Oracle E-Business Suite R12 Supply Chain Management

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By Muneeb A. Siddiqui
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  1. Getting Started with Oracle Supply Chain Management

About this book

Supply chain operations are turning increasingly global and complex, as companies aspire to support a variety of strategies, such as entering new markets and lowering costs. Oracle E-Business Supply Chain Management R12 provides comprehensive solutions to predict market requirements and align operations across global networks. However to implement these solutions, you need to gain a solid understanding of the various Oracle EBS modules used in supply chain processes.

Oracle E-Business Suite R12 Supply Chain Management will guide you to successfully configure and implement the various Oracle EBS modules for supply chain management. With this book in hand, you will be able to learn from scratch what Oracle EBS is and how it works in the supply chain management's domain. Backed by ample screenshots and clear explanation, the book will demonstrate the business flow of the entire application.

This book is an excellent learning resource for Oracle application supply chain modules. It begins by explaining the fundamentals of supply chain management and why it is necessary to use Oracle applications for supply chain management. If you have just begun using Oracle Applications, this book will give you a clear picture of the working and interface of Oracle E-Business Suite. It then progressively moves forward to demonstrate the step-by-step configuration of various Oracle EBS SCM modules.This book also covers all the transaction flows in detail, and shows how we carry out transactions in different modules. The chapters also explain the business and process flow of the modules that are configured.

By the end of this book, you will have learned to automate all your supply chain management processes thereby increasing profitability and customer satisfaction.

Publication date:
December 2010
Publisher
Packt
Pages
292
ISBN
9781849680646

 

Chapter 1. Getting Started with Oracle Supply Chain Management

Supply Chain Management (SCM) is a set of various activities in which raw materials are purchased and transformed into semi-finished or intermediate goods, which eventually become the finished goods. These finished goods are then distributed to the customer using the distribution channel. This complete cycle from supplier to customer is called the Supply Chain Management process.

As we can see in the Supply Chain Management process, all the activities are interconnected with each other. Therefore, for a smoother process flow, these activities should be clearly defined and all of them should have a proper Standard Operating Procedure, which ensures their smoother running.

Supply Chain Management is a set of activities through which we can arrange and integrate the stakeholders of the Supply Chain process, as follows:

  • Suppliers

  • Customers

  • Distributer

  • Transporter

  • Warehouse

  • Production

Supply Chain activities are very important in any organization. However, at the same time, they are very hectic and time consuming as we have to keep a track of thousands of suppliers and customers. In the same manner our internal process of procurement, inventory, manufacturing, planning, scheduling, and distribution can also get very complex. It would be very difficult for us to manage these activities manually by using spreadsheets.

Oracle E-Business Suite gives us a complete solution to map our business process and performs different types of planning related to our business process and the management of our master data in the system, giving us a great ease of control over the process.

 

Supply Chain Management and Oracle E-Business Suite


Oracle E-Business Suite provides us with a number of application parts, also called modules that can be used to manage business processes and cater to complex scenarios that are encountered in the organization.

Oracle E-Business Suite offers the following modules for the Supply Chain process:

  • Oracle Procurement

  • Oracle Logistics

  • Oracle Manufacturing

  • Oracle Order Management

  • Oracle Marketing and Sales

 

Oracle E-Business Suite Supply Chain process flow


The core processes that are listed under the Oracle E-Business Suite SCM domain are plan, source, deliver, and make. A number of Oracle Application modules reside under these broad-level processes. Some common modules are shown in the following figure. Oracle's SCM domain contains the following business suites:

  • Advanced Procurement

  • Value Chain Execution (Logistics)

  • Product Lifecycle Management

  • Asset Lifecycle Management

  • Manufacturing, Value Chain Planning

  • Order Fulfillment

Oracle Procure to Pay process

The Oracle Procure to Pay process initiates from demand. A requirement of goods or services is identified and communicated. On the basis of the received requirement the source is finalized and a purchase order is raised for the required quantity. We receive goods on the basis of the ordered quantity and pay the supplier for their goods or services.

Oracle Order to Cash process

The Oracle Order to Cash process initiates when we enter a new sales order in the system. Once the order is booked in the system, picking and shipping of goods take place on the booked orders. On the basis of goods dispatched against the orders, we invoice the customer and upon receiving payment we enter the receipt into system.

 

Oracle Purchasing


Oracle Purchasing gives us the concept of centralized procurement for operating units and all the procurement of an organization can take place under one roof.

The process of procurement starts from requisitions. These requisitions are the approved requests that are received from requesting departments.

A requisition can be for goods or services. The requisition contains all the information within it, such as:

  • Requester name

  • Item

  • Quantity

  • List price

  • Need by date

  • Justification

  • Note to buyer

The flow of the Oracle Purchasing process initiates from the create requisition step and ends at the receiving of goods from the supplier.

Suppliers

In Oracle Purchasing, Supplier Management is an essential part. It's a shared portion between Oracle Payables and Oracle Purchasing. Using the suppliers form we manage the master data of suppliers including their complete details, for example:

  • Liability and advance accounts

  • Supplier site

  • Contact person

  • Tax information

  • Payment terms

Purchase requisition

Purchase requisition is the point of initiation of the procurement process. A purchase requisition can be created in response to the requirement from different modules, as follows:

  • Inventory Management

  • Order Management

  • Advance Supply Chain Planning

  • Work in Process (WIP)

  • Legacy system

The processing of procurement only starts on the basis of an approved purchase requisition. These approved requisitions are seen in the Pool while querying from the Auto Create utility.

Purchase order

The requisitions that are approved can be converted into purchase orders. The purchase order document contains the requested quantity from approved requisition as well as the negotiated amount, which was agreed within the RFQ (Request for Quotation) and Quotation process with the potential supplier.

We can create different types of purchase order documents, as follows:

  • Standard purchase order

  • Planned purchase order

  • Blanket purchase agreement

  • Contract purchase agreement

  • Blanket and planned releases

Receiving goods and services

The process of receiving goods and services starts when the supplier ships the goods on the receipt of the purchase order. In the receiving process these goods are received as per requested quantity, location, and shipment of purchase orders.

Receiving of goods is carried out in various stages in which we can evaluate the quality and verify the requested quantity. The following are the stages involved:

  • Receiving

  • Inspecting

  • Delivering

After receiving the goods, they are inspected for quantity and quality in the inspection process. After the acceptance or approval for quantity and quality, these goods finally become the part of inventory at the Deliver stage.

 

Oracle Inventory


Oracle Inventory contains the items that we purchase from a supplier or the items that we create using the process of discrete manufacturing. It can also logically contain a service that we give to our customers.

In the Inventory Management module, the goods are inventoried these goods are charged to relevant cost centers when they are issued from inventory. These goods can be raw material that is required in the the manufacturing process of an organization; they can be finished goods that arrive as a result of manufacturing process, that would be further sold to the customers. These goods could also be the tools and spares which are needed in the maintenance process of machinery, equipments, and so on.

The flow of Oracle Inventory normally starts when the goods are received from any external supplier, from the production department, goods are returned from customers or transferred from another inventory organization, and so on.

Oracle Inventory process

The flow of Oracle Inventory Management process is initiated when the goods are delivered from a purchase order or returned from customers through Order Management or finished goods arrive from the production department, as shown next:

Item

In Oracle Inventory Management an item can be something that we purchase, such as, raw materials and packaging materials, or create such as finish goods, or an engineering item that is used for repair and maintenance. Using Oracle Inventory Management we can create and maintain items. We can have different types of items that are normally differentiated due to their accounting treatment such as:

  • Asset item

  • Inventory item

  • Expense item

Transferring inventory

In Oracle Inventory Management, we can make various types of transfer. We can transfer the goods among warehouses as per their requirements. We can also transfer the material from store to scrap of similar warehouse. Transfer in Oracle Inventory Management can also be generated from Order Management, from stores to staging inventory from where it can be dispatched to customer location.

Issuance of inventory

In Oracle Inventory Management, when we issue goods to some user department that has requested the goods, issuance takes place in the system against internal orders. In the same manner, issuance takes place when we create a sales order in Order Management on the dispatch of goods to customer.

Similarly in Inventory Management the raw materials are issued for manufacturing to the production department.

On hand using material Workbench

The material Workbench gives us a clear picture of our items whether they exist in inventory, still pending, or in transit.

Using the material Workbench we can plan and make decisions. We can view the exact status of inventory and also make the time line and plan for consumption accordingly.

There are different views available in the material Workbench to view the inventory, as follows:

  • Location

  • Item

  • Lot

  • Serial

We can use search criteria to filter the item organization and sub-inventory, and can also write a query to view frequently required item views.

 

Oracle Order Management


In Oracle Order Management we can create sales and internal orders in the system. These orders contain all the information regarding the customer such as where the goods should be shipped, which is the bill-to location for the orders, what are the agreed payment terms, and what should be the price of the ordered goods. In Oracle Order Management, we can create sales agreements as well as take returns against orders. Also, we can keep track of our orders as to what is the current status of order, using which we can perform our Order Management process efficiently and effectively.

Oracle Order Management process

The flow of the Oracle Order Management process is initiated when goods arrive against purchase orders or returns

Customers

In Oracle Order Management and Receivable, we create and maintain master data of customers using the customers form, for example:

  • Customer site

  • Customer accounts

  • Contact

  • Tax code

  • Registry ID

Sales order

We can create different types of sales orders according to our requirement, for example, local and imported orders. Sales orders contain all the information that is necessary for booking orders such as customers, ship-to and bill-to locations, details of items, and unit price of goods in the sales order form. We can create or book sales orders.

Pick release

After booking a sales order in Oracle Order Management, we run the pick release process. This process creates the move order in the Oracle Inventory for the sales order's booked quantity. The picking process is supported by the picking rules, which detail the delivery lines. The rules also describe how the inventory should be allocated and what are the inventory allocation criteria for move orders. Inventory is then moved from stores to a staging location from where it is dispatched to customers.

Ship confirm

After the pick selection of goods, the goods are moved to the staging area from stores. The goods are then shipped and dispatched. The ship confirmation process is used for dispatching the goods. This process will dispatch the booked order's quantity from staging the location to the customer.

 

Oracle Advanced Supply Chain Planning


Oracle Advanced Supply Chain Planning (ASCP) is a part of Oracle E-Business Suite. It is a web-based application that performs planning, managing our business issues, and balancing the supply and demand. Oracle ASCP gives a clear picture and ease of decision-making. It elaborates when and where supplies are required and what is the most efficient way to manage our inventory, purchase orders, and work orders. Using Oracle ASCP, we can identify what is required on an immediate basis and what should be kept.

Oracle Advanced Supply Chain Planning process

The flow of Oracle Advance Supply Chain starts when we collect the transactional data from Oracle E-Business Suite, and completes on changes we make according to the planning recommendations.

Collections

The process of transferring data from the transaction instance to the planning instance is called the collection process in Oracle Advance Supply Chain Planning. The source of the transaction can be an Oracle E-Business Suite or some legacy system.

Some target and collection methods are as follows:

  • Complete refresh

  • Target refresh

  • Net-change refresh

Plans

In Oracle Advance Supply Chain Planning (ASCP), we can create different types of plans, for example, unconstrained plan, constrained plan (enforce capacity constraints, enforce demand due dates, decision rule, and so on), and optimized plan.

Different options of planning in ASCP are as follows:

  • Material Requirement Planning (MRP)

  • Master Production Scheduling (MPS)

  • Master Production Planning (MPP)

 

Oracle Cost Management


Oracle Cost Management is a module that is mostly used for accounting and costing for modules such as inventory, product costing, and WIP costing. Oracle Cost Management is used to transfer the cost and accounting entries to general ledger from Inventory Management and WIP. Using the Oracle Cost Management Suite, we can manage and maintain the following costing methods:

  • FIFO costing

  • LIFO costing

  • Average costing

  • Standard costing

Oracle Cost Management Process

The flow of Oracle Cost Management initiates when it receives the transactional data from Inventory and WIP and transfers the accounting entries to general ledger, as shown next:

Oracle Cost Types

In Oracle Cost Management we can make different Cost Types. These Cost Types hold the cost and are identified by their unique name. In the Cost Management module there are some Cost Types that are created by default such as frozen (standard cost) and average, whereas we can create unlimited custom Cost Types according to our business requirements.

Closing Oracle Inventory Period

In Oracle Cost Management, the period closing activity of Oracle inventory is performed using Cost Management. We transfer all the accounting entries, which are created in inventory organization, to Oracle general ledger.

These transactions contain the transactions that are generated by the following:

  • Receipts against purchase order

  • Sales dispatches against sales order

  • WIP process transactions, material transactions

After transferring these transactions to general ledger, we close the period and as we know, once an inventory period is closed we cannot reopen it and enter transactions in it.

 

Oracle Landed Cost Management


Oracle Landed Cost Management is a new module, which is introduced in Oracle E-Business Suite Release 12.1. Oracle Landed Cost Management's basic functionality is to capture other costs that are incurred at the time of purchasing goods from a supplier; these costs may contain the following:

  • Port charges

  • Transportation cost

  • Shipping agent fee

  • Storage cost

  • Demurrage

Using Oracle Landed Cost Management, we can identify the factors mentioned earlier so that it becomes easier for us to calculate the cost estimation and make plans. Oracle Landed Cost Management gives a clear visibility of cost incurred on various factors, which makes planning for procurement easier.

Oracle Landed Cost Management process

The flow of Oracle Landed Cost Management starts when a purchase order is raised and completes after all the invoices in the system related to the order total cost are calculated. Using Landed Cost Management, we calculate the estimated cost and actual cost for items. These costs are variable, and includes transportation charges, freight charges, port charges, demurrage charges, container deposit, and insurance.

 

Oracle Advance Pricing


Oracle Advance Pricing is a very essential part of Oracle E-Business Suite. Using Oracle Advance Pricing, we can create different types of price list for items, which are effectively and efficiently used to cater for different business pricing scenarios.

In Oracle Advance Pricing there are different methods used for capturing our business requirements, for example, the usage of discounts and surcharges to any item. Also, we can use formulas for the computation of price for items.

Oracle Advance Pricing process for sales orders

The flow of Oracle Advance Pricing starts when a sales order line is entered in Oracle Order Management and on the order form it brings up the price that is associated with the item.

Price list

The price list contains the prices for different items. When we select an item that has a price list associated with it, the pricing engine assigns a price to the item after the modifier calculates the unit-selling price for the Item.

The price list contains prices, which can be as follows:

  • Driven from other prices

  • Calculated by formulas

  • Static non-formula values

Modifiers

In Oracle Advance Pricing we use modifiers to implement functionalities such as surcharges, discounts, implement business offers, promotional pricing discount, and seasonal variations. Using the modifiers we can apply amount-based and quantity-based discounts and surcharges.

Qualifier

Qualifier, as indicated by its name, is used for setting some condition; and if some condition qualifies, then the value will be picked from the price list on the basis of the qualified option.

Using qualifiers we can make conditions, as follows:

  • Customer name

  • Customer type

  • Ship-to, bill-to location

  • Terms

  • Orders

  • Sales territories

 

Summary


In this chapter, we went through the process of Supply Chain Management, how Oracle E-Business allows us to capture the Supply Chain process, an overview of the Procure to Pay and Order to Cash cycles, and process overviews of the following:

  • Oracle Purchasing

  • Oracle Inventory

  • Oracle Order Management

  • Oracle ASCP

  • Oracle Cost Management

  • Oracle Landed Cost Management

  • Oracle Advance Pricing

In the next chapter, we will see how to start using Oracle E-Business Suite. We will try to get familiar with the form and functionality. We will also see how menus, functions, and responsibilities are associated, how to submit and view reports, and so on.

About the Author

  • Muneeb A. Siddiqui

    Muneeb A. Siddiqui was born in Islamabad, Pakistan. He graduated from Sir Syed University of Engineering and Technology in 2006 with a degree in Computer Science and has done his Masters in Supply Chain Management. Muneeb is a certified Oracle Professional and for several years he worked in Sui Southern Gas Company Limited—SSGC, Client Centric Consulting (Pvt) Ltd, and is currently working as a Senior consultant at IBM Pakistan. Muneeb has worked in the field of Supply Chain and Financials and taken it as his passion. Muneeb has more than four years of experience in the field of Oracle Applications Supply Chain and Financial Modules with the End–to-End Cycle in Oracle Release 12 at Leading Telecom, Oil & Gas, and Manufacturing Organizations in Pakistan.

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Oracle E-Business Suite R12 Supply Chain Management
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