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Financial Orchestration for Supply Chain Transactions in Oracle Cloud

By August 19, 2019 No Comments

INTRODUCTION:

For every organization, setting internal control is very important and when it comes to Inventory Management, setting up a tight control is very important. In recent past, organizations have started opting for Centralized Supply Chain Transactions like Centralized Procurement or Centralized Shipment for inventory transactions, spread in various geographies across the globe.

With such transactions gaining pace, it’s equally important that financial aspect of the same should also be correctly handled, including the agreement between buying selling organizations, for eg: Transfer Pricing Rule for the Goods shipped by one organization on behalf of another including profit mark, if any.

For handling these intercompany/intracompany transactions, Oracle Cloud Applications has provided with a configurable set of application known as Supply Chain Financial Orchestration.

Using the Financial Orchestration flow, organizations can segregate Supply Chain Physical Flow of such transactions with their respective financial impact.

As per definition, Financial Orchestration Flow is flow of information defining the trade relationship between two different entities, which tracks and stores information which involves financial documents for the trade transaction such as intercompany accounts receivables, intercompany accounts payable.

SUPPLY CHAIN FINANCIAL ORCHESTRATION IN ORACLE CLOUD (SCFO)

Below is the list of business processes and respective events which triggers change in ownership, generating a Financial Orchestration flow in Oracle Cloud:

  • GLOBAL PROCUREMENT
    • PO Receipts
    • PO Return
  • GLOBAL PROCUREMENT FOR CONSIGNED INVENTORY
    • Transfer to Owned
    • Transfer to Consigned
  • INTERNAL ORGANIZATION TRANSFER
    • Inter organization Shipment or Internal Organization Receipt
  • INTERNAL MATERIAL TRANSFER
    • Transfer Order Shipment or Transfer Order Receipt
    • Return Transfer Order Shipment or Return Transfer Order Receipt
  • INTERNAL ORGANIZATION TRANSFER FOR CONSIGNED INVENTORY
    • Transfer to Owned
    • Transfer to Consigned
  • INTERNAL MATERIAL TRANSFER FOR CONSIGNED INVENTORY
    • Transfer to Owned
    • Transfer to Consigned
  • GLOBAL SHIPMENT
    • Sales Order Shipment
    • RMA Receipt
  • DROP SHIPMENT
    • Advance Shipment Notice from Supplier or Supplier Invoice match

QUICK SETUPS FOR CONFIGURING SCFO IN ORACLE CLOUD

  • Manage Documentation and Accounting Rules
  • Manage Supply Chain Financial Orchestration Transfer Pricing Rules
  • Manage Supply Chain Financial Orchestration System Options
  • Manage Profit Center Business Unit Party Relationships
  • Manage Supply Chain Financial Orchestration Qualifiers
  • Manage Supply Chain Financial Orchestration Flows
  • SCFO Documentation and Accounting Rules

Documentation and accounting rules are defined to specify the type of accounting documentation to be create. For example, whether intercompany AP/AR invoices are to be created or not, whether profits in inventory should be tracked or not.

  • SCFO Transfer Pricing Rules

Transfer Pricing rules are created to determine whether transaction cost, purchase order price, or the sales order price is to be used, to calculate the intercompany transfer price between the buying and selling organizations. A markup or markdown percentage can also be defined on the internal sale.

  • SCFO System Options

Configure the Item Organization and Service Item which financial orchestration will use to validate each item based on the qualifiers defined.

  • SCFO Profit Center Business Unit Party Relationships

  • Buyer Profile

Seller Profile

  • SCFO Qualifiers

Define financial orchestration qualifiers which determines when and under what conditions, financial orchestration flow needs to be triggered. For e.g. Financial Orchestration flow needs to be triggered only if Order Type is Direct Ship or a specific supplier or customer is placed in a transaction, then we can define the same under SCFO Qualifiers.

  • Manage Supply Chain Financial Orchestration Flows

Under Orchestration Flow, one need to setups the following:

  • Legal entities and business units involved in the Financial Orchestration flow.
  • Financial orchestration qualifiers configured for the Financial Orchestration flow.
  • Financial routes to use for the Financial Orchestration flow.
  • Transfer pricing rules and documentation accounting rules.
  • Effective Date.
  • Specify Priority for various Orchestration flows.

 

About the Author

Piyush Bihany is an experienced Supply Chain Consultant having an experience of 9+ years spread across various modules including Oracle Procurement Cloud, Inventory Management Cloud, Cost Management Cloud, Demantra – Demand Planning and S&OP. He has been part of multiple end to end implementation projects on Oracle Cloud. He is a certificated consultant for Oracle Procurement Cloud and Demantra. By qualification, he is a Chartered Accountant and has a sound knowledge of Financial concepts

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