Using

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Using Procure to Order to Source Buy Items
Cross Organizations

• Maggie Coleman
• Margaret Coleman Consulting
• NorCal OAUG Training Day
• July 19, 2004

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Agenda

• 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

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Oracle Functionality

• Order Management
• Assemble to Order
• Procure to Order
• Configure to order
• Internal requisitions and orders
• Within and cross operating units
• Inter-company invoicing
• Cross operating unit item sourcing

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Oracle ATO Sourcing Options

• Customer orders an ATO make item
• Item shipped directly from the mfg org to the
  customer
• Customer orders an ATO buy item
• Purchased from a supplier
• Shipped from inventory or drop shipped from
  supplier to the customer (Back to Back orders)
• Customer orders an ATO item
• 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
• Procure to Order
• Supply to Order

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Make Item Assemble to Order Process

• Planning make/buy codeMake
• ATO Flag Yes
• OM workflow creates discrete job to request
  manufacturing of an item to order
• Linked to the sales order line
• A manufacturing org builds the product to order
• Inventory is reserved to sales order line upon
  production completion
• Partial shipments allowed
• Auto-split SO lines
• ATO configurations and standard items supported

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Make Item ATO Flow Status Codes

• BOOKED
• PRODUCTION_ELIGIBLE
• PRODUCTION_OPEN
• PRODUCTION_PARTIAL
• PRODUCTION_COMPLETE
• CLOSED

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Procure to Order or Buy ATO Process

• Planning make/buy codeBuy
• 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
• Auto-split SO lines
• Drop shipments allowed Back to Back orders

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OM Buy ATO Flow Status Codes

• BOOKED
• PO_REQ_REQUESTED
• PO_REQ_CREATED
• PO_CREATED
• PO_PARTIAL
• PO_RECEIVED
• CLOSED

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Sample Multi-Org Architecture
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Inter-Org Material Flow

• Direct shipment from source org to the customer
• Within or cross operating units
• Transfer material from one inventory org to
  another inventory org before customer shipment
• Within or cross operating units
• Use internal orders to transfer material

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Direct Ship ProcessShip to Customer from Mfg Org
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Direct Ship Process

• 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
• No config issues
• ATO flag set same in all inventory orgs

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Inter-Company/Org Material Flow
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Ship to Customer from Selling Org

• SO line warehouse is not sourcing org
• Utilize internal requisitions/orders or inter-org
  transfers
• With or without in-transit inventory
• In-transit leadtime offset for internal order
  demand
• Two shipments transactions
• 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
• INV Intercompany Invoice for Internal Orders
  Yes
• ATO flag can be different in each inventory org

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Inter-Company Invoicing Process
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Internally Sourced ATO Items

• Use a planning function to create internal reqs
  from sales order demand
• ATO flag set to Yes in sourcing org, No in
  selling org
• Models/options not supported on internal
  reqs/orders
• No link from external sales order to internal
  req/order/discrete job
• No reservation upon inventory receipt

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Internally Sourced ATO Items

• Problems and workarounds
• Procure to order only creates purchase
  requisitions
• 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
• Place ATO config on internal order

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Internally Sourced ATO Item Process

• Planning make/buy codeBuy
• ATO Flag Yes
• Source type Inventory
• Source organization sourcing inventory org
• OM workflow purchase requisition to request
  purchase of an item to order
• Workaround to change into an internal requisition
  if items 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

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Internally Sourced ATO Item Process

• 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
• Auto-split SO lines
• ATO standard items supported
• Workaround to internally order configuration
  items
• Same item can be make ATO in one org buy ATO in
  another org

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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
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Progress Order Line to Create Requisition
Line Actions Button

• Or run AutoCreate Purchase Requisitions in BOM
  responsibility
• Inserts a record into the PO requisitions
  interface table
• Workaround used to change PR into internal
  requisition

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PO Req Requested from OM Workflow
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Import Requisition
Selling Op Unit PO responsibility Import Source
CTO
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ATO Supplier Buy Item

• Create standard PO or blanket release

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PO Created Workflow Status
Line 1.1 is an internally sourced ATO Buy
Item Line 2.1 is a supplier sourced ATO Buy Item
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Create Internal Sales Order In Mfg Op Unit

• Run PO Create Internal Orders in the selling op
  unit
• Inserts internal sales order information in the
  OM interface tables in the sourcing op unit
• Run OM Order Import in the sourcing op unit
• Validates and creates internal sales order in the
  sourcing op unit
• Customer selling organization
• Will book automatically if no missing data

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Internal Sales Order
3 day calendar day transit time Ship from
sourcing inv org to selling inv org
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Progress Order Line to Create Job
Line Actions Button

• Or run AutoCreate Final Assembly Orders in WIP
  responsibility
• Creates ATO discrete job

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ATO Discrete Job
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Viewing Supply

• Reservation Details
• Purchase requisition, purchase order or WIP Job

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Viewing Supply

• Supply to Order Workbench
• Purchase requisition, purchase order or WIP Job

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Fulfilling ATO Supply Request

• Internally sourced ATO item
• Build ATO job in a manufacturing org
• Pick and ship internal order
• Receive internal requisition
• Supplier sourced ATO item
• Receive purchase order

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Internal Order Shipment Accounting Entries in
Shipping Org
Material Transaction Accounting Distributions
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Internal Order Receipt Accounting Entries in
Receiving Org
Material Transaction Accounting Distributions
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Create Inter-Company AR InvoiceIn 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
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Inter-Company AR InvoiceIn Sourcing Op Unit
Revenue Accounting Entry
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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
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Inter-company AP Invoice In Selling Op Unit
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Challenges and IssuesATO Buy Items

• SO line cancellations/splits/qty changes
• PO/requisition must be de-linked first
• Workflow creates new requisition if background
  autocreate process is scheduled - put line on
  hold first
• Cancel original requisition
• New requisition created for changed/split lines
• Cannot re-link an existing requisition or PO
• Partial shipments will automatically split line
  and retain reservation
• WSH Retain ATO Reservations profile option

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Challenges and IssuesATO Buy Items

• Requisition import grouping rules
• 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.
• For internal requisitions, must sync up internal
  requisition, internal order, ATO discrete job
  dates

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Challenges and IssuesInternally Sourced ATO Items

• Requisition type
• ATO configurations
• Create configuration item first, then create
  internal req
• Config item data in sourcing organization
• Item org assignment, BOMs, routings, internal
  price lists, standard cost
• Mapped shipping methods to internal customer
  locations

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Challenges and IssuesInternally Sourced ATO Items

• 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
• Ship sets
• Customer credit checking
• Shipping notes
• PO Reservation up on receipt

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Inter-Company Invoicing and Internal Order
Accounting Notes

• 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
• A second entry debits margin at transfer price
  through the inter-company AP invoice.
• Margin Transfer price Standard cost

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Inter-Company Invoicing and Internal Order
Accounting Issues

• Inter-company invoices uses an internal order
  price list
• Shipping network setup should not use inter-org
  transfer charges
• Inter-org AR Inter-org AP should clear out each
  other

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Inter-Company Invoicing and Internal Order
Accounting Issues

• RMA requires manual entry to correct accounting
• Oracle does not have functionality to return
  product directly to the manufacturing org.
• Oracles solution is to sell inventory back to
  manufacturing org

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Contact Information

• Maggie Coleman
• Margaret Coleman Consulting
• Email mlcolema_at_ix.netcom.com
• Phone [phone]