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Outsourced Manufacturing for Discrete & Process Industries
Karen Theel Senior Director, Manufacturing Product Strategy Anil Modwel Director, Product Development
Copyright © 2013, Oracle and/or its affiliates. All rights reserved. Insert Information Protection Policy Classification from Slide 12 2
Outsourced Manufacturing Business Practices
OEM MP B
C
A
Process Inhouse
Process Outside
Process Inhouse
Manufacture Assembly Ship Partial Product
Receive Finished Product
10
20
30
20
OEM
RMS B C
MP
*
Buy Components
Virtual Sale of Components
B
C
Virtual Purchase of Assembly
A
B
C
A
Drop Ship Components
OEM
RMS B C
MP
Buy Components
Ship Components
B
C
Receive Assembly
A
B
C
A
Drop Ship Components
* Applicable only for Japan, Korea, Taiwan
OEM
RMS B C
MP
Buy Components
Sell Components (with Markup) B
C
Buy Assembly
A
B
C
A
Drop Ship Components
Copyright © 2013, Oracle and/or its affiliates. All rights reserved. Insert Information Protection Policy Classification from Slide 12 3
Chargeable vs. Buy/Sell Vs Full Outsourcing Comparison
Characteristic Chargeable Subcontracting Buy/Sell Subcontracting Full Outsourcing
Subcontracting Component Ownership
Component sales is Provisional and Ownership lies with the OEM
Ownership is Transferred to MP after the components are shipped
No component sale, components are shipped to MP on consigned basis, ownership of material is with OEM
Country Specific Deployability Applicable to Japan, Korea and Taiwan All Countries All Countries
Costing Method Available for Standard Cost Orgs only Available for Standard, Average, FIFO & LIFO Orgs
Available for Standard Cost Orgs only
Payables/Receivables/Netting Mandatory Optional Not relevant as there will not be any Sales invoices for components
Accounting setup Requires Additional setup for accounting Subcontracting components (revenue, Receivables, COGS and PPV)
Not relevant Require setup for accounting consigned Subcontracting components (COGS and PPV)
Costs/Price setup consideration
Assembly/Components costs/ prices need to be setup to avoid unrealized gain/loss
Not relevant
Purchase price of the assembly will be the Value addition
Copyright © 2013, Oracle and/or its affiliates. All rights reserved. Insert Information Protection Policy Classification from Slide 12 4
Full Outsourcing Business Process
MP added value = $5
RMS: Raw Material Supplier
OEM : Original Equipment Manufacturer
MP: Manufacturing Partner
1 Ea
B
A
C
2 Ea
B
C
Pay to MP $5 OEM
RMS B
C
A
MP doesn’t pay for the Components
MP
Copyright © 2013, Oracle and/or its affiliates. All rights reserved. 5
Automated Orchestration For Material Tracking and Financial Reconciliation
OEM Org Contract Manufacturer Org
Replenishment SO Item : C, QTY:10Ea Customer : MP
Replenishment SO Item : B , QTY:20Ea Customer: MP
Discrete Job Assembly : A QTY :10Ea
Interlock
Subcontracting Order Assembly : A , 10Ea Supplier : MP
ASCP
Auto receive Components
Receive
Receive
Replenishment PO Item : C, QTY:10Ea Supplier : OEM
Replenishment PO Item : B, QTY:20Ea Supplier : OEM
B
A
C
1 Ea 2 Ea
Process Receiving Transactions
Complete
Misc Issue A
Receive
SHIP
SHIP
AP Invoice
AR Invoice
Pay to MP $ AP/AR Netting
Copyright © 2013, Oracle and/or its affiliates. All rights reserved. Insert Information Protection Policy Classification from Slide 12 6
Subcontract Order Status
Main Point
Inventory Balances
Quality Financial Positions
1 2
4 3
EBS Outsourced Manufacturing Four categories of visibility into outsourcing business
Copyright © 2013, Oracle and/or its affiliates. All rights reserved. Insert Information Protection Policy Classification from Slide 12 7
Visibility into Outsourced Manufacturing
Typic al Business Questions…
How many subcontracting orders are delayed and which customers are impacted ?
What’s the value of our material at manufacturing partner locations ?
What’s the value of goods in transit to manufacturing partner locations?
What’s the value of defective finished goods received from manufacturing partners ?
What’s the value of uninvoiced subcontracting orders ?
Copyright © 2013, Oracle and/or its affiliates. All rights reserved. Insert Information Protection Policy Classification from Slide 12 8
Copyright © 2013, Oracle and/or its affiliates. All rights reserved. Insert Information Protection Policy Classification from Slide 12 9
Key Performance Indicators
Visibility into Outsourced Manufacturing
Copyright © 2012, Oracle and/or its affiliates. All rights reserved. Oracle Proprietary and Confidential. 10
• View status of subcontract orders (delayed, on-time) and component allocations across manufacturing partners
Subcontract Order Status
Copyright © 2012, Oracle and/or its affiliates. All rights reserved. Oracle Proprietary and Confidential. 11
• View quantity and value of components in-transit or at manufacturing partner locations
Inventory Balances
Copyright © 2012, Oracle and/or its affiliates. All rights reserved. Oracle Proprietary and Confidential. 12
• View reasons for poor quality of outsourced products and their value across manufacturing partners.
Quality
Copyright © 2012, Oracle and/or its affiliates. All rights reserved. Oracle Proprietary and Confidential. 13
• View financial positions of subcontract and replenishment orders for a manufacturing partner
Financial Positions
Copyright © 2012, Oracle and/or its affiliates. All rights reserved. 14
E-Business Suite Outsourced Manufacturing Business Benefits
Gain full visibility into the overall health of outsourced manufacturing Quickly view and analyze financial transactions related to subcontract orders
Track quality issues related to supplied components and finished products
Monitor sales and procurement activities to meet on-time customer delivery
Collaborate effectively with approved suppliers and contract manufacturers Analyze and negotiate service level agreements and pricing to optimize costs
Mitigate risks related to inventory bottlenecks across manufacturing partners
Copyright © 2013, Oracle and/or its affiliates. All rights reserved. 15
Resources
Oracle Outsourced Manufacturing for Discrete Industries User’s Guide (12.1.3)
EBS Manufacturing Release Content Guide (RCD)
EBS Manufacturing Release Value Proposition (RVP)
L1, L2, L3 recordings – Oracle University
Data Sheet
DSS Demo
Outsourced Manufacturing for Process Industries
Copyright © 2014, Oracle and/or its affiliates. All rights reserved. 17
E-Business Suite Outsourced Manufacturing Solutions Comprehensive Support for Multi-Tiered, Mixed-Mode Outsourcing
OEM
RMS B C
MP
Buy Components
Virtual Sale of Components
B
C
Virtual Buy of Assembly
A
B
C
A
Drop Ship Component
s
OEM
RMS B C
MP
Buy Components
Sell Components (with Markup)
B
C
Buy Assembly
A
B
C
A
Drop Ship Component
s
OEM
RMS B C
MP
Buy Components
Ship Components
B
C
Receive Assembly
A
B
C
A
Drop Ship Components OEM MP
B
C
A
Process In-house
Process Outside
Process In-house
Manufacture Assembly
Ship PFA
Receive PFA
Ship PFA
Receive PFA
10
20
30
20
Process
OPM Planned Support:
• Phase 1: Outsourcing at Operation / Step Level –planned for 12.2.4+
• Dashboard – Endeca – TBD
• Complete Outsourcing - TBD
• Chargeable (Shikyu) Subcontracting
• Non-Chargeable Subcontracting
• Buy/Sell Subcontracting
Copyright © 2014, Oracle and/or its affiliates. All rights reserved. 18
Background for OPM OSP
• Requirements were gathered from customers of various industries • Metal Industries – Alcoa, Macsteel, Charter Steel, ATI Metals, US Steel
• Food and Beverages –Schreiber Foods, Amy’s Kitchen
• Life Sciences – Colorcon,Beckman Coulter, Thermo-Fisher, Agilent Technologies
– Majority of customers preferred Outside Processing to the Outsource Manufacturing.
Number One Enhancement request in SIG voting
Copyright © 2014, Oracle and/or its affiliates. All rights reserved. 19
Oracle Process Manufacturing Business Flow Outside Processing (OSP) – Phase 1
Ingredients
Formula
Process Routing
Step 10
Step20
Step 30
Batch Recipe
Ingredients Product
In-House Process
Outside Process
Manufacture Process
10
20
30
20
Outside Process
In-House Process
Ship
Receive
PPM MP
Copyright © 2014, Oracle and/or its affiliates. All rights reserved. 20
System Flow Diagram for OSP Phase One
Process
Appl.
Create OSP Item,
Resource, & Batch Step
Create and Release PO Line
Create Purchase
Requisition
Complete Batch Step
OPM Procurement
Release Batch Step requiring
OSP
OPM
• Supports outsourcing of service, where shipment of material is not required.
• Standard costing supported.
• Creation of Purchase Requisition allows cross referencing the Batch Step Number.
• PO Line is Batch Step Number aware at all times, as it is created from the same Purchase Requisition.
• Batch Step can be queried at any time to inquire about receipt of PO Line.
Procurement OPM
Copyright © 2014, Oracle and/or its affiliates. All rights reserved. 21
OPM – Outside Processing Key Features – Phase 1
• Automatic or Manual creation of Purchase Requisitions/Purchase Orders at various batch/step stages.
• To identify the step for outside processing and payment of services according to either number of units/products or resource usage hours.
• Synchronization of Batch and Purchase Order Changes
• Batch quantity and date changes to be propagated to PO
• Costing of the OSP resources either at Standard Cost or PO price.
• OPM Outside Processing Report to view various batches with OSP steps and corresponding PO details.
• Quality inspections for Outside Processing
Copyright © 2014, Oracle and/or its affiliates. All rights reserved. 22
OPM – Outside Processing Features deferred to future releases
• Material Shipment and Shipment Document
• Ability to open PO from Batch Detail Window
• Partial Material Shipment
• Ability to track the delay in procuring/receiving the OSP
• Automate the manual creation of PO through Concurrent Program
• Workflow Notifications
• Multiple Outside Processing Steps per Batch
• Endeca Extension
Copyright © 2014, Oracle and/or its affiliates. All rights reserved. 23
OPM – Outside Processing Execution
Create Batch
Release Batch
Complete
Batch Step
Close
Release Step
Complete Step
Create/Approve Req
Create /Approve PO
Receive OSP Item
Create Resource Trx
Update Actual Step Qty
OSP - Process
Copyright © 2014, Oracle and/or its affiliates. All rights reserved. 24
OPM – Outside Processing
• Costing Methods – Standard, Actual and Lot Costing
• Resource Costing – OSP Resources will be valued in all costing methods at standard – resource cost or actual PO price, based on the cost source setup
• Batch Completion • Products in Standard Costing organizations will have OSP cost as the standard cost defined for
the OSP Resource • Products in Actual and Lot costing organizations will acquire their OSP cost on batch completion,
as either the resource cost or PO price depending on the Cost Source setup. • Batch Close
– On batch close in Standard Costing, the difference between – standard resource cost and PO price will be relieved as batch – close variance, if cost source is defined as PO price.
Costing
Copyright © 2014, Oracle and/or its affiliates. All rights reserved. 25
OPM – Outside Processing Reporting – OPM Outside Processing report
Copyright © 2014, Oracle and/or its affiliates. All rights reserved. 26
OPM – Outside Processing
• Automatic or Manual creation of Purchase Requisitions/Purchase Orders at various batch/step stages.
• To identify the step for outside processing and payment of services according to either number of units/products or resource usage hours.
• Synchronization of Batch and Purchase Order Changes
• Batch quantity and date changes to be propagated to PO
• Costing of the OSP resources either at Standard Cost or PO price.
• OPM Outside Processing Report to view various batches with OSP steps and corresponding PO details.
• Quality inspections for Outside Processing
Key Features - Summary
Copyright © 2014, Oracle and/or its affiliates. All rights reserved. 27