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    Yasmin
    Inv Org. issue with BU and LEAnswered
    Topic posted March 9, 2018 by YasminSilver Trophy: 7,500+ Points, tagged How-To, Inventory Cloud, SCM, Setup, Supply Chain Financial Orchestration 
    474 Views, 24 Comments
    Title:
    Inv Org. issue with BU and LE
    Summary:
    Inv Org. issue with BU and LE
    Content:
    Hi Experts,
    Need your help 
    1) How can we capture Input Tax Credits (ITC) and claim the same (i.e. the correct Procuring Legal Entity needs to appear on the Purchase Order, and associated Invoices need to have a matching Legal Entity name)
    2) How to configure the enterprise structure so can we purchase by one legal entity on behalf of another legal entity
    3) How can we hold inventory at one location in a single Inventory Organisation
    4) Can we share inventory between legal entities

    Best Comment

    Shyam Santhanam

     You are probably looking at option1 in my slide deck referred below. Please review if it meets your requirements. 

    -- so no inventory shared services in this case, maybe only purchasing shared services, right?

    Shyam: Yes. Only purchasing and requisitioning is centralized. 

     

    Find attached my take on the requirements. Please note i am not expert in all these areas. So have not filled in for some questions. These are my guidances only for enterprise structure modeling that will enable you to achieve these requirements. Please thoroughly validate before making final recommendations.

    Comment

     

    • Shyam Santhanam

      Posting my response here for benefit of experts in this forum:

      Hi Yasmin

      This is a cross functional configuration involving Enterprise structure, procurement, Inventory/Costing/Supply chain financial Orchestration (SFO) and Financials. I can give you an high level starting guidance and help you out further. Would be great if you can share some specific details of the use case here.

      Answers to your questions

      1) The 'sold to legal entity' on the purchase order is the legal owner of the purchase. The 'deliver to inventory org' and its associated legal entity are the owner of the goods or expenses delivered. In most cases, both are same. That means it is a regular purchase. Owner of liability = owner of goods. When AP invoice is matched to the PO or receipt, the 'Sold to LE' on the PO automatically becomes the LE on the invoice header. The taxes that gets defaulted will be based on this LE (on PO/Receipt/Invoice).   

       

      1. For this you would need the 'Sold to LE' <> LE of the destination inventory org to be different. This requires configuration of SFO global procurement agreement (part of inventory management cloud). In this agreement, you set the relationship that says if your Destination LE/Profit center BU/Inventory org is <specific valuee> then the Sold to LE/profit center BU/inventory org will be <different value>. When PO is created, it will call SFO and check for this agreement and based on that it sets the LE and inventory org on PO. Once set of the PO, rest of the flow follows the ownership. Then Trade events are created in receipt accounting, cost accounting. Inter co invoices generated in AR and AP. All this is orchestrated by SFO application.
      2. Not sure I understood this fully. Can you elaborate?
      3.  Each inventory org is tied to a legal entity. The goods in the inventory org belong to the legal entity. So to represent multiple legal ownership in same location, you have to create inventory org per legal entity. We don’t yet support single inventory org holding goods belonging to multiple legal entities. (that’s called internal consignment).

       

      Useful references:

      https://docs.oracle.com/en/cloud/saas/supply-chain-management/r13-update18a/fapma/using-supply-chain-cost-management.pdf (for costing configurations)

      https://docs.oracle.com/en/cloud/saas/supply-chain-management/r13-update18a/fauso/scm-cloud-using-supply-chain-financial-orchestration.pdf (for SFO configurations)

       

      Please review these and we can continue our discussion

      • Yasmin

        Hi Shayam,

        First of all i'd like to thank you so much for your help and support,

        for # 3 "How can we hold inventory at one location in a single Inventory Organisation"

        i mean how can we store inventory items belong to 2 legal entities so we can see the total amount 

        Hope it helps now,

         

        Best regards

         

        Yasmin

        • Yasmin

          Hi Shayam,

          Can multiple LEs belong to one BU ?

          • Shyam Santhanam

            It is very important to qualify the BU to answer the question.

            Business unit in cloud ERP gets its context based on the 'business function' assignment.

            When it comes to inventory management, please read the para below

            Can Materials Management business unit service inventory organizations belonging to different legal entities?

             Yes, Each inventory organization is assigned two business units
            (a) Management Business unit - you assign materials management and requisitioning business function
            (b) Profit center business unit - you assign materials management and enable 'Below Legal Entity' flag

            So an inventory organization can have same or different business units as profit center BU and Management BU. In an environment where the materials management and requisitioning is centralized, you can have one management BU common for all inventory organizations but have profit center BU specific to each slice of business within a legal entity.
            10/19/2017 at 1:21 PM
            So back to your question:
            A 'Management BU' can manage inventory for multiple LE. but a profit center BU belongs to one LE. 
            • Yasmin

              So in this case, what are the differences between Management Bu and profit center BU?

              i.e. what functionalities each BU can do? (issue PO, receive the material, issue SO, etc,...)

    • Shyam Santhanam

      Hi Yasmin,

       

      Ability to hold inventory belonging to multiple internal legal entities is not yet available. Goods in an inventory org by-default roll up to the associated profit center BU and its legal entity. So you need inventory org per LE.  If you need to view inventory balance across inventory organizations, then you can use costing on-hand UI,  reports and OTBI subject areas to see them together. Most of them support viewing across mutliple cost organizations. Each cost org has inventory organizations belonging to same LE. 

       

      Hope this helps. Please let me know

      Regards

      Shyam

    • Yasmin

      Which of the following scenarios can be achieved? and how?

    • Shyam Santhanam

      I posted before completing my reply. Please review my above replies and let me know

      • Yasmin

        Hi Shyam  ,

        Please find attached the brief business case requirements for your feedback 

         

        Yasmin

        • Shyam Santhanam

          Did a quick read of the requirements. couple of comments

          1) Warehouse is a real world term. In Cloud Inventory, it could be one or more inventory orgs. As long as they tie to same 'management BU', they still fall under one broad real world warehouse.

          2) Requirement #3, is it an internal transfer within the warehouse or from one warehouse to another? What attributes will tell it belongs to LE1 or LE2 in their business world? 

          3) Your scenario 4 comes closest to requirements. But let me qualify that. The BU you have is the 'Management BU' with requisition and materials management business functions. You still need another BU representing profit center BU per inventory org. 

          4) You are probably looking at option1 in my slide deck referred below. Please review if it meets your requirements. 

          • Yasmin

            1) Warehouse is a real world term. In Cloud Inventory, it could be one or more inventory orgs. As long as they tie to same 'management BU', they still fall under one broad real world warehouse.

            -- Ok, I understand 

            2) Requirement #3, is it an internal transfer within the warehouse or from one warehouse to another? What attributes will tell it belongs to LE1 or LE2 in their business world? 

            -- for the warehouse (inventory) point of view, they don't care how owns the items as long as they receive it and store and ship it in/from their warehouse, the finance cares about the ownership, so they need to know out of the 50 pcs, how many owned by each LE so they can cost it properly

            3) Your scenario 4 comes closest to requirements. But let me qualify that. The BU you have is the 'Management BU' with requisition and materials management business functions. You still need another BU representing profit center BU per inventory org. 

            -- ok, i'll review that 

            4) You are probably looking at option1 in my slide deck referred below. Please review if it meets your requirements. 

            -- so no inventory shared services in this case, maybe only purchasing shared services, right?

             

            Shyam, can you please reply back with the sheet i sent to you, fill it based on your experience and guidance, so i can work from their and try to figure out how to do that 

             

            Really appreciated

             

            Yasmin

            • Shyam Santhanam

               You are probably looking at option1 in my slide deck referred below. Please review if it meets your requirements. 

              -- so no inventory shared services in this case, maybe only purchasing shared services, right?

              Shyam: Yes. Only purchasing and requisitioning is centralized. 

               

              Find attached my take on the requirements. Please note i am not expert in all these areas. So have not filled in for some questions. These are my guidances only for enterprise structure modeling that will enable you to achieve these requirements. Please thoroughly validate before making final recommendations.

          • Yasmin

            How to assign multiple LEs to the same BU ?

            • Shyam Santhanam

              Whenever you say BU, please qualify as BU with 'what business function'? Here I assume it is BU with "Material Management' and/or 'Requsition' function. 

              LEs are not assigned to BU. 

              1) Inventory org is assigned to LE

              2) Inventory org is assigned to 'Management BU'.

              3) Thus 'Management BU' manage multiple inventory organization belonging to different LEs

               

              Hope this clarifies.

               

              For BU with Payables function, 

              1) BU is linked to Ledger and a 'default LE'

              2) BU are not hard linked to a list of LEs. All the LEs assigned to the ledger are available for the BU to process invoices.

               

              regards

              Shyam

    • Shyam Santhanam

      Roles of Inventory org and BUs

      1) Inventory org: Thats your inventory management entity. You can receive, reserve, ship and transfer goods at this level. 

      2) Management BU: Does the 'Requisition' business function. You can collect multiple material requests from different inventory org into this BU. this is the BU where the PO requsition gets created. Say there is inv org 1 (belonging to LE1) and inv org 2(belonging to LE2), you can associate same 'management BU' to both the inventory orgs. you can create one requisition and one PO with delivery of goods to these different inventory orgs. Its called centralized requisition. But the accounting and ownership of goods is always the 'deliver to' inventory orgs. However for 'Management BU', you also need to assign 'Materials management' business function.

      3) Profit center BU. This BU is the BU defined as 'Below LE'. It only has one business function 'Materials Management'. This business function is merely to enable the 'Below LE' flag. Once defined, this is used in definition of cost organziation. You can group inventory organizations belonging to same profit center BU into one cost organization. It is also used in 'supply chain fiancial orchestration' for defining inter company trade agreements (global procurement, dropship, internal transfers). Then we can use it in SLA accounting rules to map it to segment in COA for reporting by profit center. 

      I am attaching a slide deck that exhaustively talks about procurement side of the Enterprise structure modeling. But it covers the inventory management modeling options completely. Please take a look and let me know. 

      The key take aways are is 

      1) we can isolate Requisition management and make it as one req BU for miltiple LEs

      2) We can isolate Payables invoicing and make it as one AP BU for multiple LEs

      3) Most atomic ownership of goods is at inventory org level. Each inventory org holds goods belonging to the associated legal entity. Only exception is it can hold goods owned by external suppliers (using supplier consignment feature). 

      4) Inventory management transactions such as receipt, reservation, shipment etc does not explictly pick an LE. It only knows inventory org. That is why we dont support a shared warehouse concept (holding goods for multiple LEs in one org). The LE is implicit by the inventory org. 

      • Yasmin

        Hi Shayam,

        Is there any step-by-step documents i can follow to configure option #1, the one you proposed,

        as i'm trying to achieve it since yesterday and with no hope :(

        Regards

         

        Yasmin

        • Shyam Santhanam

          Hi Yasmin,

          Its really a cross functional flow. Unfortunately we dont have anything out-of-the-box documentation for you. But its a good idea to explore capturing the steps by this way, Will have to take this as a feedback for future action.

          For now, here are some high level guidances

          I assume you already have defined LE and ledgers

          1) Define business units : Create Business units and assign business functions according to option 1

          • One profit center BU per inventory org designate as 'Below LE'. Assign Materials Management business function. Designate the owning LE for this BU. 'Defaul LE' is actually the owning LE.
          • One Service BU per ledger: Assign  procurement, requisitioning, payables and materials management business functions. Designate a 'default' LE from the ledger. This will be the one defaulted on the invoices. You dont have to enable 'Below LE' flag here.

          2) Define inventory organization:

          • For each inventory org, pick the ledger, owning LE, corresponding profit center BU and the common 'management BU'

          This will complete the enterprise structure side setups. Then you can do the rest of the business function configurations in each of these entities.

           

          Hope this helps.

           

          Regards

          Shyam

           

           

          • Yasmin

            Hi Shyam,

            Thanks for your prompt reply and support,

            Yes, really we need a white paper to walk us through this configuration, because as you highlighted it's touching multiple modules and cross-functional areas where we need several consultants to participate in that configurations to make it happen, 

            I'll try to follow the high-level steps you sent, but please be patient with me if I request further clarifications

            Best Regards

            Yasmin