Outside Service Processing PDF

PROCESS DESIGN
APC-MGE
Outside Service Processing
Author: Sairam Balakrishnan / Anunay Sinha

Creation Date: 9 October 2007
Last Updated: 19 October 2007
Filename: X
Version: 3.0
Contents
Overview .................................................................................................................................. 1
Purpose.............................................................................................................................. 1
Scope .................................................................................................................................. 1
OSP Scenarios .......................................................................................................................... 2
Entire SKU / Sub Assembly is Outsourced ................................................................. 2
Partial SKU / Sub Assembly is Outsourced................................................................. 2
Simultaneous production Internally and at Subcon.................................................... 2
Multiple Subcon vendors for the same SKU ................................................................ 3
Setup Notes .............................................................................................................................. 4
Org Level Setup ............................................................................................................... 4
Costing Parameters .......................................................................................................... 6
Work Instructions for each item setup .......................................................................... 7
OSP Business Processes ........................................................................................................ 17
Discrete Job Creation ..................................................................................................... 17
Receiving the Outsourced Assembly .......................................................................... 18
Matching the OSP Invoice ............................................................................................ 22
Accounting entries ......................................................................................................... 23
Open and Closed Issues for this Deliverable .................................................................... 26
Open Issues ..................................................................................................................... 26
Closed Issues .................................................................................................................. 26
Overview Page ii
File Ref: Outside Service Processing.doc
Company Confidential - For internal use only
Overview
Purpose
The purpose of the document is to introduce the issues related to implementation of

Oracle Outside Service Processing in APC Manufacturing organizations. This process
will enable integration between
• Planning (SKU discrete job creation)
• Purchase Order creation for the outside service
• Receipt of outsourced assembly
• Consumption of component parts
• Booking of costs related to each step
This will help reduce the Non Value adding activity at
• Purchasing
o Expense PO created for payment to Subcon
• Receiving
o Expense PO receipt and Units to be separately backflushed
o Delay in these transactions currently affect the Inventory Accuracy
o In case of partially outsourced assemblies, the current process does

not support necessitating workarounds.
• Costing
o Variances can be reduced and issues fixed in a better manner.
The implementation of Oracle Outside Service Processing usage is focused firstly at

APC India, which can then be rolled out to other manufacturing organizations. This
document references issues at APC India sites. Discussions have taken place with
other sites and many issues are generic across manufacturing organizations.
Scope
This document contains the following:
• The outside processing scenarios envisioned and comments on how these can
be supported by the OSP functionality.
• The steps involved in the setup
• Work instructions for using the OSP process

OSP Scenarios
Entire SKU / Sub Assembly is Outsourced
In this scenario the complete SKU or SubAssembly is outsourced and does not have
any internal operations.
1. All the child parts are bought by APC and sub-inventory transfer is done to
Subcon
2. Subcon buys some of the parts while APC supplies the rest
a) The parts bought by Subcon need to be setup with WIP Supply type
as Supplier.
b) This would mean that the cost of the parts supplied by the SUBCON
is incorporated in the OSP purchase order. If this is not desirable then
APC would need to buy the parts from the SUBCON and then do a
sub-inventory transfer back to the SUBCON. In this case the scenario
is similar to APC supplying all the child parts and hence the WIP
supply type can be retained at Assembly pull.
3. APC India will use option 1 and option 2b.
Partial SKU / Sub Assembly is Outsourced
In this case the SKU / Sub Assembly is partially assembled by the Subcon and the
rest is internally completed in the APC factory.
• In this case the Routing has to be setup to reflect multiple operations
• The operation sequence for the components in the BOM to be updated
• The WIP supply type to be changed to Operations Pull for those parts that
need to be issued before the final Assembly completion.
Simultaneous production Internally and at Subcon
In this case the SKU is produced simultaneously both in the APC factory and at the
outsourced SUBCON facility. To support this we will need to setup ALTERNATE
ROUTING.
OSP Scenarios Page 2

Multiple Subcon vendors for the same SKU
It was observed that each job quantity is indivisible and gets converted as a release
for the vendor with the maximum share of business. Hence it is suggested that
outsourcing be limited to one vendor for one SKU at any point in time.
OSP Scenarios Page 3

Setup Notes
The Setup steps could be categorized into
• the Org level steps required to enable OSP
• Costing parameters
• Work instructions for setting up each Item
Org Level Setup
Shop Floor Statuses

Need to assign the shop floor status of ‘OSP’ to all manufacturing organizations. The
‘Allow Moves ‘ check box should be unchecked.
WIP > move transactions > shop floor statuses
Need to assign the ‘OSP’ shop floor status as the OSP hold status in the WIP
parameters form for each manufacturing organization.
Setup Notes Page 4

Requisition Creation Time
This parameter has already been set-up for I2F and P1F. The parameter should be set
to ‘At Job/Schedule Release’. This can be seen in the setup screen shot above. This
needs to be set for other Orgs (IDF).
OSP Item Templates

1) Create new template
2) copy Oracle OSP template to new template
3) make changes as listed
Tab Parameter Current Value Required Value

Purchasing Outside Null Assembly
Processing Item
Unit Type
Purchasing Use Approved Off On
Supplier
MPS/MRP Planning Method MRP Planned Not Planned
Planning
Lead Times - - -
General Source Type Null Supplier
Planning
Receiving Receipt Routing Null Direct
Main User Item Type Outside Processing
Work In Supply Type Push Supplier
Process
WIP Move Transaction Manager

1) Create new template
Need to schedule the WIP Move Transaction manager. This can be done from the
Inventory Transaction Manager form. This is required so that the PO receipt
automatically completes or moves the Job.
Setup Notes Page 5

Requisition Import
Schedule the Requisition Import. This process would be automatically launched if
initiated from DRP but is required to be scheduled for OSP jobs. The import type
must be set to ‘WIP’. In order to set the import type to WIP there must exist a WIP
generated requisition in the interface.
Create Releases
The Create Releases concurrent program has been set to automatically run after the
requisition import. The Scheduling of the requisition import can not be very frequent
because the Create Releases program is taking a long time to run. The length in run
time is most probably due to the huge amount of candidate requisitions available for
autocreation.
Costing Parameters
These parameter values are different for India and Phils. The main reason for this is
because the Purchase Orders may be made in INR in India but are made in USD in
Phils. Hence currency conversion is required in India which necessitates setup as
detailed below.
Setup Notes Page 6

Parameter India
OSP Unit Type Assembly
OSP Item UOM EA
Resource Standard Off
Rate Flag
Blanket PO Price Price in INR / USD
Resource rate $1
Resource UOM EA
Resource Type Miscellaneous
Routing Usage PO Price in USD
Comments Job Variance occurs when
PO <> Job costing
Work Instructions for each item setup
OSP Item
For each Outside Process Assembly a Outside processed service item is created. This
is done using the predefined template.
Tool > Copy From > Template
Assign to Organisation (3rd Icon)
Setup Notes Page 7

Sourcing Attributes for the OSP Item
Setup the sourcing attributes similar to workbench (ASL, Blanket Purchase
Agreement, Sourcing Rule, Sourcing Rule Assignements)
Since the sourcing rule is 100% on one vendor, we can create one sourcing rule for
each OSP vendor.
Setup Notes Page 8

Resource
Create a Resource with the same name as the Assembly. Set the Type to
Miscellaneous, UOM to EA and Charge Type to PO move. Link the resource to the
OSP item. Leave the Standard Rate unchecked. This will ensure that the cost incurred
would be based on the PO price in the associated release. The Rate will still need to be
specified. First time specify the Frozen cost, but next time only Pending cost can be
updated.
Department
The location for the Department should be the same as that in the Blanket agreement.
Setup Notes Page 9

Attach the Resource to the Department
Routing
If routing already exists and if we need to modify the existing routing, then the
existing operations need to be disabled. Add the new operation and attach the
department.
Setup Notes Page 10

Attach the operational resource and specify the usage as PO price in USD.
Changes in USD conversion rate will drive Discrete Job variance. Hence as part of the
Quarterly cost rollup exercise, the routing usage will also need to be corrected for
currency rate fluctuation.
In case there is multi-stage backflush the routing will need to be setup with multiple
operations and associate the resources.
Setup Notes Page 11

Ensure that the completion Subinventory is setup correctly
Setup Notes Page 12

Overhead
Associate the OSP resource to Overhead (if defined) also. This is available in the MFG
Setup GUI. In case of India we will not assign the Overhead initially. If the rate is
defined by Finance then we can assign the Overhead.
Setup Notes Page 13

BOM
Before the Job creation, ensure that the Backflush programme for Subinventory is run
In case the Subinventory / Locator is not populated then the MOVE transaction
would ERROR.
Defining the resource as a MACHINE and specifying the supply Subinventory and
Locator can circumvent this. This may not complement the with the Alternate BOM
removal.
In case of Multi-Stage Backflush the correct operation sequence needs to be specified

in the BOM. Since in this example the first stage is outsourced, all the components in
the first operation are set as Operations Pull. It is not necessary to change the WIP
Supply type as during the first move transaction the components get issued (as the
operations sequence is set as 1 by default and the outsourced operations sequence
number is 5). When the assembly is completed the rest of the parts set with a WIP
supply type as Assembly Pull get consumed.
Setup Notes Page 14

The Subinventory / Locator needs to be setup to consume as per the operations
sequence
Cost Rollup and Standard Cost Update

Roll up the cost and do Standard Cost update.
Setup Notes Page 15

Setup Notes Page 16
OSP Business Processes
The following business processes have been identified:
Discrete Job Creation
Discrete jobs can be created by releasing from the Workbench or by creating it from
the Discrete Job creation screen.
OSP Business Processes Page 17

Before releasing the job ensure that the correct Primary /Alternate is BOM and
Routing is selected on the job. Once the job is released the user will not be able to
change the BOM or Routing. Once the Job is released, the user will not be able to
unreleased or close the job as long as the associated Purchase Order is still open. The
job can be cancelled though (system gives a alert if there is a associated Open PO)
The Requisition Import process is to be scheduled in LIVE
An approved Blanket Release is created for the OSP part automatically.
Receiving the Outsourced Assembly
Once the supplier ships the assembly, warehouse receives the OSP Item by using the
normal receipt screen. They use the Discrete Job number and the OSP item number to
query the Expected Receipts.

After the Receipt transaction, the WIP Transaction Manager has to be run. This is to
be scheduled in LIVE
As can be seen on the Job, the components for the first operation have been issued
and the job history shows that 60 pieces have been moved to the next operation.
The associated components have been issued

730-0004-Z and 770-0002A are both part of the 0L. But as expected only 770-0002A
issued to the job in the first operation.
The WIP value summary shows that cost has been incurred but nothing is relieved as
expected
Complete the assembly

and check the WIP value summary
The material cost variance is because the alternate BOM used has the older version of
part (i.e 0M-1007G) which is ZERO cost, but the primary BOM used for cost rollup
has 0M-1007F which is 12 USD.
The Discrete job number is listed in the distribution of the Purchase Order shipment
The PO number associated with the Discrete job can be found by running this request.

Matching the OSP Invoice
The OSP Invoice is billed and validated for payment processing.

Accounting entries
The list of accounts and codes are given for reference
Account Type Account Number
Raw Material 1305
WIP Material 1307
WIP Labour 1308
WIP Overhead 1309
Finished Goods Account 1310
Receipts Pending Delivery 1315
Purchase Price Varience 1350
WIP Inventory Varience 1352
Trade Accounts Payable 2100
Uninvoiced Receipts 2115
The OSP part is received and the receiving number is 830430980 against the Job
437203
Receipt Screen shot of Receipt of BK350 – OSP

Accounting entry of OSP receipt:
Absorption of Outsource Resource:

WIP assembly completion:
Net of 1309 A/c ($784.77-$550.00=$234.77) is a WIP variance, which will be

transferred to GL code 1352 A/c once the Job is closed.

Open and Closed Issues for this Deliverable
Open Issues
ID Issue Resolution Responsibility Target Date Impact

Date
1 Though Sourcing rule is In case of multiple suppliers, the

defined, the blanket sourcing rule could be disabled. The
release is always being requisition could be converted into a
created on the supplier release on the required supplier by
with a larger business using the AUTOCREATE form
share
2 The Primary Routing
could always be based on
internal production and
the Alternate Routing
could be named after the
SUBCON. This will make
it easy for the Planners
while creating Discrete
Job, but may affect the
Cost Roll up process. The
Cost Roll up process may
need to be modified to use
Alternate Routings for the
specific list of SKU that
have a significant part of
the volumes outsourced.
Closed Issues
ID Issue Resolution Responsibility Target Date Impact

Date
Open and Closed Issues for Page 26

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PROCESS DESIGN

Author: Sairam Balakrishnan / Anunay Sinha

The purpose of the document is to introduce the issues related to implementation of

• Planning (SKU discrete job creation)

• Purchase Order creation for the outside service

• Receipt of outsourced assembly

• Consumption of component parts

• Booking of costs related to each step

This will help reduce the Non Value adding activity at

o Expense PO created for payment to Subcon

o Expense PO receipt and Units to be separately backflushed

o Delay in these transactions currently affect the Inventory Accuracy

o In case of partially outsourced assemblies, the current process does

o Variances can be reduced and issues fixed in a better manner.

The implementation of Oracle Outside Service Processing usage is focused firstly at

This document contains the following:

• The steps involved in the setup

• Work instructions for using the OSP process

Entire SKU / Sub Assembly is Outsourced

3. APC India will use option 1 and option 2b.

Partial SKU / Sub Assembly is Outsourced

• In this case the Routing has to be setup to reflect multiple operations

• The operation sequence for the components in the BOM to be updated

Simultaneous production Internally and at Subcon

OSP Scenarios Page 2

OSP Scenarios Page 3

• the Org level steps required to enable OSP

• Work instructions for setting up each Item

Org Level Setup

Shop Floor Statuses

WIP > move transactions > shop floor statuses

Setup Notes Page 4

OSP Item Templates

2) copy Oracle OSP template to new template

3) make changes as listed

Tab Parameter Current Value Required Value

WIP Move Transaction Manager

Setup Notes Page 5

Setup Notes Page 6

Work Instructions for each item setup

Tool > Copy From > Template

Assign to Organisation (3rd Icon)

Setup Notes Page 7

Setup Notes Page 8

Setup Notes Page 9

Setup Notes Page 10

Setup Notes Page 11

Setup Notes Page 12

Setup Notes Page 13

In case of Multi-Stage Backflush the correct operation sequence needs to be specified

Setup Notes Page 14

Cost Rollup and Standard Cost Update

Setup Notes Page 15

Discrete Job Creation

OSP Business Processes Page 17

The Requisition Import process is to be scheduled in LIVE

An approved Blanket Release is created for the OSP part automatically.

Receiving the Outsourced Assembly

OSP Business Processes Page 18

The associated components have been issued

OSP Business Processes Page 19

Complete the assembly

OSP Business Processes Page 20