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Purchasing Concepts in R12

Purchasing provides you the features you need to satisfy the following purchasing needs. You should be able to:
  • Review all of your purchases with your suppliers to negotiate better discounts
  • Create purchase orders simply by entering a supplier and item details
  • Create standard purchase orders and blanket releases from both on-line and paper requisitions
  • Quickly and effectively manage procurement in a global business environment using global agreements that can be shared across the entire enterprise
  • Create accurate and detailed accounting information so that you charge purchases to the appropriate departments
  • Check your funds availability while creating purchase orders
  • Review the status and history of your purchase orders at any time for all the information you need
  • Communicate purchase orders to suppliers flexibly using a number of options
  • Inform your suppliers of your shipment schedule requirements
  • Record supplier acceptances of your purchase orders. You always know whether your suppliers have received and accepted your purchase order terms and conditions
  • Create your purchase orders by providing a quantity and price for each item you are ordering. Alternatively, you should also be able to create your purchase order simply by providing an amount if you are ordering a service that you cannot break down by price and quantity
  • Create purchase orders that leverage flexible pricing structures or implement complex pricing from Oracle Advanced Pricing

Purchase Order Types

Purchasing provides the following purchase order types: Standard Purchase Order, Planned Purchase Order, Blanket Purchase Agreement, and Contract Purchase Agreement. You can use the Document Name field in the Document Types window to change the names of these documents. For example, if you enter Regular Purchase Order in the Document Name field for the Standard Purchase Order type, your choices in the Type field in the Purchase Orders window will be Regular Purchase Order, Planned Purchase Order, Blanket Purchase Agreement, and Contract Purchase Agreement.

Standard Purchase Orders

You generally create standard purchase orders for one-time purchase of various items. You create standard purchase orders when you know the details of the goods or services you require, estimated costs, quantities, delivery schedules, and accounting distributions. If you use encumbrance accounting, the purchase order may be encumbered since the required information is known.

Blanket Purchase Agreements

You create blanket purchase agreements when you know the detail of the goods or services you plan to buy from a specific supplier in a period, but you do not yet know the detail of your delivery schedules. You can use blanket purchase agreements to specify negotiated prices for your items before actually purchasing them. Blanket purchase agreements can be created for a single organization or to be shared by different business units of your organization (global agreements). You can encumber funds for a blanket purchase agreement.

Global Blanket Agreements

You may need to negotiate based on an enterprises’ total global purchase volume to enable centralizing the buying activity across a broad and sometimes diverse set of businesses. Using global agreements (a special type of blanket purchase agreement), buyers can negotiate enterprise-wide pricing, business by business, then execute and manage those agreements in one central shared environment. Enterprise organizations can then access the agreement to create purchase orders that leverage pre-negotiated prices and terms. You can encumber funds for a global agreement.

Blanket Releases

You can issue a blanket release against a blanket purchase agreement to place the actual order (as long as the release is within the blanket agreement effectivity dates). If you use encumbrance accounting, you can encumber each release.

Contract Purchase Agreements

You create contract purchase agreements with your suppliers to agree on specific terms and conditions without indicating the goods and services that you will be purchasing. You can later issue standard purchase orders referencing your contracts, and you can encumber these purchase orders if you use encumbrance accounting.

Global Contract Agreements

You can use global contract agreeements (a special type of contract purchase agreement) to centralize a supplier relationship. Buyers throughout the enterprise can then leverage this relationship by referencing this global contract agreement in your standard purchase orders.

Planned Purchase Orders

A planned purchase order is a long-term agreement committing to buy items or services from a single source. You must specify tentative delivery schedules and all details for goods or services that you want to buy, including charge account, quantities, and estimated cost.

Scheduled Releases

You can issue scheduled releases against a planned purchase order to place the actual orders. If you use encumbrance accounting, you can use the planned purchase order to reserve funds for long term agreements. You can also change the accounting distributions on each release and the system will reverse the encumbrance for the planned purchase order and create a new encumbrance for the release.

Purchase Order Types Summary

  Standard Purchase Order Planned Purchase Order Blanket Purchase Agreement Contract Purchase Agreement
Terms and Conditions Known Yes Yes Yes Yes
Goods or Services Known Yes Yes Yes No
Pricing Known Yes Yes Maybe No
Quantity Known Yes Yes No No
Account Distributions Known Yes Yes No No
Delivery Schedule Known Yes Maybe No No
Can Be Encumbered Yes Yes Yes No
Can Encumber Releases N/A Yes Yes N/A

Reference: http://docs.oracle.com/cd/E18727_01/doc.121/e13410/T446883T443953.htm
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Invoice Grouping Rules in Receivables R12

Grouping Rules group Revenue and Credit transactions into  Invoices, Credit memos and Debit Memos. Autoinvoice program uses the Grouping Rules to group similar sales orders into a single invoice. We need to assign matching attributes while defining the Grouping Rules. These attributes include mandatory and optional parameters. Mandatory parameters are pre-defined by Oracle, where as optional attributes are optional and can be assigned based on the business requirements. Following is the list of all Mandatory and Optional attributes which can be assigned to the Grouping Rules.

Mandatory Attributes:
AGREEMENT_ID
COMMENTS
CONS_BILLING_NUMBER
CONVERSION_DATE
CONVERSION_RATE
CONVERSION_TYPE
CREDIT_METHOD_FOR_ACCT_RULE
CREDIT_METHOD_FOR_INSTALLMENTS
CURRENCY_CODE
CUSTOMER_BANK_ACCOUNT_ID
CUST_TRX_TYPE_ID
DOCUMENT_NUMBER
DOCUMENT_NUMBER_SEQUENCE_ID
GL_DATE
HEADER_ATTRIBUTE1-15
HEADER_ATTRIBUTE_CATEGORY
HEADER_GDF_ATTRIBUTE1-30
INITIAL_CUSTOMER_TRX_ID
INTERNAL_NOTES
INVOICING_RULE_ID
ORIG_SYSTEM_BILL_ADDRESS_ID
ORIG_SYSTEM_BILL_CONTACT_ID
ORIG_SYSTEM_BILL_CUSTOMER_ID
ORIG_SYSTEM_SOLD_CUSTOMER_ID
ORIG_SYSTEM_BATCH_NAME
PAYMENT_SERVER_ORDER_ID
PAYMENT_SET_ID
PREVIOUS_CUSTOMER_TRX_ID
PRIMARY_SALESREP_ID
PRINTING_OPTION
PURCHASE_ORDER
PURCHASE_ORDER_DATE
PURCHASE_ORDER_REVISION
REASON_CODE
RECEIPT_METHOD_ID
RELATED_CUSTOMER_TRX_ID
SET_OF_BOOKS_ID
TERM_ID
TERRITORY_ID
TRX_DATE
TRX_NUMBER

Optional Attributes:
ACCOUNTING_RULE_DURATION
ACCOUNTING_RULE_ID
ATTRIBUTE1-15
ATTRIBUTE_CATEGORY
INTERFACE_LINE_ATTRIBUTE1-15
INTERFACE_LINE_CONTEXT
INVENTORY_ITEM_ID
REFERENCE_LINE_ID
RULE_START_DATE
SALES_ORDER
SALES_ORDER_DATE
SALES_ORDER_LINE
SALES_ORDER_REVISION
SALES_ORDER_SOURCE
TAX_CODE
TAX_RATE

The following Ship-To fields were mandatory grouping attributes in release 11i, but are optional in release 12 ORIG_SYSTEM_SHIP_CUSTOMER_ID
ORIG_SYSTEM_SHIP_ADDRESS_ID
ORIG_SYSTEM_SHIP_CONTACT_IDThis is because ship to information is now stored at the line level in R12. Therefore a single invoice could have different ship to information for each line.
Autoinvoice program matches all the mandatory parameters and group the transactions into invoices. If all the mandatory parameters are matched for two or more similar transactions, they will fall in a same invoice. If we define any optional attribute, Autoinvoice program matches optional attributes in addition to the mandatory attributes to group the transactions.

For Example: SALES_ORDER is the optional attribute assigned to a grouping rule, there Autoinvoice program matches all mandatory attributes + Sales Order for the transactions. For any two or more transactions, if all the mandatory attributes and Sales Order(optional attribute) are matching, only one invoice will be created for those transactions.

If your Grouping rule doesn’t include Sales Order and Ship To fields in Optional attributes, similar sales orders with different ship-to addresses but same bill to will be grouped into one invoice and AR transaction form will not show any value in Ship-To address as it can not determine which ship-to value to be picked from multiple sales orders.
Steps to create a Grouping Rule:

Responsibility: Receivables Manager
Navigation: Setup -> Transactions -> Auto Invoice -> Grouping Rules

Select Line Ordering Rules if you are using any. Optional grouping characteristics are optional. If we are not giving any optional Grouping Characteristics, Autoinvoice will only matches mandatory characteristics. We can assign Optional characteristics for Invoices, Credit Memos and Debit Memos.
 

If  we want to assign optional attributes for all invoices, credit memos and debit memos, First assign optional characteristics for invoice class and the place the cursor on Class Invoices ad use Down Arrow to define  attributes for other classes(Credit Memo and Debit Memo) as well.

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Transaction Dates for Auto Invoices in Receivables

If there is no value provided for Transaction Date, the Autoinvoice program populates the Transaction date for Auto Invoices based several facors such as Derive Date option enabled or Disabled for Transaction Source, few colums from RA_INTERFACE_LINES_ALL, Invoice rules and Accounting Rules defind or not, and the default value provided in the parameters of Autoinvoice program.

Let us see how Autoinvoice program derives Transaction date based on Derive Date option for Transaction source and populted columns from RA_INTERFACE_LINES_ALL such as GL_DATE, SHIP_DATE_ACTUAL and SALES_ORDER_DATE.

Case 1: If the Derive Date option is enabled for Transaction Source, Autoinvoice program uses the following order to create Transaction Date.
1. GL_DATE
2. SHIP_DATE_ACTUAL
3. SALES_ORDER_DATE
4. DEFAULT_DATE (Provided in parameters of Autoinvoice program, which is mandatory)

Case2: If the Derive Date check box is disabled for Transaction Source, Autoinvoice program uses following order to populated Transaction Date.
1. GL_DATE
2. DEFAULT_DATE (Provided in parameters of Autoinvoice program, which is mandatory)

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Internal Requisition – ISO Functionality Basic Setpup steps

Internal requisitions provide the mechanism for requesting and transferring material from inventory to other inventory or expense locations. To use this functionality, you need to have Purchasing, Order Management, Shipping Execution, and Inventory installed. Internal Requisition (after suitable approval) will directly result in the generation of a sales order in the Order Management system through the Order Import process in Order Management

Setup Steps:

Step 1 – Creating the Item (Navigation: Items/Master Items)
a) On the Purchasing Tab – add a price if the item is to be used in iProcurement.
Uncheck the purchasing checkboxes, if the item is to ONLY be ordered from an internal source.
b) On the Order Management tab, and choose the attributes: Internal Ordered, Internal Orders Enabled & OE Transactable
c) Ensure that the item is assigned to both the Source and Destination Inventory Organizations

Step 2 – Create the Shipping Network (Navigation: Setup/Organizations/Shipping Networks)
a)Enter the Inventory Organization that will be the Source and the scope should be From or To Organizations
b)Choose the Transfer Type
Direct – means that when the Internal Sales Order is shipped the receipt process in the destination organization is done automatically
Intransit – means that when the Internal Sales Order is shipped – the destination inventory organization has to manually do the receiving process in Purchasing
c)Choose Internal Order Required checkbox

Step 3 – Create the Location (Navigation: Setup/Organization/Locations)
Enter a Location Name – for the Internal Location. This is the location that is used as the Destination Location & will eventually be tied to a customer

Step 4 – Conduct a Miscellaneous Receipt (Navigation: Transactions/Miscellaneous Transactions)
This step is being done to satisfy the Internal Sales Order which is created, as it ensures there will be ample quantity On Hand to perform the shipping portion of the Internal Sales Order process.
a)Choose the Inventory Organization that will be the Source Inventory Organization
b)Enter ‘Miscellaneous Receipt’ – Choose ‘Transaction Lines’
c) Enter the Item created and then a sub-inventory, quantity, etc

Step 5 – Create the Internal Customer – Assign the Location
(Navigation: Customers/Standard)
a) Enter the Internal Customer Name – Choose the Find Button
b) If it is a new customer – choose New from the dialog box that appears
c) In this form – choose Open and enter the address details
d) Move to the lower half of the form – enter a usage – of ‘Ship To’
e) Followed by choosing the Open button in the lower right hand corner of the form

In the new form which opened – enter the basic information for Payment Terms, Salesperson, etc.
Important: In the Internal Block – choose the Location which was created in Step 3
This association ties the customer to the location. Move to enter other pertinent information such as price list, etc, save – Close this SUB-FORM ONLY

It is also recommended to create a Bill To Usage record for the new customer.
Add a new record to the usage – and call this Bill To
Hit Open and enter any new information that pertains to the Bill To

Step 6 – Item Price (Navigation: Items/Master Items)
a) Query the item created in Step 1
b) Choose “Tools/Item Costs” from the top text menu. The screen to follow shows the item price that is used when creating the Internal Requisition. This is how purchasing derives the price when creating the Internal Requisition

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Oracle Procure to Pay Life Cycle standard

Procure to Pay Process flow:

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Let’s see the steps involved in performing using Oracle Applications
1. Oracle Purchasing: You enter Suppliers of different materials and products you want to purchase to manufacture a finished good that your organization plans to sell.
2. Oracle Purchasing: You prepare a Request for Quotation (RFQ) and send it to different suppliers to get the best and/or economical price for the product.
3. Oracle Purchasing:Suppliers sends their quotations and you upload those quotations in Oracle Purchasing to get the best three quotes and further to get the one best quote.
4. Oracle Purchasing: You prepare a Purchase Order(PO) against the best RFQ to buy the goods from the supplier who quoted the suitable price and sends the PO to that supplier
5. Oracle Purchasing: The supplier receives the confirmation of purchase from PO and ships the ordered goods. You receive the goods enter a Goods Received Note (GRN) in Oracle Purchasing.
6. Oracle Inventory:It’s up to you whether you want to receive the goods at your head office or you Inventory directly. In either case you move the received goods to your different Raw Material Inventory from Oracle Purchasing to Oracle Inventory and the Item Count increases.
7. Oracle General Ledger: Once you move the goods to Oracle Inventory, it sends the Material Accounting to Oracle General Ledger.
8. Oracle Payables: After that the supplier sends you the invoice for the purchased goods and you Enter or Match the invoice against the PO from Oracle Purchasing in Oracle Payables.
9. Oracle General Ledger: When you enter the invoice it means that you have created a Liability against that supplier.
10. Oracle Payables: You pay the invoice and settle the Liability
11. Oracle General Ledger: The liability is settled, your expense is recorded.

12. Oracle Process Manufacturing(OPM) / Oracle Discrete Manufacturing(ODM):
You start the manufacturing of your final product. Both OPM or ODM requests the different raw materials from you inventory organizations and manufactures a finished good.
13. Oracle Inventory: As the raw materials are issued to OPM and ODM the inventory sends the issuing material accounting to General Ledger and decreases the Item Count from the Raw Material Store. As the finished good is prepared, Oracle Inventory receives the finished good in Finished Good Store and increase the Item Count.
Payable Integration:
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Payables Processes:
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 Overview of Suppliers:
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When you enter a supplier that does business from multiple locations, you enter header information only once, and you enter supplier sites for each location. Most supplier information defaults to supplier sites. However, you can override the values that default if necessary. After you define suppliers, you can use them when you import/enter invoices and create purchasing documents Define how supplier sites can be used with the following options:
• Pay – You can import/enter invoices for and make payments to the site.

• Primary Pay – Default pay site for invoice entry and import.
• Purchasing – You can create purchase orders for the site.
• RFQ Only – You can create request for quotations in Purchasing for the site. You cannot
create purchase orders for an RFQ Only site.
• Procurement Card – You can purchase goods or services using a procurement card.
• Primary Pay – If a supplier has multiple pay sites, one can be designated as the primary.The primary pay site defaults in the Invoices window, helping to speed the invoice entry process. Also, Payables Open Interface Import uses this site when it imports an external invoice with no specified site.

Designate a site as an RFQ Only site during the beginning of negotiations with a supplier. If you decide to use the supplier, designate the supplier site as a Purchasing site by deselecting the RFQ Only option and selecting the Purchasing Site option. For each supplier site, you can enter contact information (name, address, telephone) specific to that site. Contact information is for your reference only.
Flow of Default Values(P2P):
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• Defaults set at higher levels flow down to lower levels where you can override them.
• Defaults reduce data entry by providing default values based on corporate policy.
Optional defaults (especially the higher level ones) should be left blank if you frequently override them.
• Purchase order matched invoices will receive defaults from the purchase order you specify when you match. Note: Changes to default values affect only new records, not existing records. For example, if
payment terms in the Payables Options window are reset to Net 15 from Net 30, new suppliers will have a default of Net 15. Existing suppliers will have terms of Net 30.
Invoice Entry:
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You can enter invoices through:
• Manual entry: Manually enter invoices in the Invoice Gateway and Invoices windows.
• Import: The Payables Open Interface Import program imports invoices from the Payables Open Interfaces table. This table is loaded by many sources including invoices entered online by suppliers in iSupplier Portal, invoices sent by suppliers in EDI or XML formats, and Oracle applications that load invoices into the Open Interfaces Table such as Oracle Property Manager and Oracle Assets.
• Automatically generated: Oracle Payables automatically generates the following invoice
types: withholding ax invoices to pay tax authorities, interest invoices, and payment on receipt invoices.
• Recurring invoices: You can set up Oracle Payables to generate regularly scheduled invoices such as rent.
• Matching: You can match most invoices to purchase orders or receipts. You can group manually entered and imported invoices in invoice batches.
Invoice import:
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Oracle Internet Expenses expense reports:
Expense reports your employees enter using a Web browser.
Payables expense reports:
Expense reports entered in the Payables Expense reports window by the Payables department.
Credit Card invoices:
Invoices for employee credit card expenses. The credit card company sends you these invoices as a flat file.
Oracle Projects expense reports:
Project–related expense reports entered in Oracle Projects.
EDI invoices:
Electronic invoices transferred from Oracle e–Commerce Gateway.
Invoices from external systems:
Invoices, such as invoices from legacy systems, loaded using SQL*Loader.
Oracle Property Manager invoices:
Lease invoices transferred from Oracle Property Manager.
Oracle Assets lease payments:
Lease payments transferred from Oracle Assets.
Oracle Procure to Pay Accounting:
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As you know “procure to pay” Business Flow start Purchasing requisition till paying to supplier and most important, in all the case the purchase is made for basic element called Items.
There are three types of items:
1. Inventory Asset Item/Inventory item-PO Related
2. Inventory Expense Item/Inventory Expenses – PO Related
3. Expense item/Non-PO Invoice.
1. Inventory Asset Item/Inventory item-PO Related : 2. Inventory Expense Item/ Expense Item-PO Related:

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3. Expenses items/ Non-PO Invoice:
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