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Manufacturing concepts - Oracle apps –Manufacturing site
http://www.aboutoracleapps.com/2007/08/inv-concepts-1.html
Manufacturing Concepts (1)As we are dealing with inventory and purchasing we will go through the basic manufacturing concepts.
Any manufacturing unit will have a basic flow of materials. That will include right from the raw material processing to finished goods.
Flow of any manufacturing company:
1. Raw material flow into manufacturing company.
2. Raw material gets processed according to requirement.
3. Finally finished goods are distributed to end consumers through physical distribution system.
For this different companies use different manufacturing strategies, according to their business need and their requirement and they are,
Manufacuturing Strategies
Make- to- stock
In this delivery time is equal to shipment time, generally you will maintain
stock.
Make- to- order
In make- to- order delivery time is manufacturing + assembly time +
shipment time.
Assemble- to- order
In this strategy assembly time and shipment time contributes to delivery
time.
Engineer- to- order-
In this special category order processing starts from design, manufacturing, assembly and shipment.
Materials Management
Any strategy company implements, there comes material management, for following benefits
1) For planning and controlling materials flow
2) Maximize use of firm’s resources
3) Provide required level of customer service
For this material management we will control these activities
Activities
Production Planning:
The company will plan production according requirement and according to that
the status of inventory is checked.
Implementation of planning & control:
Production planning should be implemented and control through proper
resources, mainly involved purchasing.
Inventory management:
As per planning inventory should be managed, that vary from raw material to
finished goods.
Modules
Different modules which are interrelated with Inventory & Purchasing.
o MPC – Manufacturing Planning & Control
o MPS – Master Production Schedule
o MRP – Materials Required Planning
o BOM – Bill Of Material
Relation with major modules
Production planning is done by keeping long term view, while on that basis master production schedule is created. MRP will take feedback BOM, Engg. & other modules.
Purchasing will work according to MRP for which status will provide by Inventory. So now we can visualize the position of purchasing & inventory in whole manufacturing organization.
Other Manufacturing modules which are inter-related are,
Oracle BOM ( bill of material)
Oracle Engineering
Oracle Product Configurator
Oracle MRP
WIP( Work In Process)
Cost management
Oracle quality
Inventory
In Inventory all major functions are related with items, all functionality is provided by keeping item as center. Now we will discuss various aspects of inventory and flow of Inventory
Inventory consists of, mainly
1. Raw material
2. Work In Process Inventory
3. Finished Goods
Functions of inventory
1. Maintaining stock
2. Planning
3. Forecasting
4. Physical control of inventory
5. Receipt
6. Issues
We will discuss these functions as regards with oracle applications.
Inventory Flexfields
The flexfields which are used in inventory are:
Account aliases
Item catalogs
Item categories
Sales orders
Stock locators
System items
Depending on your setup inventory can use other modules flexfields like Accounting (General Ledger) & Sales tax location & territory from Accounts Receivables
Account Aliases
Table name : MTL_GENERIC_DISPOSITIONS
An account alias is an easily recognized name or label representing a general ledger account number. You can view, report, and reserve against an account alias. During a transaction, you can use the account alias instead of an account number to refer to the account.
Item catalogs
Table name: MTL_ITEM_CATALOG_GROUPS
Unique ID column: ITEM_CATALOG_GROUP_ID
If you make entries for your items in a standard industry catalog or want to group your items according to certain descriptive elements, you need to configure your Item Catalog Group Flexfield.
Even if you do not use item cataloging, you must enable at least one segment and compile this flexfields before you can define items.
These flexfields supports only one structure and dynamic inserts is not allowed.
Item categories
Table name: MTL_CATEGORIES
Unique ID Column: CATEGORY_ID
You must define & configure your item categories flexfields before you can start defining items since all items must be assigned to categories. You can define multiple structures fro different category groups. So that you can associate these structures with categories & category sets.
Sales order
Table name: MTL_SALES_ORDERS
Unique ID Column: SALES_ORDER_ID
Through this flexfield inventory will identify sales order transactions of OM with inventory.
This sales order flexfield should be defined as order number, order type and order source so that each transaction will be unique in inventory.
Stock locators
Table name: MTL_ITEM_LOCATIONS
Unique ID Column: INVENTORY_LOCATION_ID
If you keep track of specific locators such as aisle, row, bin indicators for your items, you need to configure your Stock Locators Flexfield and implement locator control in your organization.
You can use stock locators field to capture more information about stock locators in inventory. If you do not have oracle inventory installed any none of items have locator control then it is not necessary to define this flexfield.
And this flexfield supports only one structure.
System items (item flexfield)
Table name: MTL_SYSTEM_ITEMS
And unique id column is INVENTORY_ITEM_ID
You can use item flexfield for recording and reporting your item information, and you must define and configure your item flexfield before you can start defining items.
You must plan how Oracle Inventory represents your company’s inventory sites and business units. This includes defining organizations, locations, subinventories, and locators depending on your company structure.
Inventory is consisting of inventory – subinventory - locators as per your organization setup.
ITEM is defined in inventory that is generally first in master organization, so that later it can be assign to multiple organizations. Also item definition can be uploaded by item upload open interface.
Asset management attribute group
These are the attributes you have to give for asset management.
Asset item type-
This attribute identifies the asset item as an Asset Group, Asset Activity, or Rebuildable item.
Activity type-
This is relevant when the Asset Item Type is set to Asset Activity. This indicates the type of maintenance for this asset activity.
Costing attribute group
You have to set these attributes while defining or updating items.
Costing enabled-
Indicate whether to report, value, and account for any item costs.
Inventory asset value-
Indicate whether to value an item as an asset in inventory. Turning this option off indicates an expense item.
Cost of goods sold account-
This attribute is controlled at the Organization level only.
Enter a general ledger account to use as a source for the Cost of Goods Sold Account. The default cost of goods sold account is set when you define organization parameters.
Purchasing attribute group
Purchased-
Indicate whether to purchase and receive an item. Turning this option on allows you to set the Purchasable attribute.
Purchasable-
Indicate whether to order an item on a purchase order. You can set this only when Purchased is turned on.
Receipt required-
Indicate whether you must receive an item before you can pay the invoice. Leave this field blank if you want Inventory to use the value defined in the Purchasing Options window for transactions involving this item.
i.e. three way invoice matching
Inspection required-
Indicate whether to inspect an item upon receipt from the supplier, before paying the corresponding invoice. Leave this field blank if you want Inventory to use the value defined in the Purchasing Options window for transactions involving this item.
Encumbrance account-
This attribute is controlled at the Organization level only.
Enter the default encumbrance account Oracle Purchasing uses when an item is received. If the item encumbrance account does not exist, Oracle Purchasing uses the sub inventory account.
Expense account-
This attribute is controlled at the Organization level only.
Enter the default inventory account for expense items. This attribute is used only when Inventory Asset Value is turned off. Oracle Purchasing debits this account when you receive an item into inventory only if the item is being expensed. If you receive into an expense subinventory, Oracle Purchasing uses the expense account you assigned to
the subinventory first; if you do not define the account here, Oracle Purchasing uses the expense account assigned to the item.
Receiving attribute group
In this group major attributes are receipt date controls, valid transactions and over-receipt quantity control.
Physical attribute group
The main attributes like weight, volume, dimension are shown below,
General planning attributes
Inventory planning method-
Here you can select option for organizational level planning.
Like not planned, min-max or recorder point.
For min-max quantity, order quantity and source.
For source you can give inventory, subinventory or supplier.
Order Management attribute group
Customer ordered-
Indicate whether to allow an item to be ordered by external customers. You can add any customer orderable items to price lists in Oracle Order Management.
Shippable-
Indicate whether to ship an item to a customer. Shippable items are released by Oracle Shipping Execution’s Pick Release program, creating confirmable shipping lines, and are printed on the pick slip.
Default shipping organization-
Enter the Oracle Shipping Execution primary shipping organization.
Picking rule-
Enter the picking rule that defines the order in which subinventories, locators, lots, and revisions are picked.
Invoicing attribute group
Invoicable item-
Indicate whether to include an item on an Oracle Receivables invoice.
Accounting rule-
Enter an accounting rule to identify special revenue recognition rules for an item, such as recognizing revenue over time.
Invoicing rule-
Enter an invoicing rule to determine the period in which you send an invoice when you recognize revenue over time (using accounting rules).
Sales account-
This attribute is controlled at the Organization level only. Enter the general ledger account Oracle Receivables uses to record revenue when you bill the customer. If Auto-Accounting is based on items, accounting entries are created at that time.
ITEM definition
You define items in one organization. To distinguish it from others, we call it the Item Master organization. Other organizations (child organizations) refer to the Item Master for item definition. After you define an item in the Item Master, you can assign it to any number of other organizations.
Item attributes
o inventory attributes like lot control/ serial controlo Purchasing and costing information.o bill of material/ item category attributeso Physical attributes like weight, volumeo Receiving attributeso General planning attributes like min-max qty, order qty.o Status of item
Generally we will group the item attributes in these groups -
Main
Inventory
Bill of material
Asset management
Costing
Purchasing
Receiving
Physical attributes
General planning
MPS/MRP planning
Lead times
Work In Process
Order Management
Invoicing
Service
Now we will discuss main attributes from major group.
Main attribute group
Primary Unit of Measure-
This is the stocking and selling unit of measure. Any necessary conversions are based on this unit of measure. This attribute is not updatable.
The default primary unit of measure for new items is defined using the INV: Default Primary Unit of Measure profile option.
User Item Type-
Oracle provides several types by default at installation. These types correspond to the item templates also provided. Select one of these values, or one you defined with the Item Type window.
Different item types are ATO model/ Finished good/ Freight/ Inventory Type etc.
Item Status-
Item status codes set or default the values for attributes under status control. User–defined status codes control certain item attributes designated as status attributes.
Item status can be active/engineer/inactive.
The default item status for new items is defined using the INV:Default Item Status profile option.
Inventory Attribute Group
Inventory Item-
Indicate whether to stock and transact this item in Oracle Inventory.
Stockable-
Indicate whether to stock this item in Inventory. You can set this attribute only when you turn on the Inventory Item option.
Transactable –
Indicate whether to allow Inventory transactions. You can set this attribute only when you turn on the Stockable option.
Reservable-
Indicate whether you can create material reservations. You can reserve an item only when you have sufficient inventory.
Other attribute in this group are Lot control, serial control, locator control.
Bill of Material attribute group
BOM allowed-
Allows you to define a bill of material for an item, or to assign the item as a component on a bill.
BOM item type-
This attribute is controlled at the Master level only. Select a type to control bill functionality. You must enter a value here if BOM Allowed is turned on.
tem templates
There are two types of templates.
Predefined or custom template.
Predefined templates are planning item, purchased, outside processing item, lease item. So that once you assign any template, to new item then all default characters are assign to new item.
Category set & category
Categories are logical grouping of items that have similar characterizes, and
a category set is a distinct category grouping scheme and consist of
categories.
Different category set accordingly to company need and reporting structure.
Use: For forecasting & summarizing history of that category.
To keep easy track on that category.
Unit of Measure
Oracle Applications products provide powerful methods for defining and manipulating units of measure. You can easily convert between the units you define. This allows you to manufacture, order, or receive items in any unit of measure.
Table is related as:
Item setup
The main tables that are involved in item master set up are with their relation,
Item relationship
You can define item relationship between items. This allows
you to search items through these relationships and for maintaining also.
Item cross reference
Use the Customer Item Cross References window to define and update
cross references between your inventory items and the customer item
numbers defined in the Customer Items Summary/Detail windows.
Substitute items
In this relationship you can replace the outdated item, still keeping track on it.
Related items
You can relate different items according to your need.
Manufacturer part no.
You can define manufacturer part numbers for items. You can use this
information for reporting purposes; and in catalog searches for particular
items.
Inventory control
Locator control
You will track item as locator wise, it is a common method of inventory control.
Revision Control
With different revision of items according to your need, revision control can be Implemented.
Lot Control
You will define lot of your items so that you can track that item according to their lot numbers.
Serial no. Control
For expensive or for which you want tight control you will give serial numbers to those items.
Item catalog
Used to partition items that share some common characteristics.
Item Transaction
Inventory can interact or can have transactions with suppliers, customers, work in process and with other sub inventories.
A transaction type is the combination of a transaction source type and a transaction action. It is used to classify a particular transaction for reporting and querying purposes. Oracle Inventory also uses transaction types to identify certain transactions
For example, transaction type is purchase order receipt which is a combination of transaction action i.e. receipt into stores and transaction source type is purchase type.
Major transactions are,
Sub-Inventory transfer
Each subinventory transfer is carried out as two separate transactions, creating two records in MTL_MATERIAL_TRANSACTIONS. The first record represents an issue from the source subinventory and the second record is a receipt from the destination subinventory.
Inter- organization transfer
Use the Inter–Organization Shipping Network window to define accounting information and the relationships that exist between shipping and destination organizations. You can specify whether an organization is a shipping organization, a destination organization, or both.
In these transactions you will need bills, shipping bills and other accounting details.
ABC Analysis & cycle counting
ABC analysis is a method of determining relative value of items in your Inventory sites.Automatically scheduled or manually scheduled cycle counts.You can define your own ABC group like A class, B class, C class.
Now we will go through some of the set up steps, which you will need before setting up inventory.
Setup
o Define item flexfieldso Define item categories flexfieldso Define catalog group flexfieldso Define UOMo Define subinventories.o Define locatorso Define organization parameters.o Define intercompany relationship.o Define picking rules.
Some of the parameters we have to set defaults like item status as active, default primary unit of measure as Each or requisition approval status as approved or
unapproved.
Organization parameters
You can define and update default inventory and costing parameters for your current organization in the following areas:
Default inventory parameters
Costing information
Revision, lot, serial parameters
ATP, Pick, Item-sourcing parameters
Inter-Organization Information
Other account Parameters
Define warehouse parameters
Default inventory parameters
Provide organization code and item master organization
In the Move Order Timeout Period field, enter the number of days a move order requisition can wait for approval.
For locator control option:
Inventory transactions within this organization do not require locator information.
Pre-specified only: Inventory transactions within this organization require a valid, predefined locator for each item.
Dynamic entry allowed: Inventory transactions within this organization require a locator for each item. You can choose a valid, predefined locator, or define a locator dynamically at the time of transaction.
Determined at subinventory level: Inventory transactions use locator control information that you define at the subinventory level.
Costing Information
You have to define costing organization and costing method.
Valuation Accounts:
You choose a default valuation account when you define organization parameters. Under standard costing, these accounts are defaulted when you define subinventories and can be overridden.
Material
An asset account that tracks material cost. For average costing, this account holds your inventory and in transit values. Once you perform transactions, you cannot change this account.
Material Overhead
An asset account that tracks material overhead cost.
Resource
An asset account that tracks resource cost.
Overhead
An asset account that tracks resource and outside processing overheads.
Outside processing
An asset account that tracks outside processing cost.
Expense
The expense account used when tracking a non-asset item.
Other accounts
Sales
The profit and loss (income statement) account that tracks the default revenue account.
Cost of Goods Sold
The profit and loss (income statement) account that tracks the default cost of goods sold account.
Purchase Price Variance
The variance account used to record differences between purchase order price and standard cost. This account is not used with the average cost method.
Inventory A/P Accrual
The liability account that represents all inventory purchase order receipts not matched in Accounts Payable, such as the uninvoiced receipts account.
Invoice Price Variance
The variance account used to record differences between purchase order price and invoice price. This account is used by Accounts Payable to record invoice price variance.
Encumbrance
An expense account used to recognize the reservation of funds when a purchase order is approved.
Project Clearance Account
When performing miscellaneous issues to capital projects, the project clearance account is used to post the distributions.
Average Cost Variance
Under average costing with negative quantity balances, this account represents the inventory valuation error caused by issuing your inventory before your receipts.
Inter-Organization Transfer Accounts
You define default inter–organization transfer accounts in the Organization Parameters window. These accounts are defaulted when you set up shipping information in the Inter–Organization Shipping
Networks window.
Transfer Credit
The default general ledger account used to collect transfer charges when this organization is the shipping organization. This is usually an expense account.
Purchase Price Variance
The default general ledger account used to collect the purchase price variance for inter–organization receipts into standard cost organizations. This is usually an expense account.
Payable
The default general ledger account used as an inter–organization clearing account when this organization is the receiving organization. This is usually a liability account.
Receivable
The default general ledger account used as an inter–organization clearing account when this organization is the shipping organization. This is usually an asset account.
In-transit Inventory
The default general ledger account used to hold in-transit inventory value. This is usually an asset account. For average cost organizations, this account is the default material account.
Other information you have to give is,
Revision, Serial and lot control information.
ATP, Pick, Item sourcing rules.
Inventory Planning and replenishment:
Oracle Inventory lets you manage your inventory levels using any combination of the system’s planning and replenishment features, including min–max planning, reorder point planning, kanban replenishment, and a replenishment system for generating orders.
Performing Recorder-Point planning
In this planning method you will take minimum order quantity and time to fulfill the order to decide the level of order.
So record point is safety stock + forecast demand during lead time
Performing min-max planning
In this simple method you will decide maximum and minimum level of stock for that item, so that at min level order can be placed and the qty of that item can be full at max level.
Subinventory replishment planning
For some items you will have transactions with other subinventory so that optimum stock can be maintained.
Creating & executing Kanban cards
In this you will use kanban method by deciding some items as kanban cards.
And through requisition interface i.e. after running requisition import,
Purchase requisition gets created that turns out to purchase orders. Then through purchase order u can receipt material in inventory.
And that is how purchasing comes into picture.
Before that we will take look at main tables in inventory modules like
Major Tables
MTL_SYSTEM_ITEMS_B: Base table for item definition.
MTL_PARAMETERS : This table is consist of ORGANIZATION_ID, PICKING_RULE_ID, RULE_ID for ATP
MTL_ITEM_CATEGORY_ SETS MTL_ITEM_CATEGORIES : These tables will store information about different
category sets and categories defined.
MTL_ITEM _SUB_INVENTORIES
MTL_ITEM_LOCATIONS
MTL_SYSTEM_ITEMS_INTERFACE
MTL_SUPPLY
MTL_ONHAND_QUANTITIES MTL_RESERVATIONS : These table stores information about reserved quantity and on
hand quantity with available quantity for picking rules.
MTL_SALES_ORDERS : Order Management will interact with inventory for order details through this table.
MTL_ITEM_FLEXFIELDS
MTL_ITEM_TEMPLATES
MTL_ITEM_ATTRIBUTES
MTL_ITEM_REVISIONS
MTL_MATERIAL TRANSACTION
MTL_TRANSACTIONS_REASONS
Additional terms in inventory
Accounting close cycle:
General ledger transfer
Inventory accounting periods
Move orders:
Move orders are requests for the movement of material within a single organization. They allow planners and facility managers to request the movement of material within a warehouse or facility for purposes like replenishment, material storage relocations and quality handling.
Move orders are restricted to transaction within tan organization & if you are transferring material between organization, you must internal requisitions.
Three types of move orders:
Move order requisition
Replenishment move orders
Pick wave move orders
Interfaces
Open Item Interface
You can import items from any source into Oracle Inventory and Oracle Engineering using the Item Interface. With this interface, you can convert inventory items from another inventory system, migrate assembly and component items from a legacy manufacturing system, convert purchased items from a custom purchasing system, and import new items from a Product Data Management package. The Item Interface validates your data, insuring that your imported items contain the same item detail as items you enter manually in the Master Item window.
The Item Interface reads data from three tables for importing items and item details.
MTL_SYSTEMS_ITEM_INTERFACE
This table is used for your new item numbers and all item attributes. This is the main item interface table, and may be the only table you choose to use.
MTL_ITEM_REVISIONS_INTERFACE
If you are importing revision details for your new items, you can use this table. Which is used only for revision information, and is not required.
MTL_ITEM_CATEGORIES_INTERFACE
To import item category assignments, the table is used to store data about item assignments to category sets, and categories to be imported into the Oracle Inventory MTL_ITEM_CATEGORIES table.
MTL_INTERFACE_ERRORS
is used for error tracking of all items that the Item Interface fails.
Before you use the Item Interface, you must write and run a custom program that extracts item information from your source system and inserts the records into the MTL_SYSTEM_ITEM_INTERFACE table.
And if revision & category details are there upload into respective tables. After you load item, revision, and item category assignment records into these interface tables, you run the Item Interface to import the data. The Item Interface assigns defaults, validates data you include, and then imports the new items.
Customer Item and Customer Item Cross-Reference Open Interface
A number of manufacturing industries are characterized by a multi-tiered, just-in-time supply chain structure. Today’s manufacturing environment requires a close working relationship between customers and suppliers along the entire supply chain. Suppliers must be able to react quickly to their customers’ often changing requirements. By cross-referencing customer items with their own inventory items, suppliers can achieve faster order processing and shipments by allowing customers to place orders using customer item numbers.
You can import customer items and customer item cross-references from any legacy system into oracle inventory.
In customer item interface you import customer items into inventory. For each customer item you must define related information such as customer and item definition level.
MTL_CI_INTERFACE
Using this table data is transferred MTL_CUSTOMER_ITEMS table.
In customer item cross reference, you can import cross-references between customer items and exiting inventory items into your master organization.
You can create multiple cross-references between customer items and one Oracle Inventory item. You can also create multiple cross-references between Oracle Inventory items and one customer item.
MTL_CI_XREFS_INTERFACE
Using this interface table data is uploaded into base table, MTL_CUSTOMER_ITEM_XREFS.
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