Intra-Inter Company Ordering and Billing within Complex...

1 © 2009 KBACE Technologies, Inc.

Intra-Inter Company Ordering and Billing within Complex Supply Chains

Larry Talbot, Enterprise Solution DirectorPJ Maher, Logistics Practice DirectorDiego Lucero, Senior Principal ConsultantEric Thomsin, Senior Principal Consultant

June 3, 2009

© 2009 KBACE Technologies, Inc.2

Introductions

•Larry Talbot – Enterprise Solution Director

•PJ Maher – Practice Director - Logistics Practice

•Diego Lucero – Senior Principal – Logistics Practice

•Eric Thomsin – Senior Principal – Logistics Practice


Agenda

•Review of Basic Intra-co & Inter-co Functionality

•Layering Intra and Inter-co Processes for Complex Supply Chain Networks

•Key Configurations

•Review of Accounting

•Other Considerations

•Questions and Wrap-up


Review of Basic Intra-co and Inter-co Functionality


Chronology 11.03 – 11.5.7

•Internal Ordering • Transfer of goods between two inventory organizations residing in same OU

• Supply chain solution 1st and foremost – driven by internal replenishment triggers

• Intra-company solution limits financial impacts to GL only (typically Balance Sheet)

• Fully automated process relies on Shipping Network

•Inter-company Procurement and Ordering• Very manual process (unless customized/extended)


Internal Ordering Flow (Intra-co)

Order Import

Order Management

Receiving

Inventory

Scheduling & Shipping

Order Management

OF1071Schedule

Sales Order Ship Date

OF1071Schedule


• The planner schedules sales order lines ship dates.

MM1149Ship

Material

MM1149Ship

Material

• Shipping Clerk packs,weighs, counts, ships and records shipments

• Material goes intransit

MM1090Pick

Material

MM1090Pick

Material

• Shipping Clerk picks and transfers orders to Staging

Internal Requisitioning


Create and Approve Internal Requisition


• Generated by Mix Max, Planning System, Manual,

Automated RequestImport Order


• Resp: OM for Shipping Org

• Source = Internal

Automated RequestRun Create Internal Order conc request


• Resp = Purchasing in Destination Org

Receive Internal Req/Internal SOReceive Internal Req/Internal SO

• Receiving clerk scans the inbound material against the Internal Requisition

Start Here

End Here

http://industry.us.oracle.com/Tutor11i/US/HTML/PRO1071W.htm



































Chronology 11.5.8

•Introduction of Inter-Company Relationships (Inventory Function)

• Inter-company Procurement and Ordering delivered; a more comprehensivefinancial solution for Interco

• Transfer of goods between two inventory organizations residing in different OU’s

• Designed predominantly for Inter-co Direct Ship Processes; driven directly through Order Management

• More robust transfer pricing simplifies the order processing and inter-company transactions where ‘arms-length transactions’ and hard documentation is required

•Internal Ordering (through Supply Chain) not compatible initially, however remained an option (w/caveats)


Shipping (Shipping OU)

Process Intercompany Transactions

Background Intercompany Processing

Order Entry & Scheduling (Selling OU)

Order Management

OF1069Manage

CustomerOrders

OF1069Manage

CustomerOrders

• Enter Customer Order where Selling OU is different from Shipping Warehouse OU.

OF1071Schedule


OF1071Schedule


• Order Entry schedules sales order lines ship dates based on ATP.

MM1149Ship

Material

MM1149Ship

Material


• Shipment is to End Customer• Allow transaction to COST

MM1090Pick

Material

MM1090Pick

Material

• Shipping (OU) Clerk picks and transfers orders to Staging

11.5.9 BFA v2.0

Automated RequestCreate AR Invoices

Automated RequestCreate AR Invoices

• Responsibility OU = Shipping OU

• Shipping OU = OU for Warehouse on SO

Automated RequestCreate Intercompany

Invoices


Invoices


• Source = Intercompany

Automated RequestCreate AP Invoices

Automated RequestCreate AP Invoices


• Selling OU = OU in which order was entered.

Automated RequestImport Payables

Interface(Expense Report Import)



• Responsibility OU = OU in which order was entered.

• Source = Intercompany

Inter-Company Procurement and Ordering(Direct Ship)

Invoicing (Selling OU)

Receivables

Create End Customer AR

Invoice


Invoice

• Standard AutoAccounting













































Chronology 11.5.9 - 12

•Enhanced to support Internal Ordering and Inter-company Procurement and Ordering

• “Dual” accounting eliminated (Interco AR & AP) from within Shipping Network functionality

• Transfer Pricing based on Source Org Cost or on Price List

•11.5.10 –> No Change in 12


Supply Chain Layered Flow (Intra-co and Inter-co) Order Import (US)

Order Management

Receiving (GmbH)

Inventory



Scheduling & Shipping (US)

Order Management

OF1071Schedule


OF1071Schedule



MM1149Ship

Material

MM1149Ship

Material



MM1090Pick

Material

MM1090Pick

Material


Automated RequestCreate Interco AR

Invoices


Invoices

• Creates Interface Records for AR



Invoices(US/GmbH)


Invoices(US/GmbH)

• Create actual invoice in AR

• Resp OU = Shipping OU• Source = Intercompany

Automated RequestCreate Interco AP

Invoices


Invoices

• Creates Interface Records for AP

• Selling OU = Destination OU



(US/GmbH)



(US/GmbH)

• Creates AP Invoice• Resp OU = Destination OU• Source = Intercompany

Internal Requisitioning (GmbH)





• Responsibility: Selling OU• Destination = Selling OU• Source = Shipping OU



• Resp: OM for Shipping OU




• Resp = Purchasing in Destination OU



Start Here

End Here

End Here























































Layering Intra-co and Inter-co Processes for Complex Supply Chain Networks


Complex Supply Chains

Customer Customer OrderOrder

Customer Customer ShipmentShipment


Complex Supply Chain (Intra-co and Inter-co) Flows




Invoices


Invoices

• Creates Interface Records for AR



Invoices(US/UK/NE)


Invoices(US/UK/NE)

• Create actual invoice in AR

• Resp OU = Shipping OU• Source = Intercompany


Invoices


Invoices

• Creates Interface Records for AP

• Selling OU = Destination OU



(US/UK/NE)



(US/UK/NE)

• Creates AP Invoice• Resp OU = Destination OU• Source = Intercompany

Create Order for End Customer (ITL)

Quoting/Order Management

Create Quote and Order

Create Quote and Order

• Enter Quote/Order where shipping warehouse is Org that will ship to end customer.

Start Here

Internal Requisitioning (NE/UK/US)





• Responsibility: Selling OU• Destination = Selling OU• Source = Shipping OU



• Resp = Purchasing in Destination OU

Order Import (NE/UK/US)

Order Management



• Resp: OM for Shipping OU


Scheduling & Shipping (US/UK)

Order Management

OF1071Schedule


OF1071Schedule



MM1149Ship

Material

MM1149Ship

Material



MM1090Pick

Material

MM1090Pick

Material


Receiving (UK/NE)

Inventory



Scheduling & Shipping (UK/NE)

Order Management

MM1149Ship

Material

MM1149Ship

Material



MM1090Pick

Material

MM1090Pick

Material


AR (ITL)

Receivables


Invoice


Invoice

• Standard AutoAccounting

End Here


Key Configurations


Key Configurations

Internal Order Transfers across operating Units – Implemented using Shipping Network and Intercompany RelationsShipping Network with Internal Order Enabled

• Define the shipping inventory organization and receiving inventory organization

Profiles Set Up• CST: Transfer Pricing Option: Yes (Price as Incoming/Price Not as Incoming)

• INV: Intercompany Invoicing for Internal Orders: Yes

Intercompany Relations Definition• Operating unit belonging to sending organization as ‘Shipping OU’

• Operating unit belonging to receiving organization as ‘Selling OU’

Price List association in ‘Bill To’ relationship for Internal Customer is defined in Intercompany Relations


Review of Accounting


Accounting Considerations • Transfer Pricing (TP) must be set properly in System Profiles

• Yes, Price Not As Incoming Cost: The incoming cost to the Receiving organization is the Shipping organization’s inventory cost.

• Costs - Based on Inventory Cost• Yes, Price As Incoming Cost: The incoming cost to the Receiving organization is based on

the transfer price.• Costs - Based on Price List

• Shipping Network – Used Primarily for Inter-Organization Transfers• Caveat – certain accounting setups are used by Inter-Company Relationships• “Transfer pricing” exclusively based on (inventory) “at cost” – Org to Org relationships • 11.5.9 to 11.5.10 functionality changes have simplified

• Inter-company Relationships – Provides alternate accounts to capture accruals & transfer profit

• Some Shipping Network accounts used – but extremely limited


Accounting – Transfer @ Transfer PriceRepresents valuation of the transfer @ transfer price in the receiving org

Order Shipment

CST: Transfer Pricing Option: 'Yes, Price as incoming cost':Standard Cost

Transfer Price = Rcv Org Cost


Inter-company Invoicing

CST: Transfer Pricing Option: 'Yes, Price as incoming cost':Standard Cost

Accounting – Transfer @ Transfer PriceRepresents valuation of the transfer @ transfer price in the receiving org


Order Shipment

CST: Transfer Pricing Option: 'Yes, Price not as incoming cost':Standard Cost

Accounting – Transfer @ Transfer PriceRepresent valuation of the transfer @ cost of sending org in the receiving org and the difference between

Transfer Price and Cost going into 'Profit in Inventory' Account defined in shipping network

Transfer Price = Price List


Inter-company Invoicing

CST: Transfer Pricing Option: 'Yes, Price not as incoming cost':Standard Cost

Accounting – Transfer @ Transfer PriceRepresent valuation of the transfer @ cost of sending org in the receiving org and the difference between

Transfer Price and Cost going into 'Profit in Inventory' Account defined in shipping network


Accounting Sources

Account Description Source Usage

In-transit Ship Network Conditionally

Inter-company ExpenseInter-co Relations Yes

Inventory ProfitInter-co Relations Yes

Invoices (AR & AP) AP/AR Yes

Freight/Tax AP/AR Yes

Transfer Charges Ship Network No

Purchase Price Variance Ship Network Conditionally

No

No

Inter-Org AR Clearing (Secondary) Ship Network

Inter-Org AP Clearing (Secondary) Ship Network


Other Considerations


Gotcha’s• May require modifications to Standard Cost of Goods WF• May require additional auto-accounting for Supplier (AP side

transaction) • May require additional auto-accounting for Customer (AR side

transaction)• Does GL Chart of Account structure have a distinct inter-company

segment?• Typically xxx-xxx-xxxx-xxx-xxxx-iii

• These examples don’t take into account additional Elemental Accounting implications for Inventory (Issue & Receiving)

• More entries generated• Transfer Price (Ship Org) = Material Element (Rcv Org)

• Currency translation loss/gain compounds complexity/analysis• Configured Products pushed through the supply chain• Revenue Recognition and Differed COGs implications


Questions


Contact InformationFor more information, please contact:

Enterprise Solution DirectorCell: (617) 803-1443 Phone: (781) 631-3194

Email: [email protected] Technologies, Inc.6 Trafalgar Square Nashua, NH 03063

Enterprise Solution DirectorCell: (617) 803-1443 Phone: (781) 631-3194


Larry TalbotLarry Talbot

Practice Director - LogisticsCell: (978) 884-4621


Practice Director - LogisticsCell: (978) 884-4621


PJ MaherPJ Maher

Intra-Inter Company Ordering and Billing within Complex...

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