Project-Driven Supply Chain

What is Project-driven supply chain?

The project-driven supply chain is a capability in Oracle Supply Chain Management (SCM) that was first introduced in 2020 to create a project-aware supply chain. Businesses can use project information to tag supply chain transactions and on-hand inventory with relevant information – known as project striping – and segregate transactions and on-hand inventory by project and by task, allowing project-aware supply chain management. 

For example, if you are buying material that is used for several open projects, you can tag (or “Stripe”) your purchase orders with a project and task ID. Then, when the material is received, the project and task stay with the on-hand inventory throughout its lifecycle, letting users can see how much is available for each project. Users can also see how much inventory is project-free or unassigned, that is available to use for non-project activities or freely available to be assigned to projects.

How does Project-Driven Supply Chain work?

In order to take advantage of project-driven supply chain, there are a few pre-requisite modules that must be installed:

• • Projects Module (also known as PPM)
  • Inventory Module 
    • Within this module, there is a checkbox to enable project-driven supply chain
• • Manufacturing and Planning Module (optional)

Additionally, you will need to set up cost and receipt accounting to property divert the transactions appropriately. 

Once you are done with all the setups, every inventory transaction from cradle to grave is taggable with project and task information. Every time you create a requisition, a PO, a PO receipt, put-away transaction, miscellaneous receipts and issues, transfer orders, work orders, sales orders and pretty much every single event in supply chain is sensitive to project information. 

What about my non-product related fields?

Project and task fields are completely optional. If you have a line of business activity that needs to stay free from projects – for example if some inventory is used for non-project activity for internal consumption rather than customer-specific or asset-creation specific inventory – that is possible too. All you have to do is receive that inventory without populating the project and task information (thru PO, miscellaneous receipt or any other method) and you would end up with project-free, unassigned inventory.

Every time inventory is received, moved, or consumed, it is done so with awareness of which project and task it was done for. Say you are running construction projects and you have issued out (used) inventory in a manner that leads to creation of an asset. You can drive your cost accounting rules to be sensitive to those task numbers and post those transactions to a CIP or CIP-Disbursed type account. If you have issued inventory that was scrapped or used for non-asset activity, you can have cost accounting rules hit an expense account tied to the project. And, each inventory transaction can forever be available to record keepers to track against company’s project activity, whether the project activity is asset creation or manufacturing related.

Who is an ideal candidate for Project-Driven Supply Chain?

Project-driven supply chain is an excellent choice if your enterprise: 

• Your enterprise uses projects to containerize business activity 
• You buy inventory to either build assets or manufacture goods within the context of projects 
• You need to segregate your business activity project by project and have that segregation be available in your supply chain 

Alternatively, you can use the projects module without enabling project-driven supply chain. Oracle allows the use of project and task fields for expense destinations on a PO and you may use the project or task number to tag purchases. This is a good option if you do not have any inventory or goods purchases and don’t have manufacturing but still want to separate indirect purchases by project. 

Both manufacturing companies and asset-building companies can use project-driven supply chain. Manufacturing companies can receive material, build sub-assemblies and finished goods, ship products and bill customers with project-sensitive information available in standard fields. Each transaction would carry over into the sub-ledgers so that project-sensitive rules can be written, and you can even create granular financial impact by project and task. 

Asset building companies such as utilities, construction companies, contractors or subcontractors can use projects to containerize business activity and separate their supply chain activity by projects. The tasks within the projects can divert the spending to asset or expense based on task type and sub-ledger accounting setups. The task type is often mapped to asset category, so an end-to-end connection can be built between origin (purchase) and destination (fixed asset). 

How does Project-driven supply chain benefit supply chain?

Utilizing this methodology and Oracle products can benefit several areas:

• Inventory managers can use project-striping to keep inventory separated by project
• Planners can use project information to plan their supply plans, MRP, and other activities by project
• Manufacturing / Asset-building technicians can pick inventory that is assigned to their project-specific work order or asset creation without mistakenly using inventory that was earmarked for another project

In cases where borrowing is needed between projects, Oracle also allows you to do a “Project Transfer” transaction – essentially either removing project striping and turning inventory into “Common” or unassigned inventory. Oracle also allows you to take unassigned “common” inventory and set it aside for a project by striping it with project and task number. And lastly, you can take inventory that’s assigned to one project and stripe it with a different project and task number. This is useful when a technician shows up to pull inventory for their project, but realizes they are out and needs to “borrow” inventory from a project that has surplus. 

Because of the tremendous amounts of flexibility that Oracle allows in the on-hand inventory, material can move freely between project and non-project on-hand quantities and also move between projects. Each time a project transfer (Stripe, de-stripe or re-stripe) is done, the impact of that transaction can be transmitted to the sub-ledger and the GL via cost accounting SLA rules. 

How does this impact and benefit finance?

Finance managers, project managers, and the office of the CFO can track the spending project-by-project, manage costs of building assets or running manufacturing projects from end-to-end as the inventory moves from receipt to final shipment or asset creation. It is possible to have granular accounting impact while the materials are being stored, consumed, shipped, or built into assets. The projects module would have earlier visibility into the committed costs of the project when inventory is being purchased. The project committed costs are updated as soon as a project and task tagged requisition or PO is approved in procurement. 

When running reports, the finance team would be able to fully understand the impact of not just the expenses (non-inventory) but all of the inventory and material activities – which allows them to measure the profitability of projects when it comes to a manufacturing project, or allows them to measure the efficiency of an asset creation project. 

What are the limitations and costs associated with enabling the project-driven supply chain?

As with any feature or capability that is added to a system, there is an increased cost both for implementation and maintenance. Once project-driven supply chain is enabled for an inventory organization, the users have a choice to use the project and task number fields. The inventory consumption and availability would always be in the context of either a project inventory or a common inventory. When consuming project-specific inventory for issue to work order, sales order, picking, shipping, miscellaneous issues and outbound transfers, the user has to specify the project and task number that they are trying to do a transaction for. 

As far as IT and finance is concerned, project-driven supply chain adds additional work of managing and maintaining the SLA. If the rules of accounting were to change based on individual project numbers – which is rare but possible, then the SLA rules would be updated and tested periodically. 

The best way to reduce the burden of constant SLA rule updates is to build your SLA rules around task number (which is basically the task type) and project type rather than individual project numbers.