2. Landed Cost Management Update
Erin Johansson, Global Trade Management Strategy

3. Safe Harbor Statement
The following is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for Oracle’s products remains at the sole discretion of Oracle.

4. Agenda Landed Cost Management Overview 12.1.1 Solution Demo (Discrete)
Highlights (OPM)
Roadmap

5. Oracle’s Landed Cost Management Solution
Planning and Tracking Transportation Spend Related Components of Landed Costs
Coming Soon – Duties and Tax estimation and calculation as well as preferential trade schema analysis
Transportation Management
Global Trade Management
Oracle
Landed Cost Management
Total Landed Cost tracking and accounting application

6. Landed Cost Calculations Inbound Shipment Transaction
Issue Purchase Order
Vessel Carrier
Kansas City
Shipment to HK
HK Port
US Port
Customer
China Manufacturing
Buyer
Duties
Broker Fees $5 $5
So what are we talking about when we talk about “landed costs”. Let’s use a quick example to baseline our
discussion of the topic.
For many companies the first challenge is gaining internal information visibility. Companies with a high number
of purchases and sales involving great distances and cross-border transactions involving many hand-offs,
Experience challenges trying to obtain accurate, timely and complete information. The total landed cost of
merchandise is more than what is typically displayed on a trade document, like an invoice, and it can surprise a
company to realize what exactly constitutes a "total landed cost." The major cost elements include items such as:
the price of merchandise, shipping and handling fees, duties, taxes and other government charges.
In this example, the PO Item cost was $100. The real cost of the item was $140. An additional 40% is added to
the cost of the item due to extended supply chain costs. In many cases, organizations report and make decisions
on the base item cost without visibility to the real costs of product acquisition.
Organizations make decisions from
Inventory valuations
Profitability reports
Are now making them based on total landed cost rather than PO item cost
$100 $2 $3
$20 $3 $2
$140
Total Landed Cost
An additional 40% is added on to the purchase price 6

7. Oracle Landed Cost Management
Oracle’s Landed Cost Management application is a new product released on E-Business Suite r.12.1.
Oracle Landed Cost Management captures extended supply chain costs (freight, insurance, duties, taxes, etc.) and attributes them back to the products which incurred them
Costs can be estimated during receiving
Actual costs calculated when invoices arrive to identify variances
Receiving estimates and any variances automatically update inventory valuation and accounting

8. <Product Name> <TOI Functional> - 8
Value Proposition Pain Points  Features  Benefits
Pain Points
LCM Provides
Benefits
Financial visibility into supply chain costs
Captures all acquisition costs
Maximize Profits
More accurate product profitability reporting
Known costs reduces exposure
Strict Regulatory Requirements / Accounting Accuracy
Updates financial systems with costs as soon as they are incurred for the most accurate picture of outstanding liabilities
Ensure Compliance
Understand taxes & recovery
Confidence in financial reports and cost declarations
Global Sourcing
Calculates extended cost for use in sourcing and procurement decisions
Increase Competitiveness
More accurate total cost comparisons
Better contract negotiations
Oracle’s Landed Cost Management helps organizations:
Maximize Profits. By illuminating “real” product costs, organizations have the opportunity to identify areas for potential cost reduction. It also helps managers more accurately monitor product performance against profitability targets and ensure estimated costs are in line with actual costs by providing visibility into SC costs.
Ensure Compliance. Companies can feel more confident in their financial reports and their cost declarations. This includes accurately calculated taxes and consideration of those taxes whose recovery should be excluded from total cost calculations. Additionally, organizations will adhere to country specific requirements for product specific profitability documentation and income tax calculations
Increase Competitiveness. When all of the charges, fees, duties and taxes are known, companies can more strategically source products and components from lower cost foreign locations. This also allows them to better justify contracts with vendors or potential customers. Ultimately, they can price goods with the full understanding of the charges associated with bringing an item to market. 8
<Product Name> <TOI Functional> - 8

9. <Insert Picture Here>
Solution Demo (12.1.1) 9

10. Oracle Landed Cost Management Product Map & Information Flow
Charge Mgt.
LC Calculator
Product Cost Dashboard
Payables
Purchasing
PO Information
Invoices
Advanced Pricing
Charges,
Freight,
Insurance
Actual Variances
Estimated
Landed
Cost
Oracle Landed Cost Management is integrated with several modules in Oracle E-Business Suite.
Oracle Landed Cost Management consists of
Charge Management, where users can defines the charges and proration methods
Landed Cost Calculator, which performs estimated and actual cost calculations
Cost Repository, which consists of estimated and actual cost information corresponding to each receipt in Oracle Receiving. Users can use this information to analyze trends happening to the various cost buckets.
Purchase Order, tax and charge information flows from Purchasing, EB Tax and Advanced Pricing respectively. This information is used by Oracle Landed Cost Management to calculate the estimated landed cost.
Invoice information flows from Accounts Payable to Oracle Landed Cost Management for actual cost calculations.
Estimated and actual cost information flows from Oracle Landed Cost Management to receiving and costing for costing and accrual accounting.
Receipts
Receiving
Costing
Estimated
Landed Cost 10

11. Landed Cost Management Version 12.1 Flow
Actual Landed Cost
Estimated Landed Cost
Receive Goods & Calculate Estimated Landed Cost
Create Inventory Valuation & Accruals
Receive Invoices (Trade Documents)
Update Inventory Valuation & Accounting
Calculate Actual Landed Cost
Create PO
Landed costs can be initially estimated, either manually or through Oracle Advanced Pricing
Costs are updated when actual invoices are received
Support for costing at the time of goods receipt as well as within a “pre-receiving” process
From a flow standpoint, there are two components to the Oracle LCM flow. First, costs are initially estimated at the time of goods receipt or, potentially, PO creation. Then, once invoices are received for the products and services, actual landed cost is calculated.
The left portion of the slide illustrates the Estimation flow where a PO is created, goods are received and charges are either estimated using Oracle Advanced Pricing (for automated rules-based charge creation) or manually entered. After calculating the landed cost , the landed cost information is passed back to receiving and receiving carries out the accrual accounting and updates the inventory valuation to be based on the landed cost.
The second portion of the slide depicts the Actual Landed Cost flow:.
The suppliers sends in their various invoices. This includes invoices for the goods as well as separate charge invoices for things such as freight of insurance. These invoices get matched to landed cost receipts and are interfaced to Oracle Landed Cost Management for actual cost calculation.
Oracle Landed Cost Management calculates the actual landed cost and updates the item cost to Oracle Costing. Oracle Landed Cost Management’s calculator replaces the estimated item price with the item invoice price. It then prorates charge invoice amounts to the item and calculates the actual landed cost. The new Landed Cost Adjustment Manager picks up these records and then corrects Oracle Receiving’s accounts with any variances. This updates the costs based on the on-hand inventory. Actual cost updates can be carried out in near real time by configuring a set of concurrent managers.
PLEASE NOTE: There are two flows supported by LCM a “Receipts or LCM as a Service” flow and a “Pre-receiving” flow. These flows are described at a high level in the next two slides.

12. Receipts - Estimated Landed Cost Advanced Shipping Notice or Receipt
Create PO
Purchasing
Receive
Goods
Receiving
LCM
Calculate Estimated LC
Calculate Actual LC
Update Item Cost
Process Cost Adjustments
Costing
In this “LCM as a Service” (Blackbox) flow, goods are received in the Oracle Receiving application, which calls out and interfaces with the LCM application in the background to pass receipt information for Landed Cost calculations.
Process Description
PO Created in Oracle Purchasing
Goods Received in Oracle Inventory/Receiving
Receiving interfaces with the LCM application
Advanced Pricing can be used for charge creation
Landed costs estimated then updated when actuals are captured in AP
Inventory valuation and accounting updated
Receive/Enter Invoices
Update Accounting
Payables

13. Demonstration What You Are About to See
Review Charge Setup
Create PO for Two Toys
Receive Items
Review Estimated Landed Cost
Enter Item and Charge Invoices
Review Actual Landed Cost 13

14. Automated Charge Setup
Freight: 10% of shipment line
Insurance: $200 for entire shipment 14

15. Review Purchase Order
2 PO Schedules 15

16. Enter Receipt 16

17. Enter Receipt 17

18. Landed Cost Management
Enter the receipt number and search 18

19. Review Estimated Landed Cost
Line Item
Unit Landed Cost
Cost Components
Here we see the LCM Estimated Landed Cost screen. In this case this information is provided once a user has queried on a receipt transaction to view the associated items. Please note the following key areas:
The LC components of Goods, Freight, and Insurance
The line items of DT1 and DT2
The Estimated Landed Cost column, which shows a breakdown of estimated charges
The two extended cost components (I.e., non product-related charges) of Freight and Insurance based on different charge rules. Freight is based on 10% of the product value and Insurance is a flat charge of $200 allocated across the shipment based on quantity
Finally, please note the unit LC for item DT1 of 12.00
A user may select the Unit Landed Cost hyperlink to drill down to additional details and views
Insurance: Flat fee - $200 prorated by quantity
Freight: 10% of value of the item

20. Review Estimated Landed Cost
Here is a screenshot of that breakdown clearly showing the different proportional components of the landed cost for the DT1. Alternatively, the same information could be viewed as a bar chart as well. 20

21. Enter and Match Product Invoice
Original PO Price:
$1,000
$1,500 21

22. Enter and Match Freight Invoice
Original Amount:
$250 ($100 + $150) 22

23. Enter and Match Insurance Invoice
Original Amount:
$200 per shipment 23

24. Review Actual Landed Cost
The impacts to actual LC from, Products, Freight and Insurance Invoices
Now, let’s fast forward to a point where we have received actual invoices for products and services in AP and they have been passed to Oracle LCM. You will now see a new “Actuals” column that lists the costs based on actual invoices. The unit landed cost is now updated.

25. Financial Updates Expense charges or track as liability
LCM program sends variances to Oracle Cost Management to update Inventory Valuation and General Ledger
Variances applied to portion of receipt quantity still on hand
Remainder updates Landed Cost Variance account 25

26. Summary and Highlights
Single Integrated LCM Solution - Logistics, Financials, Procurement
Automatic Update of Variances - Actual vs. Estimates
Flexible Charge Allocation
Shipment line, group of lines, or an entire shipment
Prorated based on weight, volume, quantity, or value
Advanced Pricing – rules engine for applying charges
Charge Estimates and Variances Update:
Inventory Valuation
General Ledger
Existing financial reports/statements
Consideration of VAT recovery
Multiple currencies and multiple units of measure
Expense charges or accrue as liability

27. Alternative Estimation Flow Pre-receiving Estimated Shipment Entry
Create PO
Purchasing
Calculate Estimated LC
LCM
Calculate Actual LC
Receive Goods
Receiving
Update Item Cost
Process Cost Adjustments
Costing
In this Pre-receiving flow, a purchase order is created and sent to a vendor similar to the Oracle Landed Cost Management as a service flow. However goods are received into the Oracle Landed Cost Management application screens themselves. These screens default all the charges for a specific Landed Cost Management shipment. A user can optionally edit charges, prorate charges to items in the shipment, calculate estimated landed costs, and interface this information into Inventory Receiving as a Oracle Landed Cost Management shipment. Now goods are received in the Inventory Receiving module with reference to the Oracle Landed Cost Management shipment. The estimated landed cost is used for accounting accruals and inventory cost valuation just as it was in the previous receiving flow.
The major advantage of this flow is the ability to override any predefined charges .
If the Invoices are available at the time of receipt (as is common in geographies such as Brazil), the pre-receiving flow allows you take the actual amounts at the time of receiving for your inventory valuation cost calculation to help to take the advantage of this information for all subsequent manufacturing or sales transactions .
Users can also add, modify, or delete charges which one discovers to be incorrect at the time of receiving. For example you need to air freight the goods from a vendor facility to your factory to take care of emergency production requirement. Normally, these goods would have been shipped by ground freight. In this situation you can edit the freight charges from road to air to reflect the most accurate cost picture.
Process Description
PO Created in Oracle Purchasing
Receipts entered in LCM for LC estimation or actual costing if known (Advanced Pricing can be used for charge creation or users can manually enter)
Landed costs estimated then updated when actuals are captured in AP
Goods are received in the Inventory Receiving module, referencing the LCM shipment
Inventory valuation and accounting updated
Receive/Enter Invoices
Update Accounting
Payables

28. <Insert Picture Here>
Highlights 28

29. Landed Cost Management 12.1.2
Integrate to OPM Costing
UI Enhancements
Visibility into Matched Invoice Amounts
Landed Cost Calculation History
Landed Cost Visualization by Purchasing

30. Visibility into Matched Invoice Amounts
Included new column Matched Amount to display the total invoiced amount
Included new Actual History button

31. Visibility into Matched Invoice Amounts
Displays the detailed Invoicing history

32. Landed Cost Calculation History

33. Landed Cost Calculation History

34. View Acquisition Costs from Purchasing
Acquisition Cost view pages shows also data from LCM information

35. <Insert Picture Here>
Roadmap 35

36. Comprehensive Solution
Oracle LCM Roadmap
v.2
v.3
Future
Functionality/ Features
Ensure Early Adopter Success
Support for OPM
LC Analysis Enhancements
EBS PO Estimation
Cookbook or Integration with OTM
Commodity & Quality Based Pricing
Tolerance & Validation
GTM Import Process
GTM Duties Calculator
Localization Support
Outbound LC Calculation
Comprehensive Solution
Theme
Componentization
GTM Import
Industries – Broad; Particularly Process
Industries – Broad; Particularly Retail and Distribution
OTM/EBS Customers
Target

37. Additional Resources Oracle.com Metalink Solution Factory
Datasheet
Metalink
Landed Cost Management Process Guide
Customer Webinar
conference key = advisor
Solution Factory