Training Material
By: Muhammad Bilal Junaid
For Queries, please contact:
mbilaljunaid@gmail.com
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Table of Contents
1
OVERVIEW ...................................................................................... 4
1.1
1.2
1.3
1.4
1.5
1.6
1.7
2
INTRODUCTION ................................................................................... 4
BENEFITS OF ORACLE MANUFACTURING IMPLEMENTATION ........................... 5
OVERVIEW DIAGRAM ........................................................................... 6
ROUTING AND JOB OPERATIONS ............................................................. 7
PRODUCTION JOBS .............................................................................. 7
MATERIAL TRANSFER TO SHOP FLOOR AND MATERIAL CONSUMPTION ............ 7
JOB COSTING AND ACCOUNTING ............................................................. 7
MASTER DATA - SETUP .................................................................. 10
2.1
2.2
2.3
2.4
2.5
2.6
2.7
3
3.1
3.2
3.3
3.4
3.5
4
4.1
4.2
4.3
4.3.1
4.3.2
4.3.3
4.3.4
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5.1
5.2
5.3
5.4
6
INTRODUCTION ................................................................................. 46
SETUP STEPS .................................................................................... 47
PROCESS ......................................................................................... 50
ACCOUNTING ENTRIES ........................................................................ 54
ORACLE WORK IN PROCESS BACKFLUSH PROCESSING ................ 57
6.1
6.2
6.3
6.3.1
6.3.2
6.3.3
6.3.4
6.3.5
6.4
6.4.1
6.4.2
6.5
6.6
6.6.1
6.6.2
6.6.3
6.6.4
6.6.5
6.6.6
OVERVIEW .......................................................................................
57
WHAT IS BACKFLUSHING? .................................................................... 57
WHEN DO BACKFLUSH TRANSACTIONS OCCUR? ......................................... 57
PROCESS 1 : COMPLETE ASSEMBLIES AT OPERATION - MOVE TXN FORM .......... 59
PROCESS 2 : MOVE & COMPLETE ASSEMBLIES INTO INV ............................... 61
PROCESS 3 : COMPLETING ASSEMBLIES - COMPLETION TXN FORM ................. 63
PROCESS 4 : RECEIVE ASSEMBLIES FROM OSP OPERATION : PURCHASING .......... 64
PROCESS 5 : WORK ORDER-LESS COMPLETIONS WINDOW............................. 66
BACKFLUSHING PROCESSING ................................................................. 67
OPERATION PULL BACKFLUSH TRANSACTIONS ........................................... 67
ASSEMBLY PULL BACKFLUSH TRANSACTIONS : ............................................ 68
BACKFLUSH TRANSACTION RULES ........................................................... 68
GENERAL POINTS FOR ALL BACKFLUSH TRANSACTIONS : ............................... 69
LOT AND SERIAL NUMBER BACKFLUSHING : ............................................... 69
COUNT POINT AND AUTOCHARGE OPERATIONS : ........................................ 70
NEGATIVE REQUIREMENT BACKFLUSHING : .............................................. 70
REPETITIVE PRODUCTION LINE BACKFLUSHING : ......................................... 70
CHARGING OF RESOURCES .................................................................... 70
HOW DO YOU VIEW BACKFLUSH TRANSACTIONS? ....................................... 71
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1 OVERVIEW
1.1
Introduction
Inventory
Bill of Materials
Work in Process
Quality
Management
Cost
Management
Purchasing
Description
All the inventory transactions are processed in this module. New items are
defined, shop-floors are assigned and Items are BOM-enabled so that
BOMs can be created
Recipes of Finished Goods and outsourcing items will be maintained and
managed in this module in which all the raw materials along with their
standard consumption will be defined against each finished item.
Departments, operations, resources and routing data will also be
maintained in this module.
Production job creation, its shop floor movement and completion will be
managed in work in process module. Work in process module will be used
to create production jobs and to process and maintain production floor
transactions including material issuance to production floor, movement of
material from one operation to another.
Quality data including sample data, inspection results and test results will
be maintained in this module. Oracle Quality is integrated with both Oracle
Purchasing and Oracle work in process to record inspection results of both
raw materials, work in process items and finished items.
Oracle Cost Management will automatically calculate and keep details of
cost of all jobs and inventory items including raw materials, work in
process items and Finished items.
Oracle Purchasing is used to generate Requisitions for Outside Processing
Items and assigning such costs to the respective jobs.
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1.2
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1.3
Overview Diagram
Enter Sales
Order
Maintain Item
Master Data
3
Marketing
Department
Maintain BOM
Application
Administrator
BOM
Item Master
PPC
Department
6
Create Job For
Finished Item
MMC and
Commercial
Department
Routing
Materials
Procurement
7
4
Maintain
Routing
Inventory Data
Issue Materials
to Job
Job Data
Marketing
Department
10
8
Enter Process
Confirmation
Automatic
Costing and
Accounting
Production
Personnel
4
Maintain
Resource
Quality
Personnel
9
I.E and
Costing
Department
Finished
Store
Personnel
Enter
Completion
Data
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1.4
Routing and Job Operations represents the step by step operations that are performed to
manufacture a product. Each routing and job operations can have a number of standard
operations.
Routing form is used to record item wise master data. Once a routing for an item is defined,
system will automatically use this routing in multiple production jobs.
Job Operation form is used to assign standard operations to production job. Assembly items
can be moved in the sequence defined in Job Operations.
1.5
Production Jobs
Oracle Discrete Manufacturing will keep track of each production job created in system.
Materials can only be issued against the production job and resources will be charged to against
production job.
1.6
For material replenishment, manual requisitions are raised by authorized person at the
production floor to respective warehouse. The authorized user in warehouse will use subinventory transfer functionality to transfer materials to production department.
1.7
Oracle Work in process and Oracle Cost Management provides a complete costing system to
track and report production costs for all the manufactured items. All inventory items will be cost
on the basis of perpetual average costing system. The system will automatically perform costing
and generate accounting journal entries in the system. Following are the types of transactions
which will affect the value of the manufactured items:
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1.8
Variances
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standard requirements. These standard requirements are compared to the actual material
issues, resource, outside processing, and overhead charges to determine the reported variance.
Work in Process calculates, reports, and recognizes the following quantity variances:
Material Usage Variance
The material usage variance is the difference between the actual material issued and the
standard material required to build a given assembly, calculated as follows:
This variance occurs when you over or under issue components or use an alternate bill.
Resource and Outside Processing Efficiency Variance
The resource and outside processing efficiency variances is the difference between the
resources and outside processing charges incurred and the standard resource and outside
processing charges required to build a given assembly, calculated as follows:
This variance occurs when you use an alternate routing, add new operations to a standard
routing during production, assign costed resources to No - direct charge operations skipped by
shop-floor moves, overcharge or undercharge a resource, or charge a resource at actual.
Move Based Overhead Efficiency Variance
Move based overhead efficiency variance is the difference between overhead charges incurred
for move based overheads (overhead basis of Item or Lot) and standard move based overheads
required to build a given assembly, calculated as follows:
This variance occurs when you use an alternate routing, add operations to a standard routing
during production, or do not complete all the move transactions associated with the assembly
quantity being built.
Resource Based Overhead Efficiency Variance
Resource based overhead efficiency variance is the difference between overhead charges
incurred for resource based overheads (overhead basis of Resource units or Resource value) and
standard resource based overheads required to build a given assembly, calculated as follows:
This variance occurs when you use an alternate routing, add new operations to a standard
routing during production, assign costed resources to No - direct charge operations skipped by
shop floor moves, overcharge or undercharge a resource, or charge a resource at actual.
Standard Cost Adjustment Variance
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Standard cost adjustment variance is the difference between costs at the previous standards
and costs at the new standards created by cost update transactions.
Item Master
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Inventory Item: The user will turn this option on to enable the product attributes like Stockable, BOM Allowed, Transact-able and Build in WIP.
Stock able: The user will turn this option on to stock the product in inventory. This will be
enabled for all finished items.
Lot Control: The user will turn this option on to track inventory balances by lot number. Semifinished and Finished Garments, finished garment and raw materials items will be lot
controlled.
Navigation: Inventory> Items > Master Items
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BOM Allowed: The user will turn this option on so that the system allows creating a BOM for
the product. All finished items will be BOM enabled.
Navigation: Inventory> Items > Master Items
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Costing Enabled: The user will turn this option on to report, value and account for product
costs. All finished items and raw material items will be costing enabled. This option will be
turned off for client supplied materials.
Cost of Goods Sold Account: The user will enter a general ledger account to use as a source for
the Cost of Goods Sold Account. The system will automatically debit this account when the
finished goods will be dispatched.
Navigation: Inventory> Items > Master Items
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Purchased: The user will turn this option on to purchase and receive a product. This option will
be disabled for all semi-finished and Finished Garments item.
Outsourced Processing Item: The user will turn this option on to add the product to an
outsourced processing Purchase Order line. This option will be enabled for all items that can be
outsourced
Navigation: Inventory> Items > Master Items
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Build in WIP: This characteristic allows the user to create discrete jobs for the item. This option
will be enabled for all finished and semi finished items.
Navigation: Inventory> Items > Master Items
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2.2
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Effective Date: Enter the effective from and to date from which the component is effective for
the BOM.
Navigation: Bills of Materials> Bills> Bills
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Supply Type: Supply type controls how component are supplied to discrete job and how
materials are cost in cost management.
Supply Sub inventory: Supply sub-inventory will default from item master and is updatable. This
sub inventory will be replenished from store or shop floor manually to fulfill Job material
requirements. On operation completion, material will be consumed in work in process from this
sub inventory manually.
Supply Locator: Supply Locator will also default from Item master and is updatable. This locator
will be replenished from store or shop floor manually to fulfill Job material requirements. On
operation completion, material will be consumed in work in process from this default locator
manually.
Navigation: Bills of Materials> Bills> Bills
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2.3
Departments
A department is an area within an organization that consists of one or more people or machines
that can be used for collecting and analyzing various production data and accumulating cost at
department level and dividing it over discrete jobs. Departments can further be broken down
into operations if production data and costing data are required. Each department can have
various operations.
Multiple resources can be assigned to departments and operations within the department.
Following information will be maintained in the system in respect of departments:
Department name;
Department Description
Department Class
Location for the department
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2.4
Standard Operations
Standard Operations may be assigned to Departments in Routing or using Job Operation form.
These standard operations represent various stages of Production process which shall follow in
the sequence defined to get the desired outcome. Resources can be assigned to each standard
operation. Standard Operations are used for Component usage and resource charging on to job
at various production processes.
At the time of defining Operations in routing, Count Point and Auto Charge options decide how
materials and Resources will be charged to job which is explained below;
Navigation: Bills of Materials> Routings> Routings
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2.5
Resources
Resources are defined as anything of value, except material and cash, required to manufacture
products. Resources include people, tools, machines and labor purchased from a supplier.
Resources are assigned to department operations to allocate resource cost to a product.
The Resource Master Data will include the following:
Resource Name: A unique Resource name will be used to identify Resources.
Resource Description: A unique Resource description will be used to identify Resources
description.
Charge Type: A charge type will be selected and assigned to each Resource which will determine
whether the Resource cost will be charged to Work in Process automatically or manually.
Absorption account: This account will be credited at the time of work in process completion at
the relevant operation/department.
Navigation: Bills of Material> Routings>Resources
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2.6
Routing
A routing represents the stepbystep operations that are performed to manufacture a product.
Each routing can have any number of operations. Resources will be assigned to each standard
operation.
Following information will be maintained for each Routing;
Item: The user will select the item code for which the routing is to be defined.
Operations: In this tab the user will select the relevant operation of the routing
Operation sequence: This represents the sequence in which the operations will be performed.
Operation code: The user will select the code of the operation to be performed.
Navigation: Bills of Material> Routings> Routings
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Effective date range: The user will enter the date range for which the operation is effective.
Navigation: Bills of Material> Routings> Routings
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Resource: The resource used in the operation. These can be machines, piece rate labor,
permanent labor, Overheads used in specific routing operation.
Usage: The resource time or frequency consumed by one unit of the garment for its
production.
Navigation: Bills of Material> Routings> Routings> ECO>Operation Resources
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Back flush enabled: Back flush automatically charge components in the supply sub inventory to
work in process at either operation or product completion.
Navigation: Bills of Material> Routings> Routings>
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Completion Sub-inventory: The user will enter the sub-inventory code for the assembly/subassembly in which the production will be received.
Navigation: Bills of Material> Routings> Routings> Routing Details
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2.7
Work in Process Accounting class is used to group job costs for the purpose of Inventory
valuation and Variance accounting for Products at Shop Floor.
Valuation and Variance accounts for the following cost elements will be defined for the
Accounting Class:
Material
Material Overhead
Resource
Resource Overhead
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3 PRODUCTION JOB
Forms used
Purpose of form
Discrete Jobs
WIP Material Issue
Move Transaction
Completion
Transaction
After releasing the Job, authorized person in PPC department will have the option to put
it on Hold if production activities are stopped for some period against the job. Putting
the job in Hold status will ensure that the system will neither allow the user to record
production nor consumption against a discrete job.
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3.1
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Sales Order Number/Sales Order Line will represent currently used work order
number. Sales Order Number/Sales Order Line will be made part of discrete job name.
Production Jobs will be used to tracked shop floor movement, consumption of raw
materials and manage semi-finished and finished inventory. Oracle Discrete
Manufacturing will automatically be performing Job Order Costing against each
production job.
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3.2
3.3
Job Operations represents the step by step operation that needs to be performed on
the production job; already created. Resources will be assigned to each operation
assigned to production job.
Navigation: Work in Process> Discrete> Discrete Jobs
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Run
To Move
Purpose
Represents that standard operation has not given
any production although production of previous
standard operation has been transferred to it.
Represents that materials are loaded onto machine
but standard operation wise output has not been
given.
Represents completion of production of an
operation.
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3.4
Completion Transaction
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3.5
Close Job
Closing a Complete job ensures that no material or resource can further be charged
to the job. Discrete Jobs can be closed individually or based on various parameters i.e.
Assembly item, Job start and end dates, job status etc. After job close, Discrete Job
Value report can be generated from the system to check cost element wise valuation of
closed jobs. A job can be re-opened after it has been closed.
Navigation: Work in Process> Discrete> Close Discrete Jobs> Close Discrete Jobs (Form)
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4 COSTING
4.1
Costing Method
Perpetual weighted average cost method of inventory valuation is usually used to value
all inventory items in the system. Under this method, system recalculates the average
cost of the inventory item at each purchase order receipt. The issue of inventory item to
production is recorded at the average price applicable at the time of issue.
The system will automatically generate accounting journal entries in the system.
Following are the types of transactions which will affect the value of the manufactured
items:
Component Issue and Return Transaction
Resource Transaction
Assembly Completion Transaction
Job Close Transaction
4.2
Work in Process continually maintains the value of work in process at each Shop Floor, updating
it with each transaction. Cost is accumulated as the WIP Production Job moves through
production operations and is continually accumulated till the completion of the job.
Order cost analysis: Material is charged to the WIP Production Job at the time of issuance and
resources (production overheads) are charged at the time the production operation is
completed, i.e. at the time the move-transaction is recorded in the system. Total cost
accumulated till the completion of the job is allocated evenly to all the units produced in that
job.
Resources (production/manufacturing overheads) will be defined in the system and will be
associated to each production operation at a standard rate of per unit of output, e.g. per Piece
of garment produced
Cost variance analysis: Cost variance analysis can only be prepared for those jobs which have a
defined Bill of Material (BOM). BOM contains the standard recipe of inputs/materials required
for a production job / finished product. The actual materials issued against the job are recorded
in the system and cost comparisons are made between that standard recipe and actual material
consumed.
As the resources will be applied at a standard rate to each production process, the same will be
accumulated in a separate account titled resource overhead absorption account. The actual
cost incurred in respect of these resources will be accumulated in various general ledger
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accounts under respective head of accounts. This actual cost data will be used for comparison
with the applied overhead cost to generate overhead variance analysis, e.g. under/over applied
resources etc.
4.3
Journal Entries
The system will automatically generate accounting journal entries in the system. Following are
the types of transactions which will affect the value of the manufactured items:
Component Issue and Return Transaction
Resource Transaction.
Product Completion Transaction
Job Close Transaction
Each type of manufacturing transactions, their accounting journal entry and the rate / basis at
which the system will value that transaction under the Perpetual Average Costing Method has
been explained as follows:
Dr.
Xxx
Cr.
xxx
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Dr.
xxx
Cr.
xxx
In case of reversal of move transactions, following Conversion cost Accounting entries will be
generated:
Account Description
Resource Absorption Account
WIP Resource Valuation Account
Dr.
Xxx
Cr.
xxx
Dr.
Xxx
Xxx
Cr.
Xxx
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Account Description
WIP Variance Account
WIP Material Valuation Account
WIP Resource Valuation Account
Dr.
Xxx
Cr.
Xxx
Xxx
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4.4
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you must use different subelements. When you change material overhead defaults, that change
you make applies only to items defined later; there is no impact to existing items.
Assembly Scrap
The WIP Require Scrap Account parameter determines how assembly scrap is handled. If you
enter a scrap account as you move assemblies into scrap, the transaction is costed by an
algorithm that calculates the cost of each assembly through the operation at which the scrap
occurred; the scrap account is debited and the job elemental accounts are credited. If you do
not enter a scrap account, the cost of scrap remains in the job. If the job is then completed using
the final completion option in the Completion Transactions window, the cost is included in the
finished assembly cost. Otherwise, the cost is written off as a variance when the non-standard
asset and standard discrete jobs are closed and at period close for non-standard expense jobs.
If you enter a scrap account as you move assemblies out of a Scrap intraoperation step, the
above accounting transactions are reversed.
Assembly Completions Out of WIP
When finished assemblies are completed from a job to inventory, they are costed according to
the Completion Cost Source: either User Defined or System Calculated. Set the default for the
Completion Cost Source through the Default Completion Cost Source parameter in the WIP
Parameters window.
These parameters are the defaults in the WIP Accounting Class window as you define standard
and non-standard discrete accounting classes.
If you choose System Calculated, you must then choose a system option, either Use Actual
Resources or Use Pre-defined Resources. The system option determines how the system
calculates costs.
If you chose User Defined, you must choose a cost type.
The Default Completion Cost Source parameter can be overridden, but in the case of
System Calculated, not the system option. If it is necessary to use both system options, you
should set the Default Cost Source parameter to User Defined, override this parameter to
System Calculated and choose a system option for each WIP accounting class.
User defined You must ensure that the item specified cost type rolls up correctly before
completing an assembly item using this method. In other words, all component and this-level
resource and overhead details have been defined. To value the unit(s) being completed using
this method, you must predefine a cost in a user-designated cost type and specify that cost type.
Select this method to use the current average cost of the assembly or a target cost. Then use a
final completion to flush all (positive) unrelieved costs at the end of the job.
System calculated You must select a system option. The options are as follows:
a. Use Actual Resources: The unit cost to be relieved from the job is calculated based on
actual job charges and is charged to inventory as each unit is completed. This algorithm
costs the completions using a prorated amount of actual resources charged to the job
and material usages as defined on the assembly bill, multiplied by the average unit costs
in the job. Note that for completions out of a nonstandard job having no routing, this
algorithm selects the unit cost from the Average cost type. This method works best for
jobs that have resources charged in a timely manner.
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b. Use Pre-defined resources: Resource costs are relieved from the job based on the job
routing resource usages. This option works best for jobs with accurate routings.
No matter which method is used, job assemblies completed in the same transaction have the
same unit cost.
As part of a completion transaction, the unit cost of the assembly in inventory is recalculated
when it is different from the unit cost used in the completion transaction.
Note: You cannot complete assemblies to more than one subinventory in the same transaction.
Predefined Resources
Actual Resources
Final
Completion
Yes
No Variance
No Variance
Final
Completion
No
Variance
No Variance
Manual Resource
Transaction and
then Completed
Completed and
Manual Resource
Transaction
Product Cost
Product Cost
Period Cost
Period Cost
Both the Pre-defined and Actual algorithms use the job Bill of Material (Material
Requirements) to calculate cost related to components.
Figure: Flow diagram for unit cost calculation of completed assemblies in Average
Costing
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Over-completions
If you have over-completed a job, then it is not necessary to change the job quantity.
However, if you have chosen the Use Predefined Resources system option and are overcompleting assemblies associated with lot based resources and overheads, then these resources
and overheads are over-relieved from WIP. You can avoid this problem by selecting the Use
Actual Resources system option.
Final Completion
The Final Completion option check box in the WIP Assembly Completion window allows an
additional costing option for the assemblies currently being completed:
Enabled: Costs these assemblies by taking the current job balances and spreading them evenly
over the assembly units being completed or taking them to variance.
Disabled: Costs these assemblies according the Completion Cost Source method set.
Final completions ensure that no positive or negative residual balances are left in the job after
the current assembly has been completed.
Note: Use of the final completion option is unrelated to whether or not this is the last
completion of the job.
The WIP Auto Compute Final Completion parameter setting determines whether the
Final Completion option check box defaults to checked (enabled) or unchecked (disabled):
Note: When the last assembly in a job is a scrap, a residual balance may remain in the job
regardless of how you have chosen to deal with assembly scrap (see Assembly Scrap paragraph
above), because the above routine for clearing the job balance is not invoked.
Assembly Returns
If you return completed assemblies back to a job, the assemblies being returned are valued at
the average cost of all completions in this job (net of any prior completion reversals), if the
completion cost source is System Calculated. This is true for both the Use Pre-Defined Resources
option and the Use Actual Resources option. If the completion cost source is User-defined, then
the assembly is returned at the User-defined costs.
WIP Job Closures and Cancellations
Variance accounts are defined for each standard and non-standard discrete WIP accounting
class. Any balance remaining in a job after it has been closed is written off elementally to these
accounts.
Just prior to job closure, either all costs in the job have been relieved, leaving a zero balance, or
a balance will be left in the job. If the job was completed, all units required were either
completed or rejected/scrapped, and the Final Completion option was used, the job balance is
zero. The final units completed have absorbed all remaining job costs into their value.
However if the job balance is not zero, it is written off to the elemental variance accounts
defined for the job's WIP accounting class. A residual job balance may remain under the
following conditions:
On the element by level, the job was over-relieved, resulting in a negative net activity for that
element by level in the WIP Value Summary
All assemblies were completed but the final completion was not used
A late transaction was posted after the completions
The job was cancelled and closed short (not all assemblies were completed/rejected)
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The elemental account for the job's WIP accounting class should be different from the Average
Cost Variance account.
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Introduction
The Outside Processing process comes into play in Work in Process whenever all or part of the
labor on a routing is performed by a third party vendor.
More than one step on a routing can be performed by third parties. In Oracle, a link has been
defined between WIP and Oracle Purchasing to automate the process of creating a purchase
order to the vendor who will perform the OSP labor.
Because what is being purchased is LABOR, one requirement to using this process is to define a
resource for each type of labor to be purchased. An item in the Item Master must also be
defined for each type of labor to be purchased, and linked to the resource when it is defined.
The item must be classified as an outside processing item.
Although this "resource" item is purchasable and transact able, it will never be received into or
issued from a sub inventory. Instead, receiving this item from the purchase order will cause a
move transaction to occur on the WIP routing so that the outside operation step is completed
when the items are received back from the vendor. It is important to note that the item must
not only be received, but must also be delivered before the outside operation is deemed
complete by the system.
When a routing operation uses an outside processing resource, movement into that operation
step causes a purchase requisition to be generated for the "labor" resource to be purchased
from the vendor. Note: that you are not purchasing the item (as you would a "buy" item);
instead you are purchasing the vendor's labor as a substitute for using your own in-house
resources to perform the labor. This is a subtle distinction, but it is necessary to understand this
distinction in order to understand the Oracle process.
This purchase requisition is then imported from WIP into Purchasing. At this point, the
requisition is available (if approved, but that is another issue) to be auto created into a purchase
order. Or, if the buyer so chooses, the buyer may set up sourcing rules such that importing an
approved requisition automatically creates a release against a blanket purchase order.
When the vendor returns the item, a receipt must be entered against the PO or release. The
"item" is delivered not to a sub inventory, but back to the shop floor for continued processing
on the routing. If the OSP step is the only step or the last step on the outing, the finished
assembly will be available to be received into inventory using a WIP completion transaction.
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5.2
Setup Steps
Inventory
1. REQUIRED: Define an item representing the outside processing vendor labor for Purchasing
to place on the vendor PO. In the Item Master Purchasing Attributes region, make sure the
following attributes are set correctly:
* Purchased = Yes (required).
* Purchasable = Yes (required).
* Outside Processing Item = Yes (required)
* Outside Processing Unit Type = Assembly or Resource
(Assembly is recommended if a tangible item) If the item has an Outside Processing Unit Type of
Assembly and the outside resource has a basis of Item, you receive one outside processing item
for each assembly you receive. If the outside resource has a basis of
Lot, you receive one
outside processing item for each job or repetitive schedule. If the outside processing item has
an Outside Processing Unit Type of Resource and the outside resource has a basis of Item, you
receive the extended quantity (using the outside resource usage rate or amount) of the outside
processing item for each assembly you receive. For example, if you purchase 3 hours of plating
service for each assembly, (usage rate or amount is 3), then you receive a quantity of 3 hours for
each assembly you receive from the supplier. If the outside resource has a basis of Lot, you
receive 1 OSP item extended by the outside resource usage rate or amount for each job or
repetitive schedule.
* Optionally enter a list price greater than zero - this will be used as a default in the PO (you
could also set up a blanket PO with prices.)
Note: the item with the above attributes must be defined in the org which is the Purchasing
item validation organization as well as the actual production organization.
Check Purchasing > Setup > Organization > Purchasing Options
To determine which org has been defined as the validation organization.
2. OPTIONAL. In the Item Master Lead Times attributes region, enter appropriate lead times.
These will be used to automatically calculate the need by date for the requisition generated for
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the OSP item. (This step is not required, but is nice to have.) The need-by date will be
automatically entered into the requisition generated by this process, and hence into the PO.
Bill of Material Module
1. REQUIRED. Define an Outside Processing Department. Enter the location where the outside
processed item is to be delivered (example: "Shop Floor" or "Assembly") as you define the OSP
Department.
Note: the location must have been previously defined under
Purchasing > Setup > Organizations > Locations.
2. REQUIRED. Define a separate outside processing resource for EACH labor "item". Enter the
item number defined above in the Item Master for the labor "item".
Make sure the variance account defined for the labor resource is the same as the Purchase price
variance account defined in Parameters under Inventory setup. If you check the Costed box and
the Standard Costing box, you can enter a standard value for this resource by clicking on the
Rates button. Any difference between this standard value and the actual purchase price (in a
standard cost organization) will be recorded in the Purchase Price Variance Account. Make sure
that the auto charge attribute is set to PO MOVE, not PO Receipt. If you set this attribute to PO
MOVE, then the PO receipt automatically generates the WIP Move transaction from the outside
processing operation to the next operation on the routing. If you use PO RECEIPT, you must
manually perform the WIP Move transaction. The quantity of outside processing items
you
receive can relate to the assembly quantity on the job or repetitive schedule in several ways
depending on the OSP item's Outside Processing Unit Type and the
outside resource's basis.
In all cases, Purchasing charges the job or repetitive schedule using the extended quantity of the
associated outside resource.
3. REQUIRED. Add the outside processing resource to a step on the routing. If it is added to
the last step, then the item can be received into inventory as soon as the PO receipt is entered
and the transaction managers run.
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Purchasing
1. OPTIONAL. Create a blanket, and be certain to enter the line as an OSP line type. If your
item is not set up correctly, the system will not allow you to complete entry of the PO.
Optionally, in the terms region of the PO, check the Supply Agreement box. In Purchasing-Supply
Base-Auto Source Rules, link the item with the blanket PO document. Or if you are using
enhanced sourcing rules in Release 10.7, use the menu path Supplier Scheduling-Supply BaseApproved Supplier List" to link the approved supplier for the item with the blanket PO in the
Attributes region. (Note: Enhanced Sourcing Rules in 10.7 is controlled production and you may
not have been approved for using it.)
2. OPTIONAL BUT HIGHLY RECOMMENDED. In the PO line, set the over receipt tolerance for
the item to zero so that no one can receive a quantity greater than on the PO. If a quantity
greater than that in the work order is received, it will cause problems with the WIP move
transaction to the next operation. THIS IS VERY IMPORTANT. There will be problems if more is
received than is on the work order OSP operation step. This is another reason to use a blanket
PO.
3. If you are using Supply Chain Planning, there is another little gotcha. Your item could have
been set up with a 'make' sourcing rule or bill of distribution in the default assignment set. You
can create another assignment set with a 'buy' sourcing rule for the outside processing items
and link it to the responsibility of the person who will do the requisition import.
4. REQUIRED. The person who initiates the move transaction in WIP must be defined as an
employee (in Purchasing or HR, depending on whether or not the HR Module is fully installed)
and linked to the person's user logon in the System Administration module. WIP includes an
employee name on the requisition it creates through this process, and the employee name is
linked to the move transactions that initiated the requisition. Hence the name of the person
who initiated the move transaction will become the name of the "requestor for the purchased
vendor service.
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5.3
Process
1. REQUIRED. Create a discrete job for the assembly. If the outside processing step is on the
first step on the routing, releasing the job will trigger creation of the requisition. If the outside
processing step is NOT the first step, then a move transaction must be performed using the
Move Transaction window. Move the quantity to be processed by the outside vendor into the
Queue step of the outside processing operation step. This triggers creation of the requisition.
2. REQUIRED. Run the Requisition Import process
(Purchasing > Reports > Run > Requisition Import).
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3. REQUIRED. Create a purchase order from the routing. Or, if using blanket POs, run the
Create Release process
(Purchasing > Reports > Run > Create Releases)
4. REQUIRED. Receive the purchase order (note: it must be DELIVERED as well as received.
Until the item has been delivered the next step will not happen.) You might want to consider
setting the receipt routing to "Direct Delivery" for such items in the Purchasing section of the
Item Master unless you require inspection of the item from the vendor first.
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5. Once the PO has been received and delivered, and the Move transaction manager has run,
you can see that the discrete job has been updated and the item is now in the "To Move"
interoperation step of the outside processing operation step.
WIP > Job/Schedule Details > Operations
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And select the Quantity alternative region. You should see the received quantity in the To Move
interoperation step of the OSP operation step. If the Move transaction has failed or has not yet
run, you will see it in
WIP > Move Transactions > Pending Move Transactions.
6. If the step is the last step on the routing, do a WIP completion transaction into inventory.
Otherwise, continue with the routing steps until complete.
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5.4
Accounting Entries
A) RECEIVING transaction
Receiving Inventory Account Debit (DR )
Accrual account
Credit ( CR )
B) DELIVER transaction
Absorption Account
Credit (CR)
Outside processing Account Debit (DR)
To offset the Receiving Inventory Account , both the accounts should be same, else
there will be a balance in Receiving Inventory Account.
Setups for accounts:
A. Steps to set Receiving Inspection a/c
Purchasing Responsibility -> Setup -> Organizations -> Receiving Options
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Note : For OSP item Absorption Account should be equal to Receiving Inspection a/c
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OVERVIEW
The objectives of this white paper are to consolidate and clarify information about backflushing
and related issues. There is no existing document which collates all the relevant topics together.
This white paper will aim to fulfill this need and discuss the following in detail:
To explain what backflush transactions do
To explain how backflushing works in Move and Completion transactions
To explain the differences between Online processing and Background processing
and relate these to backflush transactions
To understand any differences in the behaviour of backflush transactions in
different application releases. This will also discuss any key patches that are
required.
To explain what happens when backflush transactions fail and discuss how to
correct them
6.2
WHAT IS BACKFLUSHING?
In the Bills of Material module, when a bill is created for an assembly, sub-assembly or a finished
good, the component supply type for each component in the bill has to be defined. These supply
types are push, operation pull, assembly pull, Bulk, Supplier and phantom. This Bill of Material is
used in Work in Process module for manufacturing the assembly/sub-assembly/finished good.
If the supply type of a component is Push, the components have to be manually issued to the
shop floor for the manufacturing process.
Assembly Pull and Operation Pull components are supplied in a different way. When a particular
operation or an assembly is completed during manufacturing, i.e. during move transactions or
completion transactions, the system automatically BACKFLUSHES components from the supply
subinventory and locator. No manual issuing of components is required.
The term backflushes in this case refers to the process of automatically REDUCING the
component quantity from the subinventory-locator on hand quantity when any assembly or an
operation is completed in the WIP module manufacturing process. At the same time as reducing
the inventory for the component, the system will issue the component to the work order .
6.3
Backflush transactions 'pull' components with Operation Pull and Assembly Pull supply types
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from inventory onto jobs and repetitive schedules. Backflush transactions can be launched by
the following six different processes :
1.
2.
3.
4.
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When move transactions are performed from the Move Transaction Form to COMPLETE
assemblies at an operation, then operation pull backflush transactions automatically take place
for all components with a supply type of Operation Pull that are defined at that operation. This
means that that the inventory for the components is pulled into that operation.
The assemblies are completed at the OPERATION stage in the Move Transaction Form when:
The move transaction type is MOVE
Moving assemblies from the Queue or Run intraoperation step of an operation to the To
Move, Scrap or Reject intraoperation steps of the same operation
Moving assemblies from the Queue or Run intraoperation steps of an operation to the
To Move, Scrap or Reject intraoperation steps of a subsequent operation
Assemblies are not completed at Operations by:
Moving assemblies between the To Move, Scrap, and Reject intraoperation steps of the
same operation
Moving assemblies from the To Move, Scrap, or Reject intraoperation steps of the one
operation to the Queue or Run intraoperation step of a subsequent operation
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Backflush transactions also take place when an ASSEMBLY MOVE COMPLETION TRANSACTION
takes place.
This is a transaction performed from the Move Transaction Form. Assembly move completion
transactions MOVE assemblies from the current operation to the To Move intraoperation step
of the last operation then COMPLETE them into inventory. Assemblies are completed into the
default completion subinventory and locator specified for the discrete job or repetitive
line/assembly.
The transaction type used for this is Complete.
When completing assemblies, information from the last operation of the job or schedule is
automatically defaulted into the operation To fields - Sequence, Code, and Department - and the
To Move intraoperation step is defaulted for the To Step.
The other inputs required are: UOM, quantity, date , From Operation Sequence and From
Intraoperation Step.
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Backflushing Process (section 11:see below) . It should be noted that in this case TWO
different types of backflush transaction take place. Firstly, when the assembly is moved
to the To Move step of the last operation this initiates the backflush of any
components with the supply type of Operation Pull . Then when the assembly is
completed into inventory, the backflush of all Assembly Pull components takes place.
Charging of Resources
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The next place where Backflush Transactions originate from is the Completion Transaction Form.
Backflushing takes place when you complete assemblies into inventory from the Completion
Transaction Form.
The transaction type required is WIP Assembly Completion
This form allows the user to specify the subinventory and locator into which the completed
assemblies will be placed in inventory. These fields are defaulted from the wip parameters but
can be overwritten.
So what happens when an assembly is completed into inventory as above? Backflush of
components takes place and resources are charged. See the following sections for a detailed
explanation :
Backflushing Process (section 11: see below). If you are completing assemblies that have
Assembly Pull components, the system pulls (backflushes) these components from the
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Charging of Resources
The receipt of the assembly for the outside processing operation will only initiate a backflush
transaction if the following conditions are met :
Pull.
Note the following points about the activities that are initiated by the receipt of the assemblies:
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Since the Autocharge type for the OSP resource is PO Move, the system will
automatically perform a Move Transaction to complete the assemblies at the OSP
Operation. (by placing a record in the Open Move Transaction table for processing).
The move transaction completes the assemblies at the OSP operation by moving
assemblies from the Queue or Run intraoperation step of an operation to the To Move,
Scrap or Reject intraoperation steps of the same operation or a subsequent operation.
This will then trigger the backflush of the Operation Pull components defined for the
OSP Operation.
If the OSP Operation is the last operation on the job, then a completion transaction will
also be automatically performed. This means that the assemblies would be completed
into inventory. This therefore means that any Assembly Pull components defined for
the assembly would be backflushed at this stage.
For more details of the actual Backflush transactions, see the section below on Backflush
Processing (section 11).
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The following actions can be performed from this form all these actions initiate
backflushing of components :
Assemblies can be completed in this window without having the need for a job or a
repetitive schedule.
Used to complete assemblies for Flow Schedules from Flow Manufacturing.
Used to complete assemblies for Flow Schedules which are created to replenish Production
Kanbans.
Used to complete scheduled and unscheduled assemblies
When assemblies are completed into inventory using this form, components are
backflushed.
In this case, (and only in this case) - the following supply types are backflushed :
Assembly Pull
Operation Pull
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PUSH
Phantom Components (the bills for phantoms are exploded and the phantoms
then backflushed)
The supply types of Bulk and Supplier are NOT backflushed.
The backflush window displays for component information for supply type Push and for
Pull components requiring additional information, such as lot or serial number. You can
change the transaction quantity when the Work in Process parameter, Allow Quantity
Changes During Backflush, is enabled.
6.4
BACKFLUSHING PROCESSING
Backflush transactions 'pull' components with Operation Pull and Assembly Pull supply types
from inventory onto jobs and repetitive schedules. There are two types of Backflush
Transaction :
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6.5
An enabled default supply subinventory must be defined for the component. Also, a locator
must be defined if required by the subinventory. These will be used to supply the backflush
components. Supply subinventories and locators can be defined at the item or bill of
material component level. If they are not defined, the system uses the supply subinventory
and locator specified by the WIP Backflush Supply Subinventory and Locator Parameters
when components are backflushed.
Routing references must be specified for non-standard discrete jobs. On the Discrete
Job>Routing tab, select the routing Reference when defining a non-standard job. Routing
references can be used to create routings (operations and resource requirements) for nonstandard discrete jobs, but are not required. You can optionally define non-standard jobs
without routings, then customize them by adding only those operations that are required.
However, the routing reference must exist for backflush transactions to occur.
The component item must be defined as transactable. This refers to the inventory item
parameter.
The Subinventory you you are backflushing from must be an asset subinventory if the
Allow Expense to Asset Transfer profile option is set to No.
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Backflush quantities in decimal values must be no more than five decimal places in order to
create the backflush transaction.
Yield calculations are based on exact requirements, rather than rounded values.
For component items under revision control, the system always defaults the revision based
on the items current revision as of the date of the transaction. Backflushing will therefore
always issue the current revision of the component. To issue older revisions of a component
would require changing the supply type to Push.
6.6
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a. Before we view the material transactions, lets have a look at the BOM that we will use
in the examples. The next screen shows a BOM and shows that the components have a
supply type of Operation Pull.
b. The next 2 screens shows the screen shots of 2 move transactions for the assembly.
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The purpose of the second screen is to highlight the move transaction ids. It is important to
note the following :
There is one move transaction for : From Op 20 Queue> To Op 20 To Move. This
completes the assemblies at this operation and will result in the backflush of components of
operation pull at this operation (components pc and pb)
There is one move transaction for : From Op 10 Queue> To Op 20 Queue. This assumes
that operation 10 has been completed. Therefore any operation pull components at
operation 10 will be backflushed. (component re)
d. The navigation for the form shown below is WIP>Material Transactions>View Material
Transactions. The search criteria used were transaction type (wip component issue) and
job name. It shows the backflush of the components initiated by the Move Transaction in b)
above. The following screens will highlight this in more detail. They are from the same form.
e. The next screenshot is from the same form, showing the reason, reference tab. The key
thing to note is that the source code of WIP Backflush indicates that the transaction was a
backflush transaction. The quantity backflushed is also shown. The last column is the
TRANSACTION_ID which will be used later to query the MTL_MATERIAL_TRANSACTIONS
table.
f. The tab below shows the originating Move Transaction Id for the move transaction
which resulted in the backflush of the components. If the backflush was originated by a
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completion transaction, that would be shown in Completion transaction Id. Note that the
two move transactions in step b) are both shown compare the move transaction id with
that in step b.
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