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
© 2009 KBACE Technologies, Inc.3
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
© 2009 KBACE Technologies, Inc.5
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)
© 2009 KBACE Technologies, Inc.6
Internal Ordering Flow (Intra-co)
Order Import
Order Management
Receiving
Inventory
Scheduling & Shipping
Order Management
OF1071Schedule
Sales Order Ship Date
OF1071Schedule
Sales Order Ship Date
• 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
Internal Requisitioning
Create and Approve Internal Requisition
Create and Approve Internal Requisition
• Generated by Mix Max, Planning System, Manual,
Automated RequestImport Order
Automated RequestImport Order
• Resp: OM for Shipping Org
• Source = Internal
Automated RequestRun Create Internal Order conc request
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
© 2009 KBACE Technologies, Inc.7
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)
© 2009 KBACE Technologies, Inc.8
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
Sales Order Ship Date
OF1071Schedule
Sales Order Ship Date
• Order Entry schedules sales order lines ship dates based on ATP.
MM1149Ship
Material
MM1149Ship
Material
• Shipping Clerk packs,weighs, counts, ships and records shipments
• 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
Automated RequestCreate Intercompany
Invoices
• Responsibility OU = Shipping OU
• Source = Intercompany
Automated RequestCreate AP Invoices
Automated RequestCreate AP Invoices
• Responsibility OU = Shipping OU
• Selling OU = OU in which order was entered.
Automated RequestImport Payables
Interface(Expense Report Import)
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
Create End Customer AR
Invoice
• Standard AutoAccounting
© 2009 KBACE Technologies, Inc.9
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
© 2009 KBACE Technologies, Inc.10
Supply Chain Layered Flow (Intra-co and Inter-co) Order Import (US)
Order Management
Receiving (GmbH)
Inventory
Process Intercompany Transactions
Background Intercompany Processing
Scheduling & Shipping (US)
Order Management
OF1071Schedule
Sales Order Ship Date
OF1071Schedule
Sales Order Ship Date
• 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
Automated RequestCreate Interco AR
Invoices
Automated RequestCreate Interco AR
Invoices
• Creates Interface Records for AR
• Shipping OU = OU for Warehouse on SO
Automated RequestCreate Intercompany
Invoices(US/GmbH)
Automated RequestCreate Intercompany
Invoices(US/GmbH)
• Create actual invoice in AR
• Resp OU = Shipping OU• Source = Intercompany
Automated RequestCreate Interco AP
Invoices
Automated RequestCreate Interco AP
Invoices
• Creates Interface Records for AP
• Selling OU = Destination OU
Automated RequestImport Payables
Interface(Expense Report Import)
(US/GmbH)
Automated RequestImport Payables
Interface(Expense Report Import)
(US/GmbH)
• Creates AP Invoice• Resp OU = Destination OU• Source = Intercompany
Internal Requisitioning (GmbH)
Internal Requisitioning
Create and Approve Internal Requisition
Create and Approve Internal Requisition
• Generated by Mix Max, Planning System, Manual,
• Responsibility: Selling OU• Destination = Selling OU• Source = Shipping OU
Automated RequestImport Order
Automated RequestImport Order
• Resp: OM for Shipping OU
• Source = Internal
Automated RequestRun Create Internal Order conc request
Automated RequestRun Create Internal Order conc request
• Resp = Purchasing in Destination OU
Receive Internal Req/Internal SOReceive Internal Req/Internal SO
• Receiving clerk scans the inbound material against the Internal Requisition
Start Here
End Here
End Here
11 © 2009 KBACE Technologies, Inc.
Layering Intra-co and Inter-co Processes for Complex Supply Chain Networks
© 2009 KBACE Technologies, Inc.12
Complex Supply Chains
Customer Customer OrderOrder
Customer Customer ShipmentShipment
© 2009 KBACE Technologies, Inc.13
Complex Supply Chain (Intra-co and Inter-co) Flows
Process Intercompany Transactions
Background Intercompany Processing
Automated RequestCreate Interco AR
Invoices
Automated RequestCreate Interco AR
Invoices
• Creates Interface Records for AR
• Shipping OU = OU for Warehouse on SO
Automated RequestCreate Intercompany
Invoices(US/UK/NE)
Automated RequestCreate Intercompany
Invoices(US/UK/NE)
• Create actual invoice in AR
• Resp OU = Shipping OU• Source = Intercompany
Automated RequestCreate Interco AP
Invoices
Automated RequestCreate Interco AP
Invoices
• Creates Interface Records for AP
• Selling OU = Destination OU
Automated RequestImport Payables
Interface(Expense Report Import)
(US/UK/NE)
Automated RequestImport Payables
Interface(Expense Report Import)
(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)
Internal Requisitioning
Create and Approve Internal Requisition
Create and Approve Internal Requisition
• Generated by Mix Max, Planning System, Manual,
• Responsibility: Selling OU• Destination = Selling OU• Source = Shipping OU
Automated RequestRun Create Internal Order conc request
Automated RequestRun Create Internal Order conc request
• Resp = Purchasing in Destination OU
Order Import (NE/UK/US)
Order Management
Automated RequestImport Order
Automated RequestImport Order
• Resp: OM for Shipping OU
• Source = Internal
Scheduling & Shipping (US/UK)
Order Management
OF1071Schedule
Sales Order Ship Date
OF1071Schedule
Sales Order Ship Date
• 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
Receiving (UK/NE)
Inventory
Receive Internal Req/Internal SOReceive Internal Req/Internal SO
• Receiving clerk scans the inbound material against the Internal Requisition
Scheduling & Shipping (UK/NE)
Order Management
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
AR (ITL)
Receivables
Create End Customer AR
Invoice
Create End Customer AR
Invoice
• Standard AutoAccounting
End Here
© 2009 KBACE Technologies, Inc.15
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
© 2009 KBACE Technologies, Inc.17
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
© 2009 KBACE Technologies, Inc.18
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
© 2009 KBACE Technologies, Inc.19
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
© 2009 KBACE Technologies, Inc.20
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
© 2009 KBACE Technologies, Inc.21
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
© 2009 KBACE Technologies, Inc.22
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
© 2009 KBACE Technologies, Inc.24
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
26 © 2009 KBACE Technologies, Inc.
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
Email: [email protected] Technologies, Inc.6 Trafalgar Square Nashua, NH 03063
Larry TalbotLarry Talbot
Practice Director - LogisticsCell: (978) 884-4621
Email: [email protected] Technologies, Inc.6 Trafalgar Square Nashua, NH 03063
Practice Director - LogisticsCell: (978) 884-4621
Email: [email protected] Technologies, Inc.6 Trafalgar Square Nashua, NH 03063
PJ MaherPJ Maher
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