Welcome to online seminar

on

Oracle Projects Inventory Planning &

MMAS Compliance

By: Mahender Bist

Rapidflow Apps Inc.

� Terms & Definitions

� “Hard-Pegged” Planning Environment Challenges and Opportunity

� Common Inventory Process

� Common Inventory Costing Scenario

� Process Overview – Project Contract to Customer Billing

� Common Inventory and WIP Valuation - Material Cost

� Common Inventory and WIP Valuation - Labor Cost

� Permanent Transfers and Temporary Transfers

� Customer Owned Inventory

Contents

Terms & Definitions

Hard Pegging

� “Hard-Pegging” also known as “Hard Allocation” MRP/ASCP Planning method -

mostly used in Oracle Project Manufacturing environment where the supply of a

project/task is not allowed to be shared across multiple projects or tasks

� Actual costs are incurred against the specific project and task

Common Inventory

� “Common Inventory” also known as “Soft-Pegged” or “Soft Allocation” Planning

method where the common components (parts and subassemblies) can be shared

by multiple Contracts and Projects.

� Common Inventory is procured or manufactured under a “Common Project”

� Cost is shared proportionately by the customer contracts/project

Material Management and Accounting System (MMAS)

� Provides strict guidelines for planning, controlling, and accounting for the

acquisition, use, issuing, and disposition of material

� Defense Federal Acquisition Regulation Supplement (DFARS) govern MMAS

guidelines to maintain consistent, equitable, and unbiased logic for costing of

material transactions

“Hard-Pegged” Planning Environment Challenges:

� Excess inventory levels as commingling of piece parts and subassemblies is NOT

allowed (Regulatory challenges)

� Higher cost of procurement due to piece meal procurement approach in project

based buying

� Hard to maintain a lean manufacturing environment

Solution:

� Use common components (parts and subassemblies) in finished products

� “Soft-Pegged” or “Common Inventory” planning approach for fixed price contract to:

• Streamline manufacturing processes

• Improve operational efficiencies

• Reduce costs

Note: For Federal contractors, mix mode approach using common and hard-pegged

inventory is an acceptable solution, however, detailed system testing must be recorded

to indicate strict adherence to DFAR guidelines and to gain approval while deploying a

new system or changing planning methods.

“Hard-Pegged” Planning Challenges and Solution

Common Inventory Process

“Common Inventory” Costing Scenario

SA2

Raw Material

SA1

Finished Product 1Product Family A

Common Project

Customer Project 1

Work Order1

Work Order2

Work Order3

Work Order4

100 units Purchase Price = $20/unit

$2000/100 units100 units SA2

Direct Labor: $5 per unit ($500 / 100 units)

Project: CommonSub Assembly SA2

Qty: 100

25 units TransferMaterial: $500Labor: $125

Oracle Projects

Common Project – BOM Material Task 2.1: $2000

Common Project – Direct Labor Task 2.2: $500

Common Project

Project 1– BOM Material Task 2.1: $500

Project 1 – Direct Labor Task 2.2: $875

Customer Project 1

Purchase Order1

SA3

Finished Product 2Product Family A

Customer Project 2

75 units transferMaterial: $1500 Labor:

$375

25 units SA1Labor: $10/Unit$250/25 Units

25 units FG1Labor: $20/Unit$500/25 Units

Work Order5

75 unitsLabor: $30/Unit$2250/75 Units

75 unitsLabor: $10/Unit$750/75 Units

Project 2– BOM Labor Task 2.1: $1500

Project 2 – Direct Labor Task 2.2: $3375

Customer Project 2

Support Labor for the Product Family A Task 2.3: $1000

Project 1 – Support Labor Product Family A- Task 2.3: $250

Project 2– Support Labor Product Family A- Task 2.3: $750

Customer X

Contract 1

Customer Y

Contract 2

Process Overview - Project Contract to Customer Billing

� Load Awarded Contract into the Project Contracts

� Enter Contract Deliverable Tracking System (DTS) with Projects and Task

� Propagate DTS demand to MDS

� Run ASCP Plan to generate supply schedules based on:

• Exploded demand based on Bill of Material (BOM) structure

• On hand inventory and receipt schedule

• Procurement and manufacturing lead times

� “Hard-Pegged” planning can be used for Cost Plus Contracts

� “Soft-Pegged” planning can be used for Common Inventory

� Depending on the contract type, the customer will be billed:

• After shipment of the deliverables or

• After acquisition or consumption of the parts in progress billing

Common Inventory and WIP Valuation – Material Cost

Material Cost (Average Costing):

� Common Inventory parts - Valued at a “Rolling Weighted Average”

� “Rolling Weighted Average” – Calculated based on actual costs of piece parts

� Material issues to “Common Project" work order - at the current weighted average

� Material issue increases the Common Project’s Work in Process (WIP) valuation and

reduces the Common Project’s Inventory account valuation

� Work order completion relieves the Common Project’s WIP valuation and increases

the inventory valuation

� ASCP can reallocate common inventory material anytime until consumed

� Transfer of common inventory from the “Common Project” to “Customer Specific”

project decreases the “Common Project” valuation and increases the “Customer

Project” valuation by current weighted average cost at the time of transfer

Common Inventory and WIP Valuation – Labor Cost

Labor Cost (Actual Costing)

� Cumulative Average Labor Cost can be updated from actual labor cost

� Transfer or allocation of Labor value from “Common Project” to the “Customer

Project”

� Support Cost can be allocated to Customer Project based on shipment quantities

� Overhead cost can be allocated as a fixed percentage of the Labor Cost

Permanent Transfers and Reporting

Permanent Transfers

� Issue of the “Common Project” to “Customer Project” at piece part or subassembly

level:

• Credits the weighted average value (Material, Labor and Overhead) of the part from the

“Common Project” and

• Debits the same amount to the “Customer Project”

� Permanent Part Transfer from one “Customer Project A” to “Customer Project B” :

• Credits the value of the part (Material, Labor, Support Labor and Overhead) from the

transfer-from “Customer Project A” and

• Debits the same amount to the transfer-to “Customer Project B”

Temporary Transfers

Temporary Transfer or Borrow/Payback

� Temporary Transfers from one “Customer Project A” to “Customer Project B” :

• Credits the weighted average value of the part (Material, Labor, Support Labor and

Overhead) from the “Customer Project A” and

• Debits the same amount to the transfer-to “Customer Project B”

� Payback of Borrowed part from one “Customer Project B” to “Customer Project A” :

• Original transfer-from value of the part is transferred from the “Customer Project B” back

to the “Customer Project A”

• Any variance is charged to the borrowing contract

Customer Owned Inventory

� Customer owned inventory is not to be commingled with the common inventory

� Customer owned inventory is stored in “Customer Project” in Oracle and is not

issued to the other projects

About Rapidflow Apps

About Rapidflow Apps

� Oracle Gold Partner

� Oracle Business Accelerators Specialized Partner

� Areas Expertise� Supply Chain Planning

� Product Lifecycle Management

� Master Data Management

� Business Intelligence

� Industry Solutions• High-Tech Manufacturing (Experience with Fab and Fabless)

• Process Industry (CPG and Pharmaceutical)

• Retail and Distribution

• Medical Devices

• Aerospace and Defense

Rapidflow Apps Methodology

Our business flow based methodology significantly reduces the implementation

time and cost of ownership.

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Q&A

If you have any feedback, please write to us at feedback@rapidflowapps.com

For services, please contact us at info@rapidflowapps.com

About the Presenter

Mahender Bist from Rapidflow Apps Inc. Mahender Bist has over 20 years of industry experience in

Operations Management and Information Technology consulting. He has been part of many complex

and challenging Manufacturing, Planning, PLM and MDM assignments.

About the Company

Rapidflow Apps was founded with the sole objective of providing high quality, innovative and practical

solutions to the real world business problems of our clients in the areas of Supply Chain Planning,

Product Lifecycle Management, Master Data Management and Business Intelligence. Visit our website

for more details- www.rapidflowapps.com

Disclaimer

The information contained in this presentation is for information

purposes only and is based on the Rapidflow Apps Inc experience and

publicly available material from Oracle Corporation on the subject.

The presenter is not responsible for the claims made about the

product benefits by the product vendor.