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Oracle Landed Cost Management : DataFlow and Integration…..

Posted on November 30th, 2012 by Sanjit Anand ||Email This Post Email This Post

If you refered to earlietr Post on Oracle Landed Cost Management , you might seen this consists of

  • Charge Management, where users can defines the charges and proration methods
  • Landed Cost Calculator, which performs estimated and actual cost calculations
  • Cost Repository, which consists of estimated and actual cost information corresponding to each receipt in Oracle Receiving.

Therefore you can conclude Purchase Order, tax and charge information flows from Purchasing, EB Tax and Advanced Pricing respectively. This information is used by Oracle Landed Cost Management to calculate the estimated landed cost.

Invoice information flows from Accounts Payable to Oracle Landed Cost Management for actual cost calculations.

Estimated and actual cost information flows from Oracle Landed Cost Management to receiving and costing for costing and accrual accounting.Let’s take a deep dive .

Integration of Oracle LCM with other modules

Oracle Landed Cost Management integrates with several other Oracle E-Business suite applications during the processing of estimated and actual landed costs for an item as per fig 1 in context to data flow and Integration:

Oracle Landed Cost Management

Oracle Landed Cost Management is fully integrated with other Oracle E-Business Suite modules. The following are the modules that are integrated with Oracle Landed Cost Management:

Oracle Purchasing

PO information is the baseline information used to itemize expected shipment or receiving lines on which extended supply chain charges will be applied, beacuse of this LCM provides visibility into Oracle Purchasing purchase order data to build expected shipments for charge application and subsequent landed cost estimation calculations.

Thats means , when you entering expected shipments the reference information provided by PO module saves time and decreases errors that might occur without automated access to this information. After the purchase order information is available in LCM , expected values received from the purchase order such as, quantity and price can be edited for estimated cost calculation purposes and thenafter all the necessary data is provided to help arrive at an accurate three way match after an invoice for a purchase order line or charge is entered into Oracle Payables.

ost Important , Landed Cost Management recovers the tax lines associated to the purchase order that was originally calculated by EB-Tax, in order to include the non-recoverable amounts into the landed cost.

Oracle Purchasing (Receiving)

Oracle LCM integrates tightly with the PO Receiving module, as this completely relies on the Receiving transactions to calculate the estimated landed costs for a Landed Cost Management shipment. These helps in estimating landed costs and then forwarded to Oracle Cost Management to update inventory valuations and accounting.

Oracle Payables

Invoices created in Oracle Payables provide the actual cost information that supports the actual landed cost calculations that occur in Landed Cost Management.

Oracle Cost Management and Oracle Process Manufacturing (OPM) Cost Management

After actual values are received from invoices the actual landed cost is calculated in Oracle Landed Cost Management.

The variances between the actual landed cost and the estimated landed cost are determined. Those variances are passed to Oracle Cost Management which in turn updates the proper accounts and valuation.

If you are using Oracle Process Manufacturing than you must first run a concurrent program that will pass the variances to OPM Cost Management and that application will in turn update the proper accounts and valuation. Both process and discrete Costing applications follow similar flows:

Landed Cost Management calculates the estimated and actual landed costs and the variances, which are used for costing valuation and accounting.

Oracle Advanced Pricing (Optional)

Integration with Oracle Advanced Pricing enables you to set conditions for the automatic application of the required charges, fees, duties and taxes for a Landed Cost Management shipment. This means that estimated charges can be applied automatically to a shipment.

Additional Reference

Posted in Oracle Manufacturing | No Comments »

Oracle Landed Cost Management Overview

Posted on November 28th, 2012 by Sanjit Anand ||Email This Post Email This Post

Oracle Landed Cost Management enables you to manage estimated and actual landed cost for an item purchased from a supplier .

Using Oracle Landed Cost Management you can determine the “real ” costs associated with acquiring items including insurance, transportation, handling, storage costs, container fees, and import or export charges.

Knowledge and visibility into these trade costs help organizations better evaluate new product plans, price their items, and negotiate contracts with both suppliers and customers.

Oracle Process Manufacturing Financials supports Landed Cost management (LCM), a web based application which is part of Oracle E-Business suite and a milestone for customers to track and control the cost of landed goods.

This product is being integrated with logistics, procurement, and financial applications to provide a comprehensive landed cost tracking solution.

Oracle LCM is integrated out of the box with following modules of Oracle EBS :

  • Oracle Purchasing
  • Oracle Inventory
  • Oracle Cost Management
  • Oracle Payables
  • Oracle Advanced Pricing
  • Oracle Transportation Management

Oracle’s Landed Cost Management application is a new product released on E-Business Suite r.12.1.

Using Oracle Landed Cost Management you can first estimate the landed costs for the items and then you can update those costs with the actual landed costs as they become known.

Oracle Landed Cost Management gives you the option to determine and calculate estimated landed costs before the receipt of the items into inventory (Landed Cost as a Pre-Receiving Application) or after the receipt of the item into inventory (Landed Cost Management as a Service). Then when you create and match invoices against those receipts this price information is used to calculate the actual landed costs for the item.

Within Oracle Landed Cost Management you can view the estimated and actual landed costs for an item side by side.

This gives you valuable information about the landed cost for an item and where cost improvement can made.

During the processing of landed costs using Oracle Landed Cost Management, inventory valuations for various cost methods are maintained providing better visibility into individual items profitability and an organizations outstanding exposure.

This data provides insight for item forecasting and budgeting and provides clear evidence of the detailed accumulation of expenses for regulatory requirements and reporting.

Features of Landed Cost Management

Oracle Landed Cost Management provides several features. A few of the key features are:

  • Charge Management : Oracle Landed Cost Management collects an unlimited number of estimated charges and enables you to configure how theses charges are applied to a shipment line, a group of lines within a shipment, or an entire shipment. It applies these charges based on weight, volume, quantity, or the value of the items being traded. These charges can be categorized by different cost factors which will ultimately govern the behavior in how they are included in a total landed cost calculation. Once actual amounts are received, Charge Management records the new value for comparison with the earlier estimates.
  • Landed Cost Calculation : The Oracle Landed Cost Management Calculation process provides the ability to calculate the estimated landed cost based on charges manually assigned and automatically allocated based on the configuration of the charge lines. It also calculates the actual landed costs by prorating the actual invoices and proportional taxes to obtain the variances between what was estimated and what was charged. Cost components summed in the calculation remain stored at the most granular level for detailed tracking of charge amounts while variances are updated to the appropriate accounts.
  • Shipments Workbench : It is common that the financial flows do not mirror the physical supply chain transactional flows. Oracle Landed Cost Management helps to link these two flows together and provides visibility and traceability from one to the other. With the Landed Cost Management Shipment Workbench, companies can view the real time accrual updates for a particular receipt or shipment. They can validate the accuracy of a suppliers estimate by comparing estimated and actual costs and can view the percentage of a particular cost component for a particular item. Additionally, you can make use of all the flexible Oracle and E-Business Suite tools to meet your own customized reporting requirements.

Benefits from Using Landed Cost Management

Using Oracle Landed Cost Management will provide your organization with several benefits. Oracle Landed Cost Management will help organizations:

  • Maximize Profits : By illuminating “real” product costs, organizations have the opportunity to identify areas for potential cost reduction. It also helps managers more accurately monitor product performance against profitability targets and ensure estimated costs are in line with actual costs.
  • Increase Competitiveness : When all of the charges, fees, duties and taxes are known, companies can more strategically source products and components from lower cost foreign locations. This also enables them to better justify contracts with vendors or potential customers. Ultimately, they can price goods with the full understanding of the charges associated with bringing an item to market.
  • Increase Visibility : Itemizing and tracking all acquisition costs and material cost elements as they apply to a product enables organizations to better link their product supply flows with their financial processing and reporting. In addition, tracking estimated costs as soon as they are known gives decision makers more insight into their exposure for budgeting and reporting purposes before invoices are ever received.
  • Ensure Compliance : Companies can feel more confident in their financial reports and their cost declarations. This includes accurately calculated taxes and consideration of those taxes whose recovery should be excluded from total cost calculations. Additionally, organizations will adhere to country specific requirements for product specific profitability documentation and income tax calculations.

Senario based Implementaion in Metal extraction Company

In typical metal extraction company like Iron and steel , these are type of Charges involved

  • Freight (Inbound and Supplier to Outside Processor)
  • Fuel
  • Vessel
  • Material Surcharges

Understanding the Landed Cost Management Setup Process

Before you can use the Landed Cost Management application you must set up the application. A part of the Landed Cost Management setup occurs in other Oracle E-Business applications and then some of the setup is performed within the Landed Cost Management application itself.

Since Landed Cost Management integrates with several Oracle E-Business applications these applications need to be implemented and set up as well before you can successfully use the Landed Cost Management application. The other Oracle E-Business applications that need to be set up are:

  • Oracle Inventory
  • Oracle Purchasing
  • Oracle Payables (required for actual landed cost calculation)
  • Oracle Cost Management [Conditionally Optional]
  • Oracle Process Manufacturing [Conditionally Optional]

The use of Oracle Landed Cost Management is optional for Oracle Discrete and Process manufacturing implementations.

Plus, Landed Cost Management can integrate with Oracle Advanced Pricing but it is not required.

Oracle recommends that you integrate with Oracle Advanced Pricing so automatic charge calculation will occur in the processing of landed costs. Otherwise, you will have to enter all of the charge lines manually.

Supports Two Basic Flow .

Landed cost management application supports two basic scenarios of receiving flows. First one is Landed Cost management as Pre-receiving and the other is Landed Cost management as Servicing. Details herewith:

LCM as Pre-receiving:

Before going in details, first understand two term

  • Estimated Landed Cost (ELC): Landed costs calculated at the time of receipt based on the one or more estimated charges are called estimated landed costs.
  • Actual Landed Cost (ALC): Landed cost calculations based on the actual invoice prices are called actual landed costs. You can calculate actual landed cost at the time of receipt, if all the invoices are available.

Under this senarios, LCM as Pre-receiving is used when we intend to calculate the Landed cost estimation before we receive the goods in Organization with reference to Purchase order.

The LCM Pre-receiving functionality has the flexibility of varying the item quantity and price defined in Purchase order.

The charges associated with the items are generated and validation is performed manually to derive the Estimated Landed Cost (ELC).

The Pre-receiving details from LCM module are passed on to the Receiving applications and receipt of goods and receiving transaction takes place for the same quantity.

LCM as Servicing:
This is scenario is used when the receipt of items into inventory happens followed by automatic creation of Estimated Landed Cost.

  1. The receipt happens with reference to Purchase order quantity and price, which cannot be changed like pre-receiving.
  2. This scenario is favorable when you assess that the landed cost of an item remains constant with known service providers without much variation to the charges.

The estimation of the item landed cost is also automatically calculated based on the purchase documents price and the charge amounts given by Advanced Pricing.

Posted in Oracle Purchasing | No Comments »

Implementing Oracle Advanced Collections

Posted on November 19th, 2012 by Sanjit Anand ||Email This Post Email This Post

Oracle Advanced Collections is an enterprise application for collection professionals that simplifies and optimizes the task of performing the various collection activities. This module provides visibility into the collections cycle, helping companies plan and manage effective collection activities thereby reducing the DSO.

It is integrated in the E-Business Suite and covers key collections activities from managing delinquencies to customer interaction to collections.

Oracle Collections is integrated with AR, trade management, Lease Management and Oracle Loans

Advanced Collections is used to contact delinquent customers to collect overdue invoices. The collection process can be handled at various levels

  • Customer
  • Account
  • Bill To
  • Delinquency

Oracle Advanced Collections can be configured for

  • Collection Strategies/Dunning Plans
  • Processing Payments and for capturing Promise to Pay details
  • Recording Disputes
  • Scheduling customer Call-backs
  • Sending Dunning letters to customers

dgreybarrow Mandatory Setups for Advanced Collections

  1. Setting Up Users and Reporting Hierarchy
  2. Setting Up a Group
  3. Verify Group Setup
  4. Setting Up Manager Roles
  5. Creating a Resource, and Assigning Roles and Resource Groups
  6. Setting Up Employees as FND Users and Assigning Responsibilities
  7. Setting Up Collectors
  8. Setting Up Employees as CRM Resources
    • Responsibility:- CRM Resource Manager : Navigation:- Maintain Resources -> Import Resources
  9. Setting Up Preferred Currency
  10. Setting Up and Enabling Currency Conversion
  11. Setting Up Currency Codes
  12. Setting Up the Accounting Calendar
  13. Setting Up Calendar Types
  14. Setting Up Period Type Mapping
  15. Setting Profile Options for Multiple Currency
  16. Setting Up Reporting Currencies
  17. Setting Up Quarters as a Time Period in the General Ledger
  18. Entering GL Daily Conversion Rates
  19. Running Concurrent Programs to Set Up Pseudo Period Rates
  20. Setting Up Lookup Codes
    • Responsibility:- Collections Administrator : Navigation:- Lookup Types
      Add Lookup codes for IEX_Delinquency_Status, IEX_Dispute_Reasons, IEX_History_Type, IEX_UWQ_Labels
  21. Setting Up AR Aging Buckets
  22. Setting Up Collections Operational Data level
    • Responsibility:- Collections Administrator : Navigation:- Setup Checklist -> Operational Setup -> General Collections Information
    • advance collection
    • Select values for Aging Bucket, Operational Data Level, Access Level and functionality access
    • Select values for Default tab, Default Search Type, Default Payment Method etc
  23. Setting Up Collectors Access Levels
  24. Setting Up Notes, Tasks, and Calendar
  25. Setting up Scoring Components
  26. Setting Up Scoring Engine
  27. Setting Up Strategies/Dunning Plans
    • Create Dunning Plans – Select Name, Dunning Level, Aging Bucket, Effective Dates etc.
      • Responsibility:- Collections Administrator : Navigation:- Setup Checklist -> Collections Method Setup -> Create Dunning Plans
    • Create Dunning Plans – Select Aging Bucket Line details
      • Responsibility:- Collections Administrator : Navigation:- Setup Checklist -> Collections Method Setup -> Create Dunning Plans
  28. Enabling Multi-Organization Access
    Responsibility:- Collections Administrator : Navigation:- Setup Checklist

dgreybarrow Profiles that need to be set

  • IEX: Strategy Disabled :IF Strategies are being used select ‘No’ else this should be ‘Yes’
  • IEU: Queue % :Select ‘Yes’ if the node has to be displayed in UWQ
  • IEU: Queue Order % :Enter the number to select the display sequence in the UWQ
  • IEX: Strategy Default Template (only if strategies are being used) :Select the Default Strategy to be used
  • MO: Security Profile :Grouping of Operating Units that can be accessed.
  • MO: Default Operation Unit :Identify the default Operating unit

dgreybarrow Key R12 Enhacement

  • Multi-Org Access Control
  • Enhanced Customer Credit Card and Bank Account Management
  • New Implementation Checklist and questionnaire
  • Collections Functionality of AR migrated to Oracle Advanced Collections
  • Functionalities of Collections Forms Administrator and Collections HTML Administrator combined to a single responsibility Collections Administrator
  • Configuration process has been simplified.
  • Setup is performed using a questionnaire and Setup Checklist
  • Scoring Engines, Strategies and Dunning Plans configuration performed using setup checklist

Posted in Advance Collection, Oracle Receivable | No Comments »

R12 General Ledger: Alternate Account Functionality

Posted on November 14th, 2012 by Sanjit Anand ||Email This Post Email This Post

It is a regular practice amongst users to disable code combinations where they donot require any futher activity to take place.

In 11i if there was a case where users were importing the existing data with one such code combination, the import program would error flagging invalid code combination. This would hold up the entire group of transactions from getting imported.

Release 12 provides a solution to such an issue. Oracle introduced new functionality in R12 called ‘Alternate Account’. This functionality is very useful when you have a need to disable and/or end date an account combination within your chart of accounts or you have a significant requirement to change mass chart of account values.

When an account is disabled, users can prevent transactions that include the account from erroring during journal import by defining a replacement account for the disabled account. Journal import replaces the disabled account with the replacement account and continues the import process if the replacement account is valid.

This improves processing efficiency by preventing the journal import process from erroring and enabling the successful creation of the journal when an account has been disabled.

To setup the alternative accounts, use a GL Super User responsibility:

Setup –> Accounts –> Combinations

Query the account combination, Tab over to Alternate Account and enter the account.

Note -> Balancing segment value in the alternate account must be the same as what is in the original account. Otherwise, the system will not allow it and will throw an error.
“The balancing segment value for alternate account must the same as the original account”

Posted in Oracle General Ledger | No Comments »

Know more on “REIT” [Real estate investment trust ]

Posted on November 9th, 2012 by Sanjit Anand ||Email This Post Email This Post

More and More companies are pursuing conversion to a real estate investment trust (REIT). Those who are exploring the whole new world of REIT can find this post useful to start with. Here to go:


I. What is a REIT?

Is a tax designation for a company that invests in real estate that reduces or eliminates corporate income tax

In return, a REIT must distribute 90 percent of its taxable income to investors. The REIT structure was designed to provide a real estate investment structure similar to the structure that mutual funds provide for investment in stocks.

An entity that qualifies as a REIT under the Code is entitled to preferential tax treatment. It is a “pass-through” entity that can avoid most entity-level federal tax by complying with detailed restrictions on its ownership structure and operations.

REIT shareholders are taxed on dividends received from a REIT.

II. In layman language what is Meaning of REITs

  • This is collective investment device of commercial real estate
  • This is equity-type funding
  • This Owns, and in most cases operates, income-producing property (Equity REITs)
    • Office
    • Apartment
    • Retail (shopping centers)
    • Hotels
    • Warehouses (storage)
  • This is Essentially a tax-tool where equity funding of real estate is allowed on tax transparent basis upto minimum 90% dividend
  • REITs are typically listed and quoted

III. The Four Requirements You Must Know!

  • A REIT must distribute 90% of its annual income as dividends to its shareholders
  • A REIT must have at least 75% of its assets invested in real estate, mortgage loans, other REITs, cash, or government securities
  • A REIT must derive at least 75% of its gross income from rents, interest, and gains from sale
  • A REIT must have at least 100 shareholders and must have less then 50% of the outstanding shares concentrated in the hands of five or fewer shareholders

More details you can see under section “What are the required elements for forming a REIT?”


IV. When and why were REITs created?

REIT is essentially a tax term.

Congress passed the original REIT legislation in 1960 in order to provide a tax-preferred method by which average investors could invest in a professionally managed portfolio of real estate assets.

This Offer expert management and familiar corporate governance structures (BOD)

Many of the limitations imposed upon the operation of REITs and the taxes to which they are potentially subject are perhaps best understood in terms of the original notion that the activities of REITs were to consist predominantly of passive investments in real estate.

V. What types of REITs are there?

There are three types of REITs:

  1. equity REITs, which primarily own, or have an interest in, income-producing real estate;
  2. mortgage REITs, which originate or acquire mortgage loans and other debt obligations that are secured by real property;
  3. and hybrid REITs, which combine the equity REIT and mortgage REIT model and both owns commercial real estate and holds mortgages secured by commercial real estate

VI. What are the required elements for forming a REIT? [Adopted from U.S. SEC website]

In order to qualify for the tax benefits available to a REIT under the Code, the qualifying REIT entity must:

  • Be an entity that would be taxable as a corporation but for its REIT status;
  • Be managed by a board of directors or trustees;
  • Have shares that are fully transferable;
  • Have a minimum of 100 shareholders after its first year as a REIT;
  • Have no more than 50 percent of its shares held by 5 or fewer individuals during the last half of the taxable year;
  • Invest at least 75 percent of its total assets in real estate assets and cash;
  • Derive at least 75 percent of its gross income from real estate-related sources, including rents from real property and interest on mortgages financing real property;
  • Derive at least 95 percent of its gross income from such real estate sources and dividends or interest from any source; and
  • Have no more than 25 percent of its assets consist of non-qualifying securities or stock in taxable REIT subsidiaries

VII. What other countries have REITs?

A number of countries, including Australia, Brazil, Canada, Germany, India, Japan, Pakistan, Singapore and the United Kingdom have REIT-type legislation. The details of the rules may vary from the U.S. rules and from country to country.

VIII. What are the tax advantages of being a REIT?

REITs do not have to pay federal taxes at the corporate level

  • More specifically, REITs are allowed to deduct dividends paid to shareholders from taxable income, and thus have the ability to shield 100% of taxable income through distributions to shareholders
  • REIT shareholders still have to pay taxes on dividends and capital gains
  • Most states honor the REIT status and don’t require REITs to pay state taxes


Posted in General Interest | No Comments »

Overview : Receipt-to-Receipt Applications

Posted on November 3rd, 2012 by Sanjit Anand ||Email This Post Email This Post

This is not new feature .

In simple layman :Feature that “allow you to apply an open receipt against another open receipt”

Receipt to Receipt Applications lets you apply receipts to other open receipts that have on-account and unapplied cash.

This provides you with an efficient approach to settling open cash, because it eliminates the need to open multiple receipts to apply on-account and unapplied cash.

From just one receipt, you can apply one receipt to another open receipt, and the balances and accounting are automatically updated on both receipts.

If you use Oracle Marketing Online’s Trade Management to manage claims, then you can now apply to receipts that have open claim investigations, which will in turn update amounts, or cancel claims, in Trade Management. This lets you net underpayments with overpayments in the system. For example, you might do this if you determined that a short payment on a remittance was due to an overpayment on another receipt that resulted in a claim investigation.

Working with Receipt-to-Receipt Applications

You apply a receipt against another open receipt in order to move funds between receipts. Open receipts include receipts that have either unapplied cash or on-account cash. You can then apply the resulting unapplied receipt balance to a transaction.

To use receipt-to-receipt applications, you must set up a clearing account under the Receivables activity Payment Netting to manage the offset of the one receipt against the other.

Both receipts in a receipt-to-receipt application must be in the same currency. If both receipts are in a foreign currency, the result of the receipt application may be an exchange gain or loss. The exchange gain or loss is realized on the target receipt at the time of receipt application. If you later adjust the conversion rate on either receipt, the accounting is rederived using the adjusted conversion rate.

You can unapply a receipt that was applied to another open receipt, provided that neither receipt is drawn negative by unapplying it.

Hope this helps.

Posted in Oracle Receivable | No Comments »

Are you in the right career path?

Posted on November 1st, 2012 by Sanjit Anand ||Email This Post Email This Post

Most careers are driven by 1 of 3 motivators:

  1. Achievement
  2. Affiliation
  3. and Competence.

Are you in the right career path?

Worth reading great post of how to choose a career

There are three career paths. One will fit you. read at penelopetrunk

so what is your choice then ..winning, relationships, or craftsmanship

Posted in General Interest | No Comments »