How OPM Financials can take care of Third Party

Charges(Freight, Insurance) or Indirect expenses(An OPM

LCM integration)

Thrivikram Duvvuru
Principal Software Engineer
ORACLE INDIA PVT LTD

Rathnavani Anagani
Principal Quality Assurance Engineer
ORACLE INDIA PVT LTD
Safe Harbor Statement
The following is intended to outline our general product direction. It is intended for
information purposes only, and may not be incorporated into any contract. It is not a
commitment to deliver any material, code, or functionality, and should not be relied upon
in making purchasing decisions. The development, release, and timing of any features or
functionality described for Oracles products remains at the sole discretion of Oracle.

Copyright 2014 Oracle and/or its affiliates. All rights reserved. | 3

 How OPM Financials can take care of Third Party
Charges(Freight, Insurance) or Indirect expenses (An OPM
LCM integration)

1 Procurement Costs Prior to LCM

2 LCM Setup, LCM Flow, LCM-OPM Process and LCM Features
3 Test cases Pre-Receiving, Service
4 Key Considerations
5 References

Copyright 2014 Oracle and/or its affiliates. All rights reserved. | 4

 How OPM Financials can take care of Third Party
Charges(Freight, Insurance) or Indirect expenses (An OPM
LCM integration)

1 Procurement Costs Prior to LCM

2 LCM Setup, LCM Flow, LCM-OPM Process and LCM Features
3 Test cases Pre-Receiving, Service
4 Key Considerations
5 References

Copyright 2014 Oracle and/or its affiliates. All rights reserved. | 5

 Procurement Costs Prior to LCM
Workaround #1 Freight Lines in Payable Invoice
Challenges
Create Cost Factor (Navigation Path Purchasing Superuser>Setup>Purchasing>Cost Factors)
No provision for Estimated Freight Costs

Set the value of the Profile Option 'GMF: Include Invoices in Actual Cost' to 'Yes
No Comparison of Actual Vs Estimated

Profile Option 'GMF: Use PO Acquisition Costs for Invoice', also needs to set to 'Yes
No Validation and reconciliation of Freight Charges , tie back is not easy

Match the Freight and other PO Charges using Cost factor in Payable Invoice under Miscellaneous
Charge Type

Run Extract AP Invoice Charges (Navigation Path Purchasing Superuser>View Requests

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 Procurement Costs Prior to LCM
Workaround #2 Expense Allocations
Challenges
Allocation
Expenseisallocation codes
always based oncan be set at Quantity,
Transaction Legal entity
nolevel,
otherand assigned
method to items with respective Cost
supported.
Components set
Accounts (in which balances are maintained and used in expense allocation setup) need be unique at item level,
otherwise allocation does not happen based on transaction quantity, it will divide among number of items equally
Two options in Expense allocation, one is Fixed % allocation and other is Based on GL balances
With growing data like number of Inventory org, Items, more code combination ids need to be set since the
concept of Expense allocation works based on balance existing in specified pool of accounts(Dynamic insertion concept
applicable
not From and To Accounts need to be specified(whose pool or balance that need to be allocated to Inventory
here)
items based on transaction quantity during the respective period

Copyright 2014 Oracle and/or its affiliates. All rights reserved. | 7

 How OPM Financials can take care of Third Party
Charges(Freight, Insurance) or Indirect expenses (An OPM
LCM integration)

1 Procurement Costs Prior to LCM

2 LCM Setup, LCM Flow, LCM-OPM Process and LCM Features
3 Test cases Pre-Receiving, Service
4 Key Considerations
5 References

Copyright 2014 Oracle and/or its affiliates. All rights reserved. | 8

 Landed Cost Management
Increase financial visibility into the
extended supply chain costs /procurement
costs

Enhance sourcing competitiveness

Accuracy in allocating procurement costs

Single and integrated page to compare and

view estimated vs actual landed costs

Prorates charges based on weight, volume,

quantity, or value

Oracle Landed Cost Management (LCM) gives organizations financial Charge estimates and actual variances could
visibility into their real purchasing costs such as transportation and be included item cost and there by impact
handling fees, insurance, duties and taxes. Since these types of charges inventory valuation
can constitute a significant portion (upwards of 40%) of an items cost.
Multiple currencies and multiple units of
measure supported

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 LCM Setups
2.Receiving Options
1. Organization Parameters

3. Landed Cost Management Options

Provide Organization Access for

LCM Responsibility

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 LCM Setups
4.Modifiers

5. Cost Factors 6. Set Required Profile Options in LCM, OPM and

Advanced Pricing (for automatic generation of charges)

7. Set ADR Rules of Landed Cost Accounts

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 LCM Flow
Estimated Charges Actual Charges

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 LCM OPM Process
LCM Pre-receiving LCM As Service

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 LCM Features

Variable costs of Purchasing such as taxes, freight, insurance, port charges, etc can be tracked

Estimated costs also do get included in item cost

Actual Vs Estimated costs also impact item cost

Close integration with Purchasing, Inventory, Payables, Advanced Pricing and Costing Modules

Automatic Calculation of charges based on weight, volume and quantity

Charges can be allocated at PO Level, PO shipment or receipt

Copyright 2014 Oracle and/or its affiliates. All rights reserved. | 14

 How OPM Financials can take care of Third Party
Charges(Freight, Insurance) or Indirect expenses (An OPM
LCM integration)

1 Procurement Costs Prior to LCM

2 LCM Setup, LCM Flow, LCM-OPM Process and LCM Features
3 Test cases Pre-Receiving, Service
4 Key Considerations
5 References

Copyright 2014 Oracle and/or its affiliates. All rights reserved. | 15

 Test Case : Pre-receiving Scenario
Create a PO with Two Lines for two different Items.

Automatically Estimated Charges gets allocated based on Modifier setup.

Verify Estimated Charges in Item Cost.

Create Invoice for Charges with Price Variance.

Estimated Vs Actual Charges impacts Item Cost.

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Create a LCM PO

Create PO for Two Items

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 Modifier Setup

Charges get applied at Order Level and allocated among the lines
based on allocation basis in cost factor

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Allocation of Estimated Charges

Lump sum charges of 1000 for LCM- Per Unit at PO

Header Level allocated based on PO Line quantity

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Item Cost with
Estimated
Charges

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Actual Charges Invoice with Price Variance

Invoice Price Variance shall be tracked as LCM

Adjustments in Item Cost . Same holds good for
ERV too..

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Estimated Vs Actual Charges

Estimated Charges Vs Actual Charges would impact

item cost as LC Adjustment Charges

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History of Changes in LCM Unit Cost

Sequential LCM Unit Cost changes due to

change in quantity, charges etc

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Final Item Cost

Adjustment of Actual
Adjustment
Chargesofincluding
Estimated Vs Actual
Price Variance Charges

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 Test Case : LCM As Service Scenario

Create a PO with Two Lines for two different Items.

Create a Receipt.
Run Landed Cost Integration Manager, Shipments Interface Import.
Verify Estimated Charges in Shipment.
Verify Item cost.

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Create LCM PO Service

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Modifiers Setup

Percent applies on Each Line

Value

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Create a PO Receipt

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Process to Create LCM Shipment

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LCM Shipment with Estimated Charges

LCM As Service- LCM Shipment is created and completed

automatically , with no intervention manually to modify or add
estimated charges

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Item cost with Estimated Charges

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 How OPM Financials can take care of Third Party
Charges(Freight, Insurance) or Indirect expenses (An OPM
LCM integration)

1 Procurement Costs Prior to LCM

2 LCM Setup, LCM Flow, LCM-OPM Process and LCM Features
3 Test cases Pre-Receiving, Service
4 Key Considerations
5 References

Copyright 2014 Oracle and/or its affiliates. All rights reserved. | 32

 Key Considerations
Re-run Landed Cost Adjustment Import Process after PO Returns or Corrections(For item cost calculations
to pick the impact)

Incase of foreign currency charges presence enable profile INL: Default Currency Conversion Type set at site
level to other than User, Make sure that conversion exist to what you have set.

Use INL: Item Category Set Profile for items to use LCM Item/Charges and without LCM Item/Charges in
same org.

Item price variances and exchange rate variances(for item, LCM Invoices) will be categorized as LC
Adjustments

Additional charges can be added directly at Invoice level(for completed Lcm Shipments)

When you have requirement of undoing and redoing of OPM Accounting, notify support If you have LCM
enabled orgs

Copyright 2014 Oracle and/or its affiliates. All rights reserved. | 33

 How OPM Financials can take care of Third Party
Charges(Freight, Insurance) or Indirect expenses (An OPM
LCM integration)

1 Procurement Costs Prior to LCM

2 LCM Setup, LCM Flow, LCM-OPM Process and LCM Features
3 Test cases Pre-Receiving, Service
4 Key Considerations
5 References

Copyright 2014 Oracle and/or its affiliates. All rights reserved. | 34

 References

Diagnosis and data flow:

OPM LCM Transactional Data Diagnostic (Doc ID 1664499.1)

EBS Oracle Process Manufacturing Landed Cost Management (OPM-LCM) Integration
Key Setup Analyzer (Doc ID 1664410.1)

Setup related:
EBS LCM OPM integration - using LCM Pre-Receiving (Doc ID 968122.1)
EBS LCM OPM integration (Doc ID 978607.1), Service

Copyright 2014 Oracle and/or its affiliates. All rights reserved. |

Safe Harbor Statement
The preceding is intended to outline our general product direction. It is intended for
information purposes only, and may not be incorporated into any contract. It is not a
commitment to deliver any material, code, or functionality, and should not be relied upon
in making purchasing decisions. The development, release, and timing of any features or
functionality described for Oracles products remains at the sole discretion of Oracle.

Copyright 2014 Oracle and/or its affiliates. All rights reserved. | 36

Copyright 2014 Oracle and/or its affiliates. All rights reserved. | 37
Copyright 2014 Oracle and/or its affiliates. All rights reserved. | 39