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Landed cost for process industries - An Oracle solution

Introduction:

Look at the mirror directly or through spectacles, you are most probably seeing through it

or seeing just the glass.Look deep into it - In all chance it contains sand from Australia, soda ash from China, bothprocessed in Taian, manufactured in India using Italian machinery and recipecombination !erified in American Laboratories. "ach of these processes adds costtoards freight, storage, ta#es and duty.

$ome part of the money you paid as actually for these. As a user you need not knothe profitability and margins. %ut for the manufacturer this is of utmost importance.&ormally the landed cost charges are applied to different items based on eight, !olumeand 'uantity.

Oracle (rocess )anufacturing *inancials supports Landed Cost management +LC), aeb based application hich is part of Oracle "-%usiness suite and a milestone forcustomers to track and control the cost of landed goods.

Oracle Landed Cost management application is seamlessly integrated ith Oracle(rocess )anufacturing +O(), Oracle (urchasing, Oracle In!entory and Oracle (ayables.

These costs are initially estimated as "stimated Landed Cost +"LC and then updatedith Actual Landed Cost +ALC, as hen they become knon, allocating them toshipments, orders, and products.

Accordingly the estimate !ersus the actual cost comparison through LC) orkbenchould highlight impro!ement actions on controlling the landed costs.

Oracle (rocess manufacturing customers irrespecti!e of using different cost methods canuse the Landed cost management features.

O() - Landed cost management application supports to basic scenarios of recei!ing

flos. *irst one is Landed Cost management as (re-recei!ing and the other is LandedCost management as $er!icing.

ni'ue selection of either of the flo can be made and henceforth the Organiation ouldoperate e#clusi!ely as

Landed Cost management for (re-recei!ing or $er!icing. Let us consider a routineprocure to pay flo as an e#ample and understand ho the landed cost for items arearri!ed.

LCM as Pre-receiving:

LC) as (re-recei!ing is used hen e intend to calculate the Landed cost estimationbefore e recei!e the goods in Organiation ith reference to (urchase order.

The LC) (re-recei!ing functionality has the fle#ibility of !arying the item 'uantity andprice defined in (urchase order. The charges associated ith the items are generated and!alidation is performed manually to deri!e the "stimated Landed Cost +"LC.

The (re-recei!ing details from LC) module are passed on to the /ecei!ing applicationsand receipt of goods and recei!ing transaction takes place for the same 'uantity.

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LCM as Servicing:

The $er!icing scenario is used hen the receipt of items into in!entory happens folloedby automatic creation of "stimated Landed Cost. The receipt happens ith reference to(urchase order 'uantity and price, hich cannot be changed like pre-recei!ing.

This scenario is fa!orable hen you assess that the landed cost of an item remains

constant ith knon ser!ice pro!iders ithout much !ariation to the charges.

Through Oracle (ayables, the Item in!oice and freight in!oices are created and matchedto the receipt of the item ith actual prices.

This information is passed back from Oracle payables module to the Landed costmanagement in order to calculate the Actual Landed Cost +ALC and the rele!ant accountpostings happen to 0eneral Ledger.

*or both (re-recei!ing and $er!icing, the Actual Landed Cost could be !ieed andcompared ith "stimated Landed Cost.

This ould help to analye and control the Landed cost charges. The Oracle (rocess)anufacturing reports display the history of the landed cost adjustments made to the item.

Conclusion:

1ithout knoing the landed cost of a product and realiing the profit margins ould endup e#hausting your pocket.

These landed costs is usually 23 to 435 of the product cost hich may e!en go beyondthis if unnoticed and uncontrolled. Lot many hidden costs ould put up your profitability atrisk.

The usage of LC) application gi!es the opportunity to identify areas of potential costreduction, more accurate product profitability reporting, and increased competiti!eness bysourcing of materials from foreign locations.