Supply Chain Cost Rollup

Supply chain cost rollup supports multi-level item structure where items at different levels might be manufactured in or procured from different organizations.

You can perform supply chain cost rollup for all manufactured products across multiple organizations, whether you use discrete manufacturing, process manufacturing, or mixed mode manufacturing. However, you can't perform the cost rollup for configured products.

This is useful when:

You have a multi-level BOM structure spanning across manufacturing organizations where a subassembly is manufactured one plant and then transferred to another plant to manufacture the finished good and both the plants belong to different business units.
You source the components from multiple sources, say 50% make and 50% buy in an organization. Or you could be doing a 60% buy and 40% transfer from another organization. You can include the blended cost of components for calculating the cost of finished goods.

Supply chain cost rollup considers the sourcing rules to determine whether an item or subassembly is:

procured from the supplier
transferred from an internal organization
manufactured in the current organization

This sourcing rule with rank 1 is used in determining the cost of the item. The sourcing rules can be blended for determining the weighted average cost of an item in the organization, in case there are multiple sourcing rules with a percent allocation.

Note:

Sourcing rules for items with the supply type set to Phantom are ignored.
Sourcing rules for items yielded as by-products from process manufacturing work definitions are ignored. The costs of these items would be rolled up using their process manufacturing work definitions.
For output items that are by-products in the process manufacturing work definitions, costs are calculated assuming 100% make sourcing rule. Any other sourcing rule type is disregarded for these items.

Prerequisites for Supply Chain Cost Rollup

You need to complete the pre-requisites listed here:

Create active sourcing rules for your items based on your sourcing decisions.
Assign the sourcing rules to the assignment set.
Run the Extract Supply Sources process for the assignment set. The sourcing rules in this assignment set can now be used to roll up the costs.

After the sourcing rules are extracted, you can create cost scenarios that are enabled for running supply chain cost rollup. In a supply chain cost rollup enabled scenario, you can select a cost rollup group to specify the organizations in which you want to roll up the costs. You can also select the assignment set that includes your sourcing rules and these rules would be used for calculating the product costs. In addition, if you want to incur transportation charges when your items are transferred across organizations, you can include the transfer charge rule set. Supply chain cost rollup will use the sourcing rule for a combination of item, inventory organization, assignment set, and effective date.

How the Costs are Rolled Up

All products with active work definitions will be rolled up by the supply chain cost rollup process. The standard cost for these products is equal to their rolled-up costs from the work definitions.

The cost rollup process starts by determining if the first level subassembly or components have sourcing rules defined. If not defined, it expects a cost to be set up in the organization associated with the cost scenario. If a sourcing rule is available for the component item, it may be a make item or a buy item in the source organization.

If the component is a buy item in the source organization, the sourcing rules for the item in the source organization is used.
In case of a make item, the cost to use is determined based on whether the rollup option is single-level or full cost rollup.
- For single-level rollup, the latest cost of the item is used. In the case of actual cost, where multiple layers with different costs are available, the average of the layers is used.
- For full cost rollup, the cost of the subassembly is first rolled up.

When multiple sourcing rules (rank = 1) are defined:

Standard cost of product = (User entered buy cost * Buy sourcing rule allocation) + (Rolled-up cost from work definition * Make sourcing rule allocation) + (Transfer cost * Transfer sourcing rule allocation)