TO BE DOCUMENT

ORACLE LANDED COST MANAGEMENT

A. F. FERGUSON & CO.

CHARTERED ACCOUNTANTS
A member firm of
 Table of Contents
1 OVERVIEW 3
2 INTEGRATION WITH OTHER MODULES 4
3 MASTER DATA 5
4 PROCESS FLOWS 6
4.1 Overview.................................................................................................................. 6
4.2 LCM Shipment Creation ........................................................................................ 7
4.3 LCM Shipment Receipt .......................................................................................... 9
4.4 LCM Actual Charges Processing ........................................................................ 10
5 COSTING 11
6 ACCOUNTING ENTRIES EXAMPLE 12
6.1 LCM Shipment Receipt ........................................................................................ 12
6.2 Inspection and Delivery ....................................................................................... 12
6.3 Return to Supplier ................................................................................................. 12
6.4 Invoice for Item Cost ............................................................................................ 13
7 REPORTS 14
8 DATA ELEMENTS EXAMPLE 15
 FUNCTIONAL DESIGN DOCUMENT
(LCM)

1 Overview
Oracle Landed Cost Management (LCM) manages the landed cost of an item purchased from
a supplier. Apart from the primary Purchase Order price, these costs generally include the
following costs for imported items:
 Bank Charges
 Insurance Charges
 Freight Charges
 Clearing Agents
 Chargeable duties
 Wharfage & Demurrage
 Terminal Handling Charges
 Other Port Expenses
 Transportation to Factory
 Other Miscellaneous Charges

Oracle Landed Cost Management will be used to estimate the landed costs for the imported item
shipments and then update those costs with the actual landed costs. LCM will enable the users to
input estimated landed costs before the receipt of the item into inventory. Upon receipt, the user
will create and match invoices against those receipts. Within LCM, estimated and actual costs of the
items can be viewed side by side. LCM gives a clear visibility of cost incurred on various factors,
which makes planning for procurement easier.

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 FUNCTIONAL DESIGN DOCUMENT
(LCM)

2 Integration with other Modules

Oracle Landed Cost Management will be integrated with the following other Oracle
Applications during the processing of landed costs for an item;
 Oracle Purchasing
 Oracle Inventory
 Oracle Advanced Pricing
 Oracle Cost Management

Inventory / Cost Purchasing / Landed Cost

Management Advance Pricing Management

Goods Receipt

Purchase
Order
Receiving
Shipment
Transaction &
Update Item Receipts
Cost

Estimated
Charges
Calculated

Landed costs can only be estimated for the items, which will be inventory items received in
the Inventory Organizations set up for LCM.

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 FUNCTIONAL DESIGN DOCUMENT
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3 Master Data
Oracle Landed Cost Management uses cost factors to define charge types. Charge types are
used in Landed Cost Management when defining a new charge line for LCM Enabled item.
Cost factors absorb the cost of other charges incurred during the completion of the
transactions. Following cost factors will be setup:
 Bank Charges
 Insurance Charges
 Freight Charges
 Clearing Agents
 Chargeable duties
 Wharfage & Demurrage
 Terminal Handling Charges
 Other Port Expenses
 Transportation to Factory
 Other Miscellaneous Charges
Cost factors will be configured in such a way that a Fixed Amount will be entered for each
charge type per shipment. The amount of the entered charge will be allocated
proportionately to the shipment lines based on their values, in case the shipment contains
multiple items.

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 FUNCTIONAL DESIGN DOCUMENT
(LCM)

4 Process Flows
4.1 Overview
Legend
:

Process Overview Manual process Control

System process Validation

Document No. 4.1
Decision Link

Manual Document System

Process Owner Import/Finance Department Generated
Document

Process Flow

Start

Purchase Department
Approve Import Purchase
Order
4.1.1

Import Department

LC Opening Process

4.1.2

Import Department
Create shipment with
estimated charges
4.1.3

IR Officer
Receipt in the relevant
LCM enables Org
4.1.4

Finance Department
Enter standard Invoice
for item cost and actual
charges
4.1.5

Generate Report for

comparison of Actual
and Estimated Charges

End

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 FUNCTIONAL DESIGN DOCUMENT
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4.2 LCM Shipment Creation

Legend
:

Process LCM Shipment Creation Manual process Control

System process Validation

Document No. 4.2
Decision Link

Manual Document System

Process Owner User Dept. Import Dept. Generated
Document

Process Flow Process Narrative

4.2.1 Relevant department will raise the

requisition for buffer stock items as well as
Start
demand based items.

Relevant Department
Generate Purchase 4.2.2 Purchase department will auto create RFQ
Requisition
Item Master
from the purchase requisition and send to
4.2.1
supplier for acquisition of Performa invoice.
Purchase Dept.

RFQ
Auto create RFQ from PR 4.2.3 Supplier will send the Performa invoice
4.2.2 upon the request of import department.

Purchase Dept.
4.2.4 Once the quotations are available, user
will enter the quotations.
Performa Invoice

4.2.3 4.2.5 User will auto create Purchase order from

approved requisition and send it for approval to
Purchase Dept. the relevant approving authorities.
Enter Quotations

4.2.4

Import Dept.
Auto create PO from
requisition and send for
approval
4.2.5

Continued

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 FUNCTIONAL DESIGN DOCUMENT
(LCM)

Legend
:

Process LCM Shipment Creation Manual process Control

System process Validation

Document No. 4.2
Decision Link

Manual Document System

Process Owner User Dept. Import Dept. Generated
Document

Process Flow Process Narrative

Continued 4.2.6 Buyer will finalize shipment schedule with the

supplier. This will be a manual process.

Import Dept.
Shipment schedule
finalization with supplier
4.2.7 On the receipt of shipment schedule
4.2.6
authorized user in Import department will access
the shipment workbench to create a shipment in the
Oracle Landed Cost Management. User will provide
Import Dept. vendor name and vendor site at shipment header.
Create Shipment Headers
Upon completing the information on the shipment
header, an automatic sequential number will be
4.2.7 assigned to the shipment. Single shipment as well
as multiple shipments can be processed against
Import Dept.
single PO line.

Create Shipment Lines

4.2.8 At shipment Lines user will mention the
4.2.8 quantity released by Supplier. This may be equal or
less to Purchase Order Quantity. After entering the
shipment lines, user will enter the ‘estimated
End
shipment charges’. These charges will be entered
per shipment line and will be entered in terms of
amount and not in terms of percentage. Actual
Costs will be entered on invoice which will be
matched against the estimates entered at shipment
and variance will be calculated automatically.

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 FUNCTIONAL DESIGN DOCUMENT
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4.3 LCM Shipment Receipt

Legend
:

Process LCM Shipment Creation Manual process Control

System process Validation

Document No. 4.3
Decision Link

Manual Document System

Process Owner Store department Generated
Document

Process Flow Process Narrative

4.3.1 When the shipment is received at factory site,

Start
Receipt will be entered in the system with the
shipment line quantity by the Store Department
Store Dept.
user. Receipt process is detailed in Inventory To be.
Refer Inv
Shipment Receipt at
Factory.
To be 4.3.2 Goods will be inspected by the relevant user
4.3.1 department upon arrival of goods.

Store Dept.
4.3.3 Goods that are damaged/ sub-standard will
be returned to supplier. For this purpose ‘Return to
Inspection of goods
supplier’ will be processed in the system by the user
4.3.2 department. The original shipment will automatically
be reduced by the quantity of goods returned to
supplier. Those goods will be valued at their cost
i.e. the item cost of the shipment will be reduced
Store Dept.
proportionately with the amount of goods returned
Item
Rejection
Yes Return to Supplier. whereas other shipments charges will be absorbed
4.3.3 only by the goods that passed through inspection
and delivered to inventory.
No

Refer Inv
Store Dept.
To be
Deliver to inventory

4.3.3

End

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 FUNCTIONAL DESIGN DOCUMENT
(LCM)

4.4 LCM Actual Charges Processing

Legend:
Process LCM Actual Charges Processing Manual process Control

System process Validation

Document No. 4.4
Decision Link

Manual Document System

Process Owner Finance department Generated
Document

Process Flow Process Narrative

4.4.1 Invoice will be entered in the system against

Start
the items’ cost. The invoice will be entered in
foreign currency using the ‘User Exchange Rate’ as
Finance Dept. exchange rate type.
Process Invoice for item
Cost in Foreign Currency 4.4.2 An invoice will be entered for each shipment
4.4.1 charge with the relevant supplier (payee) and
matched with the PO receipt. For the purpose of
matching, matching type ‘Freight’ or ’Miscellaneous’
Finance Dept. will be used. The supplier at the matching window
Process Actual Shipment will be changed to PO supplier for the purpose of
Charges
finding the PO/ receipt with which the invoice of the
4.4.2
charges is required to be matched. Cost factor type
will be entered with the amount of actual charges.
This is basically the stage where actual shipment
Finance Dept. charges will be entered.
Final Close Shipment Line
4.4.3 Once all the shipment charges have been
4.4.3
entered, the shipment will be locked for restricting
application of further charges. For this purpose
while matching last shipment charge, it will be
Finance Dept. marked as “final match”, so that no further charges
Run Requests
could be built against that shipment.

4.4.4
4.4.4 After processing the above-mentioned
invoices, following requests will be run from LCM:

Finance Dept. Matches Interface Import

Payment
Submit Pending Shipments

4.4.5 These will update shipment in LCM with actual

charges. Actual and estimated charges against that
shipment will then be shown in LCM module side by
End side. Pie chart and line graph can be generated to
analyze these charges.

4.4.5 Once all the process is done, user will

process the payment.

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 FUNCTIONAL DESIGN DOCUMENT
(LCM)

5 Costing
 Receipt
At the time of receipt shipments charges will be absorbed by the goods along
with the item cost.
 Invoice matching
At the time of matching charges invoice with shipments, system will automatically
update the item costs for the quantities available, with the difference in estimated
and actual charge cost.

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 FUNCTIONAL DESIGN DOCUMENT
(LCM)

6 Accounting Entries Example

6.1 LCM Shipment Receipt

Process Flow Reference 4.3

Document Type Receipts

Description Dr. Cr.

Receiving Inspection Account
***
AP Accrual Account
***
Landed Cost Absorption Account
***

6.2 Inspection and Delivery

Process Flow Reference 4.3

Inspection and Delivery
Document Type

Description Dr. Cr.

Material Valuation Account
***
Receiving Inspection Account
***

6.3 Return to Supplier

Process Flow Reference 4.3

Returns
Document Type

Description Dr. Cr.

Ap Accrual
***
Landed Cost Absorption Account
***
Receiving Inspection A/C
***

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 FUNCTIONAL DESIGN DOCUMENT
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6.4 Invoice for Item Cost

Process Flow Reference 4.4

Invoice
Document Type

Description Dr. Cr.

Ap Accrual
***
Tax A/C
***
Invoice Price Variance A/C
***
Exchange Rate Variance Account
***
Liability A/C
***

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 FUNCTIONAL DESIGN DOCUMENT
(LCM)

7 Reports
 Estimated Cost Sheet
 Actual Vs Estimated
 LCM Account reconciliation report

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 FUNCTIONAL DESIGN DOCUMENT
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8 Data Elements Example

Document Level DE 1

Document Type Shipment Workbench

HEADER LEVEL- Standard Fields

Sr. No. Data Field

1 Operating Unit

2 Receiving Location

3 Shipment Date

4 Shipment Type

5 Source Type

6 Third Party

7 Third Party Site

LINE LEVEL – Standard Fields

Sr. No. Data Field

1 Purchase Order

2 Purchase Order Line

3 Item

Manage Charges – Standard Fields

Sr. No. Data Field

1 Type

2 Third Party

3 Third Party Site

4 Amount

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