Evolution of Oracle Costing – Checking CFO’s Wish-list with In-Memory Cost Management

​Starting with early releases, Cost Management, one of the most stable components, provided multiple flavors. On the basis of costing method supported, it included Standard Cost, FIFO, as well as Average Costing. In terms of the manufacturing process, Cost Management offered support for Oracle Shop Floor Management (OSFM), focused on Lot based manufacturing and Lot genealogy with Work In Progress (WIP) provided cost transactions for discrete manufacturing and Oracle Process Manufacturing (OPM) supported process manufacturing. The core strength of Cost Management not only came with the cost management solution but its inbuilt integration with other Oracle components like Inventory, Manufacturing, Purchasing, Order Management, Assets, and General Ledger.

With cloud offering for Cost Management, Oracle has taken a giant step in costing solutions by also introducing In-Memory Cost Management. The implementation process has been vastly simplified, reducing the time and cost of implementation. At the same time, it substantially enhances the user experience and adds an ability to perform detailed analysis without compromising accuracy in determining costs, integration with other Oracle components and robust performance. As if working on a chapter from CFO’s book  ‘My Wish list for Cost Management System’, the focus has shifted from simply capturing and reporting accurate costs to how to leverage the plethora of invaluable costing information available in conjunction with other Oracle internal and external data sources.

Some of the areas worth consideration are:

  1. Real-time cost and profitability analysis: Every organization is conscious of the margins it earns and has margin optimization as one of its strategic goals. To be able to come up with an optimum mix, margin analysis on multiple dimensions including Product, Product Segment, Business Unit, Customers, and Geography, etc. is mandatory. In-Memory Cost Management comes in handy for performing such analysis

  2. Optimize operational costs: Cost planning has the potential of creating a business strategy differentiator. In-Memory Cost Management enables powerful “What-if Analysis” with changes to the bill of material, manufacturing processes, sourcing, etc. An organization can look at various scenarios and optimize its operational costs

  3. Optimize working capital: Financial cost of inventory, including work in progress is significant and forms a significant part of working capital. In-Memory Cost Management provides an ability to translate the quantities into financial impact based on the costing plans, optimizing working capital

  4. Ability to use advanced technology like AI and ML: Monitoring and controlling costs in real-time with automated/ semi-automated decisions or looking at new cost trends etc. using AI and ML is where the organizations are heading to. In-Memory Cost Management can undertake business rule-based complex calculations providing a robust data source for AI and ML

About the Author

Sanjay Bhatnagar is a seasoned professional, Chartered Accountant and certified PMP, with more than 20 years of experience in ensuring success through empowering, engaging and leading a global team of highly skilled people. He is an expert in Oracle Financials, Costing, Manufacturing, Supply chain, and Treasury, and has worked with small, medium and large companies, spread across the globe including EMEA, APAC, and North America.

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