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Outsourced Manufacturing for Discrete & Process Industries

Karen Theel Senior Director, Manufacturing Product Strategy Anil Modwel Director, Product Development

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Outsourced Manufacturing Business Practices

OEM MP B

C

A

Process Inhouse

Process Outside

Process Inhouse

Manufacture Assembly Ship Partial Product

Receive Finished Product

10

20

30

20

OEM

RMS B C

MP

*

Buy Components

Virtual Sale of Components

B

C

Virtual Purchase of Assembly

A

B

C

A

Drop Ship Components

OEM

RMS B C

MP

Buy Components

Ship Components

B

C

Receive Assembly

A

B

C

A


* Applicable only for Japan, Korea, Taiwan

OEM

RMS B C

MP

Buy Components

Sell Components (with Markup) B

C

Buy Assembly

A

B

C

A



Chargeable vs. Buy/Sell Vs Full Outsourcing Comparison

Characteristic Chargeable Subcontracting Buy/Sell Subcontracting Full Outsourcing

Subcontracting Component Ownership

Component sales is Provisional and Ownership lies with the OEM

Ownership is Transferred to MP after the components are shipped

No component sale, components are shipped to MP on consigned basis, ownership of material is with OEM

Country Specific Deployability Applicable to Japan, Korea and Taiwan All Countries All Countries

Costing Method Available for Standard Cost Orgs only Available for Standard, Average, FIFO & LIFO Orgs

Available for Standard Cost Orgs only

Payables/Receivables/Netting Mandatory Optional Not relevant as there will not be any Sales invoices for components

Accounting setup Requires Additional setup for accounting Subcontracting components (revenue, Receivables, COGS and PPV)

Not relevant Require setup for accounting consigned Subcontracting components (COGS and PPV)

Costs/Price setup consideration

Assembly/Components costs/ prices need to be setup to avoid unrealized gain/loss

Not relevant

Purchase price of the assembly will be the Value addition


Full Outsourcing Business Process

MP added value = $5

RMS: Raw Material Supplier

OEM : Original Equipment Manufacturer

MP: Manufacturing Partner

1 Ea

B

A

C

2 Ea

B

C

Pay to MP $5 OEM

RMS B

C

A

MP doesn’t pay for the Components

MP

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Automated Orchestration For Material Tracking and Financial Reconciliation

OEM Org Contract Manufacturer Org

Replenishment SO Item : C, QTY:10Ea Customer : MP

Replenishment SO Item : B , QTY:20Ea Customer: MP

Discrete Job Assembly : A QTY :10Ea

Interlock

Subcontracting Order Assembly : A , 10Ea Supplier : MP

ASCP

Auto receive Components

Receive

Receive

Replenishment PO Item : C, QTY:10Ea Supplier : OEM

Replenishment PO Item : B, QTY:20Ea Supplier : OEM

B

A

C

1 Ea 2 Ea

Process Receiving Transactions

Complete

Misc Issue A

Receive

SHIP

SHIP

AP Invoice

AR Invoice

Pay to MP $ AP/AR Netting


Subcontract Order Status

Main Point

Inventory Balances

Quality Financial Positions

1 2

4 3

EBS Outsourced Manufacturing Four categories of visibility into outsourcing business


Visibility into Outsourced Manufacturing

Typic al Business Questions…

How many subcontracting orders are delayed and which customers are impacted ?

What’s the value of our material at manufacturing partner locations ?

What’s the value of goods in transit to manufacturing partner locations?

What’s the value of defective finished goods received from manufacturing partners ?

What’s the value of uninvoiced subcontracting orders ?


Key Performance Indicators

Visibility into Outsourced Manufacturing

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• View status of subcontract orders (delayed, on-time) and component allocations across manufacturing partners

Subcontract Order Status


• View quantity and value of components in-transit or at manufacturing partner locations

Inventory Balances


• View reasons for poor quality of outsourced products and their value across manufacturing partners.

Quality


• View financial positions of subcontract and replenishment orders for a manufacturing partner

Financial Positions


E-Business Suite Outsourced Manufacturing Business Benefits

Gain full visibility into the overall health of outsourced manufacturing Quickly view and analyze financial transactions related to subcontract orders

Track quality issues related to supplied components and finished products

Monitor sales and procurement activities to meet on-time customer delivery

Collaborate effectively with approved suppliers and contract manufacturers Analyze and negotiate service level agreements and pricing to optimize costs

Mitigate risks related to inventory bottlenecks across manufacturing partners


Resources

Oracle Outsourced Manufacturing for Discrete Industries User’s Guide (12.1.3)

EBS Manufacturing Release Content Guide (RCD)

EBS Manufacturing Release Value Proposition (RVP)

L1, L2, L3 recordings – Oracle University

Data Sheet

DSS Demo

Outsourced Manufacturing for Process Industries

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E-Business Suite Outsourced Manufacturing Solutions Comprehensive Support for Multi-Tiered, Mixed-Mode Outsourcing

OEM

RMS B C

MP

Buy Components

Virtual Sale of Components

B

C

Virtual Buy of Assembly

A

B

C

A

Drop Ship Component

s

OEM

RMS B C

MP

Buy Components

Sell Components (with Markup)

B

C

Buy Assembly

A

B

C

A

Drop Ship Component

s

OEM

RMS B C

MP

Buy Components

Ship Components

B

C

Receive Assembly

A

B

C

A

Drop Ship Components OEM MP

B

C

A

Process In-house

Process Outside

Process In-house

Manufacture Assembly

Ship PFA

Receive PFA

Ship PFA

Receive PFA

10

20

30

20

Process

OPM Planned Support:

• Phase 1: Outsourcing at Operation / Step Level –planned for 12.2.4+

• Dashboard – Endeca – TBD

• Complete Outsourcing - TBD

• Chargeable (Shikyu) Subcontracting

• Non-Chargeable Subcontracting

• Buy/Sell Subcontracting


Background for OPM OSP

• Requirements were gathered from customers of various industries • Metal Industries – Alcoa, Macsteel, Charter Steel, ATI Metals, US Steel

• Food and Beverages –Schreiber Foods, Amy’s Kitchen

• Life Sciences – Colorcon,Beckman Coulter, Thermo-Fisher, Agilent Technologies

– Majority of customers preferred Outside Processing to the Outsource Manufacturing.

Number One Enhancement request in SIG voting


Oracle Process Manufacturing Business Flow Outside Processing (OSP) – Phase 1

Ingredients

Formula

Process Routing

Step 10

Step20

Step 30

Batch Recipe

Ingredients Product

In-House Process

Outside Process

Manufacture Process

10

20

30

20

Outside Process

In-House Process

Ship

Receive

PPM MP


System Flow Diagram for OSP Phase One

Process

Appl.

Create OSP Item,

Resource, & Batch Step

Create and Release PO Line

Create Purchase

Requisition

Complete Batch Step

OPM Procurement

Release Batch Step requiring

OSP

OPM

• Supports outsourcing of service, where shipment of material is not required.

• Standard costing supported.

• Creation of Purchase Requisition allows cross referencing the Batch Step Number.

• PO Line is Batch Step Number aware at all times, as it is created from the same Purchase Requisition.

• Batch Step can be queried at any time to inquire about receipt of PO Line.

Procurement OPM


OPM – Outside Processing Key Features – Phase 1

• Automatic or Manual creation of Purchase Requisitions/Purchase Orders at various batch/step stages.

• To identify the step for outside processing and payment of services according to either number of units/products or resource usage hours.

• Synchronization of Batch and Purchase Order Changes

• Batch quantity and date changes to be propagated to PO

• Costing of the OSP resources either at Standard Cost or PO price.

• OPM Outside Processing Report to view various batches with OSP steps and corresponding PO details.

• Quality inspections for Outside Processing


OPM – Outside Processing Features deferred to future releases

• Material Shipment and Shipment Document

• Ability to open PO from Batch Detail Window

• Partial Material Shipment

• Ability to track the delay in procuring/receiving the OSP

• Automate the manual creation of PO through Concurrent Program

• Workflow Notifications

• Multiple Outside Processing Steps per Batch

• Endeca Extension


OPM – Outside Processing Execution

Create Batch

Release Batch

Complete

Batch Step

Close

Release Step

Complete Step

Create/Approve Req

Create /Approve PO

Receive OSP Item

Create Resource Trx

Update Actual Step Qty

OSP - Process


OPM – Outside Processing

• Costing Methods – Standard, Actual and Lot Costing

• Resource Costing – OSP Resources will be valued in all costing methods at standard – resource cost or actual PO price, based on the cost source setup

• Batch Completion • Products in Standard Costing organizations will have OSP cost as the standard cost defined for

the OSP Resource • Products in Actual and Lot costing organizations will acquire their OSP cost on batch completion,

as either the resource cost or PO price depending on the Cost Source setup. • Batch Close

– On batch close in Standard Costing, the difference between – standard resource cost and PO price will be relieved as batch – close variance, if cost source is defined as PO price.

Costing


OPM – Outside Processing Reporting – OPM Outside Processing report


OPM – Outside Processing

• Automatic or Manual creation of Purchase Requisitions/Purchase Orders at various batch/step stages.

• To identify the step for outside processing and payment of services according to either number of units/products or resource usage hours.

• Synchronization of Batch and Purchase Order Changes

• Batch quantity and date changes to be propagated to PO

• Costing of the OSP resources either at Standard Cost or PO price.

• OPM Outside Processing Report to view various batches with OSP steps and corresponding PO details.

• Quality inspections for Outside Processing

Key Features - Summary

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