Oracle Purchasing: Oracle Landed Cost Management is fully integrated with the Oracle Purchasing Suite.

When a purchase order is raised for an inventory organization, which has landed cost available on it as a pre-receiving application, the approved purchase order can be called and updated in LCM. In LCM, extra charges such as freight, miscellaneous charges, port charges, and duties are added, which eventually update the cost of the goods that are to be received in the inventory. Oracle Payables: Oracle LCM is fully integrated with the Oracle Payables Suite. When the actual invoices against the purchase order arrive and enter in to Oracle Payables, the actual cost is transferred to Oracle LCM to see the difference that is raised between the actual and estimated cost of the items. Oracle Advanced Pricing: Oracle LCM is fully integrated with Oracle Advanced Pricing. When Advanced Pricing is enabled, the cost and freight duties are automatically picked from Advanced Pricing, and all shipments are updated directly.

Oracle Apps Tutorial: Overview of Landed Cost Management Module

Landed Cost Management (LCM) is a new module to Oracle EBS R12. The LCM module helps companies record more accurate costs when purchasing inventory items. It accomplishes this by allowing you to add shipping, taxes, duties, insurance, and handling costs to an inventory item. This functionality is especially helpful in our global economy where your items can be sourced from multiple countries and the transportation and handling costs can account for more than 40% of the items total cost. Challenge Before LCM Before LCM, you could use material overheads to account for transportation and handling cost. But the material overhead rates could only be based on the quantity received or on the value of the item. The other limitation is material overhead rates cannot be vendor or shipment specific. The material overhead rate (for each inventory organization) is the same regardless of the source. Also there is no linkage between the material overhead applied to the item and the actual cost booked in Accounts Payable is in the General Ledger. This makes it difficult to verify that the transportation cost associated with a specific shipment is correct. How does LCM overcome material overhead challenges LCM gives you more control over how you can estimate and accrue transportation and handling cost for a specific shipment. LCM uses the information from a purchase order along with formulas in Advance Pricing to calculate shipping, taxes, duties, insurance, and handling costs. These costs can apply to a specific item on the shipment (like duties) or can apply to the entire shipment (like freight) and then allocated to the item. You can use an items weight and volume

in your calculations. If you have ever shipped something, you know that the shipping company mainly cares about weight and volume. Something small and heavy will have the same shipping costs as something big and light. You can also calculate and allocate cost to a group of items on a purchase order. After you have estimated the transportation and handling cost for a purchase order, these costs will be accrued when the purchase order is received. To verify if your estimates are correct, you can match the invoices (in the Payables module) for shipping company to estimates. This will give the detail you need to verify your estimates are correct. If your actual transportation cost is different than your estimates, Oracle allows you to update the inventory value with the differences. How LCM Works LCM can be setup to run in two modes: Pre-Receiving and Service. If you use LCM in the Pre-Receiving mode, you estimate the total cost of purchasing the item before the receipt and then perform the receipt in the LCM shipment workbench. If you are using LCM in the Service mode, the system will automatically calculate the estimated cost of purchasing the item (based on formulas you setup). The receipt in the Service mode is performed in the standard Inventory receipt window. In a nutshell, the Pre-Receiving mode gives you more control over the estimated cost by shipment and the Service is more automated. Also new in R12.1.3, is the ability to simulate the cost of purchasing an item. This feature allows you to play with different purchasing scenarios and see the total cost of each scenario. LCM Process Flow for Pre-Receiving mode 1. 2. 3. 4. 5. 6. 7. 8. Purchase order is created Transportation and handling cost are estimated Transportation and handling cost are reviewed and adjusted Goods are received in the LCM shipment workbench Transportation and handling cost are accrued Transportation invoices are matched to estimates Variances are imported into Cost Management to update inventory cost Analysis is performed to compare estimate cost to actual cost

LCM Process Flow for Service mode 1. 2. 3. 4. 5. 6. Purchase order is created Goods are received in the LCM shipment workbench Transportation and handling cost are accrued Transportation invoices are matched to estimates Variances are imported into Cost Management to update inventory cost Analysis is performed to compare estimate cost to actual cost

LCM Data Flows

LCM Data Flow - Pre-Receiving Mode

LCM Data Flow - Service Mode So if you are interested in more accurate material overhead rates for your inventory, the you should consider using Landed Coat Management.