Business Units and Shared Service model in Fusion Procurement

Business Units (BU) definition: A business unit is a unit of an enterprise that performs one or many business functions that can be rolled up in a management hierarchy. A business unit can process transactions on behalf of many legal entities. Normally, it will have a manager, strategic objectives, a level of autonomy, and responsibility for its profit and loss. (1)

Prior to Oracle Fusion Applications, operating units in Oracle E-Business Suite were assumed to perform all business functions, while in PeopleSoft, each business unit had one specific business function. Oracle Fusion Applications blends these two models and allows defining business units with one or many business functions. (2)

In Fusion Procurement context we need to understand the function of the following types of BU’s”

1. Procurement BU
2. Requisitioning BU
3. Sold-To BU
4. Client BU

Procurement Business units: As the name suggests, Procurement BU’s are responsible for the procurement business function which involves vendor management, negotiation of contracts and purchase agreements, issue of order and subsequent administration.

Client Business Unit: Any BU that will be serviced by the Procurement BU needs to be set as the Client BU. In case of Shared Services model where the Procurement services are centralized to one BU, the Procurement BU will be serving all the requisitions from the Client BU’s.

Requisitioning Business Unit: As the name suggests Requisitioning BU is the business unit that raises the requisition for the goods or services that it needs to the Procurement BU. Sometimes, the Requisitioning BU may be responsible for the financial impact of the purchase, in which case it will also be defined as the Sold-To BU. In case there is another BU which takes the financial responsibility of the purchase then, this Sold-To BU will be different from the Requisitioning BU.

I’ll take an example to explain the above concept.

A mobile manufacturing company having global presence has its headquarters based in Norway (XYZ Norway). Its manufacturing division is based in India (XYZ India). The India operation sources its parts from the branch based in Singapore (XYZ Singapore) which does the centralized purchase of chips from different manufacturing companies based in Taiwan and Japan. However, the payment to the supplier is done by headquarter in Norway. In this case the Requisitioning BU would be XYZ India, Purchasing BU would be the XYZ Singapore BU and the Sold-To BU would be XYZ Norway

Another example to make this clearer. I’ll take the example one of my colleagues Suchismita, uses to explain the concept;

In a normal family, when the teenage daughter while returning home sees the designer shoe on the shop’s display, and promptly she approaches her mother with the request, knowing very well that her need would be fulfilled. The mother being a simple homemaker approaches the dad, and the dad being a doting father purchases the shoe and gives to the daughter.

If we take the above example, the daughter is the Procurement BU as she is buying the shoe from the supplier (shoe store). The mother is the requisitioning BU and the father is the Sold-To BU as he is taking the financial responsibility of the purchase. (3)

Following is the list of setups to be done to ensure this works in the system.

1. Select the Procurement Service Providers for the selected BU
2. Assign either one or many out of the Procurement, Requisitioning and Receiving business functions to the respective BU
3. Configure the Procurement Business Function for the BU and Configure the Requisitioning Business Function for the BU
4. Select the Procurement BU at the Supplier Address
5. Select the Client BU and Sold-To BU at the Supplier Site Assignment

In today’s scenario, businesses find it beneficial to channel purchases through international subsidiaries instead of directly dealing with suppliers. The reasons range from country specific legal requirements to favorable tax treatment to having better margins due to economies of scale because of centralizing procurement. Fusion Procurement provides this feature seamlessly which in hindsight seems quite intuitive.

Bibliography

1. Oracle® Fusion Applications Procurement Implementation Guide. Retrieved from http://docs.oracle.com/cd/E15586_01/fusionapps.1111/e20383/toc.htm
2. Oracle® Fusion Applications Financials Implementation Guide. Retrieved from http://docs.oracle.com/cd/E15586_01/fusionapps.1111/e20375/toc.htm
3. Suchismita Pattnaik, Linkedin profile: http://in.linkedin.com/in/suchismita.

Payables Hold Release Workflow

In R12 Oracle Payables integrates with Oracle Workflow to provide a resolution of user releasable holds through workflow. A new transaction type called “Payables Hold Resolution” (APHLD) in AME has been introduced in R12 for the same. There has been a business requirement to release the AP invoice holds, especially the matching holds based on an approval mechanism. In R12 of Payables, this feature has been provided so that, we can send the invoice lines on hold to approvers before the hold is released. As usual the seeded AME objects can be extended to accommodate different approval groups, rules and other business conditions before the hold is released.

Following setup needs to be done at Payables level: Setup > Invoice > Hold and Release Names.

• The Initiate Workflow option is selected for the hold type in the Hold and Release Names window.

• The hold is setup to be user releasable

• Notify After X Days: The Notify After X days setup, will cause the notification to be sent to the approver after X days of the hold being placed.

• Remind After X Days: The Remind after X days will cause a reminder to be sent to the appover after X days of the first notification, and subsequently, if no action is taken.

At AME setup Level, for the Transaction Type: Payables Holds Resolution setup Attribute, Condition, Action types, Approver groups and Rules

1. Choose the Default/seeded Attribute existed for Hold Look Up Code as shown below

2. E.g. Use the seeded Condition by assigning Hold Look Up Code with String values “Amt Ord, Amt Rec, Price, Qty Ord, Qty Rec” as below: 3. Create an Custom Approver group ‘Demo1’ by choosing “Serial” Voting method assign with Static to generate Invoice Hold notifications and send for release to approvers on basis of below logic 4 Assign this Approval group to the action type.
5 Create a Rule for this Hold notification and assign above Condition and Action type to the Rule as shown below:

Steps to Release the Hold:

1. Validate invoice on matching hold like “Amt Ord, Amt Rec, Price, Qty Ord, Qty Rec”

2. A notification will be sent to the approver for hold release

3. Once the Approver clicks on “Release Hold”, the hold gets released from the invoice.

Open Account AP Balance Listing

As per Metalink Note 604739.1, the AP Trial Balance has been replaced by the Open Account AP Balance Listing in R12. This report is a variation on the more general Open Account Balances Listing, and shows basically the outstanding amount (liability) for all open AP invoices. The balance should match your AP liability account(s) in General Ledger. Users can create their own layout and publish their custom reports using Oracle XML Publisher.