Handling Outside Processing In Discrete Manufacturing Organizations With India Localization In Oracle Applications

Author Document Version Date

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Amogh Dike 1.0 21-Jul-2011

Outside Processing with India Localization in Oracle Apps

Table of Contents
1. 2. Introduction .................................................................................................................................... 3 Setup ............................................................................................................................................... 3 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 3. Additional Information............................................................................................................ 3 OSP Subinventory.................................................................................................................... 3 OSP Item.................................................................................................................................. 4 Excise Items Classification....................................................................................................... 5 OSP Resource .......................................................................................................................... 6 Department ............................................................................................................................. 7 WIP Parameters ...................................................................................................................... 7 Routing .................................................................................................................................... 8 Bills of Material ....................................................................................................................... 8

Transactions .................................................................................................................................... 9 3.1 3.2 3.3 3.4 3.5 3.6 3.7 Job Creation and material issue .............................................................................................. 9 Move Transaction ................................................................................................................... 9 Auto Create Purchase Order ................................................................................................. 10 Approve 57F(4) Dispatch....................................................................................................... 10 Print OSP Challan .................................................................................................................. 11 Receive Material and Approve 57F(4) Receipt ..................................................................... 12 Dispatching Partial Quantity ................................................................................................. 13

4. 5.

Reports .......................................................................................................................................... 14 Issues Identified and Their Resolution .......................................................................................... 15 5.1 5.2 5.3 Cannot enter Item while creating manual 57F(4) Challan .................................................... 15 Value in the Item Rate Field is not updatable and defaults from purchase order rate ........ 15 Value defaulting in the Tariff field is the tariff of the OSP item ........................................... 17

6.

Conclusion ..................................................................................................................................... 18

Outside Processing with India Localization in Oracle Apps

1. Introduction
Because of certain reasons such as manufacturing constraints, cost considerations, etc. manufacturing organizations may not be able to carry out certain processes out within their own premises. In such cases, the processing is done from outside. The process performed outside is called as job work. Job work in India is governed by provisions under the Rule 57F(4) - removal of inputs as such or partially processed inputs in respect of which Modvat credit has been availed. Oracle Financials for India provides the functionality of tracking the goods sent to a sub-contractor for Job work. This document explains the setup required and the transactions flow required for achieving the same. The setup and transactions given in this document are based on Oracle E Business Suite Rel. 12 and 12.1

2. Setup
2.1 Additional Information
Setup Preferences tab of Additional Organization Information (Navigation: India Local Inventory Setup Additional Information) Since there is no need to pay duty while sending goods for sub contracted operations, the user needs to input zero in this field. If any other value is given in this fields, appropriate duty will get calculated whenever a 57 F4 Challan is prepared.

2.2 OSP Subinventory

Define a Subinventory with name OSP.

Outside Processing with India Localization in Oracle Apps

2.3 OSP Item

Create an item with template @Outside Processing Item. This item needs to be associated with the OSP resource. The unit type in Purchasing tab should be Resource. Allow Description Update in Purchasing Tab helps to enter more meaningful description of subcontracting operation description in the purchase order. Enter a list price for the OSP item. If not entered then the purchase requisition will not be created.

Outside Processing with India Localization in Oracle Apps

2.4 Excise Items Classification

For the components to be sent for subcontracting, make Excisable Flag as Yes (Navigation: India Local Inventory India Localization Setup Item Setup VAT/Excise Item Classification) All the items OSP Item, assembly item and components in the BOM must be excisable.

Outside Processing with India Localization in Oracle Apps

2.5 OSP Resource

Create a resource for OSP. Check Outside Processing flag for this resource. Associate OSP item with this resource. Charge type should be PO Receipt or PO Move. If charge type is PO Move, Oracle will automatically perform mover transaction after receipt is made. If charge type is PO Receipt, Move Transaction needs to be performed explicitly.

Outside Processing with India Localization in Oracle Apps

2.6 Department
Create a department and attach appropriate location to the department. Associate the OPS resource with this department.

2.7 WIP Parameters

Setup Requisition Creation Time in WIP Parameters to At Job/Schedule Release or At Operation. If it is set to At Operation, requisition for OSP operation will be created when the discrete job is moved to Queue intraoperation step. If it is setup as At Job/Schedule Release, purchase requisition will be created automatically when the job / schedule is released. If it is setup as Manual, then purchase requisition needs to be created manually. (Navigation: Work in Process Setup Parameters)

Outside Processing with India Localization in Oracle Apps

2.8 Routing
Create routing for the assembly item. Department for the operation to be subcontracted should be OSP department and the resource for this operation should be OSP resource.

2.9 Bills of Material

Create bills of material for the assembly item.

Outside Processing with India Localization in Oracle Apps

3. Transactions
3.1 Job Creation and material issue
Create discrete job for the assembly item, release it and make material issue transaction for this job. If the material control is Operation Pull, Oracle will do the material transaction.

3.2 Move Transaction

Move the job from the first operation to Queue intraoperation step of the operation that needs to be subcontracted.

Outside Processing with India Localization in Oracle Apps After saving the move transaction, requisition will be automatically created. The requisition can be queried from Requisition Summary window by querying for Import Source as WIP

3.3 Auto Create Purchase Order

Autocreate the purchase order from purchase requisition and approve it. The line type of the purchase order is Outside Processing. The job and operation details can be seen in Distribution The purchase order needs to be approved only from India Localization because after approving the purchase order 57F4 details gets updated.

3.4 Approve 57F(4) Dispatch

Approve 57F(4) Challan. (Navigation: India Local Purchasing India Localization Outside Processing Approve 57F(4) Dispatch). Enter PO Number and Click on Create 57F4 button

Update the details of Item and Quantity being dispatched and click on Approve button.

Outside Processing with India Localization in Oracle Apps

After Approving, 57F(4) Challan number is generated and is populated in the field Form Number.

3.5 Print OSP Challan

Navigate to India Local Purchasing Outside Processing Print control 57F(4). Enter appropriate selection criteria and click on Find. Select on Original / Duplicate and save record.

Outside Processing with India Localization in Oracle Apps

Go to View Requests Submit New Requests India - Outside Processing Challan. Enter appropriate parameters and submit the request.

3.6 Receive Material and Approve 57F(4) Receipt

Create a receipt against purchase order. After creating the receipt approve 57F(4) Receipt. Navigation: India Local Purchasing Outside Processing Approve 57F(4) Receipt. Approve 57F(4) Receipt should be done only if you are sure that you will not receive any more material from the vendor. 57F(4) receipt will no longer be available for approving once approved once.

Outside Processing with India Localization in Oracle Apps

3.7 Dispatching Partial Quantity

Sometimes material is dispatched to the subcontractor in a staggered manner. In such a case first create and approve 54F(4) Challan as explained in point no. 2.4 above. In the first Challan enter the partial quantity being dispatched in the first lot.

For the subsequent dispatches, create Manual 57F(4) Challan (Navigation: India Local Inventory India Localization Outside Processing Approve 57F(4) Dispatch). Enter the PO Number and click on Manual button

This will open 57F4 Form details screen. Primary form number will appear in the subsequent forms. Enter the necessary details of Job Number, Item Number and dispatch quantity and save the record.

Outside Processing with India Localization in Oracle Apps

After this, click on Approve Dispatch Button. This will generate a new form number.

4. Reports
Following reports are available with respect to Outside Processing: 1. India - OSP Pending Despatch Report: This report gives all OSP material pending for dispatch 57F(4) challan is created; however it is not approved 2. India - OSP Pending Receipt Report: This report gives details of unapproved 57F(4) receipts Receipt transaction is done; however Approve 57F(4) transaction is not done. 3. India - OSP Stock Register: This report gives stock register of goods sent for Processing/job working under Rule 57F(4)

Outside Processing with India Localization in Oracle Apps

5. Issues Identified and Their Resolution

5.1 Cannot enter Item while creating manual 57F(4) Challan
While creating manual 57F(4) Challan we have to enter item number of the item to be dispatched in the Item field. When enter the item, we get error Item not found. The list of values is also empty. To resolve this error, first enter the item number of OSP item in the parent item field and then enter the item number of the item to be dispatched in the Item field. Before saving the record, the value entered in Parent Item field can be deleted.

5.2 Value in the Item Rate Field is not updatable and defaults from purchase order rate
The value in the Item Rate Field in 57F(4) Challan defaults from the PO rate. Defaulting from PO rate is not correct because the PO rate is the rate for converting the material from one form to another. The payment to the subcontractor needs to be made on the basis of this rate. The item rate in the 57F(4) Challan is the rate of the item for the purpose of valuation from excise perspective. Moreover, the current form provided by India Localization does not allow to update the item rate. These issues can be resolved by personalizing the Approver 57F4 Dispatch form.

Outside Processing with India Localization in Oracle Apps

Defaulting of item rate can also be modified by personalization

Outside Processing with India Localization in Oracle Apps

The query to be used for getting value of item rate from list price is: select LIST_PRICE_PER_UNIT from mtl_system_items_b where inventory_item_id = :JA_IN_57_F3_LINES.ITEM_ID and organization_id = :JA_IN_57_F3.ORGANIZATION_ID In this query, the rate is taken from list price of the item. It can be suitably modified, if required.

5.3 Value defaulting in the Tariff field is the tariff of the OSP item
The value that defaults in the Tariff field of the 57F(4) Challan is the tariff of OSP item. It is quite possible that the tariff of the item being dispatched is different from that of OSP item. Correct tariff must be entered on the Challan. This can be achieved by personalization.

Outside Processing with India Localization in Oracle Apps

The query to be used for picking the appropriate tariff code is: select attribute_value from JAI_RGM_ITEM_ATTRIB_V where inventory_item_id = JA_IN_57_F3_LINES.ITEM_ID and organization_id = :JA_IN_57_F3.ORGANIZATION_ID and attribute_code = 'ITEM TARIFF'

6. Conclusion
The OSP functionality provided by India Localization in Oracle e Business Suite is good for meeting the legal requirements in discrete manufacturing organizations. The setup involved is minimal and users do not have to make lengthy transactions. There are certain lacunas; however they can be easily taken care of by form personalization with little efforts.