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, both processed in Tai an, manufactured in India using Italian machinery and recipe combination !erified in American Laboratories. "ach of these processes adds cost to ards freight, storage, ta#es and duty. $ome part of the money you paid as actually for these. As a user you need not kno the 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, !olume and 'uantity. Oracle (rocess )anufacturing *inancials supports Landed Cost management +LC),, a eb based application hich is part of Oracle "-%usiness suite and a milestone for customers 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 updated ith Actual Landed Cost +ALC,, as hen they become kno n, allocating them to shipments, orders, and products. Accordingly the estimate !ersus the actual cost comparison through LC) orkbench ould highlight impro!ement actions on controlling the landed costs. Oracle (rocess manufacturing customers irrespecti!e of using different cost methods can use the Landed cost management features. O() - Landed cost management application supports t o basic scenarios of recei!ing flo s. *irst one is Landed Cost management as (re-recei!ing and the other is Landed Cost management as $er!icing. -ni'ue selection of either of the flo can be made and henceforth the Organi.ation ould operate e#clusi!ely as Landed Cost management for (re-recei!ing or $er!icing. Let us consider a routine procure to pay flo as an e#ample and understand ho the landed cost for items are arri!ed. LCM as Pre-receiving: LC) as (re-recei!ing is used hen e intend to calculate the Landed cost estimation before e recei!e the goods in Organi.ation ith reference to (urchase order. The LC) (re-recei!ing functionality has the fle#ibility of !arying the item 'uantity and price 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 applications and receipt of goods and recei!ing transaction takes place for the same 'uantity.

. Through Oracle ( the profit margins ould end up e#hausting your pocket. hich cannot be changed like pre-recei!ing. The receipt happens ith reference to (urchase order 'uantity and price. The usage of LC) application gi!es the opportunity to identify areas of potential cost reduction. This information is passed back from Oracle payables module to the Landed cost management in order to calculate the Actual Landed Cost +ALC. Conclusion: 1ithout kno ing the landed cost of a product and reali. the Item in!oice and freight in!oices are created and matched to the receipt of the item ith actual prices. The Oracle (rocess )anufacturing reports display the history of the landed cost adjustments made to the item.e and control the Landed cost charges. and increased competiti!eness by sourcing of materials from foreign locations. *or both (re-recei!ing and $er!icing.LCM as Servicing: The $er!icing scenario is used hen the receipt of items into in!entory happens follo ed by automatic creation of "stimated Landed Cost. the Actual Landed Cost could be !ie ed and compared ith "stimated Landed Cost. and the rele!ant account postings happen to 0eneral Ledger. more accurate product profitability reporting. Lot many hidden costs ould put up your profitability at risk. This scenario is fa!orable hen you assess that the landed cost of an item remains constant ith kno n ser!ice pro!iders ithout much !ariation to the charges. This ould help to analy. These landed costs is usually 23 to 435 of the product cost hich may e!en go beyond this if unnoticed and uncontrolled.