The Federal Government contractors need to adhere to DFARS regulations in order to maintain Material Management and Accounting System (MMAS) standards. Most companies in the Aerospace and Defense (A&D) project based manufacturing industry tend to utilize the Hard-Pegged planning approach where material is planned, purchased and manufactured to specific projects and with very strict borrow-payback inventory movement between the projects. This approach hinders lean manufacturing principles, increases inventory costs significantly and leads to an increased number of transactions. The common inventory approach on the other hand helps fulfill the lean manufacturing promise. Since Hard-pegging is required to a certain extent, a mixed planning approach using common inventory and hard-pegging can be used to satisfy the MMAS requirement as well as to help companies reduce their inventory levels. This presentation outlines the high level solution using the mixed planning approach.

1. Welcome to online seminar
on
Oracle Projects Inventory Planning
&
MMAS Compliance
By: Mahender Bist
Rapidflow Apps Inc.

2. Contents
Terms & Definitions
“Hard-Pegged” Planning Environment Challenges and Opportunity
Common Inventory Process
Common Inventory Costing Scenario
Process Overview – Project Contract to Customer Billing
Common Inventory and WIP Valuation - Material Cost
Common Inventory and WIP Valuation - Labor Cost
Permanent Transfers and Temporary Transfers
Customer Owned Inventory

3. Terms & Definitions
Hard Pegging
“Hard-Pegging” also known as “Hard Allocation” MRP/ASCP Planning method -
mostly used in Oracle Project Manufacturing environment where the supply of a
project/task is not allowed to be shared across multiple projects or tasks
Actual costs are incurred against the specific project and task
Common Inventory
“Common Inventory” also known as “Soft-Pegged” or “Soft Allocation” Planning
method where the common components (parts and subassemblies) can be shared
by multiple Contracts and Projects.
Common Inventory is procured or manufactured under a “Common Project”
Cost is shared proportionately by the customer contracts/project
Material Management and Accounting System (MMAS)
Provides strict guidelines for planning, controlling, and accounting for the
acquisition, use, issuing, and disposition of material
Defense Federal Acquisition Regulation Supplement (DFARS) govern MMAS
guidelines to maintain consistent, equitable, and unbiased logic for costing of
material transactions

4. “Hard-Pegged” Planning Challenges and Solution
“Hard-Pegged” Planning Environment Challenges:
Excess inventory levels as commingling of piece parts and subassemblies is NOT
allowed (Regulatory challenges)
Higher cost of procurement due to piece meal procurement approach in project
based buying
Hard to maintain a lean manufacturing environment
Solution:
Use common components (parts and subassemblies) in finished products
“Soft-Pegged” or “Common Inventory” planning approach for fixed price contract to:
• Streamline manufacturing processes
• Improve operational efficiencies
• Reduce costs
Note: For Federal contractors, mix mode approach using common and hard-pegged
inventory is an acceptable solution, however, detailed system testing must be recorded
to indicate strict adherence to DFAR guidelines and to gain approval while deploying a
new system or changing planning methods.

5. Common Inventory Process

6. “Common Inventory” Costing Scenario
Oracle Projects
Customer X Customer Y
Contract 1 Contract 2
Customer Project 1 Customer Project 2
Project 1– BOM Material Project 2– BOM Labor
Task 2.1: $500 Task 2.1: $1500
Customer Project 1 Customer Project 2
Project 1 – Direct Labor Project 2 – Direct Labor
Task 2.2: $875 Task 2.2: $3375
Finished Product 1 Finished Product 2
Project 1 – Support Labor Work Order Project 2– Support Labor
Product Family A Product Family A
Product Family A- Task 2.3: $250 3 Work Order Product Family A- Task 2.3: $750
5
Support Labor for the Product Family A
25 units FG1 75 units
Task 2.3: $1000
Labor: $20/Unit Labor: $30/Unit
$500/25 Units $2250/75 Units
SA1 SA3
Work Order
2 Work Order 75 units
25 units SA1 4 Labor: $10/Unit
Labor: $10/Unit $750/75 Units
$250/25 Units
25 units Transfer 75 units transfer
Material: $500 Material: $1500 Labor:
Labor: $125 $375
Common Project
Common Project
Common Project – BOM Material Work Order SA2
Task 2.1: $2000 1
Common Project – Direct Labor
Task 2.2: $500
Purchase
Order
Raw Material
Project: Common 1 100 units
100 units SA2 Sub Assembly SA2 Purchase Price = $20/unit
Qty: 100 $2000/100 units
Direct Labor: $5 per unit
($500 / 100 units)

7. Process Overview - Project Contract to Customer Billing
Load Awarded Contract into the Project Contracts
Enter Contract Deliverable Tracking System (DTS) with Projects and Task
Propagate DTS demand to MDS
Run ASCP Plan to generate supply schedules based on:
• Exploded demand based on Bill of Material (BOM) structure
• On hand inventory and receipt schedule
• Procurement and manufacturing lead times
“Hard-Pegged” planning can be used for Cost Plus Contracts
“Soft-Pegged” planning can be used for Common Inventory
Depending on the contract type, the customer will be billed:
• After shipment of the deliverables or
• After acquisition or consumption of the parts in progress billing

8. Common Inventory and WIP Valuation – Material Cost
Material Cost (Average Costing):
Common Inventory parts - Valued at a “Rolling Weighted Average”
“Rolling Weighted Average” – Calculated based on actual costs of piece parts
Material issues to “Common Project" work order - at the current weighted average
Material issue increases the Common Project’s Work in Process (WIP) valuation and
reduces the Common Project’s Inventory account valuation
Work order completion relieves the Common Project’s WIP valuation and increases
the inventory valuation
ASCP can reallocate common inventory material anytime until consumed
Transfer of common inventory from the “Common Project” to “Customer Specific”
project decreases the “Common Project” valuation and increases the “Customer
Project” valuation by current weighted average cost at the time of transfer

9. Common Inventory and WIP Valuation – Labor Cost
Labor Cost (Actual Costing)
Cumulative Average Labor Cost can be updated from actual labor cost
Transfer or allocation of Labor value from “Common Project” to the “Customer
Project”
Support Cost can be allocated to Customer Project based on shipment quantities
Overhead cost can be allocated as a fixed percentage of the Labor Cost

10. Permanent Transfers and Reporting
Permanent Transfers
Issue of the “Common Project” to “Customer Project” at piece part or subassembly
level:
• Credits the weighted average value (Material, Labor and Overhead) of the part from the
“Common Project” and
• Debits the same amount to the “Customer Project”
Permanent Part Transfer from one “Customer Project A” to “Customer Project B” :
• Credits the value of the part (Material, Labor, Support Labor and Overhead) from the
transfer-from “Customer Project A” and
• Debits the same amount to the transfer-to “Customer Project B”

11. Temporary Transfers
Temporary Transfer or Borrow/Payback
Temporary Transfers from one “Customer Project A” to “Customer Project B” :
• Credits the weighted average value of the part (Material, Labor, Support Labor and
Overhead) from the “Customer Project A” and
• Debits the same amount to the transfer-to “Customer Project B”
Payback of Borrowed part from one “Customer Project B” to “Customer Project A” :
• Original transfer-from value of the part is transferred from the “Customer Project B” back
to the “Customer Project A”
• Any variance is charged to the borrowing contract

12. Customer Owned Inventory
Customer owned inventory is not to be commingled with the common inventory
Customer owned inventory is stored in “Customer Project” in Oracle and is not
issued to the other projects

13. About Rapidflow Apps
About Rapidflow Apps
Oracle Gold Partner
Oracle Business Accelerators Specialized Partner
Areas Expertise
Supply Chain Planning
Product Lifecycle Management
Master Data Management
Business Intelligence
Industry Solutions
• High-Tech Manufacturing (Experience with Fab and Fabless)
• Process Industry (CPG and Pharmaceutical)
• Retail and Distribution
• Medical Devices
• Aerospace and Defense
Rapidflow Apps Methodology
Our business flow based methodology significantly reduces the implementation
time and cost of ownership.

14. Q&A
About the Presenter
Mahender Bist from Rapidflow Apps Inc. Mahender Bist has over 20 years of industry experience in
Operations Management and Information Technology consulting. He has been part of many complex
and challenging Manufacturing, Planning, PLM and MDM assignments.
About the Company
Rapidflow Apps was founded with the sole objective of providing high quality, innovative and practical
solutions to the real world business problems of our clients in the areas of Supply Chain Planning,
Product Lifecycle Management, Master Data Management and Business Intelligence. Visit our website
for more details- www.rapidflowapps.com
If you have any feedback, please write to us at feedback@rapidflowapps.com
For services, please contact us at info@rapidflowapps.com
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15. Disclaimer
The information contained in this presentation is for information
purposes only and is based on the Rapidflow Apps Inc experience and
publicly available material from Oracle Corporation on the subject.
The presenter is not responsible for the claims made about the
product benefits by the product vendor.