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  • 26th April 13

    Enabling Global Manufacturing Using Oracle Inter-Company Processes

  • Agenda Overview Objective System Landscape Project Scope Process Flow Key Solution Features Mexico Requirements Challenges Key Benefits Q & A

  • Overview Cummins Power Generation (CPG), a Business unit of Cummins Inc. (NYSE: CMI,

    2012 Revenue = $17.3B), recently decided to transition one of its product lines to San Luis Potosi (SLP), Mexico from Fridley, MN

    This move aligns with companys strategy to become a truly global business and expands CPGs global manufacturing footprint


    System Challenges Requirement to not impact our

    customers, which meant keeping Fridley, MN systems involved in operations

    Operations in Mexico would be conducted as a Maquila*, greatly increasing the complexity of the move

    *Maquila: similar to a free trade zone in Mexico, where foreign companies are allowed to temporarily import raw material for assembly, processing, or manufacturing to be subsequently exported

  • Objective We had 5 major critical success factors for this initiative

    Fridley to remain as the customer facing organization for all inquiries and ordering

    Meet Maqulia and Mexican regulatory requirements No initial changes to the existing supply base for raw materials

    /components. First initiative at Cummins PGBU to link global supply chain in the

    fulfillment of customer orders Minimal impact to the existing Oracle solution footprint

    Oracle Intercompany functionality used to successfully meet the above business objectives


  • ORACLE R12

    PLM System

    Core Financial System


    PowerCom (Web Ordering System)

    OBIEE Reporting Layer

    System Landscape

  • 6 Cummins Confidential

    ModulesGL, AR, EB-Tax, Costing

    WIP, Engineering, BOM,

    Quality, OM (Powercom),

    Advanced Pricing, Inventory,

    Purchasing, iSupplier Portal,

    Supplier scheduling, E-

    Commerce Gateway, ASCP &

    GOP, Oracle Shipping, Mobile

    apps, HRMS, PLM(Legacy),


    Business processes

    Order to Invoice

    Design to Production

    Forecast to Plan

    Plan to Build

    Core Finance

    Procure to Pay

    Record to Report

    Infrastructure Cummins Global

    Desktops (CGDs)

    Print Smart Printers

    Non CGDs (RF Scanner, Bar Code Printers)




    Project Scope

  • 4/26/2013 Cummins Confidential7

    Process Design SummaryBusiness Process Changes Global Processes Reused New Common Process Enhancements

    Finance Intercompany transaction flows Inbound/outbound Proforma


    Sourcing rules to support automation of IR-ISO

    Manufacturing Inventory transactions will have

    customs implications

    Warehouse Management Oracle Shipping, Inventory &

    MSCA instead of WMS

    Procurement Sourcing rules to support

    automation of IR-ISO

    Order Management Lines from multiple warehouses on

    the sales order Automation of internal sales orders

    from purchase requisitions

    Finance Credit check Bolt on CBS Integrations

    ASCP Automatic Scheduling of Customer


    Manufacturing WIP job processing

    Warehouse Management Line Mapping functionality

    Procurement Global Purchase Order & Release


    Order Management Existing Holds functionality

    Finance Automation of Intercompany

    accounting Update to COGS workflow ASCP

    Calculate planning percentages for Mexico

    Manufacturing Nameplate changes

    Warehouse Management Export documentation

    Procurement Use of Internal requisitions

    Order Management Fridley order acknowledgement

    modified to support multiple warehouses

  • Key Solution Features Internal Drop Ship Order (IDS)

    Intercompany flow setup between selling and shipping OU Change the warehouse on the sales order in Fridley to drive the manufacturing from Mexico. Manufacturing and Shipping done from Mexico Customer is invoiced from US OU while Intercompany invoicing between US and Mexico

    Internal Requisition Internal Sales Order (IRISO) Shipping network setup done between the two orgs Planning creates the requisition in Mexico based on the sourcing rule setup. ISO created in US OU against the requisition Manufacturing and Shipping done from US Intercompany invoicing between US and Mexico

  • Key Solution Features Transfer Pricing

    Oracle Advanced Pricing used to calculate transfer price Intercompany pricelists created with cost plus markup using formula Separate pricelists created for IDS and IRISO transactions Freight charge modifier created to apply freight charges at the time of delivery.

    Advanced Accounting Accounting transactions for IDS created in both the operating units using the new feature of advanced accounting COGS entries generated in both selling and shipping organization including logical accounting entries

    Integration with 3PL logistics Consolidation of shipment before export/import to SLP Two step receiving process Supplier pickup and delivery planning automation

  • Mexico Requirements Documentation for importing goods into Mexico

    Inbound Proforma Invoice document (Virtual /Direct)

    Documentation for exporting goods from Mexico Outbound Proforma Document (Virtual /Direct)

    Integration with SAICE system Information about the BOM data for all the material coming in and out of Inventory to be interfaced with SAICE system.

    Integration with Customs Broker Inbound and Outbound VUCEM documents to be emailed/uploaded in Customs Broker system

    Analytical reports for re-conciliation of Proformas generated.

  • Implementation Challenges Business readiness for New Plant Start up IT project delivered in phases with limited functionality rolled out in initial phase. Large number of RICEW changes to existing components due to hard coding. Functional currency for Mexico OU changed from USD to MXP after SIT. Delay in finalizing Maquiladora / customs requirements Integration to core financials Core Finance system is still on 11i due to which Inter-company AP invoice interfaces had to be modified Training of new users in Mexico Training documentation had to be converted in Spanish

  • Product Challenges Multi-currency not enabled in current R12 environment hence we could not use currency conversion in Pricelist resulting in Interface Trip stop erroring out.

    Solution: Used currency conversion in pricing formula to resolve the issue

    Intercompany COGS Accounts COGS account for shipping OU for IDS transaction default based on the Intercompany Transaction setup where as the requirement from business was to pick the account codes from item master.

    Solution: Customization of the COGS workflow and SLA functionality used to derive the account codes from item master

    Due to security rules defined for specific responsibilities ship confirmation was failing as accounting transactions for IDS are happening across multiple OUs

    Solution: Deferred the Interface trip stop and ran it from Appworx chain with responsibility which does not have any security rules mapped to it

    Additional freight charge line getting interfaced in AR interface tables Solution: Working with Oracle to modify the setups to resolve the issue

    Currency on ISO can only be functional currency The requirement was to generate the intercompany invoices in USD

    Solution :Created pricelists in USD and used conversion formula

    Implementation of LPN functionality without WMSSolution: LPN functionality of Oracle shipping was invoked from MSCA (custom)

  • Key Benefits Automation of Order Entry and Procurement processes (IRISO) Streamlining of supply chain by fulfilling orders from multiple OUs using Oracle inter-company processes Realizing the benefits of lowered tax through the Maquiladora program Lowered manufacturing costs

  • Thank you

  • Appendix

  • Maquiladora Definition

    A Maquiladora (Spanish pronunciation: [makilaoa]) or maquila (IPA: [makila] is the Mexican name for manufacturing operations in a free trade zone (FTZ), where factories import material and equipment on a duty-free and tariff-free basis for assembly, processing, or manufacturing and then export the assembled, processed and/or manufactured products, sometimes back to the raw materials' country of origin.

    Currently about 1.3 million Mexicans are employed in one or more of approximately 3,000 Maquiladoras.

    The term Maquiladora, in the Spanish language, refers to the practice of millers charging a maquila, or "miller's portion" for processing other people's grain

    Under the Maquiladora program, UK companies operating out of Mexico will get additional tax benefit

    Cummins Confidential18

  • Intercompany Setups

    Cummins Confidential19

  • Pricing Setup

    Cummins Confidential20

  • Pricing Setup

    Cummins Confidential21

  • Pricing Setup

    Cummins Confidential22

  • Shipping Network

    Cummins Confidential23