14 Replies Latest reply on Mar 2, 2015 8:02 AM by 1051789

    Oracle Procurement/Sourcing :- Need advise on an implementation design

    1051789

      Dear Guru's,

       

      Need advise on an implementation design

       

      Problem Summary :-

      ----------------------------

      Our client(say "X") is contracted to perform certain business functions for their client (Say"Y")

       

      Say "X" is do sourcing (RFP,RFQ) functions till PO creation,receiving in a excel based custom application ( Not through oracle EBS) for client "Y".

      So "X" is not responsible for paying for those services and "Y" pays for those receipts.


      We want to implement Oracle EBS Advance procurement solution for their above functions and replace the custom application processes.

       

      But client "X" is not accepting advance procurement solution as they("X") are not paying for the services and they don't want to fit this solution in Oracle EBS as this may cause legal issues.

       

      Questions:-

      -----------------.

      1. Whats the best design solution for this type of scenario to fit the custom process into Oracle EBS procurement ?

      2. Can we follow the sourcing implementation process(RFQ/RFP)-> PO Creation-> PO receipts-> AP Invoice matching in Oracle EBS and is there a way to nullify this transaction in Oracle so      that there will not be any legal issues? May be creating credit memo/AR invoice etc...


      Appreciate your help!


      Thanks

      Karthik

        • 1. Re: Oracle Procurement/Sourcing :- Need advise on an implementation design
          PranitSaha

          What kind of legal issues you are trying to nullify. Your option 2 mentioned above will be able to fulfil the requirement. Just establish appropriate Segregation of duties to setup required access restrictions fir X  and Y.

           

          Sent from my iPhone

          • 2. Re: Oracle Procurement/Sourcing :- Need advise on an implementation design
            1051789

            Thank you Pranit for your reply.

             

            But if we do segregation of duties, then we are involving client "Y" employee as well. But in this situation they("Y") have contracted us("X") for their operations and "X" doesn't  want to involve "Y" on any sourcing/procurement process.

             

            So base line is "Y" doesn't want to involve in any of these processes and then have contracted "X" for those activities.

            "X" doesn't want to implement Oracle Adv procurement solution because they are not directly paying the vendors and they don't want to have any entry in EBS because of this reason.

             

            Ideally we are trying to find out a solution that "X" will do all the procurement activities in EBS and the AP liabilities are nullified by some process( May be AR invoice like that)..

             

            So please advise

             

            Thanks

            Karthik

            • 3. Re: Oracle Procurement/Sourcing :- Need advise on an implementation design
              Abhi83

              In Procurement, we have three kinds of models

              a) Center led Procurement (Sourcing and Negotation Done by One Organization - Utilized By another)

              b) Centralized Procurement (Sourcing, Purchase & Receipt Done by One Organization - Receiving by another Organization, and subsequent intercompany transfers)

               

              The Nullification you are talking about is the case of Centralized Purchasing and you need use a combination of Inter-company Transaction flows (in Inventory)and GBPA setup to achieve this.

              But rather taking simplistic view, your seems to be a classic case of Center Led Procurement.

               

              Can you please enlighten what is the basic SCM Structure and relationship between X & Y in above context and I am sure, we can propose a solution which fits.

              • 4. Re: Oracle Procurement/Sourcing :- Need advise on an implementation design
                Abhi83

                The Third model btw is decentralized Procurement model, not relevant to this discussion.

                • 5. Re: Oracle Procurement/Sourcing :- Need advise on an implementation design
                  1051789

                  Hi Abhi, Thank you for your reply.

                   

                  The basic relationship is "X" is contracted to do what "Y" requires.

                  Say, Y requires 100 man service hours for their projects, then they request "X" to do sourcing activities for a best bid .

                  "X" does every thing and receipt is done in "Y" location and payment is made by "Y".

                   

                  Note:- Both are not in ERP, they are using some custom process.Now we are trying to map this business scenario into oracle .

                   

                   

                   


                  • 6. Re: Oracle Procurement/Sourcing :- Need advise on an implementation design
                    Abhi83

                    The only problem with this requirement is One Organization cannot issue a purchase order (X)which will be invoiced by another (Y). PO and Invoice must be done within  the same OU, receipt however can be done in an Inventory Organization belonging to a different OU all together.

                    Inter company transaction flows and centralized procurement model is an answer to your question my friend.

                     

                    Rgds,

                    Abhi

                    • 7. Re: Oracle Procurement/Sourcing :- Need advise on an implementation design
                      1051789

                      Thank you Abhi!

                       

                      Could you please point out some setup documents regarding the Inter company transaction flows and centralized procurement model? I'm new to this and your help is highly appreciated.

                       

                      Thanks

                      Karthik

                      • 8. Re: Oracle Procurement/Sourcing :- Need advise on an implementation design
                        1051789

                        Hi All,

                         

                        Once basic question on the centralized procurement model. Please advise.

                        Scenario :-  Two OU(OU1- Requesting OU and OU2- Purchasing OU) Scenaio:-

                          

                        1Purchase Requisition in OU1
                        2AutoCreate PO in OU2
                        3Approve PO in OU2
                        4Receive the material in INV1 of OU1
                        5Supplier sends the invoice to OU2
                        6Cost the transactions
                        7Run ‘Create Intercompany AR invoices in OU2
                        8Run ‘Auto Invoice Master Program in OU2
                        9Run ‘Create Intercompany AP invoices in OU1
                        10Run ‘Expense Report Import in OU1

                         

                        Question:-

                        -------------

                        1. After step 5(Supplier sends the invoice to OU2) who will do the payment for supplier and what's the process?

                        2. I could see the intercompany invoice process in further steps which creates invoices, but not sure on how supplier payments are paid.

                           In which step the paymens(Supplier, Intercompany) are processed.


                        Please advise!

                        Thanks

                        Karthik

                        • 9. Re: Oracle Procurement/Sourcing :- Need advise on an implementation design
                          Abhi83

                          Great Karthik,

                           

                          I am glad I could point you in the right direction. Below is my point of view on this process:

                           

                          OU2 - Will Enter and Pay a simple AP Invoice, as any other PO

                          Technically OU2 as a Vendor in OU 1's books.

                          When the receipt is created and inter-company accounting process run, The Liability will be shifted from OU2 to OU1 and The Revenue will be acquired in the books of OU2 from OU1.

                          Now, with this the following transaction happens

                           

                          (Pays Regular Invoice)

                          OU2 ---->  Vendor (Receives)

                          (Receives Inter-company Payment and Sends Inter-Company AP Invoice )

                          ~

                          |   [On Transfer Price, can include markup]

                          |

                          (Pays)

                          OU1 --------< Material

                          (Receives, Inter-company Payable Invoice and Material)

                           

                          Payment to Supplier Happens based on Negotiated payment terms and aging as required by business.

                          "Accounting" if inter-company receivable and payables happens when you run the Intercompany process.

                          Payment/ Receipt - to be decided by Business as it will be like a regular invoice, except it would be created automatically and not entered by the user.

                          • 10. Re: Oracle Procurement/Sourcing :- Need advise on an implementation design
                            1051789

                            Thank you Abhi!

                             

                            Question on your above comment:-

                            1. "OU2 - Will Enter and Pay a simple AP Invoice, as any other PO"

                                 -  PO is created in OU2 for the supplier which is in the PO Header  and supplier Invoice is created in OU2 for the same supplier(PO Header supplier) and payment also done to Supplier (PO Header) from OU2 as other standard payment to the supplier is what you are trying to tell in this statement right?

                            2. And the other transactions are only to relieve the balances between OU1 and OU2 right?

                             

                            Please guide.

                             

                            Thanks

                            Karthik

                            • 12. Re: Oracle Procurement/Sourcing :- Need advise on an implementation design
                              1051789

                              Thank you Abhi. So through this central procurement process also the payment is done by procuring OU on behalf of requesting OU.

                              But our scenario is that payment should be directly done by requesting OU not the procuring OU.

                              Is it possible? Please advise!

                              • 13. Re: Oracle Procurement/Sourcing :- Need advise on an implementation design
                                Abhi83

                                Dear Karthik,

                                 

                                In conventional supply chain process, material procured by one unit (like corporate) may be received by another (like factory) but payment (bill to address) must always be to the OU raising the PO. AFAIK, the Invoicing cannot be done by a unit which has not created the PO itself, it defies logic.

                                 

                                The above process is the only answer. PO - AP must be in the same OU.