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7/16/2014 Oracle Warehouse Management Implementation Guide

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Oracle Warehouse Management Implementation Guide
Release 12.1
Part Number E13434-06
Contents Previous Next
Cost Groups
This chapter covers the following topics:
Cost Groups
Setting Up Cost Groups
Common Problems
Debugging Notes
Frequently Asked Questions
Cost Groups
A Cost Group is the set of accounts that hold on hand inventory. Before the advent of Cost Groups,
subinventories in an Oracle Inventory organization defined both the physical and accounting
attributes of the material. Different subinventories represented functional/processing requirements,
packaging/material handling characteristics or storage/control characteristics. In each warehouse
zone, different accounts were maintained by creating separate subinventories, and preassigning
locators to each subinventory. Thus a single physical area of the warehouse was subdivided to
represent the different accounts which are present in this area.
Cost groups associate account information with its related inventory item. Cost groups provide a way
to track both physical and accounting attributes for a subinventory, and enable you to manage
inventory that is owned by multiple owners within the same subinventory and locator. Thus, with
cost groups, inventory account information no longer needs to be tracked in a separate inventory or
physical location.
Several business needs arose due to the limitations of this architecture, including:
Improve space utilization by eliminating pre-assignment of each subinventory (and all
associated locators) to a unique account
Maintain inventory valuation as a characteristic of inventory, rather than as a characteristic of
the subinventory and locator
Change valuation separately from physical movement
Allow multiple inventory asset accounts within the same subinventory
Cost Groups were introduced in Oracle Warehouse Management to separate tracking of physical and
accounting attributes. The subinventory now represents the physical characteristics of the
warehouse and the Cost Group tracks the accounts of the inventory that is held in the warehouse.
With the introduction of Cost Groups, it is now possible to have a 1:1 mapping of the zones in the
warehouse to the subinventories in the system resulting in more accurate representation of capacity.
Cost Groups are assigned by the rules engine based on the Cost Group rules setup. Cost Groups
provide the following functional enhancements:
Provide a two-dimensional matrix for tracking physical and account characteristics
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Derive Cost Groups dynamically based on a variety of information including supplier, customer,
item, locator, item-status, item-category, and so on.
Allows inventory of the same item with different Cost Groups in the same locator or LPN
Support multiple item costs per organization (in Average, LIFO, or FIFO costed organizations)
With the introduction of cost groups, subinventory transfers do not trigger accounting changes.
They are now purely physical moves. A new transaction called the Cost Group Change can perform
accounting moves.
Process Overview
A Cost Group is assigned whenever inventory is introduced into the warehouse. inventory enters the
warehouse by:
Receiving (from external source), including:
Standard receiving
Direct receiving
Receiving with inspection
Miscellaneous receipt
Intransit receipt
Direct org transfer
WIP transactions (from internal Manufacturing), including:
WIP Assembly completion
WIP Component Return
The Cost Group engine can be driven off of numerous pieces of information of these transactions
Descriptive flexfield information
Item category
Item status
Item disposition (used, new, and refurbished)
Oracle Warehouse Management does not allow Cost Group to be the only distinguishing
characteristic between two quantities of loose inventory within a single locator or LPN. After the Cost
Group is derived by the Cost Group rules engine, the Transaction Manager checks to see if there is
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any conflict between the assigned Cost Group and Cost Groups of existing material in the location. If
there is a commingle error then the Transaction Manager reports an error condition. Once a Cost
Group is assigned to material, it can be changed only by a Cost Group Update transaction.
Business Cases
Receiving from Multiple Suppliers to Same Subinventory
Without Cost Groups, multiple logical subinventories are created to receive material from multiple
suppliers. Multiple logical subinventories are required to separate the accounting information of items
coming from different suppliers. With Cost Groups, it is possible to receive all the inventory to the
same subinventory and have it associated with different Cost Groups. During the receiving
transaction, the Cost Group rules engine allocates a different Cost Group to the item based on the
value of supplier business object.
Once these items have been received into inventory, the onhand would reflect a case like this:
On-Hand Example
Subinventory Locator Item Qty LPN Cost Group
BULK BLK1.1.1 Item1 10 1 CG-Suppl1
BULK BLK1.1.1 Item1 20 2 CG-Suppl2
Receiving Item of Different Grade to Same Zone
In this case, Cost Group Rules engine could be set up to look into some attribute of the item.
Supposing the Cost Group Rules were setup to assign different Cost Groups to a Lot-controlled item
based on the attribute of the Lot.
In this scenario, after the item has been received, the onhand could reflect a case like this:
On-Hand Example 2
Subinventory Locator Item Qty Lot Number Cost Group
BULK BLK1.1.1 Item1 10 GoodLot CG-Good
BULK BLK1.1.1 Item1 20 BadLot CG-Reject
Setting Up Cost Groups
Cost group rules define the conditions under which a specific cost group should be assigned to a
specific set of inventory. After you define cost group rules, you assign strategies that define the
sequence in which a set of rules should be executed to determine the cost group.
For example, you might define a strategy that evaluates several rules to determine whether
inventory is consigned from a specific supplier, and subsequently evaluate other rules to determine
whether the item is of a category that should be associated with a specific account.
When you set up cost groups, you modify or add attributes to existing organizations and
Cost group setup involves the following general steps:
1. Defining an inventory cost group for a particular organization.
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2. Specifying the default cost group in the Organization Parameters window.
3. Setting up , Oracle Warehouse Management User's Guide cost group rules.
Steps 1 and 2 represent the incorporation of cost groups into the standard inventory
organizations and subinventories setup. For instructions on how to set up cost groups, see:
Defining Project Cost Groups, Oracle Cost Management User's Guide.
The Oracle Warehouse Management Rules Engine enables you to set up rules that assign items to
cost groups, based on business criteria, such as the item's material status, or the item's ownership.
First, for all costing methods, accounts are determined by the cost group, not by the subinventory
or the organization parameters. The cost groups allow items in the same subinventory to be held in
different accounts.
For actual costing, such as Average, FIFO, and LIFO, organizations, item costs are held by the cost
groups. When cost groups are assigned by item status, the cost groups hold different item costs for
items of different status. In FIFO and LIFO organizations, the layer cost is maintained with the cost
A new transaction, called Cost Group Update, now enables the costs associated with one item to be
transferred to another, without physically moving the item. In organizations with both Project
Manufacturing and Oracle Warehouse Management enabled, the Project cost group overrides the
Oracle Warehouse Management Cost Group.
Cost Group setup consists of these four setup operations
1. Define organization and specify default Cost Group
2. Define inventory Cost Groups for a particular organization
3. Define subinventories and assign default Cost Groups
4. Define Cost Group Rules
Steps 1 - 3 reflect the incorporation of Cost Group associations into the basic setup of
inventory organizations and subinventories
Step 4 reflects the additional setup required to specify new rules to assign accounts to
inventory with specific characteristics. See:
A Summary of the steps involved in defining Cost Group rules include:
Configure The strategy search order
Define cost group rules
Cost Group rules define the conditions under which a specific Cost Group should be
assigned to a specific set of Inventory.
Configure the strategy search order
Define cost group strategies
Cost Group Assignment Strategies define the sequence in which a set of rules should be
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exercised to determine Cost Group. For example, a specific strategy might evaluate
several rules to determine whether inventory is consigned from a special supplier, and
subsequently evaluate other rules to determine whether the item is of a category that
should be associated with a specific account.
Assign cost group strategies to business objects
Assigning the strategy to a specific business object indicates that the specific strategy
should be invoked when the inventory is created in association with that specific object.
For example, a specific strategy could be assigned to the business object Transaction
Type = Account Alias Receipt,' a second strategy could be assigned to Item =
M9571A,' a third strategy could be assigned to Item Category = ASSEMBLY.FINAL,'
and so on. If an Account Alias Receipt is performed, the first strategy is invoked. If
some other transaction is performed for Item M9571A, the second strategy is invoked.
If a different transaction is performed for a different item of Item Category
ASSEMBLY.FINAL, the third strategy is invoked. If none of these conditions are met,
the default cost group for the subinventory is invoked.
Common Problems
1. Receiving causes a Cost Group commingle error.
A Storable Unit is a quantity of inventory, uniquely identifiable by a combination of Item
Number, Revision, Lot, Serial Number, LPN, and Locator. If any one of these six identifying
characteristics varies between two quantities of inventory, then each quantity represents a
distinct Storable Unit, capable of carrying a distinct Cost Group. If all of the characteristics are
identical, then the two quantities are really a single Storable Unit of the combined quantity,
which must carry a single Cost Group.
Any on-hand inventory that exists for a specific Item carries some Cost Group. For example,
LPN 123 contains 100 Each of Item M9571A in Organization WM1, Subinventory Bulk, and
Locator BLK1.1.1. The Item is not Revision, Lot, or Serial controlled. This Storable Unit carries
Cost Group Alpha. A receipt for Item M9571A is performed against a purchase order. As the
Cost Group rules have been established, this new inventory will be assigned Cost Group Beta.
If the newly received quantity is destined for LPN 123 in Locator BLK1.1.1, this transaction is
attempting to co-mingle inventory of two different Cost Groups into a single Storable Unit. The
Transaction Manager will report a co-mingle error, and the transaction will fail.
For the transaction to succeed, the new inventory must be a distinct Storable Unit. This can
be accomplished by receiving or performing the put away into a different locator or into a
different LPN (this includes the option to store the inventory loose in Locator BLK1.1.1). For
other items that are Revision, Lot, and/or Serial controlled, co-mingling errors may be
prevented by using distinct Revisions, Lots, or Serial Numbers. There is no circumstance under
which a co-mingling error may arise for serial tracked inventory, since every unit of inventory is
its own Storable Unit, uniquely identified by the serial number.
2. Failure to assign a Cost Groups when performing a transaction.
Changing the definition of a rule in one user session could cause a failure in other user sessions
if the rule being changed is used by the other sessions. The Inventory Transaction Manager
would fail in this case with an error message of 'Failed to assign Cost Group to Item'. The
solution to this problem is log out of the affected session and log back in and retry the
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Debugging Notes
The Inventory Transaction Manager log file provides details on the various steps involved in deriving
the Cost Group when processing a transaction. This trace is enabled by the Transaction Manager
trace profiles. Please refer to Oracle Warehouse Management Mobile Inventory Transaction
Technical Manual for details on enabling trace.
List of common error conditions in deriving cost groups
FOB (Free on Board) point is not defined for the organization
The onhand quantity is zero for the selection criteria entered
Error Updating Entity
Frequently Asked Questions
1. What is a Cost Group?
A Cost Group is a set of related financial accounts, representing ownership of inventory. Think
of this as the accounts that used to be on the accounting tab of the subinventory form.
2. Does the Cost Group change when inventory is moved?
Cost Group is not changed by a Subinventory Transfer. Inventory retains the originally
assigned Cost Group throughout any movements within the same organization. When an
InterOrg Transfer is performed, a new Cost Group is assigned based on the Cost Group Rules
for the destination organization.
3. How can I change the Cost Group assigned to inventory?
The Cost Group Update transaction is specifically designed to do this. The physical location of
the inventory is managed by a Subinventory Transfer, and ownership is separately managed
by a Cost Group Update.
4. What is the difference of a Oracle Warehouse Management Cost Group and a Project
Manufacturing Cost Group?
They are the same thing. If the organization is a Project Manufacturing organization, the PJM
cost group will always be assigned to project inventory regardless of the rules you set up. A
user cannot transfer material that belongs to a project out of the project's cost group.
5. What if I want to derive the Cost Group from the subinventory?
The final, underlying default for the Rules Engine is to assign the default Cost Group of the
subinventory to new inventory arriving there. If no other, more specific rules are created, the
Default Cost Group of the subinventory will always be used (similar to functionality before Cost
Groups). However, the Cost Group will not be changed by a subsequent Subinventory
Transfer. That functionality will remain the province of the Cost Group Update.
6. Do multiple Cost Groups enable multiple costs?
In an Average, LIFO or FIFO costed organizations, a distinct cost is maintained for each
Item/Cost Group combination. In a Standard costed organization, a single Standard Cost is
maintained for each item. All inventory of that item, regardless of Cost Group, carries the
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same Standard Cost.
7. What is commingling?
Commingling is an attempt to assign two distinct Cost Groups to a single Storable Unit of
inventory. Oracle Warehouse Management will prevent co-mingling by failing any transaction
that would result in co-mingled inventory. The user can avoid co-mingling errors by ensuring
that at least one of the characteristics Item Number, Revision, Lot, Serial Number, LPN, or
Locator differ between any two quantities of inventory that should belong to different Cost
8. How does Cost Group assignments differ between Oracle Inventory and Oracle Warehouse
Cost Groups in Oracle Warehouse Management are assigned by the Cost Group Rules Engine.
In Oracle Inventory, Cost Groups are derived based on the Primary Cost Method of the
organization and the location where the material is being moved. If the costing method is
Standard-Costing, then the Cost Group associated with subinventory is assigned to the
material. For the other costing methods, the Cost Group associated with the organization is
used. In Oracle Warehouse Management, once a Cost Group is associated with a material, it
does no change when the material is moved within the organization. In Oracle Inventory, the
Cost Group associated with the material changes with the location where it is residing.
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