Using Procure to Order to Source Buy Items

Using ‘Procure to Order’ to Source Buy Items Cross Organizations Maggie Coleman Margaret Coleman Consulting Nor. Cal OAUG Training Day July 19, 2004 M. Coleman - July 19, 2004 1

Agenda n n n ATO item sourcing options in Oracle Order Management How to source ATO items from an internal inventory organization System steps for a ‘Procure to Order’ process Resulting inter-company invoicing and accounting for cross op unit transfers Challenges and issues M. Coleman - July 19, 2004 2

Oracle Functionality n Order Management Assemble to Order n Procure to Order n Configure to order n n Internal requisitions and orders n n Within and cross operating units Inter-company invoicing n Cross operating unit item sourcing M. Coleman - July 19, 2004 3

Oracle ATO Sourcing Options n Customer orders an ATO make item n n Customer orders an ATO buy item n n n Purchased from a supplier Shipped from inventory or drop shipped from supplier to the customer (‘Back to Back’ orders) Customer orders an ATO item n n Item shipped directly from the mfg org to the customer Sourced from another inventory org Inventory transferred from one inventory org to the selling org before shipment to the customer Workaround to be discussed aka n n Procure to Order Supply to Order M. Coleman - July 19, 2004 4

Make Item Assemble to Order Process n n n Planning make/buy code=‘Make’ ATO Flag = ‘Yes’ OM workflow creates discrete job to request manufacturing of an item to order n n A manufacturing org builds the product to order Inventory is reserved to sales order line upon production completion Partial shipments allowed n n Linked to the sales order line Auto-split SO lines ATO configurations and standard items supported M. Coleman - July 19, 2004 5

Make Item ATO Flow Status Codes n n n BOOKED PRODUCTION_ELIGIBLE PRODUCTION_OPEN PRODUCTION_PARTIAL PRODUCTION_COMPLETE CLOSED M. Coleman - July 19, 2004 6

‘Procure to Order’ or Buy ATO Process n n n Planning make/buy code=‘Buy’ ATO Flag = ‘Yes’ OM workflow creates a purchase requisition to request the ordering of the item A purchase order is created and is linked to the sales order line. Inventory is reserved to the sales order line upon PO receipt Partial shipments allowed n n Auto-split SO lines Drop shipments allowed = ‘Back to Back’ orders M. Coleman - July 19, 2004 7

OM Buy ATO Flow Status Codes n n n n BOOKED PO_REQUESTED PO_REQ_CREATED PO_PARTIAL PO_RECEIVED CLOSED M. Coleman - July 19, 2004 8

Sample Multi-Org Architecture Oracle ERP Instance US SOB Euro SOB Asia SOB US Op Unit Euro Op Unit Asia Op Unit Euro Inv Org Asia Inv Org Mfg Org #1 Mfg Org #2 Master Inventory Organization M. Coleman - July 19, 2004 9

Inter-Org Material Flow n Direct shipment from source org to the customer n n Within or cross operating units Transfer material from one inventory org to another inventory org before customer shipment Within or cross operating units n Use internal orders to transfer material n M. Coleman - July 19, 2004 10

Direct Ship Process Ship to Customer from Mfg Org M. Coleman - July 19, 2004 11

Direct Ship Process n n n n SO warehouse is source organization Does not transfer inventory value or quantity to selling organization Cannot use in-transit inventory AR invoice created upon shipment from source org Uses inter-company invoicing for cross op unit shipments One shipment transaction One demand feeding planning Does not use internal req/orders n n No config issues ATO flag set same in all inventory orgs M. Coleman - July 19, 2004 12

Inter-Company/Org Material Flow M. Coleman - July 19, 2004 13

Ship to Customer from Selling Org n n SO line warehouse is not sourcing org Utilize internal requisitions/orders or inter-org transfers n n n In-transit leadtime offset for internal order demand Two shipments transactions n n n Sourcing org on internal order into in-transit Selling org on customer order Transfers inventory value and quantity to selling org AR invoice created upon shipment from selling org Option to use inter-company invoicing n n With or without in-transit inventory INV: Intercompany Invoice for Internal Orders = ‘Yes’ ATO flag can be different in each inventory org M. Coleman - July 19, 2004 14

Inter-Company Invoicing Process M. Coleman - July 19, 2004 15

Internally Sourced ATO Items n Use a planning function to create internal reqs from sales order demand ATO flag set to ‘Yes’ in sourcing org, ‘No’ in selling org n Models/options not supported on internal reqs/orders n No link from external sales order to internal req/order/discrete job n No reservation upon inventory receipt n M. Coleman - July 19, 2004 16

Internally Sourced ATO Items n Problems and workarounds n Procure to order only creates purchase requisitions n n Switch purchase requisition into internal requisition after sales order line progression and before requisition import Models and options cannot be placed on an internal order Create newly created item/BOM/routing in each sourcing organization after config is created by OM n Place ATO config on internal order n M. Coleman - July 19, 2004 17

Internally Sourced ATO Item Process n n n n Planning make/buy code=‘Buy’ ATO Flag = ‘Yes’ Source type = ‘Inventory’ Source organization = sourcing inventory org OM workflow purchase requisition to request purchase of an item to order n Workaround to change into an internal requisition if item’s source type = ‘Inventory’ Internal requisition triggers creation of internal sales order from source org to selling organization ATO job is created and completed in mfg org M. Coleman - July 19, 2004 18

Internally Sourced ATO Item Process n n n Internal sales order is picked, shipped and put into in-transit inventory Inventory is reserved to the customer sales order line upon internal requisition receipt Partial shipments allowed n n ATO standard items supported n n Auto-split SO lines Workaround to internally order configuration items Same item can be make ATO in one org & buy ATO in another org M. Coleman - July 19, 2004 19

Book Customer Order in Selling Op Unit Line 1. 1 is an internally sourced ATO Buy Item Line 2. 1 is a supplier sourced ATO Buy Item M. Coleman - July 19, 2004 20

Progress Order Line to Create Requisition Line ‘Actions’ Button • Or run ‘Auto. Create Purchase Requisitions’ in BOM responsibility • Inserts a record into the PO requisitions interface table • Workaround used to change PR into internal requisition M. Coleman - July 19, 2004 21

PO Requested from OM Workflow M. Coleman - July 19, 2004 22

Import Requisition Selling Op Unit PO responsibility Import Source = ‘CTO’ M. Coleman - July 19, 2004 23

ATO Supplier Buy Item Create standard PO or blanket release M. Coleman - July 19, 2004 24

PO Created Workflow Status Line 1. 1 is an internally sourced ATO Buy Item Line 2. 1 is a supplier sourced ATO Buy Item M. Coleman - July 19, 2004 25

Create Internal Sales Order In Mfg Op Unit n Run PO ‘Create Internal Orders’ in the selling op unit n n Inserts internal sales order information in the OM interface tables in the sourcing op unit Run OM ‘Order Import’ in the sourcing op unit n Validates and creates internal sales order in the sourcing op unit Customer = selling organization n Will book automatically if no missing data n M. Coleman - July 19, 2004 26

Internal Sales Order 3 day calendar day transit time Ship from sourcing inv org to selling inv org M. Coleman - July 19, 2004 27

Progress Order Line to Create Job Line ‘Actions’ Button • Or run ‘Auto. Create Final Assembly Orders’ in WIP responsibility • Creates ATO discrete job M. Coleman - July 19, 2004 28

ATO Discrete Job M. Coleman - July 19, 2004 29

Viewing Supply Reservation Details • Purchase requisition, purchase order or WIP Job M. Coleman - July 19, 2004 30

Viewing Supply to Order Workbench • Purchase requisition, purchase order or WIP Job M. Coleman - July 19, 2004 31

Fulfilling ATO Supply Request n Internally sourced ATO item n n Build ATO job in a manufacturing org Pick and ship internal order Receive internal requisition Supplier sourced ATO item n Receive purchase order M. Coleman - July 19, 2004 32

Internal Order Shipment Accounting Entries in Shipping Org Material Transaction Accounting Distributions M. Coleman - July 19, 2004 33

Internal Order Receipt Accounting Entries in Receiving Org Material Transaction Accounting Distributions M. Coleman - July 19, 2004 34

Create Inter-Company AR Invoice In Supplying Op Unit Run ‘Create Inter-company AR Invoices’ in Inventory - Inserts into AR invoice interface tables Run ‘Autoinvoice’ in AR - Creates AR inter-company invoice from interface M. Coleman - July 19, 2004 35

Inter-Company AR Invoice In Sourcing Op Unit Revenue Accounting Entry M. Coleman - July 19, 2004 36

Create Inter-Company AP Invoice In Selling Op Unit Run ‘Create Inter-company AP Invoices’ in Inventory - Inserts into AP expense report tables Run ‘Expense Report Import’ in AP - Creates AP inter-company invoice from interface M. Coleman - July 19, 2004 37

Inter-company AP Invoice In Selling Op Unit Invoice Distributions M. Coleman - July 19, 2004 38

Challenges and Issues ATO Buy Items n SO line cancellations/splits/qty changes PO/requisition must be de-linked first n Workflow creates new requisition if background autocreate process is scheduled - put line on hold first n Cancel original requisition n New requisition created for changed/split lines n Cannot re-link an existing requisition or PO n Partial shipments will automatically split line and retain reservation n n ‘WSH: Retain ATO Reservations’ profile option M. Coleman - July 19, 2004 39

Challenges and Issues ATO Buy Items n Requisition import grouping rules n n Wanted all external sales order lines on one requisition, not supported in std functionality SO schedule date changes Date changes allowed, does not update requisition or purchase order. n For internal requisitions, must sync up internal requisition, internal order, ATO discrete job dates n M. Coleman - July 19, 2004 40

Challenges and Issues Internally Sourced ATO Items n n Requisition type ATO configurations Create configuration item first, then create internal req n Config item data in sourcing organization n Item org assignment, BOMs, routings, internal price lists, standard cost Mapped shipping methods to internal customer locations M. Coleman - July 19, 2004 41

Challenges and Issues Internally Sourced ATO Items n n Used descriptive flexfields for visual link from external sales order to requisition to internal sales order to discrete job External sales order data not flowing to the internal order n n Ship sets Customer credit checking Shipping notes PO Reservation up on receipt M. Coleman - July 19, 2004 42

Inter-Company Invoicing and Internal Order Accounting Notes n n COGS recorded for customer shipment in inventory Inter-co margin is recorded using 2 entries A credit at standard cost is recorded to margin upon internal order ship confirm n A second entry debits margin at transfer price through the inter-company AP invoice. n n Margin = Transfer price – Standard cost M. Coleman - July 19, 2004 43

Inter-Company Invoicing and Internal Order Accounting Issues n Inter-company invoices uses an internal order price list Shipping network setup should not use interorg transfer charges n Inter-org AR & Inter-org AP should clear out each other n M. Coleman - July 19, 2004 44

Inter-Company Invoicing and Internal Order Accounting Issues n RMA requires manual entry to correct accounting Oracle does not have functionality to return product directly to the manufacturing org. n Oracle’s solution is to sell inventory back to manufacturing org n M. Coleman - July 19, 2004 45

Contact Information n Maggie Coleman Margaret Coleman Consulting n Email: mlcolema@ix. netcom. com n Phone: 415 -215 -1112 n M. Coleman - July 19, 2004 46