One embodiment is directed generally to a computerized accounting system, and in particular to a cost management system.
A supply chain or logistics network is the system of organizations, people, technology, activities, information, and resources involved in moving a product or service from supplier to customer. Supply chain activities transform natural resources, raw materials and components into a finished product that is delivered to the end customer.
Supply chain management is the process of planning, implementing and controlling the operations of the supply chain as efficiently as possible. Supply chain management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point-of-origin to point-of-consumption. Supply chain management is typically implemented by integrated computer systems that include modules for such functions as general ledger, inventory management, human resources, customer relationship management, etc.
Inventory management for a supply chain is typically concerned with the quantity and location of inventory including raw materials, work-in-process, and finished goods. Cost management provides a way to track costs in production as well as in finished goods, and provides a link to accounting systems so that the financial aspects of goods can be properly calculated.
One embodiment is a cost management system. The system, for an inventory item, defines a set of one or more attributes or “valuation structures”, and at least one value for each of the attributes in the set or “valuation unit”. The system receives a transaction involving the inventory item. The system then determines the cost of the inventory item based on the attribute values for the valuation structure of the item. Therefore, the cost of the inventory item will vary based on the attribute values.
One embodiment is a cost management system that allows the cost of inventory items to be tracked with varying levels of granularity. This allows costs for the items to be more closely tracked to specific attributes.
Computer readable media may be any available media that can be accessed by processor 22 and includes both volatile and nonvolatile media, removable and non-removable media, and communication media. Communication media may include computer readable instructions, data structures, program modules or other data in a modulated data signal such as a carrier wave or other transport mechanism and includes any information delivery media.
Processor 22 is further coupled via bus 12 to a display 24, such as a Liquid Crystal Display (“LCD”), for displaying information to a user. A keyboard 26 and a cursor control device 28, such as a computer mouse, is further coupled to bus 12 to enable a user to interface with system 10.
In one embodiment, memory 14 stores software modules that provide functionality when executed by processor 22. The modules include an operating system 15 that provides operating system functionality for system 10. The modules further include inventory and cost management module 16 that performs cost management as disclosed in more detail below. The modules further include other enterprise resource planning (“ERP”) modules 18 of an ERP system. An ERP system is a computer system that integrates several data sources and processes of an organization into a unified system. A typical ERP system will use multiple components of computer software and hardware to achieve the integration. A unified ERP database 17, coupled to bus 12, is used to store data for the various system modules. In one embodiment, ERP modules 18 are part of the “Oracle E-Business Suite Release 12” ERP system from Oracle Corp. In other embodiments, inventory and cost management 16 may be a stand-alone system and not integrated with an ERP system, or may be part of any other integrated system.
In one embodiment, inventory and cost management module 16 tracks the cost of each item or good in the inventory of an organization. An item or good can be anything that is used in a manufacturing process, such as raw materials and components.
Inventory organizations 54 can be linked to cost organizations 56. A cost organization 56 in one embodiment is a grouping of inventory organizations 54 and can be used to indicate the financial ownership of the items and establish common costing policies and responsibilities. Inventory organizations 54 linked to a cost organizations 56 can be from any business unit 52 as long as they belong to the same legal entity 50 in one embodiment. Cost organizations 56 also allow a user to share the item cost in multiple inventory organizations within a legal entity, regardless of their business units.
Cost organizations 56 are linked to cost books 58. A cost book 58 in one embodiment includes all of the costing and accounting data derived from the supply chain transactions and product management setups under a specified set of parameters and rules including the cost methods to use for an item or item category. A user can establish any number of cost books as necessary to obtain as many alternate representations of costing and accounting data.
In one embodiment, multiple cost books 58 may be assigned to a cost organization 56. However, a single primary cost book 58 should be assigned to a cost organization 56. A cost book assignment is treated as a primary book if the ledger assigned to it is the primary ledger of the legal entity to which the cost organization is linked to. Attributes assigned to a cost book include the cost book name, cost profile, ledger (optional for secondary book), ledger currency and ledger calendar.
The cost profile is used to define the costing and accounting preferences/policies.
In one embodiment, valuation structure 64 is used to specify the granularity at which the cost of the item is maintained by defining a set of attributes for the item. In prior art inventory and cost management systems, each item is associated with only a single cost, even though the actual cost of an item may vary based on many factors. For example, in some industries the cost of an item varies by material grades. As the grade of the item changes, so do the value and the cost of the item. So, for example, in the dairy industry, a cheese may be evaluated as Grade A, Grade B, or Grade C, with the cost differing for each grade. In prior art cost management systems, three different items would need to be defined to account for the varying costs. Further, in some companies the inventory organizations are physically located together and use the same set of items, and the cost of the item may need to be maintained for a group of Inventory organizations. Further, in some industries, every lot of an item may need to be assigned a different cost.
In order to accommodate these needs, for each valuation structure 64 one or more “valuation units” are defined which identify the values of the control attributes for that valuation structure. Some examples of possible control attributes for a valuation unit include: inventory organization; subinventory; stock locator; material grade; lot; and serial no. The valuation units may be automatically or manually generated.
As an example, a valuation structure may be “Grade VU”=Inventory Organization/Material Grade. This valuation structure indicates that the cost of the Items will be maintained by Material Grade within an inventory organization. The following valuation units are examples of three valuation units that can be associated with valuation structure Grade VU:
Based on the three above valuation units, Grade A and Grade B indicates Top Grade and an item will have a single cost for inventory with these 2 grades. An item will have a different cost for Grade C, which indicates medium grade. Similarly, the item will have a different cost for Grade D. Therefore, multiple costs will be assigned to a single item depending on the grade of the item.
Valuation structures are defined at 602 and stored at 603. Valuation units are defined at 604 and stored at 605. “Sets” are stored at 611. A set is a user defined set of cost organizations for which the user would like to define valuation structure. This provides the user with the capability to define a valuation structure for a single, all, or a set of cost organizations depending on business needs.
Cost organizations are defined at 606 and stored at 607. Cost books are stored at 608. Cost organizations 607 and cost books 608 are combined and stored at 612 as cost organization books. Cost profiles 610 are defined/generated for cost organization books 612 and reference valuation structures 603 for cost calculations.
Inventory transactions from 621 are processed at 620. Transaction processing 620 uses the cost profiles 610 and valuation units 605 to determine costs based on item attributes. Incoming transactions' costs are processed at 622 from receiving transactions 627 and account payable invoices 628. Cost component/elements 629 map these transaction costs to the cost elements. The transaction costs are stored at 631.
Cost estimates are defined at 640 and stored at 641. The cost estimates are for the “Standard Cost Methods”. In this type of cost method, the item cost is not computed from the transaction cost, but is pre-defined based upon estimates for the raw materials. Cost rollup 642 computes the costs or products based on raw material costs and Bills of Material 643 (“BOM”) for products. Freeze standards 644 and 645 is a process by which the calculated standard costs are finalized for accounting purposes. Any deviation of actual costs from standard costs are recorded as variances during accounting.
At 630, costs are calculated. As shown, costs are calculated using as input transaction costs 631 and cost profiles 610. Therefore, the valuation units are taken into account when determining the costs of the transactions. The calculated costs are stored at 633 and the costed transactions are stored at 632. Costed transactions 632 and calculated costs 633 are available to the General Ledger module and other modules of the ERP system in one embodiment to be used for further calculations.
At 704, a transaction for the item occurs.
At 706, the valuation unit for the transaction at 704 is stored/recorded or “stamped”.
At 708, the cost of the transaction is determined based on the valuation unit. In one embodiment, each valuation unit will be associated with a different cost. For example, Grade A may cost $100, Grade B may cost $80, etc. Therefore, the cost of the item will vary depending on the corresponding valuation unit.
As disclosed, the cost management system in one embodiment allows multiple attributes to be defined for an inventory item, and different costs to be defined for each attribute. Therefore, costs for an item can be maintained at a desired granularity within the cost management system.
Several embodiments are specifically illustrated and/or described herein. However, it will be appreciated that modifications and variations of the disclosed embodiments are covered by the above teachings and within the purview of the appended claims without departing from the spirit and intended scope of the invention.