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Landed Cost: The Secret of

Successful Supply Chains


How to Use Landed Cost as a Strategic Weapon

Rosalie Cmelak, Oracle


Mario Nobre, Oracle
Diane Streubel, Schreiber Foods
October 1, 2014

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Safe Harbor Statement


The following is intended to outline our general product direction. It is intended for
information purposes only, and may not be incorporated into any contract. It is not a
commitment to deliver any material, code, or functionality, and should not be relied upon
in making purchasing decisions. The development, release, and timing of any features or
functionality described for Oracles products remains at the sole discretion of Oracle.

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Program Agenda
1

Landed Cost & Roles in Supply Chain

Oracle Landed Cost Management (EBS)

Schreiber Foods Discovers the Secret of Landed Cost

Summary & Questions

Copyright 2014, Oracle and/or its affiliates. All rights reserved. |

Program Agenda
1

Landed Cost & Roles in Supply Chain

Oracle Landed Cost Management (EBS)

Schreiber Foods Discovers the Secret of Landed Cost

Summary & Questions

Copyright 2014, Oracle and/or its affiliates. All rights reserved. |

The supreme art of war is to subdue


the enemy without fighting.
Sun Tzu, The Art of War

Copyright 2014, Oracle and/or its affiliates. All rights reserved. |

What is Landed Cost Management?


Traditional: True cost of an item once it has arrived at the Buyers door.
Modern: Having full visibility into extended supply chain costs, with the
power to use this information as a strategic decision support, accounting
and profitability tool within the organization.

Purchase
Price

Warehousing and
Handling Fees
Transportation
& Insurance
Customs
Duties, Taxes
& Fees

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Landed Cost Scenario

China
Manufacturing

Ship to HK

HK Port

$3

Freight

$4

Vessel Carrier

US Port

Port Fees

$20

$100

Custom
er

Buyer
Ocean Freight

$4
$5
PO item price

Kansas City

Port Fees
Duty

$2
$2

An additional 40% is added on to the purchase price


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Broker
Freight

Total Landed
Cost

$140
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Risks of Hidden Supply Chain Costs


What Happens When You Cannot Understand, Predict, Plan
LANDED COST EXPECTATIONS
Visible

Purchase Price
Transportation
Insurance
Customs Duties & Taxes

EXAMPLE IMPACT
60% Margin Expected
Happy Customer
IT Staff

Expediting Fees/Warehousing

Hidden

Unexpected Fuel Surcharge


Other Accessorial Fees

0% or Negative Margin Realized


Customer Satisfaction Compromised

Unplanned
Customs Storage

Hidden Supply Chain Cost Risks Can Diminish Expected Returns


Copyright 2014, Oracle and/or its affiliates. All rights reserved. |

Landed Cost Roles in Supply Chain


Analytics
Periodic Reporting & Measurement
Use landed cost data to track KPIs,
metrics and uncover trends to address
in supply chain processes

Planning

Prior to PO
Cost simulations used upfront to
strategically support sourcing activities

Landed Cost
Lifecycle

Financials/Costing
At Invoicing
Receive and process invoices, update
inventory valuation based on actual data
Compare actuals to estimate for variances

Execution
From PO Creation to Receipt
Effectively estimate planned costs and
revise based on order/shipment changes

Copyright 2014, Oracle and/or its affiliates. All rights reserved. |

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Landed Cost Footprint @ Oracle


Analytics
Periodic Reporting & Measurement
Oracle GTM (Roadmap)
Oracle EBS

Planning

Prior to PO
Oracle Global Trade Management

Oracle
Landed
Cost
Solutions

Financials/Costing
At Invoicing/Payables/Costing
Oracle EBS
Oracle Fusion
Oracle PeopleSoft
Oracle Retail

Execution

From PO Creation to Receipt


Oracle GTM (Roadmap)
Oracle EBS
Oracle Fusion
Oracle PeopleSoft
Oracle Retail
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Landed Cost Management @ Oracle


Oracle Global Trade Management
Part of Value Chain Execution suite
Focus on Landed Cost Planning
New ELC feature set planned for
CY2015 for What if? Sourcing
scenario simulations
Features planned:

Cost Model definitions


Duty/Tax calculation
Simulation of costs
Sourcing scenario comparisons (Ad hoc)

Copyright 2014, Oracle and/or its affiliates. All rights reserved. |

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Landed Cost Management @ Oracle


Other Oracle ERP:
Oracle Fusion
Fusion Landed Cost Management
Planned for Fusion Release 11

PeopleSoft
Part of Supply Chain solution

Oracle Retail
LCM for Financials in Retail
Retail Trade Management module (RTM)*
required (part of RMS ERP)

Oracle E-Business Suite


Oracle Landed Cost Management
(LCM)
GA Since EBS Release 12.1
Growing customer base in all regions, with
customer clusters in:
North America
Middle East

Primary industries include Process


Manufacturing, Industrial Manufacturing,
Retail

Copyright 2014, Oracle and/or its affiliates. All rights reserved. |

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Program Agenda
1

Landed Cost & Roles in Supply Chain

Oracle Landed Cost Management (EBS)

Schreiber Foods Discovers Secret of Landed Cost

Summary & Questions

Copyright 2014, Oracle and/or its affiliates. All rights reserved. | Oracle Confidential Internal/Restricted/Highly Restricted

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Business Flow
Create PO

Ship Goods

Receive Goods

Capture Invoices

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Business Flow
Track Landed Cost throughout the Flow
Create PO

Ship Goods

Receive Goods

Capture Invoices

Simulate
Model the landed
cost before approval

Estimate
Account for
estimated cost in
inventory value

Copyright 2014, Oracle and/or its affiliates. All rights reserved. |

Actual
Adjust item cost
based on invoice
amount

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Simulate Landed Cost


Apply pre-defined cost
model to derive landed
cost for a purchase
order
Drive purchasing
decision using
simulated landed cost

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Estimate Landed Cost


Item valuation based on
estimated landed cost

Prior to receiving
Manually control the
shipments
Consolidate multiple suppliers

During receiving
Shipments automatically
created
based on receipts
Review critical transactions

Copyright 2014, Oracle and/or its affiliates. All rights reserved. |

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Actual Landed Cost


Adjust LC based on invoice
Capture charge invoices in any
currency
Post variances to item cost

Copyright 2014, Oracle and/or its affiliates. All rights reserved. |

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Landed Cost Analysis

Track Landed Cost throughout the Flow


Source efficiently with visibility
into charges and taxes
Compare landed costs and
trends across items and
suppliers
Track variances and unplanned
charges

Copyright 2014, Oracle and/or its affiliates. All rights reserved. |

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Landed Cost Analysis


Demonstration of Endeca in Oracle LCM

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Program Agenda
1

Landed Cost & Roles in Supply Chain

Oracle Landed Cost Management (EBS)

Schreiber Foods Discovers the Secret of Landed Cost

Summary & Questions

Copyright 2014, Oracle and/or its affiliates. All rights reserved. |

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Who is Schreiber Foods


$5B+ company
Worlds largest employee-owned dairy company

In business for over 65 years


Diversified customer base and product offerings
More than 7,000 partners (employees)

Copyright 2014, Oracle and/or its affiliates. All rights reserved. |

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Application Footprint
Oracle EBS 12.1.3

Could use visual?

Process Manufacturing
Purchasing
Inventory Control
Order Management
Financials
Landed Cost Management
EAM

Lean Logistics TMS


JDA (Demand Planning)

Copyright 2014, Oracle and/or its affiliates. All rights reserved. |

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Why Landed Cost @ Schreiber?


Original View of LCM (Modern Definition)
Way to capture total item cost
Cumbersome to maintain acquisition cost detail
Its a finance system, right?
Questions started coming we couldnt answer

Initially a Finance project, LCM sat on the back burner


How did we get funding to move ahead? We uncovered secrets

Copyright 2014, Oracle and/or its affiliates. All rights reserved. |

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Questions We Couldnt Answer


LCM Project Approved to Provide Answers for Leadership
What are our overall freight charges?
Demurrage
Port Fees

What are our pallet costs?


What are our total packaging costs?
What are our expediting costs?
What is our overall Cost-to-Serve at individual Customer level?

Copyright 2014, Oracle and/or its affiliates. All rights reserved. |

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LCM Journey: Secrets became useful tools


Didnt know we were being charged for pallets
We never agreed to paying for that test
Paying the vendor and the trucking line for freight

We can tell how much we are spending on expediting!

Copyright 2014, Oracle and/or its affiliates. All rights reserved. |

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Value of Landed Cost at Schreiber


Fundamental component of overall Cost-to-Serve strategy
Captures individual acquisition costs at Customer level
Provides item-level detail cost, which triggers internal behavioral changes

Enabled corporate cost management & visibility


Cant manage what we dont know
Ability to measure and control costs with analytics

Optimized & streamlined financial processes


Coupled LCM with our automated Invoicing process to provide upfront visibility to
Buyer costs prior to payment

Copyright 2014, Oracle and/or its affiliates. All rights reserved. |

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Program Agenda
1

Landed Cost & Roles in Supply Chain

Oracle Landed Cost Management (EBS)

Schreiber Foods Discovers the Secret of Landed Cost

Summary & Questions

Copyright 2014, Oracle and/or its affiliates. All rights reserved. |

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Landed Cost as Weapon by User


Sourcing

Procurement

Finance/Costing

Compare suppliers across


common criteria & cost
models

Identify and estimate all


expected costs at
Purchase Order creation
based on cost model

Receive and process


invoices from trading
partners

Simulation of purchase
prior to PO for negotiation
purposes

Use for negotiations


during PO creation

Source to comply with


Update estimates when
downstream requirements
order changes for most
current and accurate
Customer Requirements
estimated costs
BOM compliance
Metrics & KPIs

Metrics & KPIs

Identify variances
between invoice and
previous estimate
resolve
Update Costing based on
actuals (close loop)
Metrics & KPIs

Copyright 2014, Oracle and/or its affiliates. All rights reserved. |

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Summary
LCM strategic AND tactical weapon in supply chain

LCM not just a financial tool (traditional), also a Procurement tool (modern)
Starts with understanding corporate/supply chain objectives and how
landed cost can be used in overall strategy
Oracle provides comprehensive solutions to support every phase of landed
cost lifecycle
How will you start the conversation in your organization? (Hint: Sun Tzu)

Copyright 2014, Oracle and/or its affiliates. All rights reserved. |

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Oracle Value Chain Summit 2015


Register Today: OracleValueChainSummit.com
Jan 26-28, 2015 | San Jose McEnery Convention Center
Thought-Leading Speakers:

Behind every successful Value Chain Innovation is a


committed Agent of Change supporting new
opportunities and driving business results. Well
celebrate their achievements at this years summit our
best yet, featuring:
More speakers
New Hands-On Training Sessions
Peer-to-Peer Networking

Steve Young
NFL Legend &
HGGC Co-Founder
Andrew Winston
Co-Author of Green to Gold
and Author of The Big Pivot

Sean Tucker
Aerobatic Pilot,
Team Oracle

#ovcs
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Questions?

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