Oracle Subcontracting

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An Introduction: Oracle Subcontracting

Srikanta Nanjundaswamy

Oracle Senior Software Engineer

AGENDA

• Introduction to Subcontracting

• Types of Subcontracting

• Subcontracting in Oracle

• Features of Oracle subcontracting

• Basic setups in Subcontracting

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• Basic setups in Subcontracting

• Upcoming Trainings

• Demo

• Q&A

© 2010 Oracle Corporation – Proprietary and Confidential

Introduction to Subcontracting

Subcontracting is a common business practice where

a brand-owner or an Original Equipment Manufacturer (OEM)

outsources its entire manufacturing operations or a portion of it

by entering into a contractual agreement with an external

manufacturing service provider commonly known as a

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Manufacturing Partner (MP).

Types of Subcontracting

• Extent of Outsourcing:

Enterprises can opt to outsource the entire manufacturing process or a portion of it

by collaborating with a MP.

• Nature of Component Supply:

Enterprises can either own and manage the components for consumption at the

MP's facility, or engage a supplier to either own and consign inventory, or drop

ship the components at the MP's facility. In other situations, the OEM may charge

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ship the components at the MP's facility. In other situations, the OEM may charge

the MP by registering a sale of the components resulting in a complete transfer of

Ownership

• Shipment of Finished Goods:

Enterprises can decide to either supply finished goods directly to the customer or

enter into a contractual agreement with the MP to drop ship the finished goods to

the customer's facility.

Subcontracting In Oracle

Oracle supports the following types of subcontracting business practices that involve

complete outsourcing of assemblies and most importantly, component sale by an OEM to a MP:

• Chargeable Subcontracting

Chargeable Subcontracting is a practice where the OEM completely outsources the

manufacturing of an assembly to an MP and makes a provisional sale of components by

invoicing the MP

• Buy/Sell Subcontracting

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• Buy/Sell Subcontracting

Buy/Sell Subcontracting is a business practice where an Original Equipment

Manufacturer (OEM) completely outsources the manufacturing of an assembly to a

Manufacturing Partner (MP) by buying the assembly from the MP and most

importantly, selling the components to the MP that are consumed in the manufacturing

of the assembly at the MP's premises. The ownership of the components is transferred

to the MP immediately after the OEM ships the components to the MP unlike

Chargeable Subcontracting where the OEM retains the ownership of the components

throughout the subcontracting process.

Features of Oracle subcontracting

> Modeling of OEM and MP as inventory organizations to facilitate tracking and

simulation of subcontracting processes.

> Chargeable Subcontracting support is only for Standard Costing Orgs and can

be deployed in Japan, Taiwan, and Korea.

> Buy/Sell Subcontracting support is for Standard, Average, FIFO and LIFO

costing methods and can be deployed in any country.

>Separate tracking of accounting transactions and variances associated with

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subcontracting component sales in the OEM Org by setting up different accounts

for Subcontracting COGS, Subcontracting Revenue, and Subcontracting

Receivables.(only for chargeable subcontracting)

>Integrated planning (using ASCP) and subcontracting execution in discrete and

project manufacturing environments to manage and control processes throughout

the extended supply chain

>Support for different types of component supplies both Pre-positioned and

Synchronized,

Features of Oracle subcontracting

> Automatic creation of discrete jobs, replenishment sales order and purchase orders by running interlock manager

>Dedicated Subcontracting Workbench and Reports providing better tracking and

increased visibility throughout the subcontracting life cycle.

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Basic setups in Subcontracting• Setting Profile Options

• Defining Original Equipment Manufacturer (OEM) Organizations

• Defining Manufacturing Partner Organizations

• Defining WIP Parameters

• Defining Customers and Suppliers

• Associating Customers and Suppliers

• Setting Up Item Definitions

• Setting Up Bills of Material for Outsourced Assemblies

• Setting Up Subcontracting Accounting

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• Defining Receivables Transaction Types

• Defining Transaction Sources

• Setting Up Order Management Transaction Types

• Setting Up Standard Costs of Components and Assemblies

• Defining Price Lists for Subcontracting Components

• Setting up Purchase Price of an Outsourced Assembly

• Setting Up Shipping Network/Shipping lead times

• Defining Sourcing Rules

• Defining Netting Agreements

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Demo Setups – Profile set up

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The above two profiles should be enabled to use subcontracting

Demo Setups – Defining OEM and MP

orgs

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OEM org is defined and OEM org location is attached from Inventory responsibility


orgs

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MP3 org is defined and MP org location is attached from Inventory responsibility


orgs

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Define OEM org Organization parameters from Inventory responsibility


orgs

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Define MP org Organization parameters from Inventory responsibility

Demo Setups – Modelling Customer

and Suppliers

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Model OEM org as a supplier and MP org as customer and supplier


and Suppliers

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and Suppliers

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and Suppliers

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Demo Setups – Associating Customer

and Supplier to OEM and MP orgs

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Associate Supplier modelled from OEM org as supplier in OEM org parameters

Demo Setups – Associating Customer

and Supplier to OEM and MP orgs

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Associate Supplier and customer modelled from MP org as supplier and customer in MP org parameters

Demo Setups – Defining WIP

parameters

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Define WIP paramters for MP org

Demo Setups – Receivables

Transaction Types

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Define the Recevables Transaction types

Demo Setups – Defining Transaction

Sources

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Define the Recevables Transaction typesTransaction sources from Order Management

Demo Setups – Defining Order

Management Transaction Types

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Define the Transaction types in Order management which is used while creating sales order

Demo Setups – Defining Order

Management Transaction Types

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Define the Transaction types in Order management which is used while creating sales order

Demo Setups – Defining Shipping

Networks

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Define shipping networks between OEM and MP org from Inventory


Networks

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Define shipping networks between OEM and MP org from Inventory and make sure Default order type for Internal orders are assigned


Networks

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Define shipping networks between OEM and MP org from Inventory and assign a default shipping method

Demo Setups – Defining Items In MP

and OEM orgs

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Define Items from Inventory


and OEM orgs

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Define Items from Inventory , ensure you have checked outsourced assembly flag for Outsourced assembly


and OEM orgs

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Define Items from Inventory and ensure for the assembly you have set as Do not release for Release time fence so that planning does not release the assembly order to MP org


and OEM orgs

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Define Subcon assembly component from Inventory


and OEM orgs

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and OEM orgs

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and OEM orgs

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and OEM orgs

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and OEM orgs

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and OEM orgs

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and OEM orgs

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and OEM orgs

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and OEM orgs

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and OEM orgs

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and OEM orgs

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and OEM orgs

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and OEM orgs

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and OEM orgs

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and OEM orgs

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and OEM orgs

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and OEM orgs

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and OEM orgs

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and OEM orgs

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Demo Setups – Defining BOM In MP

and OEM orgs

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Define BOM in OEM org

Demo Setups – Defining BOM In MP

and OEM orgs

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Define BOM in MP org

Demo – Creation Of PO

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Create a PO for the Subcontracted assembly in OEM org OU

Demo – Launching Interlock Manager

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Launch Interlock manager from Subcontrating super user responsibility.Make sure the paramters are correct and it refrences the correct OU

Demo – Viewing results in

Subcontracting Workbench

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Navigate to Subcontracting workbench from Suncontracting super user responsibility



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Query in the subcontracting workbench with the OEM and MP org and you can view the subcontracted assembly purchase orders



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Also you can view components used for the subcontracting order and also the quantity required for each component and quantity allocated



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Also you can view components used for the subcontracting order and also the replenishment order for the components

Demo – Workorder and sales order

creation after Interlock

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Also you can view subcontracting workoprder created in the WIP for the outsourced PO by interlock manager

Demo – Workorder and sales order

creation after Interlock

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Also you can view the replenishment sales order created for the component in Order management

Documents

Oracle Subcontracting