Oracle Value Chain Execution Cloud Implementing Supply Chain Financial Orchestration. Release 9

Transcription

1 Oracle Chain Execution Cloud Implementing Supply Chain Financial Orchestration Release 9

2 Oracle Chain Execution Cloud Part Number E Copyright , 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 by intellectual 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, or decompilation 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 to us 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 following notice 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 Regulation and agency-specific supplemental regulations. As such, use, duplication, disclosure, modification, and adaptation of the programs, including any operating system, integrated software, any programs installed on the hardware, and/or documentation, shall be subject to license terms and license restrictions applicable 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 in any inherently dangerous applications, including applications that may create a risk of personal injury. If you use this software or hardware in dangerous applications, then you shall be responsible to take all appropriate fail-safe, backup, redundancy, and other measures to ensure its safe use. Oracle Corporation 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 or registered trademarks of SPARC International, Inc. AMD, Opteron, the AMD logo, and the AMD Opteron logo are trademarks or registered trademarks of Advanced 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 Corporation and its affiliates are not responsible for and expressly disclaim all warranties of any kind with respect to third-party content, products, and services. Oracle Corporation 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 ctx=acc&id=docacc Oracle customers have access to electronic support through My Oracle Support. For information, visit ctx=acc&id=info or visit if you are hearing impaired.

3 Contents Preface i 1 Overview 1 Supply Chain Financial Orchestration: Overview... 1 Financial Orchestration Flow: How it Works Implementing 6 Implementing Oracle Fusion Financial Orchestration: Procedure... 6 Importing Business Unit, Customer, and Supplier Data: Procedure Manage Documentation and Accounting Rules 9 Documentation 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 Intercompany Invoices in Financial Orchestration: Explained Specifying Events That Apply Documentation and Accounting Rules: Procedure Manage Supply Chain Financial Orchestration Transfer Pricing Rules 12 Transfer Pricing Rules: Explained Accounting Transfer Price: Explained Transfer Pricing Markup Percentage: Explained Manage Supply Chain Financial Orchestration Buy and Sell Terms 13 Buy and Sell Terms: Explained Incoterms: Explained Primary Financial Route: Explained Manage Supply Chain Financial Orchestration System Options 14 Financial Orchestration System Options: Explained... 14

4 7 Manage Profit Center Business Unit Party Relationships 15 Profit Center Business Units: Explained Intercompany Buyer Profile: Explained Intercompany Seller Profile Explained: Explained What happens if I modify the supplier or customer for the legal entity? When can I delete an intercompany buyer or seller profile? Manage Supply Chain Financial Orchestration Qualifiers 17 Financial Orchestration Qualifiers: Explained Manage Supply Chain Financial Orchestration Flows 18 Financial Orchestration Flows: Explained Setting Priorities for Financial Orchestration Flows: Explained Creating Financial Orchestration Flows 20 Creating Financial Orchestration Flows: Worked Example... 20

5 Preface Preface This Preface introduces information sources available to help you use Oracle Applications. Oracle Applications Help Use 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 have help icons. You can also access Oracle Applications Help at Oracle Applications Guides To find other guides for Oracle Applications, go to: Oracle Applications Help, and select Documentation Library from the Navigator menu. Oracle Help Center at Other Information Sources My Oracle Support Oracle customers have access to electronic support through My Oracle Support. For information, visit or visit if you are hearing impaired. Oracle Enterprise Repository for Oracle Fusion Applications Oracle Enterprise Repository for Oracle Fusion Applications ( provides details on assets (such as services, integration tables, and composites) to help you manage the lifecycle of your software. Documentation Accessibility For information about Oracle's commitment to accessibility, visit the Oracle Accessibility Program website at Comments and Suggestions Please give us feedback about Oracle Applications Help and guides! - Send to: oracle_fusion_applications_help_ww_grp@oracle.com. - Click your user name in the global area of Oracle Applications Help, and select Send Feedback to Oracle. i

6 Chapter 1 Overview 1 Overview Supply Chain Financial Orchestration: Overview Oracle Fusion Supply Chain Financial Orchestration is a configurable application that you can use to manage an intercompany transaction, which is a type of transaction that occurs between a seller and a buyer, where the seller provides a product or service 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 different profit center business units that belong to the same legal entity. You can use Financial Orchestration to separate the physical part of this transaction from the financial part of the transaction. The following diagram illustrates an example of this internal 1

7 Chapter 1 Overview buyer and seller relationship. It includes an intercompany transaction that occurs in Vision Corporation, which is a fictitious company that makes and sells computer products. In this example, a financial orchestration flow exists between the Vision Distribution Center, located in Singapore, and Vision Operations, located in North America. The Vision Distribution Center sends the physical product that is involved in the transaction to retailers. It also sends the financial information and transfers ownership of the product in the financial books for the transaction to Vision Operations in North America. Each of these organizations constitutes a separate legal entity that resides in Vision Corporation. However, they reside in different countries, and they each require separate accounting and tax reporting. You can use Oracle Fusion Supply Chain Financial Orchestration to capture, process, and perform an accounting of 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 trade distributions. 2

8 Chapter 1 Overview Create transfer pricing rules that specify whether to use the transaction cost, a purchase order price, or the sales order price as the basis to calculate the intercompany transfer price between the seller and the buyer. You can create 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 entities that constitute the buyer and seller, the documentation rules, accounting rules, and transfer pricing rules to use, the payment terms to use, incoterms and incoterm locations, and tax determinants. Create intercompany buyer profiles and intercompany seller profiles that Financial Orchestration uses to create the intercompany invoice. You can specify the business units that provide the procurement and payables invoicing for the profit center business unit, the business unit that provides receipt accounting information, the bill-to business unit and bill-to locations, and the procurement business unit. Create financial orchestration qualifiers that specify when and under what conditions to run a financial orchestration flow. For example, you can create a rule that specifies to run an orchestration flow only if a particular supplier is involved 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, the buy and sell terms to use with the flow, and the date when the flow goes into effect. You can also specify a priority among 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 of goods. 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 supply chain. This capability can reduce implementation costs and cycle time, and it allows you to react effectively to corporate reorganizations or acquisitions. In general, this implementation guide uses the phrase Financial Orchestration to describe the Financial Orchestration work area and the work that it does. This work area is part of the Oracle Fusion Financial Orchestration product offering. 3

9 Chapter 1 Overview Financial Orchestration Flow: How it Works The 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 event occurred, such as a shipment transaction. 2. Financial Orchestration receives the supply chain event. For more information, see Specifying Events That Trigger Documentation and Accounting Rules: Procedure. 4

10 Chapter 1 Overview 3. Financial Orchestration identifies the financial orchestration flow that it must use in reply to the event. It uses the configuration 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 Orchestration Flows: Explained. 4. Financial Orchestration creates an instance of the financial orchestration flow that it identified in step 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 Fusion applications while the instance runs. It can exchange information about the instance with these applications automatically, 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 a financial orchestration flow that does validation is available when it creates or updates a global procurement purchase order. Product Information Manager. Provides information about the products that Financial Orchestration uses for each supply chain transaction. Financials. Provides information about the supplier and customer that Financial Orchestration associates with each legal entity. To get this information, Financials uses the advanced global intercompany that you specify when you set up Financials. Financial Orchestration interfaces the intercompany receivables and payables invoices to Financials. Materials Management and Logistics. Sends a notification to Financial Orchestration that indicates that a transaction occurred in the physical supply chain, such as a shipment or a receipt. It also sends other details about 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 store costing, receivables, and payables data. 8. After you complete the setup, you can use the Monitor Financial Orchestration Execution page to monitor and correct problems that might occur during the financial orchestration flow. 5

11 Chapter 2 Implementing 2 Implementing Implementing Oracle Fusion Financial Orchestration: Procedure This topic describes how to implement Oracle Fusion Supply Chain Financial Orchestration. For more information about this offering, see Supply Chain Financial Orchestration: Overview. 1. Import the data that Financial Orchestration uses to create relationships between each business unit, customer, and supplier 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 Chain Financial Orchestration product offering. Consult with your system administrator to determine the login that you must 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. If it is not implemented, then implement it now. Make sure the Implementation Status for the Materials Management and Logistics offering is Implemented. If it 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 to determine 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 Chain Financial 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. 6

12 Chapter 2 Implementing This folder includes the following folders: Define Common Applications Configuration for Supply Chain Financial Orchestration. Includes all the tasks that Financial Orchestration requires for common applications. You do not need to modify any of these tasks. Define Supply Chain Financial Orchestration. Allows you to customize Supply Chain Financial Orchestration. You can expand this folder to view the tasks that you must perform to set up Financial Orchestration. 8. Use the Define Supply Chain Financial Orchestration folder and the tasks that it contains to set up Financial Orchestration. 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 depends on the work that you do in prior tasks. For example, you specify buy and sell terms when you create a financial orchestration 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 following task depends on your deployment requirements: Manage Supply Chain Financial Orchestration System Options Importing Business Unit, Customer, and Supplier Data: Procedure For Oracle 11g Release 9 (11.1.9) and Release 10 ( ), you must import the data that Financial Orchestration uses to create 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. 7

13 Chapter 2 Implementing 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 order information. 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 must import 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. 8

14 Chapter 3 Manage Documentation and Accounting Rules 3 Manage Documentation and Accounting Rules Documentation and Accounting Rules: Explained You 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 receipt transaction to start the tasks that Financial Orchestration uses during an internal transfer of goods. Accounting Rule Currency Options: Explained You can use the Currency Option on the Manage Documentation and Accounting Rules page to specify the currency that 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 the buyer uses the Euro, then Financial Orchestration will use the US Dollar throughout the entire transaction, including in the 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 the business unit. Source document. Use the currency that the source document uses. Accounting Rule Conversion Types: Explained You can use Conversion Type on the Manage Documentation and Accounting Rules page to specify the exchange rate that Financial Orchestration uses for calculations. For example, when it calculates the intercompany transfer price. For more information about the conversion types that you can use, see Using Rate Types: Examples and What's the difference between spot, corporate, user, and fixed rate types? Accounting Rule Trade Distributions: Explained You can use the Trade Distributions option on the Manage Documentation and Accounting Rules page to include a trade distribution. Fusion Cost Management uses trade distributions when it does the cost accounting distributions for the transactions that Financial Orchestration sends. These are the accounting distributions that Fusion Cost Management uses for intercompany accrual, intercompany cost of goods sold, and so on. For more information, see Record Cost Accounting FAQs. 9

15 Chapter 3 Manage Documentation and Accounting Rules Track Profits in Inventory: Explained Financial 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 on each of these pieces. In this example, Financial Orchestration calculates a profit of $1,000 for product A. To override this behavior, you can remove the check mark from the Track profits in inventory option on the Create Documentation and Accounting Rule page. Intercompany Invoices in Financial Orchestration: Explained If you use the Intercompany invoice option on the Manage Documentation and Accounting Rules page to include intercompany 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 or services from another business unit. Accounts receivable invoice. A transaction that records the receivable accounting for the shipping business unit in an intercompany flow. It records journal entries in accounts receivables for the seller, it records revenue, and it records tax and freight charges. It adds journal entries to the inventory asset account and the cost of goods sold account for the shipping warehouse. If you specify to not include intercompany invoices, then Financial Orchestration does not create any intercompany invoices during the transaction. An intercompany invoice is not mandatory. For example, an intracompany trade that occurs between business units that belong to the same legal entity might not require an intercompany invoice. In this situation, 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 and Accounting Rules: Procedure If you use the Create Documentation and Accounting Rule page, then Financial Orchestration automatically adds the tasks that it uses to process the transaction for your rule, and then displays them in the View Tasks column of the Forward Flow 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 the following: Click the Forward Flow tab. 10

16 Chapter 3 Manage Documentation and Accounting Rules 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 a purchase 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. 11

17 Chapter 4 Manage Supply Chain Financial Orchestration Transfer Pricing Rules 4 Manage Supply Chain Financial Orchestration Transfer Pricing Rules Transfer Pricing Rules: Explained A transfer pricing rule calculates the intercompany transfer price according to the information that is associated with an intercompany transactionthe transfer pricing rules determine how to price an international transaction that occurs in a multinational company so that each country receives the correct share of taxation. You can use a transfer pricing rule with buy and sell terms. For more information, see Buy and Sell Terms: Explained. Accounting Transfer Price: Explained You can use the Accounting Transfer Price on the Manage Supply Chain Financial Orchestration Transfer Pricing Rules page to specify the intercompany transfer price that Financial Orchestration uses for the transactions and documents that 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 an external supplier. This price basis varies depending on the following Business Process Type that you set in the Manage 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 Orchestration specifies. Internal Transfer. Not supported. Transfer Pricing Markup Percentage: Explained You can use the Markup Percentage on the Manage Supply Chain Financial Orchestration Transfer Pricing Rules page to allow the seller to earn a profit or to incur a loss on an intercompany transaction. To determine the intercompany transfer price, Financial Orchestration multiples the Markup Percentage with the value of the Accounting Transfer Price. For example, if an item costs $1.00, and if you set Markup Percentage to 15, then Financial Orchestration sets the transaction price 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 down the items that it sells to retailers by 15%. So, if an item costs $1.00, and if you set Markup Percentage to -15, then Financial Orchestration sets the intercompany transfer price for this item to $

18 Chapter 5 Manage Supply Chain Financial Orchestration Buy and Sell Terms 5 Manage Supply Chain Financial Orchestration Buy and Sell Terms Buy and Sell Terms: Explained Buy and Sell terms are terms that you can use to specify the conditions that determine the nature of an agreement to use during an intercompany transaction, such as the documentation and accounting rule to use, the transfer pricing rule to use, and so on. Financial Orchestration gets some of the values that it displays for the Receivable Invoice Type field, the Receivables Credit Memo Type field, and in the Default Buy Side Tax Determinants section and the Default Sell Side Tax Determinants section of this page from the values that you specify when you set up receivables. For more information about setting up receivables, see Oracle Financials Cloud Using Receivables, Payments, Cash, and Collections. Incoterms: Explained As an option, you can specify the Incoterm (International Commercial Terms) and Default Incoterm Location on the Manage Supply Chain Financial Orchestration Manage Buy and Sell Terms page. Financial Orchestration uses these items as part of the matter of record for the intercompany transaction. The incoterm and incoterm location that you choose does not affect how Financial Orchestration handles the transaction or does calculations, but it does provide audit trail information. Primary Financial Route: Explained You typically use the Manage Supply Chain Financial Orchestration Flows page to create the primary route. You can also click Add Primary Route on the Create Buy and Sell Term page to specify the primary route, and then choose the business process type to use with the buy and sell terms that you specify. Financial Orchestration uses the route that you specify for all intercompany transactions. In Release 9, Financial Orchestration does not support the inclusion of internal financial intermediaries on the financial route. These internal intermediaries are organizations that reside in the company, such as an organization that resides in Vision Corporation. Also in Release 9, Financial Orchestration supports only the primary financial route. You cannot specify a secondary financial route. 13

19 Chapter 6 Manage Supply Chain Financial Orchestration System Options 6 Manage Supply Chain Financial Orchestration System Options Financial Orchestration System Options: Explained You can specify the following financial orchestration system options on the Manage Supply Chain Financial Orchestration 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 item according 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 chain flow 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 it processes supply chain events. You can use this field to tune the performance of your server environment. 14

20 Chapter 7 Manage Profit Center Business Unit Party Relationships 7 Manage Profit Center Business Unit Party Relationships Profit Center Business Units: Explained A profit center business unit is a part of a company that you treat as a separate business. Your organization calculates the profits and losses for this profit center separately from other parts of the organization. Intercompany Buyer Profile: Explained You can specify the intercompany buyer profile in the Profit Center BU Profiles section of the Create Profit Center BU to Party Relationship page. You must specify it for a profit center business unit that acts as a buyer in a buy and sell relationship. You can use the following sections: Setup for Buyer's Payables Invoice and Purchase Order. You can use the following dropdown lists to specify the business units that provide the procurement and payables invoicing for the profit center business unit. Financial Orchestration uses these business units when it calculates trade distributions and costing transactions, so you must specify them even if you do not require Financial Orchestration to create an intercompany invoice for the buy and sell relationship: Procurement Business Unit. Specify the business unit that provides procurement services and that stores the 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 that it 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 dropdown lists: Seller's Customer Address Set. Choose an address set. The address set that you choose includes the billto 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 Orchestration must use as the buyer. Financial Orchestration uses this bill-to location to create the intercompany receivables invoice that it sends to the selling business unit. Note that the Manage Legal Entity Supplier Customer Association task from Advance Global Intercompany System (AGIS) of the Financials product offering provides the 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 validations for the buy and sell terms that you specify, or for the financial routing that you specify. For more information, see Buy and Sell Terms: Explained and Primary Financial Routes: Explained. 15

21 Chapter 7 Manage Profit Center Business Unit Party Relationships Intercompany Seller Profile Explained: Explained You can specify the intercompany seller profile in the Profit Center BU Profiles section of the Create Profit Center BU to Party Relationship page. You must specify it for a profit center business unit that acts as a seller in a buy and sell relationship. You can use the following sections: Business Unit for Seller's Receivables Invoice. In the Receivables Business Unit dropdown list, choose the profit 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 buy and 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 payables invoice. What happens if I modify the supplier or customer for the legal entity? If you define an intercompany seller profile, and then at some later point you modify this profile, then Financial Orchestration displays an error message that describes that you updated the supplier profile and that you must also update the seller profile with new supplier information. To fix this error, you must use the Profit Center BU Profiles section of the Edit Profit Center BU to Party Relationship page to modify the seller profile. If you do this modification, then this page displays the name of the supplier that you modified in the Supplier field. You must also do similar work if you modify the buyer. For example, 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 seller profile? 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 sell terms, 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 sell terms, or in any financial route. 16

22 Chapter 8 Manage Supply Chain Financial Orchestration Qualifiers 8 Manage Supply Chain Financial Orchestration Qualifiers Financial Orchestration Qualifiers: Explained A financial orchestration qualifier is a rule that specifies when to run one of the financial orchestration flow that you create in the Manage Supply Chain Financial Orchestration Flows task. If you do not create any qualifier, then Financial Orchestration runs the financial flow for all the transactions that it receives. 17

23 Chapter 9 Manage Supply Chain Financial Orchestration Flows 9 Manage Supply Chain Financial Orchestration Flows Financial Orchestration Flows: Explained You 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 same organization but in widely dispersed physical locations, including in different countries. Define the trade relationship that exists between two entities, including business rules, internal controls, regulatory compliances, and other terms and conditions. These controls allow you to run, monitor, and evaluate the transactions 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 financial orchestration 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 the countries 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 configure Financial Orchestration so that it creates transactions that are associated with a source document that occur before the date when the modified financial orchestration flow goes into effect. Financial Orchestration can also associate transactions with this flow when your source system creates the source document after this date. Setting Priorities for Financial Orchestration Flows: Explained You can set the Priority of a financial orchestration flow to specify which flow to use when more than one flow is available for two primary trade partners. The lower the number you use, the higher the priority. For example, if you set the Priority to 1 for Flow A, and 2 for Flow B, then Financial Orchestration will use Flow A. In a more detailed example, assume the following situation exists: Financial Orchestration Flow Priority Shipping Business Unit Selling Business Unit Qualifier Rule 1 10 BU A BU B Category = Category B 2 20 BU A BU B Category = Category A 18

24 Chapter 9 Manage Supply Chain Financial Orchestration Flows Financial Orchestration Flow Priority Shipping Business Unit Selling Business Unit Qualifier Rule 3 30 BU A BU B None. Applicable to all documents. The following table summarizes how to set up the priority for each financial orchestration flow in this example. Source Document Financial Orchestration Flow Priority Result DOO fulfillment line 1 Flow 1 Priority for Flow 1 is 10. Priority for Flow 3 is 30. Financial Orchestration assigns Flow 1 the highest priority. DOO fulfillment line 2 Flow 2 Priority for Flow 2 is 20. Priority for and Flow 3 is 30. Financial Orchestration assigns Flow 2 the highest priority. DOO fulfillment line 3 Flow 3 Only Flow 3 is assigned. Financial Orchestration does not use the Priority. 19

25 Chapter 10 Creating Financial Orchestration Flows 10 Creating Financial Orchestration Flows Creating Financial Orchestration Flows: Worked Example This example demonstrates how to create a financial orchestration flow for Vision Corporation, which is a multinational company that makes and sells computerized toys. It describes how to create this flow between Vision Operations, which is the selling business unit located in the United States, the Vision Distribution Center, which is the shipping business unit located in Singapore, and the Schatze Toy Company, which is a retailer with locations in Germany. The following diagram 20

26 Chapter 10 Creating Financial Orchestration Flows illustrates the financial orchestration flow for this example, and demonstrates how this flow separates the physical flow of goods for this transaction from the financial flow for this transaction: Note the following items for this example: Item Flow type Description Shipment Selling business unit Vision Operations 21

27 Chapter 10 Creating Financial Orchestration Flows Item Customer Description Schatze Toy Company Shipping business unit Vision Distribution Center Qualifier All asset items Sales order currency USD (United States Dollar) Sales order price $ 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 Tasks Create 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 Rules Vision Operations is the seller. It uses the same currency that Vision Corporation uses, and it uses the standard currency rate that Vision Corporation uses. Vision Operations uses trade distributions, tracks profits in inventory, and requires an intercompany invoice. It must capture this transaction only for a shipment event, and not for a procurement or intercompany 22

28 Chapter 10 Creating Financial Orchestration Flows transfer. It must handle returns in the same way that it handles shipments, so make sure you set the forward flow and the return 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. Name Vision Operations Documentation and Accounting Rule Currency Option Source document Conversion Type Corporate Trade Distributions Contains a check mark Track Profits In Inventory Contains a check mark Intercompany Invoices Contains a check mark 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. Financial Orchestration uses these fields for other types of flows. For more information, see Types of Financial Orchestration Flows: Explained. 7. Click the Return Flow tab, and then set Shipment to SO Shipment. 8. Click Save and Close. Creating Transfer Pricing Rules Vision Operations must use the production cost that it incurs to produce computerized toys as the transfer pricing rule, and it requires a 15% markup on this cost so that it can realize a profit when it sells products to internal buyers. To create the intercompany transfer price, do the following work: 1. On the Implementation Project page, in the Task list, click Go To Task next to Manage Supply Chain Financial 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. 23

29 Chapter 10 Creating Financial Orchestration Flows Name Vision Operations Transfer Pricing Rule Accounting Transfer Price Source Document Price Basis. For more information, see Transfer Pricing Cost Basis: Explained. Effective Start Date Use today's date. Markup Percentage Click Save and Close, and then click Done. Creating Buy and Sell Terms Vision Distribution Center is the seller and Vision Operations is the buyer. Vision Distribution Center requires an intercompany invoice 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 Chain Financial 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. Name Vision Buy and Sell Term Selling Legal Entity Vision Distribution Center Selling Business Unit Vision Distribution Center Transfer Pricing Rule Vision Operations Transfer Pricing Rule Documentation and Account Rule Vision Operations Documentation and Accounting Rule Receivables Invoice Type Intercompany Payment Terms Immediate 24

30 Chapter 10 Creating Financial Orchestration Flows 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 Relationships To 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 Center Business 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 at their default 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 all other fields at their default value, and then click OK. Customer Address Set Vision Distribution Center SET Receivables Business Unit Vision Distribution Center Buyer's Procurement Business Unit Vision Operations 25

31 Chapter 10 Creating Financial Orchestration Flows 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 following locations, 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 Qualifiers You must create the financial orchestration qualifiers that configure Financial Orchestration to run the financial orchestration flow for Vision Operations only when the Vision Distribution Center ships an asset item. To create these qualifiers, do the following work: 1. On the Implementation Project page, in the Task list, click Go To Task next to Manage Supply Chain Financial 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. Name Vision Operations Qualifiers Description Asset Item = "Yes" AND Ship from organization = "D1" Business Process Type Procurement 26