ennVee

Enterprise

Managing Landed Cost with NetSuite

Customer

Kiss of Beauty (KOB) is a renowned cosmetic and beauty products manufacturing company in Malaysia. KOB products are exported worldwide, predominantly to Philippines, China, Hong Kong, UAE, Singapore.

Technology Status & Business Problem

The customer was using MOLOG Warehouse Management System (WMS). They did not have an automated system for landed cost tracking. They were so far tracking actual landed costs against item receipts.

Given their global presence and growth, KOB needed accurate tracking of landed cost. Since their value chain involved multiple levels of collaboration between manufacturer, sub-contractor, and multiple distribution subsidiaries, it needed a scenario-based approach to automate landed cost calculations under each scenario.

The three parties operate in different combinations on making the final finished goods for KOB and the landed cost of each party’s involvement (operations & goods), their service charges, their consumable and other raw materials are to be tracked for each stage. All of these are to be rolled back to final Finished Goods when it is transferred back to KOB inventory. Below mentioned are five case scenarios.

For more information
about this project

Case 1: KOB purchases goods overseas (raw materials & package materials) and all the burden costs such as tax, duties, carriers etc, are to be added to the original freight cost, which should be added along with the receipt of goods.

KOB freight cost + Tax + Duties + Port charges + Carrier Charges + others

Case 2: KOB raises demand with the CMN for preparing the final finished goods but ships the packaging material alone from KOB to CMN. The final inbound receipts from CMN to KOB should include the cost of

CMN Finished Goods Price + CMN Service Cost + Packaged Material shipped by KOB

Case 3: KOB sends the partially finished goods (Work-In-Progress Goods) to CMN along with the required set of additional package / raw materials to complete the task at CMN level.  CMN passes back the charges of manufacturing services alone to KOB but the final finished goods from CMN should be processed with the below mentioned.

KOB’s Original WIP Goods + Additional Raw materials shipped from KOB + CMN Service Charge.

What further complicates this transaction is that KOB wants to ship the WIP goods and raw materials either in full or multiple part shipments to CMN and receive the final finished good from CMN, either in full or multiple part receipts. However, KOB wanted accurate aggregate of the total landed cost for the specific assignment, and the same to reflect in the average cost of the final inventory.

Case 4: KOB directly outsources the packaging / manufacturing tasks to the third-party manufacturer. KOB optionally sends some WIP goods, raw materials to the contract manufacturer. The third-party contract manufacturer completes the finished goods production, transfers back the goods to KOB and the receipt should be loaded with the below mentioned.

KOB’s Original WIP Goods + Additional Raw materials shipped from KOB + CMN Service Charge.

Case 5KOB passes the manufacturing demand to CMN along with part of raw materials required for finished goods. CMN in turn outsources the manufacturing to other third-party contract manufacturer by passing some additional materials along with that from KOB. The final product receipt at the KOB should possess the cost of the below mentioned.

KOB’s Original materials + CMN’s materials + CMN’s service cost + Contract Manufacturer’s service cost + Contract manufacturer’s material cost

ennVee Solution for Landed Cost Setup & Management

To meet the above-mentioned five scenarios, ennVee proposed solution to respond to each of the cases by enabling Landed Cost features in Oracle NetSuite. Below mentioned are the key features

With the above features, ennVee developed various client scripts based on Suite Script 2.0. This was done to appropriately allocate, transfer, track and aggregate the total landed cost for goods automatically to the final finished goods receipt at the KOB GRN level to ensure accuracy in finished good’s average cost.

Case 1:  KOB purchases materials (finished goods / packaging materials) from overseas. (KOB should account freight + tax + other charges)

This was handled by creating various Landed Cost categories in Oracle NetSuite and the corresponding landed cost is enabled to be associated with the supporting invoice documents. The solution is designed to not allow landed cost to be added without approved associated vendor bills. The value of the bill is associated to the GRN, prorated based on the quantities, if the GRN contains more than one good / item.

Case 2: Inter-company finished goods transactions (KOB owned packaging and ordered CMN to produce the final finished good)

Case 3:  Inter-company repackaging transaction (KOB owned packaging and WIP, FG, and CMN charges only the service fee)

Case 4KOB hired third party contract manufacturer ( KOB owns part FG , WIP, raw materials, packaging material and the sub-contractor owns the required list of other materials and charges the service fee)

Case 5:  CMN hires third party manufacturer in the production process of mix, fill, and pack (KOB and CMN owns part raw materials, sub-contractor owns list of other materials and packaging materials)

Custom Generated Report

The below screen shot is a custom generated record to facilitate product allocation either partially or fully from one organization to another and associate it with a specific PO. This would be used eventually to calculate the logic of final landed cost for the finished good.

Business Outcomes

With the successful enablement of the Landed Cost feature and the additional customization offered for each of the business scenarios, KOB is now able to track and manage landed cost, which also ensures accuracy in inventory valuation, average costs, and financial reports. Below mentioned are the key outcomes for the business.

Roadmap

As the next stage of progression, ennVee is assisting KOB with integration of NetSuite and MOLOG Warehouse Management System. KOB wants a single conduit for data flow and thereby wants to integrate the modular solutions. This move is also to get access to real-time data and reporting for better control over operational efficiencies.

For more information
about this project

More case studies