Catch Weights in Oracle E-Business Suite Applications

An Oracle White Paper October 2007

Catch Weights in Oracle E-Business Suite Applications

EXECUTIVE OVERVIEW

Item Standard: 1 Wheel = 10 LB

Catch Weight management applies primarily to the meat and dairy industries where weights can vary from piece to piece, either due to biological variations, or because of weight losses that occur during storages. This variability affects procurement pricing and invoicing sales processes. A distinction must be made between the logistic unit of measure and a valuation unit of measure. While the logistic unit is the leading unit for all processes in operative logistics, the valuation and payment flows take place on the basis of the valuation unit. As a logistic unit, pieces, cases or each are often used. However for the valuation unit weight units like kilogram or pound are used. Within the consumer sector, "catch weight product" refers to a class of food product that because of its nature cannot normally be portioned to a predetermined quantity and is, as a result, usually sold in packages of varying quantity. Catch weight functionality allows two units of measure for an item to have a default relationship to each other that can be overridden when entering transaction quantities. An example is a wheel of cheese. The wheel has a standard default weight of ten pounds. However, each individual wheel has its own unique weight, for example 10.61 pounds. The user must be able to override the default relationship to indicate that for a specific lot the weight is actually 10.61 pounds, which represents 1 wheel of cheese. Although the term catch weight is most readily identified with the food industry, it is not limited to food producers.

Default value

Actual value

Lot #123 1 Wheel = 10.61 LB

INTRODUCTION

Many process manufacturers, in the food, dairy, meat/and fish, chemical, pharmaceutical, metal and paper industries, are heavy users of catch weights. They have the basic requirement to track inventory simultaneously in two units of measure (dual UOM), where there is not a fixed relationship between the two units of measure (catch weights). Oracle E-Business Suite application manages material variability by supporting various industry applications of dual UOM.

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In the food industry, typically one unit of measure is the physical measure (e.g., weight or volume) and the other unit of measure is the count (e.g., each or case). For the dairy producers, one unit of measure is the physical measure (e.g., volume) and the second is content (e.g., percent solids). In chemical and pharmaceutical industries one unit of measure is the physical measure (e.g., weight or volume) while the second is the strength value (e.g., potency or ppm) for that physical measure. For metal and fiber manufacturers, one unit of measure is length (e.g., feet or inches) while oftentimes the second is thickness (e.g., inches or gauge).

DEFINING CATCH WEIGHT ITEMS

With Oracle E-Business Suite Release 12, process inventory features and functionality are part of Oracle Inventory. With the converged inventory model, the Dual UOM functionality required to support catch weights is now available for both Discrete and Process Inventory organizations. Dual UOM control is available for both lot controlled and non-lot controlled items. Any item within Oracle Inventory can support catch weights if the item is set to track quantities in both primary & secondary unit of measures. Users are allowed to configure options to default or enter the secondary UOM quantities and define deviation factors to speed up data entry and minimize errors. Data entry may be driven either by entering primary or secondary quantity, and allow the other quantity to be calculated. Users are not restricted to data entry in the primary UOM quantity only. System also allows defining pricing unit of measure for pricing catch weight items.

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The system supports lot-specific conversions between differing units of measure. These lot-specific conversion factors are the core of catch weight functionality. Lot-specific conversions allow updating the lot onhand balances, recalculate onhand primary and secondary quantity and recalculate batch primary and secondary quantity. At the item level, a default relationship is defined between the two units of measure. This relationship is used for planning, production batches and customer shipments. Execution is always done at the specific lot level, where the actual relationship between the two units of measure is determined. Once an item is defined as using catch weight, all transactions for that item require that both units of measure be specified for the transaction. In the previous example, the item conversion factor is set at 10 pounds to 1 cheese wheel. This becomes the default conversion rate (10-to- 1). However, each cheese wheel has its own lot number and individual weight. For example, cheese wheel lot #123 has a weight of 10.61 pounds. The application stores this specific conversion factor for lot #123 as 10.61 to 1, and validates that all transactions for this lot fall within the tolerance range specified for the item.

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INVENTORY

Items, which are tracked for Primary & Secondary unit of measure, have visibility to both the primary and secondary units of measure throughout all the standard inventory inquiries for Oracle Inventory organizations. Both units of measure are maintained simultaneously for these items and can be viewed side by side on inventory inquiries and reports. Catch weight items require that both units of measure quantities be defined for any inventory transaction. This includes all inventory adjustments, physical inventory counts and cycle counts. If we take the cheese wheel example, in cycle counting it is easier to verify the count on the number of cheese wheels rather than the weight of the wheels. However, the cost of the cheese wheel and its selling price are determined by its weight in pounds. Both units of measure are important for these items. Consumption of these items in Process Manufacturing and Order Management require the user to specify the quantities for both units of measure. Replenishment transactions through purchase receipts expect quantities to be defined for both units of measure for inbound transactions affecting catch weight items. Tolerance checking is performed on all the transactions to ensure that the conversion between the two units of measure is appropriate.

This means that the cheese manufacturer can see all the lot numbers of cheese wheels with their counts and specific weights side by side. An example of one inquiry is shown here.

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MANUFACTURING

Just as all transactions in inventory require that both quantities be specified, the same thing happens in Process Manufacturing. Allocation routines attempt to find the best lots for ingredient consumption, and both the primary and secondary quantities are specified. Similarly, when a catch weight item is produced, quantities for both units of measure can be captured.

LOGISTICS Purchasing

Oracle Purchasing allows the buyer to create on-line requisitions and purchase orders with two units of measure for an item. This is set up as a catch weight item (item tracking set to Primary & Secondary). The Auto Create feature also supports two units of measure while creating standard purchase orders, planned purchase orders and blanket releases. Purchase receiving functionality allows simultaneous capture of both units of measure at receipt. So, if a raw material or purchased item is flagged as a catch weight item, then the user is required to enter quantities for both units of measure. The application verifies that the conversion factor between the units of measure falls within the tolerances defined for the item.
Order Management

When a customer orders catch weight items, the order pad requires the input of quantities in both units of measure. The same tolerance checking is used to verify that the conversion factor is within an acceptable range. The default conversion factor for the item can be used at this stage because it not known which lot of material will be shipped to the customer.

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Shipping Execution

Once the order line is booked and sent to Shipping, allocation routines select the most appropriate lot number to fulfill the request. When the lot number is selected the quantities in both units of measure are brought into Shipping.
Pricing
Pricing Setup

Oracle Pricing supports catch weight items. When catch weight items are created, a pricing unit of measure needs to be defined. The pricing unit of measure can be defined as either the primary or the secondary unit of measure for the item. Price lists are then created for that item in its pricing unit of measure. All pricing calculations for catch weight items are done with respect to the pricing unit of measure defined for that item.
Pricing for Catch Weights

If the cheese wheel in our previous example has a pricing unit of measure in pounds, then at the time an order is taken the order line shows the default conversion value (for example, 10 pounds) as the pricing quantity because we do not yet know which lot will be shipped to fulfill the order line. A price based on that 10 pounds is calculated. Once lot #123 is allocated to the order line, the application determines that the actual weight of the material is 10.61 pounds. Therefore, the extended price for the cheese wheel is changed to reflect the actual weight of the material. Re-pricing of the order line at shipment is critical for catch weight items.

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COSTING

The primary unit of measure defined in the item master is assumed to be the costing unit of measure for that item. This assumption is true throughout Oracle E-Business Suite Applications. Therefore inventory valuation is based on the primary unit of measure for each item. Quite often this same unit of measure is used for pricing (cost plus pricing). For catch weight items, the primary unit of measure and costing unit of measure is not usually the count, but rather the actual weight/volume or logical unit of measure.

In the food industry, the primary unit of measure is usually the physical measure (i.e., weight or volume). For the dairy producer, the primary unit of measure may be the content unit of measure (i.e., percent solids). In chemical and pharmaceutical industries, the primary unit of measure may be the strength value (i.e., potency or ppm). For metal and fiber manufacturers, the primary unit of measure oftentimes is thickness (i.e., inches or gauge).

CONCLUSION

The requirement to track inventory in two units of measure, where there is no fixed relationship between the two units of measure, is fully supported by Process Manufacturing in Oracle E-Business Suite Applications. The catch weight process starts with the items definition in Oracle Inventory and extends across the Suite. The management of inventory simultaneously in two units of measure can be seen everywhere from purchasing of materials, to internal inventory management, to use in production and on to the finished product and the sales operation.

FURTHER READING

Detailed discussions of each of the features discussed above can be found in the Oracle Applications Users Guides. For further information please refer to the Oracle Inventory Users Guide, Oracle Process Manufacturing Users Guides, Oracle Purchasing Users Guide and Oracle Order Management Users Guide. These guides outline the fields, functions and transactions required to execute the business processes outlined above.

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Catch Weights in Oracle Applications October 2007 Author: Venkata Ramana Malluri Oracle Corporation World Headquarters 500 Oracle Parkway Redwood Shores, CA 94065 U.S.A. Worldwide Inquiries: Phone: +1.650.506.7000 Fax: +1.650.506.7200 Web: www.oracle.com This document is provided for informational purposes only and the information herein is subject to change without notice. Please report any errors herein to Oracle Corporation. Oracle Corporation does not provide any warranties covering and specifically disclaims any liability in connection with this document. Oracle is a registered trademark, and Oracle Order Management is (are) a trademark(s) or registered trademark(s) of Oracle corporation. All other names may be trademarks of their respective owners. Copyright Oracle Corporation 2007 All Rights Reserved