Supply Chain Cost Rollup Overview

an Oracle White Paper

by Laura Z. Miller
Supply Chain Cost Rollup Overview

Supply Chain Cost Rollup enhances the existing Assembly Cost Rollup process. The
functionality of this process became available in Oracle Applications Release 11.5.2.
The rollup process can be used to create a global standard cost for items.

The rollup process uses the Bill of Distribution (BOD) and Sourcing Rules that are defined in
MRP. Now the application will allow the direct computation of rollup costs when assemblies
are made with components from other organizations. Partial sourcing of components from
different organizations can also be performed. This process supports using organization-specific
markup costs. Each item can have a different Bill of Material (BOM) in different organizations
and be included in the rollup.

The Bill of Material is the representation of components that are used for an assembly or a sub-
assembly. The BOM does not included sourcing rules information that may exist for these
individual components. If there are multi sourcing rules on the BOM, these are not used by the
Assembly Cost Rollup but are used by the Supply Chain Cost Rollup. For the Supply Chain
Cost Rollup, the Bill used is called the Supply Chain Bill of Material which combines the existing
concept of the BOM as well as including the Supply Chain sourcing rules that exist.

The Supply Chain Cost Rollup can be performed for items specifically belonging to one
organization or for all organizations included in the Supply Chain. This rollup uses a cost type
that is multi-org and updateable.

Since items can be made or bought in an organization, these costs can be captured in a rollup.
If the items are made in an organization, the cost of the items is determined by rolling up the
costs and then using the sourcing rules percentages that are in place. Items that are built in other
organizations of the Supply Chain will have their cost calculated first in the owning organization,
and then the percentage weights are used when bringing the costs over to the organization
performing the rollup. The rollup cost can show the cost breakdown as computed by the
various sources in the supply chain.

For Buy items, which have partial sourcing rules, the costs rows will get re-weighted every time
the supply chain cost rollup is performed. This means that every time a supply chain cost rollup
occurs, the starting buy cost will be different at the start of the next rollup process. The cost
type for buy items should be flagged as multi-org but does not need to be flagged as
updateable.

There is an option of using a Buy Cost Hook. If this is used then the Buy Cost Type is ignored
for the preferences listed in the hook. This hook is used to allow customization capabilities in
regard to vendor information. The retrieval of purchase costs of the vendor, the shipping site,
and the shipping method can all be taken into account by use of the Buy Cost Hook.
The details of item sourcing rules for the Supply Chain Cost Rollup are entered using Oracle
MRP functionality. There can be a set of Sourcing Rules established or a Bill of Distribution
that is used to compute the Supply Chain costs. The navigation for these setups is included in
the Cost Management responsibility for ease of use.

Navigation Path: Cost > Supply Chain Costing

Markup costs related to any inter-org transfer of items are also included in the Supply Chain
Cost Rollup. By default, markup costs are retrieved from InterOrg Parameters. These
parameters must be setup prior to running the Rollup. If the markup cost hook is being used in
the rollup, the InterOrg Parameters are disregarded.

The Markup Cost Hook can be used to capture more costs for the rollup. This allows the user
to create customizations to capture markup costs for ‘transfer from’ other organizations that are
in the Supply Chain.

The system will track cost details with source organization/vendor visibility. Costs will be
marked with the original source organization/vendor and the related allocation percentages that
contribute to the final assembly cost.

The Supply Chain indented report provides all cost information for the Rollup. All costs from
prior Supply Chain Rollups used in the latest rollup are considered to be previous level costs.
When running the rollup, a snapshot of the MRP sourcing rules is used. No loops can exist in
the BOM or BOD otherwise the rollup will not compute the costs.

The following is the list of steps required to perform a Supply Chain Cost Rollup:
1 - Setup rollup and buy cost types

Two types are necessary:

Rollup Cost Type: This parameter is as used in assembly cost rollup; costs are
read from and written to this cost type during the rollup.
In the Rollup Cost Type, setups include the user-defined costs and the “Based On
Rollup” flags for the items. The user-defined costs are applied over and above the
weighted average of all sources for a particular item in an organization.

The cost of an item in a particular organization will be recalculated only if its “Based On
Rollup” flag is set to Yes in the Rollup Cost Type. Otherwise, the item cost will be
taken as is from the Rollup Cost Type.
Buy Cost Type: This parameter holds the costs to be used that are setup as
purchase costs. All costs from this cost type will be taken as is, with no rollup done
within the Buy Cost Type.
Both Rollup Cost Type and Buy Cost Type should be Multi-Org and the Rollup Cost
Type must be Updateable. If the Buy Cost Hook is used, then the Buy Cost Type is
disregarded; the buy costs will be populated by the Buy Cost Hook instead.

2-Setup Buy Cost Hook (optional)

This provides the user customization capabilities in regard to vendor information. The
Buy Cost Type holds the default buy cost for purchased items specified in the MRP
sourcing rules.
The Buy Cost Hook can be customized to provide vendor level visibility for purchase
costs. Parameters that can be utilized include:
p_rollup_id
p_assignment_set_id
p_item_id
p_organization_id
p_vendor_id
p_site_id
p_ship_method

3-Setup Interorg Parameters

The Supply Chain Cost Rollup uses transfer costs in these parameters as the
markup charge for interorg transfers. These parameters must be set prior to running a
rollup. If a Markup Cost Hook is defined then these parameters are disregarded

4-Setup Markup Cost Hook (optional)

This allows the user to create customizations of the markup costs for “transfer from”
other organizations that are in the Supply Chain. If desired, the Markup Cost Hook can
be customized to provide custom markup costs for “Transfer From” other organizations
in the Supply Chain ONLY.

5-Setup Transportation Cost Hook (optional)

This allows the user to create customizations to capture transportation cost for “Transfer
From” other organizations that are in the Supply Chain. If hook is not used, the default
setting in the Inter-Org Shipping Networks will be used.

6-Setup Sourcing Rules

Setup the MRP Assignment Set with sourcing rules/BOD reflecting the Supply Chain
structure to rollup the cost on
 7-Run Supply Chain Cost Rollup

The following parameters are using in the process:

Supply Chain Cost Rollup Parameters:
Parameter Options Required?
Cost Type Y
Buy Cost Type Y
Organization N
Assignment Set N
Conversion Type Y
Rollup Option Full cost rollup, Single level cost Y
rollup
Report Type Detail Indented, Consolidated Y
Material Detail Yes, No Y
Material Overhead Detail Yes, No Y
Routing Detail Yes, No Y
Report Number of Levels Y
Effective Date Y
Include Unimplemented Yes/No Y
ECOs
Alternate Bill N
Alternate Routing N
Engineering Bills Yes/No Y
Specific Item N
Category Set N
Specific Category N
Item From N
Item To N

Once the process is launched, a snapshot of the MRP Sourcing Rules/Bill of Distribution is
performed. This information is taken from data entered in MRP. This snapshot has the existing
state of relevant information.

The snapshot data is then taken from MRP_SOURCES_V and placed in

CST_SC_SOURCING_RULES. If any sourcing rules exist in MRP_SOURCES_V, the code
then verifies that the sum of all sourcing percentages for a particular item/org will sum to 100.

The markup_percent column in the CST_SC_SOURCING_RULES table will be populated

from the interorg shipping network, MTL_INTERORG_PARAMETERS, if the markup hook
is not used
The Supply Chain Bill of Materials Explosion of each assembly then takes place. This logic is
the same as the Assembly Rollup code but is modified to track the item/org combination instead
of tracking the item only. Also the explosion will take the sourcing rules that were captured via
the snapshot
The Supply Cost Rollup Report is re-runnable for particular Supply Chain Rollup previously
performed, identified by rollup_id. This is the report that is printed when the Cost Rollup is run
with the “Cost Rollup – Print Report” option. It first calls the rollup processor, then generates
the report using the data generated in CST_SC_BO_STRUCTURES. It resembles the BOM
Indented Cost Report for regular assembly rollup, with additional data displayed to designate
the supply chain cost sources.