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April 2, 2014

Difference in WMS cost group and Inventory cost group assignment

Bishnu Prasad Choudhury / / 1
Cost Groups in Oracle WMS are assigned by the Cost Group Rules Engine.
In Oracle Inventory, Cost Groups are derived based on the primary cost Method of the organization and the location where the material is being moved. If the costing method is Standard-Costing, then the Cost Group associated with subinventory is assigned to the material. For the other costing methods, the Cost Group associated with the organization is used.
In Oracle Warehouse Management, once a Cost Group is associated with a material, it does not change when the material is moved within the organization. 
In Oracle Inventory, the Cost Group associated with the material changes with the location where it is residing.
So in WMS, once the material moved with in the organization, then cost group update needs to be done if you want to change the cost group assigned to the material.

Lets understand this with below example

Example 1:

In your organization, you are dealing with FMCG products which has multiple variants.
You have edible and non edible products, creme, liquid and solid products and you are storing those across subinventories where multi variant products can be stored in same subinventory but you want to distinguish the costing reporting.
This canot be possible if you are using only Inventory, as the maximum level of cost group assignment will be at subinventory level.
If you are using WMS, this can be achieved by defining cost group assignment rules which can be assigned by considering many attributes like item type, supplier, customer and many more.

Example 2:

WMS Inventory Organization with the Average Costing Method

Transaction 1: Buy 100 units @ 10/unit from Supplier 1 in LOT A
Transaction 2: Buy 100 units @ 20/unit from Supplier 2 in LOT B
Transaction 3: Sell and Ship 100 units @ 30/unit to Customer 1 in LOT A
Transaction 4: Sell and Ship 100 units @ 30/unit to Customer 2 in LOT B

In this organization, LOT A’s 100 units would be received into inventory and averaged together (10/unit) and LOT B’s 100 units would be received into inventory and averaged together (20/unit) . Then when the items are shipped to the customer, LOT A would have an average cost of 10 and a higher margin than LOT B. The units from both projects could be indistinguishable and in the same physical location in the warehouse. But, in the system, they are tracked separately using the cost group.

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