle
Manufacturing Inventory Org.
2. Setting up Selling Price for an Item
Next Step is to define the Selling Price for the item Dell Computer in Oracle
Pricing Module.
Log on to Oracle Order Management Super User Responsibility.
Navigation Path
Pricing Price List
Price List Set up
Click on the Form and Query for ‘%Corporate%’ in Name Field.
Click on New Button keeping the cursor in Product Context Field
Enter the Following
Product Context – Item
Product Attribute – Item Number
Product Value – Choose from LOV Dell Computer, which is the Finished
Goods Item.
Scroll towards right in the same form and check Application method Field
has Unit Price and enter 6000 in the Value field which is the Selling Price of
the Dell Computer and save it.
3. Define Customers
Next step is to define the Customer from whom the Sales Order is received.
In Order Management Super User responsibility enter the Customer from
which you got the Sales Order.
Navigation Path
Order Management Super User responsibility
Customers Standard
Enter the Name of the Customer and ensure Customer type is Organization.
Click on Find Button. System will Prompt the Customer do not exist and Do
you want to create a New Customer. Click New and Continue.
Customer Standard form will open. Click on New button to enter the address
for the customer.
Click on New Button to create an address for the Customer
Enter the Address and Choose Bill to and Ship to Business Purpose and
enable the Primary check box for both Business Purpose and attach the Bill
to site for the Ship to site.
Note down the Organization Number (Party Number), Customer Number
Generated for the Customer. The Default Customer Profile Class will get
attached to the Customer the moment you save the Customer.
You are ready to create a Sales Order for the Customer you have created
now.
4. Creation of Sales Order
Order Management Super User Responsibility
In Sales Order form Enter the Sales Order for the Finished Goods Item Dell
Computer
Navigation Path
Order Management Super User Responsibility
Order, Returns Sales Orders
Click on the Sales order form and enter the Customer Number or Name.
The Bill to and Ship to Information will default from the Customer. Enter
the Order type as Mixed from the LOV and choose the Price List as
Corporate (We entered our Finished Goods Item under this Price List and
defined the Selling Price for this item).
Click on Other Tab in Sales Order Header Form and some fields will be
populated from the Customer Form.
Choose Warehouse as M1- Seattle Manufacturing and save the Sales Order.
Click on Line Items Tab
Enter the Ordered Item as Dell Computer from the LOV and Enter the
Quantity Field, the Unit Price Field and Extended Field amount will
populate from the Price List we defined above.
Scroll towards Right in Main tab of Line Items and choose the Tax Code
Field as Exempt and save the record.
It pops up a Message unable to Reserve the quantity, as there is no Stock.
Click OK and go to Sales Order Header Screen.
In the Sales Order Header Screen, now you will find the Status of the Sales
Order is entered and the Value is populated with the Quantity and the Selling
Price of the item.
5. Enter Item Costs
We have to define the BOM (Bill of Materials) and Routing for the Finished
Goods to create a Discrete Job to get the Inventory for the Finished Good.
We need to define the Lower Level first and then Higher Level to define the
BOM and Routing.
The Steps involved are as follows.
Define Item
Enter Item Costs
Define Resource Enter Resource cost Define Departments Enter
Resource Utilization in Man hours Enter Departmental Fixed Overhead
Define Routing Attach the Department to Routing
Define BOM for Subassembly Attach Purchased Item Attach
Operations Run Item Roll up Costs Update Standard Costs
Define BOM for Finished Goods Attach Subassembly Attach
additional Purchased Item Attach Operations Run Item Roll up Costs
Update Standard Costs.
We have already defined the Purchased Items, Sub assembly Item and
Finished Goods Item.
First Let us define the Item Costs for the Purchased Items.
Log on to Manufacturing and Distribution Manager Responsibility
Navigation Path
Manufacturing and Distribution Manager
Costs Item Costs Item Costs
Click on the Item Costs Form and Choose M1-Seattle Manufacturing
Inventory Org. Find Window Pops up. Enter the Purchased Item and Click
Find
Item Costs Summary Window Pops up which is as follows. Click on Open
Button
Item Costs Summary Window Opens with Following Details.
This is a Purchased Item. Hence Based on Roll up is not enabled and Make
or Buy field shows as Buy.
The Material Overhead by Default shows the Value of 20.We will overwrite
this amount and make the changes in Costs Screen. Click on Costs Screen.
In the Costs Screen click on Cost Elements LOV, You will find Five List of
Values.
The Cost Elements in Oracle Applications are as Follows
1. Materials
2. Material Overheads
3. Resource
4. Outside Processing
5. Overhead
The Cost of an Item is calculated using the above five Cost Elements.
In the Item Costs Screen Overwrite the Material Overheads with the
Following Values.
Cost Element - Materials
Sub element – Materials
Basis – Item
Rate or Amount – 250
Save the Record
Now close the Item Costs Screen and come to Item Cost Details Screen and
you will find Unit cost is updated with 250 and Material Overhead is zero.
Similarly, Enter the Item Cost Details of other Items as Follows.
Compact Disc Drive – 750 USD
Mother Board – 1000 USD
Printer – 900 USD
Mouse – 100 USD
Monitor – 500 USD
All of them should be entered Cost Element as Materials.
6. Define Resources
Before defining Routing, We Need to Define Resources, Resource Costs,
Define Departments and Departmental Overheads.
First we will define the Resources.
Manufacturing and Distributions Manager Responsibility
Bill of Materials Routings Resources
Click on the Resource Form and enter the following
Resource – Soldering
Description – Soldering Department
UOM – HR
Type – Person
Charge Type – WIP Move
Enable costed check box and choose activity as Move from LOV and enable
Standard Rate Button. Enter the absorption account and variance account.
Click on Rates tab in the Resource form and enter the Resource unit cost
Similarly define Resources Fixing and Assembly and enter the Rates as
follows.
Fixing – 125 USD
Assembly – 40 USD
7. Define Departments
Next we need to define Department and attach the Resources to the
Department
Navigation Path
Manufacturing and Distributions Manager Responsibility
Bill of Materials Routings Departments
Click on Department Form and Enter the Department Name. Click on
Resources Button.
For Fixing Resource the UOM defaults from the Resource we defined earlier
and enter the Utilization of the Resource for this Department to manufacture
this Product.
Close the previous Window and come to main Department screen. Click on
rates Button
This Opens the Overhead Rates Window.
Apportionment to this Product as follows.
Enter
the
Overhead
Choose Cost Type as pending and in Overhead rates choose overhead as
Indirect from the LOV. Basis of charge choose as Item from LOV and enter
the Rate or amount field with Overhead Apportionment.
(i.e) 250 USD in this case.
Similarly Define Departments for soldering and Assembly. Enter the
utilization of the Resource for the Department and enter the Departmental
Overheads.
Fixing Department – Man-hour Utilization 4 Hrs.
Fixed Overheads – 400 USD
Assembly Department – Man hour Utilization 10 Hours
Fixed Overheads – 350 USD
8. Define Routing (CPU Sub assembly)
After Defining resources and departments, next we need to define Routing
for CPU Sub Assembly. Routing is the Sequence of operation performed to
convert the Raw material to Finished Goods.
Navigation Path
Manufacturing and Distributions Manager Responsibility
Bill of Materials Routings Routings
Click on the Routings and choose the CPU Subassembly from the Item Field
Enter the Sequence in which operations are performed for Manufacture of
Subassembly
10 – Soldering
20 – Fixing Dep
Under the Routing Form, WIP Tab check whether back flush checkbox is
enabled or not.
Click on Operation Resources Button keeping the cursor in Soldering
Department. This allows you to enter the Resource Soldering for Soldering
Department attached to Routing CPU Assembly.
In Operation Resources Form, Choose the Soldering Resource and enter the
Usage as 10 Hours. Save the Record.
Close the Form
In the Main Routings Form Keep the Cursor in Fixing Dep and Click
Operation Resource button again and enter the Usage for the Fixing
Department for CPU Subassembly. The Usage value is the utilization of
hours for this operation.
Click on the Scheduling Tab and choose the Schedule to Yes. We need to do
this for all Resources. (Fixing and Soldering). The Purpose of setting the
Schedule field to ‘Yes’ is to calculate the starting operation hours to close
operation hours. If we set it to ‘No’, then operational hours will not be
calculated.
9. Define Bill of Materials (BOM) CPU Sub assembly
Next, we have to define the BOM (Bill of Materials) for CPU Sub assembly.
Navigation Path
Manufacturing and Distributions Manager Responsibility
Bills of Materials Bills Bills
Click on Bills and Choose the CPU Subassembly from Item Field
In the Item sequence 10 Defaults Choose Operation Sequence as 1 and
Component as Mother Board
Similarly Enter Item Sequence 20 and choose Operation Sequence 1 and
component Compact Disc Drive
Similarly Enter Item Sequence 30 and choose Operation Sequence 1 and
component Floppy Drive
In the Component Details Section You can check whether the Chosen Items
are included in cost roll up and whether it is a Purchased Item or Sub
assembly Item.
Click on Material Control Tab and choose Supply Type as Assembly Pull
and Sub-inventory as RM Stores and save the work.
The Purpose of choosing Supply Type as Assembly Pull the Raw material
items pertaining to the Finished Goods will get consumed once we complete
the Discrete Job or Scheduled Job.
The Sub-inventory is the Location where the Purchased Items are stored will
get reduced as Consumption once we complete the Discrete Job.
Click on Tools Menu and click on Roll up costs button.
Choose cost Type as Pending and click OK. This will create a concurrent
request to run the Roll up Cost Report for CPU Sub assembly.
Click on View Menu
1770313
Requests
Find Requests
check for Request ID
Click on View Output file to view the Cost Report.
We have to run the Update Standard costs Program to Update the Standard
Costs after checking the Costs have been calculated Properly.
Navigation Path
Manufacturing and Distributions Manager
Costs Item costs Standard Cost Updates
Update costs
Click on Update Costs. This will run a Concurrent request. Enter The
Parameters
View Request for Concurrent Request ID 1770355 completed Normal.
The Item cost for CPU Sub assembly after running the Standard Cost Update
is as Follows
Navigation Path.
Manufacturing and Distributions Manager
Costs item Costs Item Costs
10. Define Routing (Dell Computer)
Next, we need to Define Routing for Dell Computer.
Navigation Path
Manufacturing and Distributions Manager
Bill of Materials Routings Routings
Attach the Assembly department to the Dell Computer Item. The steps are
exactly same as what we did in CPU Subassembly.
Click on Operation Resources Button
In Operation Resources Form choose the Resource Assembly and enter the
Usage and click Scheduling tab.
In the Scheduling Tab set schedule to Yes and save the Record.
11. Define Bill of Materials (Dell Computer)
Next step is to define the BOM (Bill of Material) for Finished Goods item
Dell computer
Navigation Path
Manufacturing and Distributions Manager
Bills of Materials Bills Bills
Click on Bills and Choose the Dell Computer from Item Field
In the Item sequence 10 Defaults Choose Operation Sequence as 1 and
Component as CPU Subassembly
Similarly Enter Item Sequence 20 and choose Operation Sequence 1 and
component Mouse
Similarly Enter Item Sequence 30 and choose Operation Sequence 1 and
component Printer
Similarly Enter Item Sequence 40 and choose Operation Sequence 1 and
component Monitor
Go to Component Details Tab and check Roll up cost is enabled or not
Go to Material Control tab and enter the Supply type as Assembly Pull for
all the three Items. In sub-inventory field enter FG Stores from LOV for
CPU subassembly Item and RM Stores for Printer and Mouse and save the
records.
The Purpose of choosing Supply Type as Assembly Pull is the Raw material
items pertaining to the Finished Goods will get consumed once we complete
the Discrete Job or Scheduled Job.
The Sub-inventory is the Location where the Purchased Items are stored will
get reduced as Consumption once we complete the Discrete Job
We have to run the Rollup Cost to get the Cost of Finished Goods Item Dell
Computers.
In the Same Bills Form for Dell Computer Item
Click on Tools Menu
Roll up costs.
Choose cost Type as Pending and click OK. This will create a concurrent
request to run the Roll up Cost Report for Dell Computer.
View Request
find Request
Request ID 1770655
Click on View Output file to view the Cost Price calculated for Finished
Goods item Dell Computer.
We have to run the Update Standard costs Program to Update the Standard
Costs after checking the Costs have been calculated Properly.
Navigation Path
Manufacturing and Distributions Manager
Costs Item costs Standard Cost Updates
Update costs
Submit the Request with the parameters given.
View the Request 1770664 and check is it completed normal.
The Item cost for CPU Sub assembly after running the Standard Cost Update
is as Follows
Navigation Path.
Manufacturing and Distributions Manager
Costs Item Costs Item Costs
12. Define Suppliers
Then, We have to complete the Purchasing to Inventory Receipt cycle in
Purchasing Responsibility.
Log into Purchasing Responsibility
Supply Base Suppliers
Click on the Supplier Form and Enter the Suppliers Name Flextronics Inc
And click on Sites Button
For this Business case, we assume Flextronics Inc is Supplying Mother
Board, Compact Disc Drive and Floppy Drive.
In the Supplier Sites Form enter the Address for the Supplier and save the
record.
For this Business case we assume HP Incorporated is supplying Mouse and
Printer on Self Billing Basis.
We need to create one More Supplier to Show the Pay On Receipt Invoice.
(Self-billing Invoice)
Log into Purchasing Responsibility
Supply Base Suppliers
Click on Site Button and enter Address for the Supplier.
In General Tab/ Site Uses / Pay Site / Purchasing
In Supplier Site Payment Tab change Terms to Immediate and payment
method to Electronic
In Supplier Sites Bank Account Tab attach the bank Account and Enable the
Primary check box as it is an Electronic payment method.
In Supplier Sites Purchasing tab under Self Billing
Pay on Field choose Receipt and save the Record.
