eam costing, how is it different from mfg costing? costing cost sig 21-oct... · uses the same...
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Slide 1Helping people using Oracle Applications since 1990Copyright ©2014 Douglas Volz Consulting, Inc.
Douglas VolzDouglas Volz [email protected]
EAM Costing, How Is It Different from MFG Costing?
OAUG Cost Mgmt SIG MeetingOctober 21, 2014
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Slide 2
Learning Points
Introduction to the Oracle Enterprise Asset Management Applications (EAM)
How Does EAM Costing fit in with Oracle Cost Management?
How Does EAM Costing work and how is it different from Oracle Cost Management or Discrete Costing?
Helping people using Oracle Applications since 1990Copyright ©2014 Douglas Volz Consulting, Inc.
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Slide 3
Agenda
Overview for eAM Costing
General Implementation Principles
Item Cost Setup
Accounts Setup
Receiving Accounting Flows
Inventory Accounting Flows
eAM WIP Accounting Flows
eAM WIP Job Costing
Subledger Accounting
Summary
Helping people using Oracle Applications since 1990Copyright ©2014 Douglas Volz Consulting, Inc.
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Slide 4
Overview of EAM Transaction Costing
PurchaseOrders
Inventory
Inspection Material Issues
Move Orders (Accounts)
MiscellaneousReturns
Projects And/or
G/L Accounts
Uses the same accounting engines or processors as Oracle Cost Management
Special features for EAM Work Orders for Shop Floor Deliveries
Receipts
Material Returns eAMWork Order
Requisitions
Min-MaxPlanning
DirectItems
MaterialDistributions
AssetActivityBOM
ManualAdditions
Shop Floor Deliveries
Requirements
Requirements
Accounted for Entries
Helping people using Oracle Applications since 1990
Source: COURTESY OF GLOBAL PTM
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Slide 5
General Implementation ConceptsEAM focuses on planning, scheduling and delivering maintenance services:
Preventative maintenanceEmergency repairs and overhaulsSpares planning and trackingAsset rebuildsCost tracking and allocationMachine or asset usage and tracking
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Slide 6
General Implementation Concepts (continued)Best or leading EAM Cost practices across industries:
Keep it simple, don’t burden Operations / Field Service with financial cost accounting “requirements” such as entering account numbersUse an actual cost method (Average preferred, is FIFO worth the extra effort? You decide.)Keep the number of inventory organizations to a minimum
With shared maintenance services use SLA rules to record maintenance expenses for different divisions as opposed to having multiple inventory organizations
Implement in a non-MFG inventory organizationMFG is typically at Standard Costing – EAM variances don’t mean muchMFG is mostly based on dependent demand planning
Helping people using Oracle Applications since 1990Copyright ©2014 Douglas Volz Consulting, Inc.
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Slide 7
General Implementation Concepts (continued)Common EAM projects pain points:
Unwilling to make business changesi.e. move from emergency repairs to PM-based management
Hire team to implement EAM based on firm reputation instead of experience, team member knowledge and past performance
Choose EAM team based on price and not industry experience; witness these real-world client examples:
Having multiple EAM inventory orgs in US using Standard Costing, with one common maintenance teamBreak standard Oracle functionality and force maintenance staff to hand-enter account numbers on bills, routings or work ordersStay as a “repair shop” with little to no preventative maintenance
Helping people using Oracle Applications since 1990Copyright ©2014 Douglas Volz Consulting, Inc.
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Slide 8
EAM Item Costing
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Slide 9
Item Costing Setup Overview
CostTypes
Sub-Elements
Sub-Element Defaults
Item Costing
OrgSetup
Cost Method
Use seeded cost types
Setup needed only for
resources
From EAM parameters
Driven by your Cost Method
Cost Elements
EAM WIP Uses different Cost
Elements
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Slide 10
Organization Costing RefresherOne Costing Method per Inventory Organization:
An exception to this is Project Manufacturing or PJMPJM allows separate costs by Cost Group
Inventory Organization Definition Sets up:Inventory Controls
Costing methodMany default accounts
Cost Setup is by Inventory Organization
Typically only use Average Costing
Helping people using Oracle Applications since 1990Copyright ©2014 Douglas Volz Consulting, Inc.
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Slide 11
EAM Functionality and Costing by Item Types
11
Asset ActivityAsset GroupATO Option ClassATO ModelFG Finished GoodInventory TypeKitModelOption ClassOutside OperationOutside Processing Item
Oracle Item Types
Purchased itemProduct FamilyPhantom itemPlanningPTO Option ClassPTO modelReference itemRebuildableSubassemblySupply item
Oracle Item Types
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Slide 12
Cost Integration with Other Modules
EAM Costing (and Oracle Cost Mgmt) Share and Use:
Enterprise Financial Model• Ledgers• Legal Entities• Accounting periods• Currencies / Exchange Rates• Operating units• Chart of Accounts (COA)
G/L Controls and Setup• Cross-Validation Rules• Security Rules• Workflow and Sub-Ledger
Accounting Rules
Supply Chain Model• Inventory organizations• Items• BOMS and routings• WIP jobs• Suppliers• Purchase orders
Financial Information• Payables invoices• Projects Billing and Costing• Employees
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Cost Type Setup
13
Enterprise Asset Management => Cost Definition => Setup => Cost Types
Choose Multi-Org so all inventory organizations can share the name“Inactive On” controls date availability for various forms and lookupsAverage cost type used for Average Costing
EAM Cost Types
Helping people using Oracle Applications since 1990Copyright ©2014 Douglas Volz Consulting, Inc.
Slide 13
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Cost Types
14
Seeded Cost Types – Determined by Costing Method
COST TYPE COSTING METHOD
COMMENTS
FROZEN (Standard) Standard Not recommended for EAM
AVERAGE Average Recommended for EAM
PENDING Standard Seeded, not in use
FIFO FIFO Is the complexity worth it?
LIFO LIFO Seeded, not recommended
CTO (Configure to Order) Standard Seeded, not applicable
EAM Cost Types
Helping people using Oracle Applications since 1990Copyright ©2014 Douglas Volz Consulting, Inc.
Slide 14
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Cost Elements
15
Cost Elements for EAM vs. Discrete Costing
EAM and Discrete Cost Elements for Inventory / Onhand ValuesMaterialMaterial OverheadResourcesOutside ProcessingOverheads (Production Overheads)
Yes, the same cost elements for onhand goods in a subinventory
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Slide 15
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Cost Elements
16
Cost Elements for EAM vs. Discrete Costing
EAM Cost Elements for Maintenance JobsEquipmentLaborMaterials
Discrete Costing for Non-Maintenance Jobs or Work Orders(i.e. factory production accounting, distribution or warehousing accounting)
MaterialMaterial OverheadResourcesOutside ProcessingOverheads (Production Overheads)
Cost elements are different for EAM vs. Discrete work orders
Helping people using Oracle Applications since 1990Copyright ©2014 Douglas Volz Consulting, Inc.
Slide 16
The EAM WIP Balances are held in WIP_EAM_PERIOD_BALANCES
Estimated EAM WIP Charges are held in CST_EAM_BALANCE_BY_ACCOUNTS
The Discrete WIP Balances are held in WIP_PERIOD_BALANCES
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Cost Elements
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Equipment
Labor
Material
EAM Cost Sub-Elements for Maintenance Jobs
Cost Elements Sub‐Elements
Material
Equipment
ResourceSub‐Elements
Setup?
No setupneeded
No setup needed
Use the Define Resource form
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Slide 17
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Sub-Elements – Material OverheadEnterprise Asset Management => Cost Definition => Setup => Sub-Elements => Overhead
Slide 18
Are material overheads used by EAM?
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Sub-Elements – Material OverheadEnterprise Asset Management => Cost Definition => Item Costs => Item Costs
Slide 19
Works just like Average Costing for Non-EAM
Inventory Organizations
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Sub-Elements – ResourceEnterprise Asset Management => Cost Definition => Setup => Sub-Elements => Resources
Slide 20
For this example, charge actual hours at “standard” rate
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Resource Rates
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Enterprise Asset Management => Cost Definition => Setup => Sub-Elements => ResourcesSub-Elements – Resource
Use the AvgRates Cost Type to hold your rates
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Slide 21
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Resource Rates
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Sub-Elements – ResourceEnterprise Asset Management => Cost Definition => Setup => Sub-Elements => Resources
Can also assign employees
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Slide 22
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Slide 23
EAM Calendar, Organization and Accounts Setup
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Cost Management and EAM uses Month calendar types
Other calendar types include week, quarter, year or adjusting periods
Share the Same G/L Calendar DefinitionGeneral Ledger Super User => Setup => Financials => Calendar => Accounting
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Each inventory organization has its own financial calendar
When you open an org’s accounting period it makes a copy from the G/L calendar and puts it into the inventory org’s calendar
Inventory Calendar DefinitionEnterprise Asset Management => Cost Definition => Accounting Close Cycle => Inventory Accounting Periods
Slide 25
G/L Calendar
Inventory Org
Calendar
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Sub-Element Item Cost DefaultsEnterprise Asset Management => Cost Definition => Setup => Sub-Elements => Defaults
Material Overhead Defaults
Slide 26Helping people using Oracle Applications since 1990Copyright ©2014 Douglas Volz Consulting, Inc.
Works just like Average Costing for Non-EAM
Inventory Organizations
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eAM Parameter Setup
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Enterprise Asset Management => Setup => ParametersEAM Parameters
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Slide 27
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Costing Method
28
Enterprise Asset Management => Setup => Organization ParametersEAM Organization Parameters
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Costing Method
29
Enterprise Asset Management => Setup => Organization ParametersEAM Organization Parameters
This example has separate accounts by cost element
Slide 29Helping people using Oracle Applications since 1990Copyright ©2014 Douglas Volz Consulting, Inc.
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Slide 30
Default Cost AccountsEnterprise Asset Management => Setup => Organization Parameters
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Used for PO and Shop Floor Deliveries
Used for Project Cost Collection
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Slide 31
Shipping Network Organization DefaultsEnterprise Asset Management => Setup => Organization Parameters
Defaults to the Shipping Network setup form
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Slide 32
Shipping NetworkEnterprise Asset Management => Inventory => Setup => Organizations => Shipping Networks
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Costing Method
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Enterprise Asset Management => Inventory => Setup => Organizations => SubinventoriesEAM Subinventory Definition
Slide 33
Main tab
Expense subinventory
example
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Costing Method
34
Enterprise Asset Management => Setup => SubinventoryEAM Subinventory Definition
Slide 34
Used for expense
subinventories
Not used with Average Costing
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Slide 35
Accounting Setup – Account AliasesEnterprise Asset Management => Inventory => Setup => Account Aliases
These accounts are used for your inventory account alias transactions, as the Supply Chain/Warehouse staff choose the
Account Alias and it supplies the correct accounts
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Slide 36
Accounting Setup – Purchasing OptionsEnterprise Asset Management => Inventory => Setup => Organizations => Purchasing Parameters
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Set up your Expense
A/P Accrual Account
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Slide 37
Accounting Setup – Receiving OptionsEnterprise Asset Management => Inventory => Setup => Organizations => Receiving Parameters
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Set up your Receiving Inspection
Account
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Slide 38
Accounting Setup – WIP Accounting ClassesEnterprise Asset Management => Setup => WIP => WIP Accounting Classes
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Typically for EAM both Valuation and Variance Accounts are set to expense accounts
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Slide 39
EAM Accounting Flows
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Basic Accounting for EAM – PO Receipt– Matl & Matl Ovhd Sub-Elements
Receiving Value Inventory A/P Accrual100 100
100
Stock Value Matl Ovhd Absorption 120
20
TransactionPO Receipt Delivery to Stock
Delivery to StockMat’l Ovhd
Absorption
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Basic Accounting for EAM– Issue Materials for Repair
Parts Storeroom WIP Job Accounts120 120
TransactionIssue Materials
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Basic Accounting for EAM– Earn Labor for Repair
WIP Job Accounts Resource Absorption100 100
50
Dept. Ovhd Absorption 50
TransactionRes. AbsorptionResource Ovhd
(50% dept. Rate)
Dept. OverheadAbsorption
Slide 42Helping people using Oracle Applications since 1990Copyright ©2014 Douglas Volz Consulting, Inc.
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Basic Accounting for EAM– Direct EAM Shop Floor Deliveries – With or Without OSP Setup
Receiving Value Inventory A/P Accrual100 100
100
100
WIP Job Accounts Trade Payables 100
100
Transactions PO Receipt (@ PO)Shop Floor Delivery
Invoice Match
Shop Floor DeliveryInvoice Match
Slide 43Helping people using Oracle Applications since 1990Copyright ©2014 Douglas Volz Consulting, Inc.
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Source Amount
Issue Materials 120
Earn Labor 150
Receive Services to WIP 100
Total: 370
Basic Accounting for EAM– Completed Repair
Spares Storeroom WIP Job Accounts
370 370
Transaction
Complete Repaired Unit
Slide 44Helping people using Oracle Applications since 1990Copyright ©2014 Douglas Volz Consulting, Inc.
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Slide 45
EAM WIP Job Costing
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WIP discrete jobs goes through the following steps or statuses:
Materials, labor, requisitions may be charged if the work order is ReleasedComplete No Charges Allowed is sometimes used as wellIf a formal Cost Accounting group exist they typically close the jobs once the status reaches Complete or Complete No Charges Allowed
Work Order Statuses and Transactions
Slide 46Helping people using Oracle Applications since 1990Copyright ©2014 Douglas Volz Consulting, Inc.
Unreleased Released Complete Closed
On hold Cancelled
Maintenance Planners / ExpeditorsCost
Accounting
Complete No Charges Allowed
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Work Order Cost Estimates for EAMEnterprise Asset Management => Cost => Work Order Cost Estimate
Slide 47Helping people using Oracle Applications since 1990
Source : COURTESY OF GLOBAL PTM
Work Order Definition – Cost Estimates for:Materials (Stock)Materials (Direct Requisitions) Routing (Work Operations)• Internal Labor • Internal Equipment (Non Charge)• Vendor Labor • Vendor Equipment
Recalculate Estimates Option
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Work Order Cost Estimates for EAMEnterprise Asset Management => Cost => Work Order Value Summary
Slide 48Helping people using Oracle Applications since 1990Copyright ©2014 Douglas Volz Consulting, Inc.
Work Order Cost Estimate and Valuation (forms or self-service)
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Work Order Cost Estimates for EAMEnterprise Asset Management => Cost => Work Order Value Summary
Slide 49Helping people using Oracle Applications since 1990Copyright ©2014 Douglas Volz Consulting, Inc.
Work Order Actual Costs (forms or self-service)
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Work Order Cost Estimates for EAMEnterprise Asset Management => Cost => Work Order Value Summary
Slide 50Helping people using Oracle Applications since 1990Copyright ©2014 Douglas Volz Consulting, Inc.
Work Order Estimated Costs (forms or self-service)
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Work Order Cost Estimates for EAMEnterprise Asset Management => Cost => Work Order Value Summary
Slide 51Helping people using Oracle Applications since 1990Copyright ©2014 Douglas Volz Consulting, Inc.
Work Order Actuals vs. Estimated Costs (forms or self-service)
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Work Order Cost Details for EAMEnterprise Asset Management => Cost => Work Order Value Summary
Slide 52Helping people using Oracle Applications since 1990Copyright ©2014 Douglas Volz Consulting, Inc.
Work Order Cost Details (form or self service)
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Work Order Cost Distributions for EAMEnterprise Asset Management => Cost => Work Order Value Summary
Slide 53Helping people using Oracle Applications since 1990Copyright ©2014 Douglas Volz Consulting, Inc.
Work Order Cost Distributions (form or self service)
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Slide 54
Subledger Accounting
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Release 12 has two transaction modelsRCV, INV, WIP Transactions SLA transactions – “Mirror image” of the original transactions
CO
ST
INV
Supply Chain / EAM
G/L
PO Receipts
SO Shipmts
Inventory
PayablesWIP
RCV
Txn
Sou
rces
Subledger Accounting & Transaction Processing
Slide 55Helping people using Oracle Applications since 1990Copyright ©2014 Douglas Volz Consulting, Inc.
INV
WIP
RCV
WIP
SLA
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Event Model: A set of subledger transaction types with common characteristics
Entity : Denotes the transaction sourceEvent Class: Classifies transaction types by accounting ruleEvent Type: for each transaction type, defines possible actions with accounting significance
ENTITY Material, Receiving or WIP or Write Off Transaction
EVENT CLASS
Grouping of transaction events which have similar kind of accounting
EVENT TYPE
The most granular level of business event which has accounting impact
Key Concepts for SLA Transaction Types
Slide 56Helping people using Oracle Applications since 1990Source: Oracle Corporation and Douglas Volz Consulting, Inc.
EVENT MODEL
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Subledger Accounting Basics
SLA Basic Architecture
SLA Accounting Tables
Enter Transaction(s)
Transaction Accounting Tables
Cost Manager
XLA_AE_HEADERS
XLA_AE_LINES
XLA_DISTRIBUTION_LINKS
XLA_EVENTS
Same Cost AccountingTransaction
Tables
Create Accounting
GL_INTERFACE
G/L Tables
GL_LEDGERS
GL_JE_HEADERS
GL_JE_LINES
GL_JE_BATCHES
One Common Accounting Subledger
Table
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Slide 58
Common EAM SLA Solutions
Use a Common EAM Inventory Org and:Use SLA Rules to drive the company number, based on Asset or Asset Location information
Charge Maintenance expenses based on the item’s PO Category by using PO Expense Account Rules:
Corrects the default accounts coming from the WIP Accounting ClassSLA custom sources with user-defined ADRs and journal line definitions
Charge Maintenance expenses based on the purpose of the expense or task:
Use the description in the Standard Operations to hold the AccountsSLA custom sources with user-defined ADRs and journal line definitions
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Slide 59
Recommended Papers for EAM SLA SolutionsDouglas Volz, Douglas Volz Consulting (http://www.volzconsulting.com/resources.html)
“Subledger Accounting for Discrete & EAM Cost Accounting: Product Line and Expense Accounting Made Easy Through SLA”(Collaborate13)
Robert J. Flick, Onplan Solutions LLC
“Simplify Enterprise Asset Management Product Line Accounting Using E-Business Suite Release 12 Subledger Accounting”
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Summary – EAM Costing
Cost ElementsFive for items in inventory, three different ones for EAM jobs
Uses same cost processors for inventory and WIP transactions
EAM WIP has an additional Shop Floor Delivery transaction
Best to use EAM Oracle Responsibilities (not Cost responsibilities)
Do try to keep Account Charging as easy to use as possible
SLA can be your friend for EAM
Slide 60Helping people using Oracle Applications since 1990Copyright ©2014 Douglas Volz Consulting, Inc.
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Slide 61
Any Questions?
Helping people using Oracle Applications since 1990Copyright ©2014 Douglas Volz Consulting, Inc.
Doug [email protected] +1 510 755-7050
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Douglas Volz ([email protected])
Professional BackgroundDoug Volz is a Senior Architect and Business Advisor for Oracle EBS projects, specializing in Cost Management and Intercompany processes. He has over 35 years accumulated experience, including 5 years in Oracle Development (co-designing Oracle Cost Management), 19 years implementing Oracle EBS in multiple countries and 12 years in industry for Cost and Accounting Management positions. His Manufacturing and Cost systems experience covers project management, software design/development, delivery and consulting services, for both Oracle Corporation and multiple international consulting firms. Prior to his systems career, Mr. Volz also held management accounting positions for telecommunications, defense and electronics companies.
In his consulting roles, Doug has served over 100 clients. Many of these were multi-org, multi-currency with global footprints and intercompany accounting requirements. Countries include US, Mexico, UK, Netherlands, Belgium, Taiwan, PRC, Norway, Japan, Italy, Switzerland and Germany.
Doug has been recognized as the 2014 OAUG Member of the Year. He leads the OAUG Cost Management Special Interest Group and freely gives out valued business advice to his SIG members and to the Oracle community at large. Doug also presents at OAUG Collaborate, UKOUG and Oracle OpenWorld conferences. In addition he advises and participates on Oracle Customer Advisory Boards and frequently meets with the Oracle Cost Development team.
Core ExpertiseMulti-organization, Multi-currency Global ImplementationsCost Accounting Business SolutionsProject Management and Senior Project AdvisorCore manufacturing and distribution processes
Cost ManagementInventoryBills of MaterialWIP
ExperienceSample of clients served:
Beckman Coulter (US)Celgene (US, Switzerland)Garlock Sealing Tech. (US, Germany)Logitech (US, Taiwan, P.R.C.)Matsushita (UK, Mexico)NTL (UK, now Virgin Media)Onninen AS (Norway)
www.volzconsulting.comHelping people using Oracle Applications since 1990Copyright ©2014 Douglas Volz Consulting, Inc.
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Slide 63
End of Presentation
Helping people using Oracle Applications since 1990Copyright ©2014 Douglas Volz Consulting, Inc.