Account for Issuing and Consuming the Same Item in a Process Manufacturing Work Order
In specific process industries, it's a common practice for manufacturers to recover a product or by-product from the production process and rework it back into the batch for further processing, In certain industries with blending operations where product yield and material consumption are optimized, it is common practice to capture off-spec product or rework material and blend it back into production to meet target product characteristics such as consistency and concentration. Another business process takes the product left over from one batch as a starting point for the next batch, for example, when filling the product into containers. In these dynamic scenarios, the same item can be used as an ingredient and a product of a batch, creating a circular reference between the batch input and batch output.
Cost Accounting can now support such work orders where there are product completions and component issues for the same item using all the supported cost methods.
To explain the cost processing logic for each of the cost methods, let's consider the following example:
Example
| Operation | Item | Resource | Transaction Type | Date | Quantity | Cost Allocation Factor |
|---|---|---|---|---|---|---|
| 10 | Oranges | Input | WIP Material Issue | 01-Jul-25 | 5 Lbs | |
| 10 | Orange Juice | Input | WIP Material Issue | 01-Jul-25 | 1 Lb | |
| 20 | Pulp | Secondary Output | Product Completion | 01-Jul-25 | 5 Lbs | 25% |
| 30 | Orange Juice | Primary Output | Product Completion | 01-Jul-25 | 4 Lbs | 100% |
Standard Cost Method
The WIP Material Issue and Product Completion will be costed with the standard cost that is effective when the transaction is processed. If the input was added as an ad-hoc input, it would be treated as a component substitution variance because the input item isn't in the work definition used for the cost rollup.
Perpetual Average Cost Method
If the item uses perpetual average cost method, the WIP Material Issue will be processed with the current perpetual average whereas the product completion will be costed using the provisional completion option chosen in the cost profile.
Actual Cost Method
For actual costed items, the WIP Material Issue transaction will be costed based on the receipt layer that the issue transaction is depleting from and the product completions will be costed using the provisional completion option chosen in the cost profile. If the adjustment propagation is enabled, then it is possible that there is a cyclic dependency that is introduced where the product completion of the same order is used to deplete the material issue. In such cases, the adjustment propagation would be stopped after 3 loops.
For products costed using actual and perpetual average cost methods, if the Enforce Transaction Order option is enabled in the cost profile to process the transactions strictly in a sequence and if the provisional option is set to Use Accumulated WIP Balances, there's a chance of a deadlock.
In the above example, let's say that there's another issue transaction on 02-Jul-25 for Orange Juice and all of these transactions are interfaced to costing. Because the enforce transaction ordering is enabled, the WIP Issue will get processed only after the product completion is processed. But, the provisional completion logic requires that all the transactions are processed before a cost is calculated and this might lead to a deadlock. To prevent this, the cost of the WIP Issue on 02-Jul-25 is assumed to be the same cost as on 01-Jul-25 (or last actual cost for Actual costed items) for the purposes of the Accumulated WIP balance calculations. This will remove the deadlock conditions and the product completion will get costed. Any difference between the cost assumed and the actual cost used for the WIP Material Issue on 02-Jul-25 will get recorded as part of the cost adjustment when the work order is closed.
Periodic Average Cost Method
If the items are costed using periodic average cost method, then the input item would be costed as a cost derived transaction (uses the periodic average cost of the item) while the product completion would be a cost owned transaction. The cost processor will iteratively calculate the cost of the product by assigning a cost to the WIP material issue and will continue to loop till the cost converges from one iteration to the next.
Process manufacturing customers who have a need to use the same item as input and output would be able to do so in manufacturing execution and the same would be costed appropriately, irrespective of the cost method chosen.
Steps to Enable
You don't need to do anything to enable this feature.
Tips And Considerations
The ability to issue a product in a process manufacturing work order is enabled through an opt-in in the Manufacturing offering. The opt-in choice can't be updated after you add an output item as input and transact the item in material or output transactions.
Key Resources
- Oracle Fusion Cloud SCM: Implementing Manufacturing and Supply Chain Materials Management Guide, available on the Oracle Help Center.
- Oracle Fusion Cloud SCM: Using Cost Management Guide, available on the Oracle Help Center.
Access Requirements
Users who are assigned a configured job role that contains the following privilege can access this feature:
- Allows review of costs and balances by each individual work order. (CST_REVIEW_WORK_ORDER_COSTS_PRIV)