Implementing Supply Chain Cloud Financial Orchestration ... · PDF fileOracle Value Chain...

OracleValue Chain ExecutionCloudImplementing Supply ChainFinancial Orchestration

Release 9

Oracle® Value Chain Execution CloudImplementing Supply Chain Financial Orchestration

Part Number E55673-03

Copyright © 2011-2014, Oracle and/or its affiliates. All rights reserved.

Authors: Carl Casey, Pallavi Ghosh

This software and related documentation are provided under a license agreement containing restrictions on use and disclosure and are protected byintellectual property laws. Except as expressly permitted in your license agreement or allowed by law, you may not use, copy, reproduce, translate, broadcast,modify, license, transmit, distribute, exhibit, perform, publish, or display any part, in any form, or by any means. Reverse engineering, disassembly, ordecompilation of this software, unless required by law for interoperability, is prohibited.

The information contained herein is subject to change without notice and is not warranted to be error-free. If you find any errors, please report them tous in writing.

If this is software or related documentation that is delivered to the U.S. Government or anyone licensing it on behalf of the U.S. Government, the followingnotice is applicable:

U.S. GOVERNMENT END USERS: Oracle programs, including any operating system, integrated software, any programs installed on the hardware, and/or documentation, delivered to U.S. Government end users are "commercial computer software" pursuant to the applicable Federal Acquisition Regulationand agency-specific supplemental regulations. As such, use, duplication, disclosure, modification, and adaptation of the programs, including any operatingsystem, integrated software, any programs installed on the hardware, and/or documentation, shall be subject to license terms and license restrictionsapplicable to the programs. No other rights are granted to the U.S. Government.

This software or hardware is developed for general use in a variety of information management applications. It is not developed or intended for use inany inherently dangerous applications, including applications that may create a risk of personal injury. If you use this software or hardware in dangerousapplications, then you shall be responsible to take all appropriate fail-safe, backup, redundancy, and other measures to ensure its safe use. OracleCorporation and its affiliates disclaim any liability for any damages caused by use of this software or hardware in dangerous applications.

Oracle and Java are registered trademarks of Oracle Corporation and/or its affiliates. Other names may be trademarks of their respective owners.

Intel and Intel Xeon are trademarks or registered trademarks of Intel Corporation. All SPARC trademarks are used under license and are trademarks orregistered trademarks of SPARC International, Inc. AMD, Opteron, the AMD logo, and the AMD Opteron logo are trademarks or registered trademarks ofAdvanced Micro Devices. UNIX is a registered trademark of The Open Group.

This software or hardware and documentation may provide access to or information on content, products and services from third parties. Oracle Corporationand its affiliates are not responsible for and expressly disclaim all warranties of any kind with respect to third-party content, products, and services. OracleCorporation and its affiliates will not be responsible for any loss, costs, or damages incurred due to your access to or use of third-party content, products,or services.

For information about Oracle's commitment to accessibility, visit the Oracle Accessibility Program website at http://www.oracle.com/pls/topic/lookup?ctx=acc&id=docacc

Oracle customers have access to electronic support through My Oracle Support. For information, visit http://www.oracle.com/pls/topic/lookup?ctx=acc&id=info or visit http://www.oracle.com/pls/topic/lookup?ctx=acc&id=trs if you are hearing impaired.

http://www.oracle.com/pls/topic/lookup?ctx=acc&id=docacc


http://www.oracle.com/pls/topic/lookup?ctx=acc&id=info


http://www.oracle.com/pls/topic/lookup?ctx=acc&id=trs

Oracle Value Chain Execution CloudImplementing Supply Chain Financial Orchestration

Contents

Preface i

1 Overview 1Supply Chain Financial Orchestration: Overview ........................................................................................................ 1

Financial Orchestration Flow: How it Works .............................................................................................................. 4

2 Implementing 6Implementing Oracle Fusion Financial Orchestration: Procedure ................................................................................ 6

Importing Business Unit, Customer, and Supplier Data: Procedure ........................................................................... 7

3 Manage Documentation and Accounting Rules 9Documentation and Accounting Rules: Explained ..................................................................................................... 9

Accounting Rule Currency Options: Explained .......................................................................................................... 9

Accounting Rule Conversion Types: Explained .......................................................................................................... 9

Accounting Rule Trade Distributions: Explained ........................................................................................................ 9

Track Profits in Inventory: Explained ....................................................................................................................... 10

Intercompany Invoices in Financial Orchestration: Explained ................................................................................... 10

Specifying Events That Apply Documentation and Accounting Rules: Procedure ..................................................... 10

4 Manage Supply Chain Financial Orchestration Transfer Pricing Rules 12Transfer Pricing Rules: Explained ............................................................................................................................ 12

Accounting Transfer Price: Explained ...................................................................................................................... 12

Transfer Pricing Markup Percentage: Explained ...................................................................................................... 12

5 Manage Supply Chain Financial Orchestration Buy and Sell Terms 13Buy and Sell Terms: Explained ............................................................................................................................... 13

Incoterms: Explained ............................................................................................................................................... 13

Primary Financial Route: Explained ......................................................................................................................... 13

6 Manage Supply Chain Financial Orchestration System Options 14Financial Orchestration System Options: Explained ................................................................................................. 14


7 Manage Profit Center Business Unit Party Relationships 15Profit Center Business Units: Explained .................................................................................................................. 15

Intercompany Buyer Profile: Explained .................................................................................................................... 15

Intercompany Seller Profile Explained: Explained ..................................................................................................... 16

What happens if I modify the supplier or customer for the legal entity? ................................................................... 16

When can I delete an intercompany buyer or seller profile? .................................................................................... 16

8 Manage Supply Chain Financial Orchestration Qualifiers 17Financial Orchestration Qualifiers: Explained ............................................................................................................ 17

9 Manage Supply Chain Financial Orchestration Flows 18Financial Orchestration Flows: Explained ................................................................................................................. 18

Setting Priorities for Financial Orchestration Flows: Explained ................................................................................. 18

10 Creating Financial Orchestration Flows 20Creating Financial Orchestration Flows: Worked Example ....................................................................................... 20


Preface

i

PrefaceThis Preface introduces information sources available to help you use Oracle Applications.

Oracle Applications HelpUse the help icon to access Oracle Applications Help in the application.

Note

If you don't see any help icons on your page, click the Show Help button in the global area. Not all pages havehelp icons.

You can also access Oracle Applications Help at https://fusionhelp.oracle.com/.

Oracle Applications GuidesTo find other guides for Oracle Applications, go to:

• Oracle Applications Help, and select Documentation Library from the Navigator menu.

• Oracle Help Center at http://docs.oracle.com/

Other Information Sources

My Oracle SupportOracle customers have access to electronic support through My Oracle Support. For information, visit http://www.oracle.com/pls/topic/lookup?ctx=acc&id=info or visit http://www.oracle.com/pls/topic/lookup?ctx=acc&id=trs if youare hearing impaired.

Oracle Enterprise Repository for Oracle Fusion ApplicationsOracle Enterprise Repository for Oracle Fusion Applications (http://fusionappsoer.oracle.com) provides details on assets (suchas services, integration tables, and composites) to help you manage the lifecycle of your software.

Documentation AccessibilityFor information about Oracle's commitment to accessibility, visit the Oracle Accessibility Program website at http://www.oracle.com/pls/topic/lookup?ctx=acc&id=docacc.

Comments and SuggestionsPlease give us feedback about Oracle Applications Help and guides! - Send e-mail to:[email protected]. - Click your user name in the global area of Oracle Applications Help,and select Send Feedback to Oracle.

https://fusionhelp.oracle.com/

http://docs.oracle.com/



http://www.oracle.com/pls/topic/lookup?ctx=acc&id=trs

http://fusionappsoer.oracle.com




Chapter 1Overview

1

1 Overview

Supply Chain Financial Orchestration: OverviewOracle Fusion Supply Chain Financial Orchestration is a configurable application that you can use to manage an intercompanytransaction, which is a type of transaction that occurs between a seller and a buyer, where the seller provides a product orservice to the buyer, and this buyer resides in the same enterprise as the seller but in a different legal entity or business unit.Financial Orchestration can also support an intracompany flow where a financial orchestration exists between two differentprofit center business units that belong to the same legal entity. You can use Financial Orchestration to separate the physicalpart of this transaction from the financial part of the transaction. The following diagram illustrates an example of this internal


Chapter 1Overview

2

buyer and seller relationship. It includes an intercompany transaction that occurs in Vision Corporation, which is a fictitiouscompany that makes and sells computer products.

In this example, a financial orchestration flow exists between the Vision Distribution Center, located in Singapore, and VisionOperations, located in North America. The Vision Distribution Center sends the physical product that is involved in thetransaction to retailers. It also sends the financial information and transfers ownership of the product in the financial booksfor the transaction to Vision Operations in North America. Each of these organizations constitutes a separate legal entity thatresides in Vision Corporation. However, they reside in different countries, and they each require separate accounting and taxreporting. You can use Oracle Fusion Supply Chain Financial Orchestration to capture, process, and perform an accountingof the events that occur during an intercompany transaction in an enterprise that is similar to Vision Corporation. For example,you can use it to do the following work:

• Create documentation and accounting rules that specify the type of accounting documentation to create.For example, whether or not to create an intercompany invoice, to track profits in inventory, or to track tradedistributions.


Chapter 1Overview

3

• Create transfer pricing rules that specify whether to use the transaction cost, a purchase order price, or the salesorder price as the basis to calculate the intercompany transfer price between the seller and the buyer. You cancreate transfer pricing rules that apply a markup or markdown percentage on the internal sale.

• Create buy and sell terms that specify the selling and buying legal entities, the business units within these entitiesthat constitute the buyer and seller, the documentation rules, accounting rules, and transfer pricing rules to use, thepayment terms to use, incoterms and incoterm locations, and tax determinants.

• Create intercompany buyer profiles and intercompany seller profiles that Financial Orchestration uses to create theintercompany invoice. You can specify the business units that provide the procurement and payables invoicing forthe profit center business unit, the business unit that provides receipt accounting information, the bill-to business unitand bill-to locations, and the procurement business unit.

• Create financial orchestration qualifiers that specify when and under what conditions to run a financial orchestrationflow. For example, you can create a rule that specifies to run an orchestration flow only if a particular supplier isinvolved in the transaction, and only if the flow is a procurement flow.

• Create financial orchestration flows. You can specify the legal entities and business units that are involved in a flow,the financial orchestration qualifiers that control when to use the flow, the financial routes to use for the flow, thebuy and sell terms to use with the flow, and the date when the flow goes into effect. You can also specify a priorityamong different flows.

In summary, Oracle Fusion Financial Orchestration helps your company to meet the following business objectives:

• Support complex, global structures without compromising supply chain efficiency.

• Model your corporate tax structures in a global environment efficiently without impacting the physical movement ofgoods. This capability helps to make sure you can get goods and services to your customers as quickly as possible,and lower your total supply chain costs at the same time.

• Optimize operational efficiency by centralizing sourcing and order management functions.

• Run financial orchestration flows without impacting the physical movement of goods.

• Define business rules for financial orchestration flows that support a variety of physical movements in your supplychain. This capability can reduce implementation costs and cycle time, and it allows you to react effectively tocorporate reorganizations or acquisitions.

In general, this implementation guide uses the phrase Financial Orchestration to describe the Financial Orchestration workarea and the work that it does. This work area is part of the Oracle Fusion Financial Orchestration product offering.


Chapter 1Overview

4

Financial Orchestration Flow: How it WorksThe following diagram illustrates a typical financial orchestration flow that Financial Orchestration manages.

Explanation of Callouts

A financial orchestration flow includes the following steps:

1. A Fusion Supply Chain application, such as Inventory and Receiving, sends a notification that a supply chain eventoccurred, such as a shipment transaction.

2. Financial Orchestration receives the supply chain event. For more information, see Specifying Events That TriggerDocumentation and Accounting Rules: Procedure.


Chapter 1Overview

5

3. Financial Orchestration identifies the financial orchestration flow that it must use in reply to the event. It uses theconfiguration that you specify on the following pages to identify this flow:

◦ Manage Supply Chain Financial Orchestration Qualifiers

◦ Manage Supply Chain Financial Orchestration Flows

For more information, see Creating Financial Orchestration Qualifiers: Procedure and Financial OrchestrationFlows: Explained.

4. Financial Orchestration creates an instance of the financial orchestration flow that it identified in step 3.

5. Financial Orchestration creates the tasks that it uses to run the instance.

6. Financial Orchestration interacts with one or more Fusion applications. It can interact with the following Fusionapplications while the instance runs. It can exchange information about the instance with these applicationsautomatically, so you are not required to do any configuration to enable these interactions:

◦ Distributed Order Orchestration. Provides the Orchestration Order information for shipment flows.

◦ Procurement. Provides the Purchase Order information for procurement flows, and confirms whether or not afinancial orchestration flow that does validation is available when it creates or updates a global procurementpurchase order.

◦ Product Information Manager. Provides information about the products that Financial Orchestration uses foreach supply chain transaction.

◦ Financials. Provides information about the supplier and customer that Financial Orchestration associates witheach legal entity. To get this information, Financials uses the advanced global intercompany that you specifywhen you set up Financials. Financial Orchestration interfaces the intercompany receivables and payablesinvoices to Financials.

◦ Materials Management and Logistics. Sends a notification to Financial Orchestration that indicates that atransaction occurred in the physical supply chain, such as a shipment or a receipt. It also sends other detailsabout each transaction.

◦ Managerial Accounting. Tracks cost elements. For more information, see Cost Components, Cost Elements,and Analysis Groups: Explained.

7. Financial Orchestration uses various Web services to interact with other Fusion applications that provide and storecosting, receivables, and payables data.

8. After you complete the setup, you can use the Monitor Financial Orchestration Execution page to monitor andcorrect problems that might occur during the financial orchestration flow.


Chapter 2Implementing

6

2 Implementing

Implementing Oracle Fusion Financial Orchestration:ProcedureThis topic describes how to implement Oracle Fusion Supply Chain Financial Orchestration. For more information about thisoffering, see Supply Chain Financial Orchestration: Overview.

1. Import the data that Financial Orchestration uses to create relationships between each business unit, customer, andsupplier for intercompany invoices.

For more information, see Importing Business Unit, Customer, and Supplier Data: Procedure.

2. Log into Fusion.

Make sure you use a login that allows you to add a new implementation project that includes the Supply ChainFinancial Orchestration product offering. Consult with your system administrator to determine the login that youmust use.

3. In the Navigator, click Setup and Maintenance.

4. On the Setup and Maintenance page, click Configure Offerings.

5. On the Configure Offerings page, do the following work:

◦ Make sure the Implementation Status for the Supply Chain Financial Orchestration offering is Implemented. Ifit is not implemented, then implement it now.

◦ Make sure the Implementation Status for the Materials Management and Logistics offering is Implemented. Ifit is not implemented, then implement it now.

If these offerings do not exist, or if you cannot implement them, then consult with your system administrator todetermine how to implement them, implement them, and then resume this procedure.

6. Create an implementation project:

◦ On the Setup and Maintenance page, click Manage Implementation Projects.

◦ On the Manage Implementation Projects page, click Actions, and then click Create.

◦ In the Name field, enter a value that describes your project, and then click Next.

For example, enter My Financial Orchestration Project.

• On the Create Implementation Project: Select Offerings to Implement page, include the Supply ChainFinancial Orchestration offering, and then click Save and Open Project.

The application creates an implementation project that you can use to customize Financial Orchestration.

7. In the Task list, expand the Supply Chain Financial Orchestration folder.



7

This folder includes the following folders:

◦ Define Common Applications Configuration for Supply Chain Financial Orchestration. Includes all thetasks that Financial Orchestration requires for common applications. You do not need to modify any of thesetasks.

◦ Define Supply Chain Financial Orchestration. Allows you to customize Supply Chain FinancialOrchestration. You can expand this folder to view the tasks that you must perform to set up FinancialOrchestration.

8. Use the Define Supply Chain Financial Orchestration folder and the tasks that it contains to set up FinancialOrchestration.

It is recommended that you complete these tasks in the following sequence:

◦ Manage Documentation and Accounting Rules

◦ Manage Supply Chain Financial Orchestration Transfer Pricing Rules

◦ Manage Supply Chain Financial Orchestration Manage Buy and Sell Terms

◦ Manage Profit Center Business Unit Party Relationships

◦ Manage Supply Chain Financial Orchestration Qualifiers

◦ Manage Supply Chain Financial Orchestration Flows

It is recommended that you use this sequence because the configuration that you do in some tasks dependson the work that you do in prior tasks. For example, you specify buy and sell terms when you create a financialorchestration flow, so you must create the buy and sell terms before you create the financial orchestration flow.For most configurations, you must complete each of these tasks. Whether or not you complete the followingtask depends on your deployment requirements:

• Manage Supply Chain Financial Orchestration System Options

Importing Business Unit, Customer, and SupplierData: ProcedureFor Oracle 11g Release 9 (11.1.9) and Release 10 (11.1.10), you must import the data that Financial Orchestration uses tocreate relationships between each business unit, customer, and supplier for intercompany invoices.

1. Export the Financials product offering:

◦ Log into an environment that includes the Financials offerings.

◦ In the Navigator, click Setup and Maintenance.

◦ Click Manage Offerings and Functional Areas.

◦ In the Search Results list, choose the Financials product offering, and then click Export.



8

◦ In the Export Offering dialog box, specify a file to export, and then click Export.

You must export your customizations so Financial Orchestration can use them when it processes orderinformation. For more information, see Exporting and Moving Customizations: Points to Consider.

2. Repeat step 1 for the Materials Management and Logistics product offering.

3. Repeat step 1 for the Supply Chain Financial Orchestration product offering.

4. Import the Financials product offering:

◦ Log into the environment where you are setting up Financial Orchestration.

◦ In the Navigator, click Setup and Maintenance.

◦ Click Manage Offerings and Functional Areas.

◦ In the Search Results list, click Import.

◦ In the Import Offering dialog box, locate the file that you exported in step 1, and then click Import.

◦ In the Search Results list, click Import.

5. Import the other product offerings:

◦ Repeat step 4 for the Materials Management and Logistics product offering.

◦ Repeat step 4 for the Supply Chain Financial Orchestration product offering.

6. Import each supplier and customer:

◦ Create a file that includes information about your suppliers and customers.

Fusion Applications do not define suppliers and customers in the Functional Setup Manager, so you mustimport them. You must create and upload a file that includes information about each supplier and customer.This file must use a comma-separated value (CSV) format.

◦ Import the file. For more information, see Importing Data from a File: Getting Started.


Chapter 3Manage Documentation and Accounting Rules

9

3 Manage Documentation and Accounting Rules

Documentation and Accounting Rules: ExplainedYou can create documentation and accounting rules that do the following work:

• Specify whether or not an intercompany invoice is required.

• Specify the type of currency and the conversion type to use during intercompany invoicing.

• Specify whether or not to track profits as a separate cost in the inventory that the customer controls.

• Specify the event that runs the rule. For example, you can specify to use the shipment transaction or the receipttransaction to start the tasks that Financial Orchestration uses during an internal transfer of goods.

Accounting Rule Currency Options: ExplainedYou can use the Currency Option on the Manage Documentation and Accounting Rules page to specify the currencythat Financial Orchestration uses during an intercompany transaction. You can pick of the following values:

• Selling Node. Use the same currency that the seller uses. For example, if the seller uses the US Dollar, and if thebuyer uses the Euro, then Financial Orchestration will use the US Dollar throughout the entire transaction, including inthe invoice data that it creates.

• Buying Node. Use the same currency that the legal entity uses in their primary ledger. This legal entity resides in thebusiness unit.

• Source document. Use the currency that the source document uses.

Accounting Rule Conversion Types: ExplainedYou can use Conversion Type on the Manage Documentation and Accounting Rules page to specify the exchange ratethat Financial Orchestration uses for calculations. For example, when it calculates the intercompany transfer price. Formore information about the conversion types that you can use, see Using Rate Types: Examples and What's the differencebetween spot, corporate, user, and fixed rate types?

Accounting Rule Trade Distributions: ExplainedYou can use the Trade Distributions option on the Manage Documentation and Accounting Rules page to include atrade distribution. Fusion Cost Management uses trade distributions when it does the cost accounting distributions for thetransactions that Financial Orchestration sends. These are the accounting distributions that Fusion Cost Management usesfor intercompany accrual, intercompany cost of goods sold, and so on. For more information, see Record Cost AccountingFAQs.



10

Track Profits in Inventory: ExplainedFinancial Orchestration comes predefined to track profits according to the items that your physical inventory contains.For example, assume your physical inventory includes 1,000 pieces of product A, and that you realize a profit of $1.00 oneach of these pieces. In this example, Financial Orchestration calculates a profit of $1,000 for product A. To override thisbehavior, you can remove the check mark from the Track profits in inventory option on the Create Documentation andAccounting Rule page.

Intercompany Invoices in Financial Orchestration:ExplainedIf you use the Intercompany invoice option on the Manage Documentation and Accounting Rules page to includeintercompany invoices, then Financial Orchestration creates the following intercompany invoices during the transaction:

• Accounts payable invoice. A transaction that records the payable accounting when one business unit buys goods orservices from another business unit.

• Accounts receivable invoice. A transaction that records the receivable accounting for the shipping business unit in anintercompany flow. It records journal entries in accounts receivables for the seller, it records revenue, and it recordstax and freight charges. It adds journal entries to the inventory asset account and the cost of goods sold account forthe shipping warehouse.

If you specify to not include intercompany invoices, then Financial Orchestration does not create any intercompanyinvoices during the transaction. An intercompany invoice is not mandatory. For example, an intracompany trade thatoccurs between business units that belong to the same legal entity might not require an intercompany invoice. In thissituation, a trade distribution in cost accounting handles the accounting for the receivables and payable balances.For more information, see Cost Accounting Process Flow: Explained.

Specifying Events That Apply Documentation andAccounting Rules: ProcedureIf you use the Create Documentation and Accounting Rule page, then Financial Orchestration automatically adds thetasks that it uses to process the transaction for your rule, and then displays them in the View Tasks column of the ForwardFlow and Return Flow tabs on the Create Documentation and Accounting Rule page. You cannot modify these tasks,but you can specify the event that applies them.

1. On the Create Documentation and Accounting Rule page, click one of the following tabs:

◦ Forward Flow. Specifies the trigger to use when the seller sells a good or service to the buyer.

◦ Return Flow. Specifies the trigger to use when the buyer returns a good or service to the seller.

2. In the Task Generating Event section, choose a task-generating event.

For example, to apply this rule when Financial Orchestration receives a purchase order from the buyer, you do thefollowing:

◦ Click the Forward Flow tab.



11

◦ In the Procurement dropdown list, choose PO Receipt.

For Release 9, Financial Orchestration does not support returns for an interorganization transfer.

You can specify multiple events for a single rule. For example, to apply this rule when Financial Orchestration receives apurchase order from the buyer, or when it creates a shipment order, you do the following:

1. Click the Forward Flow tab.

2. In the Procurement dropdown list, choose PO Receipt.

3. In the Shipment dropdown list, choose SO Receipt.


Chapter 4Manage Supply Chain Financial Orchestration Transfer Pricing

Rules

12

4 Manage Supply Chain Financial OrchestrationTransfer Pricing Rules

Transfer Pricing Rules: ExplainedA transfer pricing rule calculates the intercompany transfer price according to the information that is associated with anintercompany transactionThe transfer pricing rules determine how to price an international transaction that occurs in amultinational company so that each country receives the correct share of taxation. You can use a transfer pricing rule withbuy and sell terms. For more information, see Buy and Sell Terms: Explained.

Accounting Transfer Price: ExplainedYou can use the Accounting Transfer Price on the Manage Supply Chain Financial Orchestration Transfer PricingRules page to specify the intercompany transfer price that Financial Orchestration uses for the transactions and documentsthat it creates in a financial orchestration flow. You can choose one of the following options:

• Transaction Cost Basis. Use the production cost that the seller incurs to produce the product.

• Source Document Price Basis. Use the purchase cost that the seller incurs when it buys the product from anexternal supplier. This price basis varies depending on the following Business Process Type that you set in theManage Supply Chain Financial Orchestration Flows task:

◦ Procurement. Use the value that the line item of the purchase order contains.

◦ Shipment. Use the selling price from the fulfillment line that Oracle Fusion Distributed Order Orchestrationspecifies.

◦ Internal Transfer. Not supported.

Transfer Pricing Markup Percentage: ExplainedYou can use the Markup Percentage on the Manage Supply Chain Financial Orchestration Transfer Pricing Rulespage to allow the seller to earn a profit or to incur a loss on an intercompany transaction. To determine the intercompanytransfer price, Financial Orchestration multiples the Markup Percentage with the value of the Accounting Transfer Price. Forexample, if an item costs $1.00, and if you set Markup Percentage to 15, then Financial Orchestration sets the transactionprice for this item to $1.15.

You can also enter a negative value to incur a loss. For example, assume the Singapore Distribution Center must mark downthe items that it sells to retailers by 15%. So, if an item costs $1.00, and if you set Markup Percentage to -15, then FinancialOrchestration sets the intercompany transfer price for this item to $0.85.


Chapter 5Manage Supply Chain Financial Orchestration Buy and Sell

Terms

13

5 Manage Supply Chain Financial OrchestrationBuy and Sell Terms

Buy and Sell Terms: ExplainedBuy and Sell terms are terms that you can use to specify the conditions that determine the nature of an agreement to useduring an intercompany transaction, such as the documentation and accounting rule to use, the transfer pricing rule touse, and so on. Financial Orchestration gets some of the values that it displays for the Receivable Invoice Type field, theReceivables Credit Memo Type field, and in the Default Buy Side Tax Determinants section and the Default Sell SideTax Determinants section of this page from the values that you specify when you set up receivables. For more informationabout setting up receivables, see Oracle Financials Cloud Using Receivables, Payments, Cash, and Collections.

Incoterms: ExplainedAs an option, you can specify the Incoterm (International Commercial Terms) and Default Incoterm Location on the ManageSupply Chain Financial Orchestration Manage Buy and Sell Terms page. Financial Orchestration uses these items aspart of the matter of record for the intercompany transaction. The incoterm and incoterm location that you choose does notaffect how Financial Orchestration handles the transaction or does calculations, but it does provide audit trail information.

Primary Financial Route: ExplainedYou typically use the Manage Supply Chain Financial Orchestration Flows page to create the primary route. You canalso click Add Primary Route on the Create Buy and Sell Term page to specify the primary route, and then choose thebusiness process type to use with the buy and sell terms that you specify. Financial Orchestration uses the route that youspecify for all intercompany transactions. In Release 9, Financial Orchestration does not support the inclusion of internalfinancial intermediaries on the financial route. These internal intermediaries are organizations that reside in the company, suchas an organization that resides in Vision Corporation. Also in Release 9, Financial Orchestration supports only the primaryfinancial route. You cannot specify a secondary financial route.


Chapter 6Manage Supply Chain Financial Orchestration System Options

14

6 Manage Supply Chain Financial OrchestrationSystem Options

Financial Orchestration System Options: ExplainedYou can specify the following financial orchestration system options on the Manage Supply Chain FinancialOrchestration System Options page. Financial Orchestration uses them when it processes a financial orchestration flow:

• Item Validation Organization. Specify the organization that Financial Orchestration uses to validate each itemaccording to the qualifiers that you create. For more information, see Financial Orchestration Qualifiers: Explained.

• Service Item. Specify the service item number that various Financial Orchestration tasks use when the supply chainflow handles a service item. Trade Distributions and Intercompany AR Invoice are example tasks.

• Maximum Number of Records per Batch. Specify the number of records that Financial Orchestration gets when itprocesses supply chain events. You can use this field to tune the performance of your server environment.


Chapter 7Manage Profit Center Business Unit Party Relationships

15

7 Manage Profit Center Business Unit PartyRelationships

Profit Center Business Units: ExplainedA profit center business unit is a part of a company that you treat as a separate business. Your organization calculates theprofits and losses for this profit center separately from other parts of the organization.

Intercompany Buyer Profile: ExplainedYou can specify the intercompany buyer profile in the Profit Center BU Profiles section of the Create Profit CenterBU to Party Relationship page. You must specify it for a profit center business unit that acts as a buyer in a buy and sellrelationship. You can use the following sections:

• Setup for Buyer's Payables Invoice and Purchase Order. You can use the following dropdown lists to specifythe business units that provide the procurement and payables invoicing for the profit center business unit. FinancialOrchestration uses these business units when it calculates trade distributions and costing transactions, so you mustspecify them even if you do not require Financial Orchestration to create an intercompany invoice for the buy and sellrelationship:

◦ Procurement Business Unit. Specify the business unit that provides procurement services and that storesthe supplier site data that Financial Orchestration uses to create the intercompany payables invoice.

◦ Bill to Business Unit. Specify the business unit that Financial Orchestration must use to get the attributes thatit uses to create the receipt accounting in the Fusion Cost Management application.

• Customer Locations for Seller's Receivables Invoice and Sales Order. You can use the following dropdownlists:

◦ Seller's Customer Address Set. Choose an address set. The address set that you choose includes the bill-to locations that you can specify for the buyer. If your organization does not require an intercompany invoice,then you do not need to specify an address set or bill-to location.

◦ Bill to Location. Choose a location that identifies the profit center business unit that Financial Orchestrationmust use as the buyer. Financial Orchestration uses this bill-to location to create the intercompany receivablesinvoice that it sends to the selling business unit. Note that the Manage Legal Entity Supplier CustomerAssociation task from Advance Global Intercompany System (AGIS) of the Financials product offering providesthe customer and supplier record for the legal entity.

If you modify any values for the intercompany buyer profile, then Financial Orchestration does not do any of the validationsfor the buy and sell terms that you specify, or for the financial routing that you specify. For more information, see Buy and SellTerms: Explained and Primary Financial Routes: Explained.


Chapter 7Manage Profit Center Business Unit Party Relationships

16

Intercompany Seller Profile Explained: ExplainedYou can specify the intercompany seller profile in the Profit Center BU Profiles section of the Create Profit CenterBU to Party Relationship page. You must specify it for a profit center business unit that acts as a seller in a buy and sellrelationship. You can use the following sections:

• Business Unit for Seller's Receivables Invoice. In the Receivables Business Unit dropdown list, choose theprofit center business unit where Financial Orchestration sends the receivables invoice.

• Supplier Site for Buyer's Payables Invoice and Purchase Order. You can use the following dropdown lists:

◦ Buyer's Procurement Business Unit. Choose the profit center business unit that acts as the seller in the buyand sell relationship.

◦ Buyer's Bill to Business Unit. Choose the business unit where Financial Orchestration sends the bill.

◦ Supplier Site. Choose the supplier site that Financial Orchestration uses to create the intercompany payablesinvoice.

What happens if I modify the supplier or customer forthe legal entity?If you define an intercompany seller profile , and then at some later point you modify this profile, then Financial Orchestrationdisplays an error message that describes that you updated the supplier profile and that you must also update the sellerprofile with new supplier information. To fix this error, you must use the Profit Center BU Profiles section of the Edit ProfitCenter BU to Party Relationship page to modify the seller profile. If you do this modification, then this page displaysthe name of the supplier that you modified in the Supplier field. You must also do similar work if you modify the buyer. Forexample, if you modify the intercompany buyer profile, then you must also modify this profile with the new buyer information.

When can I delete an intercompany buyer or sellerprofile?You can delete:

- The intercompany buyer profile only if the profit center business unit is not a buying business unit in any of the buy and sellterms, or in any financial route.

- The intercompany seller profile only if the profit center business unit is not a selling business unit in any of the buy and sellterms, or in any financial route.


Chapter 8Manage Supply Chain Financial Orchestration Qualifiers

17

8 Manage Supply Chain Financial OrchestrationQualifiers

Financial Orchestration Qualifiers: ExplainedA financial orchestration qualifier is a rule that specifies when to run one of the financial orchestration flow that you createin the Manage Supply Chain Financial Orchestration Flows task. If you do not create any qualifier, then FinancialOrchestration runs the financial flow for all the transactions that it receives.


Chapter 9Manage Supply Chain Financial Orchestration Flows

18

9 Manage Supply Chain Financial OrchestrationFlows

Financial Orchestration Flows: ExplainedYou can use a financial orchestration flow to do the following:

• Manage the internal trade relationships that exist between two entities, where these entities might reside in the sameorganization but in widely dispersed physical locations, including in different countries.

• Define the trade relationship that exists between two entities, including business rules, internal controls, regulatorycompliances, and other terms and conditions. These controls allow you to run, monitor, and evaluate thetransactions that occur in the trade relationships that exist between two entities.

• Orchestrate supply chain events that occur as the result of a transaction that is associated with a financialorchestration flow, including events that this flow receives from an external source system.

• Start tasks in an external system that is part of the financial orchestration flow.

• Create a series of financial movements of goods that can provide equitable distribution of the product margin to thecountries and tax jurisdictions that are involved in a transaction.

• Set a date that indicates when to start using a financial orchestration flow. This dating allows you to configureFinancial Orchestration so that it creates transactions that are associated with a source document that occur beforethe date when the modified financial orchestration flow goes into effect. Financial Orchestration can also associatetransactions with this flow when your source system creates the source document after this date.

Setting Priorities for Financial Orchestration Flows:ExplainedYou can set the Priority of a financial orchestration flow to specify which flow to use when more than one flow is available fortwo primary trade partners. The lower the number you use, the higher the priority. For example, if you set the Priority to 1for Flow A, and 2 for Flow B, then Financial Orchestration will use Flow A. In a more detailed example, assume the followingsituation exists:

FinancialOrchestrationFlow

Priority ShippingBusiness Unit

Selling BusinessUnit

Qualifier Rule

1

10

BU A

BU B

Category =Category B

2

20

BU A

BU B

Category =Category A


Chapter 9Manage Supply Chain Financial Orchestration Flows

19

FinancialOrchestrationFlow

Priority ShippingBusiness Unit

Selling BusinessUnit

Qualifier Rule

3

30

BU A

BU B

None. Applicableto all documents.

The following table summarizes how to set up the priority for each financial orchestration flow in this example.

Source Document FinancialOrchestration Flow

Priority Result

DOO fulfillment line 1

Flow 1

Priority for Flow 1 is 10.Priority for Flow 3 is 30.

Financial Orchestrationassigns Flow 1 thehighest priority.


Flow 2

Priority for Flow 2 is 20.Priority for and Flow 3 is30.

Financial Orchestrationassigns Flow 2 thehighest priority.


Flow 3

Only Flow 3 is assigned.

Financial Orchestrationdoes not use the Priority.


Chapter 10Creating Financial Orchestration Flows

20

10 Creating Financial Orchestration Flows

Creating Financial Orchestration Flows: WorkedExampleThis example demonstrates how to create a financial orchestration flow for Vision Corporation, which is a multinationalcompany that makes and sells computerized toys. It describes how to create this flow between Vision Operations, whichis the selling business unit located in the United States, the Vision Distribution Center, which is the shipping business unitlocated in Singapore, and the Schatze Toy Company, which is a retailer with locations in Germany. The following diagram



21

illustrates the financial orchestration flow for this example, and demonstrates how this flow separates the physical flow ofgoods for this transaction from the financial flow for this transaction:

Note the following items for this example:

Item Description

Flow type

Shipment

Selling business unit

Vision Operations



22

Item Description

Customer

Schatze Toy Company

Shipping business unit

Vision Distribution Center

Qualifier

All asset items

Sales order currency

USD (United States Dollar)

Sales order price

$100.00 USD

Intercompany transfer price

Equal to the sales order price

Intercompany trade currency

USD

Intercompany invoice

Required

Track profit in inventory

Yes

Summary of the TasksCreate a financial orchestration flow:

1. Creating documentation and accounting rules

2. Creating transfer pricing rules

3. Creating buy and sell terms

4. Creating profit center business unit party relationships

5. Creating financial orchestration qualifiers

6. Creating financial orchestration flows

7. Testing your custom financial orchestration flow

8. Setting financial orchestration system options

9. Testing your custom financial orchestration flow

Creating Documentation and Accounting RulesVision Operations is the seller. It uses the same currency that Vision Corporation uses, and it uses the standard currencyrate that Vision Corporation uses. Vision Operations uses trade distributions, tracks profits in inventory, and requires anintercompany invoice. It must capture this transaction only for a shipment event, and not for a procurement or intercompany



23

transfer. It must handle returns in the same way that it handles shipments, so make sure you set the forward flow and thereturn flow to use the same events. To create the documentation and accounting rules, do the following work:

1. In the Navigator, click Setup and Maintenance.2. In the Task list, expand the Supply Chain Financial Orchestration folder, and then expand the Define Supply

Chain Financial Orchestration folder.3. Click Go To Task next to Manage Supply Chain Financial Orchestration Documentation and Accounting

Rules.4. On the Manage Documentation and Accounting Rules page, Click Actions, and then click Create.5. On the Create Documentation and Accounting Rule page, set the following values.

Field Value

Name

Vision Operations Documentation and AccountingRule

Currency Option

Source document

Conversion Type

Corporate

Trade Distributions

Contains a check mark

Track Profits In Inventory


Intercompany Invoices


Effective Start Date

Use today's date

6. In the Forward Flow tab, set Shipment to SO Shipment.This is a shipment flow, so you do not set a value for Procurement or for Internal Transfer. FinancialOrchestration uses these fields for other types of flows. For more information, see Types of Financial OrchestrationFlows: Explained.

7. Click the Return Flow tab, and then set Shipment to SO Shipment.8. Click Save and Close.

Creating Transfer Pricing RulesVision Operations must use the production cost that it incurs to produce computerized toys as the transfer pricing rule, andit requires a 15% markup on this cost so that it can realize a profit when it sells products to internal buyers. To create theintercompany transfer price, do the following work:

1. On the Implementation Project page, in the Task list, click Go To Task next to Manage Supply ChainFinancial Orchestration Transfer Pricing Rules.

2. On the Manage Transfer Pricing Rules page, click Actions, and then click Create.3. On the Create Transfer Pricing Rule dialog box, set the following values.



24

Field Value

Name

Vision Operations Transfer Pricing Rule

Accounting Transfer Price

Source Document Price Basis. For moreinformation, see Transfer Pricing Cost Basis:Explained.


Use today's date.

Markup Percentage

15

4. Click Save and Close, and then click Done.

Creating Buy and Sell TermsVision Distribution Center is the seller and Vision Operations is the buyer. Vision Distribution Center requires an intercompanyinvoice that is payable immediately. To create the buy and sell terms, do the following work:

1. On the Implementation Project page, in the Task list, click Go To Task next to Manage Supply ChainFinancial Orchestration Buy and Sell Terms.

2. On the Manage Buy and Sell Terms page, click Actions, and then click Create.3. On the Create Buy and Sell Term page, set the following values. Leave all other fields at their default values. Do

not modify values in the tax determinants sections.

Field Value

Name

Vision Buy and Sell Term

Selling Legal Entity


Selling Business Unit


Transfer Pricing Rule

Vision Operations Transfer Pricing Rule

Documentation and Account Rule

Vision Operations Documentation and AccountingRule

Receivables Invoice Type

Intercompany

Payment Terms

Immediate



25

Field Value

Incoterm

Leave empty

Buying Legal Entity

Vision Operations

Buying Business Unit

Vision Operations

Default Incoterm Location

Leave empty

4. Click Save and Close, and then click Done.

Creating Profit Center Business Unit Party RelationshipsTo create the party relationship for the profit center business unit, do the following work:

1. On the Implementation Project page, in the Task list, click Go To Task next to Manage Profit CenterBusiness Unit Party Relationships.

2. On the Manage Profit Center BU to Party Relationships page, click Actions, and then click Create.

3. On the Create Profit Center BU to Party Relationships page, set the following values. Leave all other fields attheir default value.

Field Value

Profit Center Business Unit

Vision Operations

Default Trade Organization

V1

Ship-to Location

Leave empty

4. In the Profit Center BU Profiles section, edit the Intercompany seller profile. Set the following values. Leave allother fields at their default value, and then click OK.

Field Value

Customer Address Set

Vision Distribution Center SET

Receivables Business Unit


Buyer's Procurement Business Unit

Vision Operations



26

Field Value

Buyer's Bill to Business Unit

Vision Operations

5. In the Profit Center BU Profiles section, edit the Intercompany buyer profile:

◦ Set the Business Unit to Vision Operations.

◦ In the Customer Locations for Seller's Receivables Invoice and Sales Order section, add the followinglocations, and then click OK.

Seller's Customer Address Set Bill to Location

Vision Operations Set

9685

Vision Germany SET

CDRM_112

Vision Distribution Center SET

CDRM_116

Buyer's Bill to Business Unit

Vision Operations

6. On the Create Profit Center BU to Party Relationships page, click Save and Close.

Creating Financial Orchestration QualifiersYou must create the financial orchestration qualifiers that configure Financial Orchestration to run the financial orchestrationflow for Vision Operations only when the Vision Distribution Center ships an asset item. To create these qualifiers, do thefollowing work:

1. On the Implementation Project page, in the Task list, click Go To Task next to Manage Supply ChainFinancial Orchestration Qualifiers.

2. On the Manage Financial Orchestration Qualifiers page, click Actions, and then click Create.3. On the Create Financial Orchestration Qualifier page, set the following values. Leave all other fields at their

default value.

Field Value

Name

Vision Operations Qualifiers

Description

Asset Item = "Yes" AND Ship from organization ="D1"

Business Process Type

Procurement



27

4. Click Actions, Add Before, and then set the following values.

Field Value

Parameter

Asset Item

Operator

Equals

Value

Yes

5. Click Actions, Add Before, and then set the following values.

Field Value

Parameter

Ship from Organization

Operator

Equals

Value

D1 D1 identifies the Vision Distribution Center.

6. Click Save and Close.

Creating Financial Orchestration FlowsYou must create a financial orchestration flow. To create this flow, do the following work:


2. On the Create Financial Orchestration Qualifier page, set the following values. Leave all other fields at theirdefault value.

Field Value

Name

Vision Operations Financial Orchestration Flow

Business Process Type

Shipment

Priority

1



28

Field Value


Use the default value.

Effective End Date

Choose a date that occurs sometime in the future.

3. On the Create Financial Orchestration Flow page, in the Primary Routes section, click Actions, click AddRow, and then set the following values. Leave all other fields at their default value.

Field Value

Shipping Business Unit


Shipping Legal Entity



Vision Operations


Vision Operations

4. On the Create Financial Orchestration Flow page, in the Primary Routes section, click Actions, click AddRow, and then set the following values. Leave all other fields at their default value.

Field Value






Vision Operations

Buying Legal Entity

Vision Operations

Buy and Sell Term

Vision Buy and Sell Term

Selling Trade Organization

Leave empty.

Buying Trade Organization

Vision Operations

5. Click Save.



29

Setting Financial Orchestration System OptionsYou must set the Financial Orchestration system options. To create these options, do the following work:


2. On the Manage Financial Orchestration Qualifiers page, click Actions, and then click Create.

Field Value

Item Validation Organization

V1

Service Item

RR_RP_Item24

Maximum Number of Records per Batch

100


Testing Your Custom Financial Orchestration FlowPerform the following steps to make sure your custom financial orchestration flow works correctly:


◦ Log into your order capture system, and then use it to create a sales order that will start the financialorchestration flow that you configured in this example.

◦ Make sure the order includes an asset that the Vision Distribution Center must ship to the Schatze ToyCompany. The following values are examples that will start this flow. Your order capture system might usedifferent fields:

Field Value

Business Unit

Vision Operations

Ship to Customer

Schatze Toy Company

Warehouse

D1

Source Order ID

Vision12345



30

2. On the Manage Financial Orchestration Qualifiers page, click Actions, and then click Create.

◦ Log into your Fusion application.

◦ Navigate to the Manage Fulfillment Lines page.

◦ Query the Customer field for Schatze Toy Company and the Warehouse field for D1.

◦ In the General tab, make sure a fulfillment line exists that includes a value of Vision12345 in the Source Orderfield, and notice that the Status field displays a value of Awaiting Shipping.

◦ Notice the value that the Orchestration Order field displays, such as 181094.

◦ Navigate to the Edit Shipment page, notice the value that the Shipment field displays, and then verify that thevalue in the Shipment Status field is Closed.

3. Verify that the customer received the goods:

◦ Navigate to the Financial Orchestration work area, and then the Monitor Financial OrchestrationExecution page.

◦ Issue a query that locates the order. For example, in the Sales Order field, enter the Orchestration Ordernumber that you noticed in step 2, such as 181094.

◦ Verify that the Search Results section contains the following values.

Field Value

Source Order Type

Orchestration order

Source Order

Contains the Orchestration Order number that younoticed in step 2, such as 181094.

From Primary Business Unit


To Primary Business Unit

Vision Operations

Sales Order

Vision12345

◦ Verify that the first record in the Financial Route Details tab contains the following values.

Field Value

Type

Financial Route

Buy and Sell Term Vision Buy and Sell Term



31

Field Value






Vision Operations

Buying Legal Entity

Vision Operations

◦ Verify that the second record in the Financial Route Details tab contains the following values.

Field Value

Type

Customer ownership change

Status

Contains a green checkmark.



Glossary

32

Glossary

buy and sell term

Term that you can use to specify the conditions that determine the nature of an agreement to use during an intercompanytransfer, such as the documentation and accounting rule to use, the transfer pricing rule to use, and so on.

documentation and accounting rule

A type of rule that determines how Financial Orchestration creates intercompany invoicing, uses financial routes, and usesdifferent routes in reply to the different supply chain events that might occur during a transaction.

financial orchestration flow

A flow of information that defines a trade relationship between two different entities. It tracks and stores data that involvesfinancial instruments, such as accounts receivables, accounts payable, billing, and so on. This flow is different from thephysical flow that goods and services travel because it can include intermediary steps that the physical route does notinclude. Internal organizations might perform these intermediary steps, such as wholesalers, distributors, agents, or retailers.

financial orchestration qualifier

A rule that specifies when to run one of the financial orchestration flows that you create in the Manage Supply Chain FinancialOrchestration Flows task. If you do not create any qualifier, then Financial Orchestration runs the flow for all transactions thatit receives

financial orchestration system option

A type of option that affects all financial orchestration flows.

intercompany buyer profile

A type of profile that specifies information about the buyer that Financial Orchestration uses to create the intercompanyinvoice.

intercompany invoice

A type of invoice that Financial Orchestration creates when a seller provides a product or service to a buyer, and this buyerresides in the same organization as the seller but in a different legal entity. It captures accounting and tax information aboutan intercompany transaction.

intercompany seller profile

A type of profile that specifies information about the seller that Financial Orchestration uses to create the intercompanyinvoice.

intercompany transaction

A type of transaction that occurs between a seller and a buyer, where the seller provides a product or service to the buyer,and the buyer resides in the same organization as the seller but in a different legal entity. For example, one division of abusiness might sell goods to another division that resides in the same business, or a parent company might sell goods to aforeign subsidiary. An intercompany transaction typically includes a transaction of financial information.


Glossary

33

intercompany transfer price

A type of price that Financial Orchestration uses during an intercompany transaction. The transfer price determines howFinancial Orchestration allocates profits and losses among different parts of an enterprise when these parts use different taxsystems. Financial Orchestration uses the transfer price for accounting and taxation purposes.

service item

A type of item that provides a service. A purchase order that does not include an inventory entry in any of the purchase orderline items is an example of a service item.

source document

The document that Financial Orchestration uses as the input to the transaction. A fulfillment line from an order in DistributedOrder Orchestration is an example of a source document. A line in a purchase order in Procurement is another example of asource document.

task-generating event

A type of event that results in the title transfer from seller to buyer for goods, or for the fulfillment of services from sellerto buyer for services. This event creates tasks that Financial Orchestration uses to perform accounting activities, such asupdating the intercompany accounts receivable account, or to create financial documents, such as creating the accountspayable invoice.

trade distribution

The path through which goods and services travel from the seller to the buyer, and the path that the payment for these goodsand services travel from the buyer to the seller. A trade distribution can be short, such as a transaction between the seller andthe buyer, or it can be long, such as a transaction that includes the seller and the buyer, and that also includes wholesalers,distributors, agents, and retailers.

transfer pricing rule

A type of rule that calculates the intercompany transfer price according to the information that is associated with anintercompany transaction. The transfer pricing rules determine how to price an international transaction that occurs in amultinational company so that each country receives the correct share of taxation. You can use a transfer pricing rule withbuy and sell terms.

Implementing Supply Chain Cloud Financial Orchestration ... · PDF fileOracle Value Chain...

Documents

Transcript of Implementing Supply Chain Cloud Financial Orchestration ... · PDF fileOracle Value Chain...