ASL-Sourcing in Procurement

An Oracle White Paper October 2004

Table of Contents

Executive Overview............................................................................................................ 3 Introduction......................................................................................................................... 3 Important Sourcing terms in Oracle Purchasing................................................................. 3 Approved Supplier List (ASL)........................................................................................ 3 ASL Attributes ................................................................................................................ 4 Global & Local ASL....................................................................................................... 4 Sourcing Rules ................................................................................................................ 4 Assign Sourcing Rules.................................................................................................... 4 Setup for Sourcing .............................................................................................................. 5 Create a Blanket Purchase Agreement........................................................................ 7 Sourcing Cycle in Core Purchasing .................................................................................. 12 Sourcing Cycle in iProcurement ....................................................................................... 13 Creating a Release from a BPA for a catalog item ....................................................... 13 Creating a Standard Purchase Order from a quotation for a Catalog Item. .................. 14 Creating a Standard Purchase Order from a Contract Purchase Order for a catalog item. ....................................................................................................................................... 15 Creating a Standard Purchase Order from a Contract Purchase Order for a Non Catalog Item ............................................................................................................................... 16 PO Create Documents Workflow in Sourcing.................................................................. 17 Advanced Features of Automatic Sourcing ...................................................................... 20 Steps to implement Automatic Sourcing ...................................................................... 21 Tables involved in Sourcing ............................................................................................. 25 Summary ........................................................................................................................... 26

Executive Overview
Sourcing is a function with strategic importance within the broader context of procurement. Infact it is a subset of procurement with strategic context. Sourcing sets the stage for the entire companys purchase for direct and indirect materials, and involves highlevel, company-wide approaches to obtaining materials and services, identifying and evaluating potential suppliers to meet those needs, negotiating and implementing contracts with selected suppliers, monitoring and improving ongoing supplier relationships. This white paper focuses on the features that sourcing provides in the Procurement module of Oracle Applications. It lays down the road map towards implementing sourcing and describes in detail the sourcing cycle with related setups. It also discusses the new sourcing feature in Oracle Applications- Automatic Sourcing.

Introduction
Oracle Purchasing allows users to automatically source items from suppliers based on the sourcing rules and purchase agreements. The business needs of Sourcing are Automatically default supplier and pricing information onto requisition lines Source the item from negotiated purchase agreements Reduce manual intervention Sourcing in Oracle Applications, can be implemented either to the requisition created in iprocurement or core purchasing. The only difference lies in setup techniques. The setups for both of the methodologies are discussed in this paper.

Important Sourcing terms in Oracle Purchasing

Approved Supplier List (ASL)
All procurement organizations maintain lists that associate the items and services they buy from supplier organization. Data stored in a global repository containing relevant details about each item/supplier/supplier site relationship, is known as an Approved Supplier List (ASL). This repository includes information about all suppliers with business statuses ranging from Approved (the supplier has demonstrated the ability to satisfy rigorous quality, cost, and delivery requirements over a sustained period) to Debarred (the supplier is temporarily/permanently disallowed on purchase orders due to performance failure, ethics violations, etc.) or ' New' if you have never placed a purchase order with the supplier.

ASL Attributes
For each ASL entry, ASL attributes specify the Release Generation Method, purchasing Unit of Measure, source Blanket Agreements and Catalog Quotations for automatic reference during document creation.

Global & Local ASL

Global ASL entries are valid for all Inventory Organizations. Local ASL entries are specific to a single Inventory Organization.

Sourcing Rules
Sourcing rules define inventory replenishment method for either a single organization or all organizations in the enterprise. They describe sourcing supply; for any organization, they answer the question where do I get part A from? User defines rankings and % allocation for replenishment sources in the form of Sourcing Rules.

Assign Sourcing Rules

Sourcing rule must be assigned to a particular item and/or organization. These assignments are grouped together in assignment sets. This is where various sourcing strategies define a particular supply chain network. In an assignment set, sourcing can be assigned at different levels, as follows: An item across all organizations A single item in an inventory organization A category of items across all organizations A category of items in an inventory organization All organizations

Setup for Sourcing

Sourcing setups in Oracle Applications is accomplished using the series of steps described below. An important prerequisite for Sourcing is that items and suppliers should be defined. Define items.

Assign Item to Inventory organization

Create suppliers and supplier sites in the Suppliers window.

Steps to implement sourcing are

Create a Blanket Purchase Agreement

Defining the Approved Supplier list To define the Approved Supplier List (ASL) 1. Navigate to the Approved Supplier List window as follows: Navigation: Supply Base Management -> Approved Supplier List. 2. In the Organizations window that appears, choose the ship-to organization for which to define Approved Supplier List (ASL) entries. This will be the owning organization. 3. An ASL can be created for either of the following a. Item - assigns a supplier to a particular item. b. Commodity - assigns a supplier to a group of items belonging to a category (or commodity). 4. Select an item or commodity. 5. One of the following Business type can be selected: 7

a. Direct (Supplier): This option should be selected when the supplier sells his products or services directly to buyer organization. Specify the supplier and supplier site. b. Manufacturer: This option should be selected when the supplier does not sell his product/services directly to the procuring organization but sells it through distributors c. Distributor: This option should be selected when the supplier sells products made by manufacturers. A distributor needs to be associated with manufacturer, which implies that a manufacturer should be defined in ASL before defining its distributor. 6. Select the supplier' s approval status. Use one of the default statuses provided. 7. Navigate to the Record Details Alternate region. 8. Select one of the following in Global: 1) 2) Yes - This ASL entry is valid for all inventory organizations in this Operating unit. No - This ASL entry is local, meaning that it is valid only for the organization chosen in the Organizations window when first opening the Approved Supplier List window.

Note: If two ASL entries exist for the same item or commodity, one Global entry that applies to all organizations and one local entry that applies only to the local inventory organization, the local entry takes precedence.

Source document information can be specified in the Supplier-Item Attributes window.

To define the supplier and commodity/item attributes: 1. Navigate to the Supplier-Item Attributes window by choosing the Attributes button in the Approved Supplier List window. 2. Choose the Purchasing UOM. 3. Choose the Release Generation Method from the following options: a) Automatic Release/Review: Automatically generates releases, but requires a separate step for approval. Create Release Program is used to create releases in this case. b) Automatic Release: Automatically generates approved releases. This choice is not available if encumbrance is turned on. Create Release Program is used to create release in this case. c) Release Using AutoCreate: Release is created by the workflow and Create Release Program is not required. NOTE: If Requisition Line(s) are for a one-time item then the Release Generation Method is not considered and the requisition is a candidate for Automatic creation by the CREATEPO workflow. This Occurs in the workflow (CREATEPO) after the workflow has verified that the Requisition has the required information for automatic release creation 4. One of the following attribute groupings can be selected from the Alternate region: a. Enter a unique Seq (Sequence) Number. Sourcing picks up the document as per the sequence, i.e. if there are two documents specified in ASL having sequence number 1 and 2, then the document with sequence number 1 will be picked up irrespective of whether it is a Blanket or Quotation. b. Following Document types can be selected: --Blanket --Quotation A requisition with a quotation as a source document can be created into a standard purchase order. A requisition with a blanket purchase agreement as a source document can be created into a release (unless the ASL is setup for this item as a Cosigned Inventory item. If this is the case then a Standard PO is created instead of a Blanket Release)

c. Choose a Document Number. d. Choose a Line Number. The Status and Effective Dates for the document, if any, are displayed.

Define a sourcing Rule To define a sourcing rule: 1. Navigate to the Sourcing Rule window. 2. Enter a unique Sourcing Rule name. 3. Indicate whether this sourcing rule is used for all organizations (global) or a single organization (local). If the sourcing rule is local, enter an organization name; otherwise, the current organization will be the receiving organization. 4. Enter effective dates. A start date is mandatory, but entering an end date is optional. 5. Enter an allocation percentage 100%

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To assign a sourcing rule: 1. Navigate to the Sourcing Rule/Bill of Distribution Assignments window. 2. Enter an assignment set name and description. Note: The assignment specified in profile option MRP: Default Sourcing Assignment Set is the only one used by Purchasing during the sourcing process 3. Enter an Item/Category if the selection for the Assign To Type is Item or Item-Org. 4. Enter the sourcing rule as the Type. 5. Enter the name of the sourcing rule. 6. Save the form.

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Sourcing Cycle in Core Purchasing

1. Create a requisition for the Item for which the Sourcing Rule and Approved Supplier List has been created. 2. The Supplier and Supplier Site defaulted from the Sourcing Rule. 3. Navigate to Source Details Alternate region. 4. The Blanket Purchase Agreement, which was specified in the ASL, is now attached to the Requisition.

5. Approve the requisition. 6. Run the Workflow Background Process with the following parameters 12

ItemType: PO Requisition Approval Process Deferred: Yes Process Stuck: No Process Timeout: No This step is not required if using the Create Documents workflow in Online Mode, which is determined by the value of Requisition Approavl workflow item attribute = Send PO Autocreation to Background is set to No. If this is set to No then the Create Documents workflow will be done in online mode. If it is set to yes it will be sent to the Background and this step is required

Sourcing Cycle in iProcurement

Sourcing can also be used in iProcurement. Following types of documents can be created in iProcurement with the help of Sourcing i) Creating a release from a BPA for a catalog item. ii) Creating a standard purchase order from a quotation for a catalog item. iii) Creating a standard purchase order from a contract purchase order for a catalog item. iv) Creating a standard purchase order from a contract purchase order for a non catalog item.

Creating a Release from a BPA for a catalog item

Following steps should be followed in order to create a release from a BPA for a catalog item. i) Create one item. ii) Create one BPA and ASL for that item and attach the BPA to the ASL for this item. iii) Extract item, BPA and ASL in iProcurement Note: Following points to be taken care of while extraction. Item List Price should be specified in Item Master in Purchasing tabbed region. Item should be attached to a category, which should be web enabled. Category should be extracted before Item. Owning Org of ASL should be same as the Inventory Organization specified in Financial System Parameters. iv) Search for the item in iProcurement. v) Create a requisition in iProcurement for this item. vi) Approve the requisition. vii) Run the workflow background process (if Release Generation Method in ASL is Release using Autocreateand if the Requisition Approval Workflow item attribute Send PO Autocreation to Background is set to yes. If Send PO autocreation to Background is set to No then this step is not required.) 13

The CREATEPO workflow performs the following checks before creating a release. Wfstatus output for ItemType CREATEPO provides the status of these activities. Does Req Line Have Enough Information To Create Document? Does The Req Line Have Valid Supplier Information? Does the Req Line Reference a Valid Blanket or Quotation? Also it validates the Source document extracted for that item and the Release Generation Method from the extracted ASL. If the Requisition Line(s) are for a one time item then the Release Generation Method is not considered and the Requisition is a candidate for automatic creation by the CREATEPO workflow. If all the above conditions are satisfied then it will create the release.

Creating a Standard Purchase Order from a quotation for a Catalog Item.

Following steps should be followed in order to create a Standard PO from a Quotation for a catalog item. i) Create one item ii) Create one quotation and ASL for that item. Attach the quotation in ASL iii) Extract item, Quotation and ASL in iProcurement iv) Search for the item in iProcurement v) Create a requisition in iProcurement for this item vi) Approve the requisition. vii) Run the workflow background process. NOTE: If the Requisition Approval Worlflow item Attribute Send PO Autocreation to Background is set to Yes.If Send PO Autocreation to Background is set to No then this stepsis not required The CREATEPO workflow performs the following checks before creating a release. Wfstatus output for ItemType CREATEPO provides the status of these activities. Does Req Line Have Enough Information To Create Document? Does The Req Line Have Valid Supplier Information? Does the Req Line Reference a Valid Blanket or Quotation? Also it validates the Source document extracted for that item. If all these conditions are satisfied then it will create the Standard PO.

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Creating a Standard Purchase Order from a Contract Purchase Order for a catalog item.
i) Create one item ii) Create one contract purchase oder and ASL for that item. Contract is not specified in ASL. iii) Extract item and ASL in iProcurement. iv) Search for the item in iProcurement. v) Create a requisition in iProcurement for this item vi) Approve the requisition. vii) Run the workflow background process. NOTE: If the Requisition Approval Worlflow item Attribute Send PO Autocreation to Background is set to Yes.If Send PO Autocreation to Background is set to No then this stepsis not required The CREATEPO workflow performs the following checks before creating a release. Wfstatus output for ItemType CREATEPO provides the status of these activities. Does Req Line Have Enough Information To Create Document? Does The Req Line Have Valid Supplier Information? Does the Req Line Reference a Valid Blanket or Quotation? (Which will be No in this case) Should Contract be used to AutoCreate Doc? (Which will be yes and will come from workflow attribute) Does Contract Info Exist in ReqLine? (It is No because contract is not extracted) Is Contract Required on the ReqLine? (This needs to be set in workflow attribute as No) Does Contract Exist and Allow Creation from Contract? (Yes because contract is there in core purchasing) Now as it gets the details from the source document in core purchasing it will create a standard Purchase order.

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Creating a Standard Purchase Order from a Contract Purchase Order for a Non Catalog Item
i) Create one contract purchase order in core purchasing ii) Create one non catalog requisition in iprocurement iii) Specify the supplier and site (should be same as in the contract purchase order iv) Approve the requisitionRun the workflow background process. NOTE: If the Requisition Approval Worlflow item Attribute Send PO Autocreation to Background is set to Yes.If Send PO Autocreation to Background is set to No then this stepsis not required The CREATEPO workflow performs the following checks before creating a release. Wfstatus output for ItemType CREATEPO provides the status of these activities. Does Req Line Have Enough Information To Create Document? Does The Req Line Have Valid Supplier Information? (As given during Requisition creation) Does the Req Line Reference a Valid Blanket or Quotation? (Will not be there in this case) Should Contract be used to AutoCreate Doc? (Workflow attribute) Does Contract Info Exist in ReqLine? (No as Contract PO is not extracted) Is Contract Required on the ReqLine? (Workflow attribute) Should Non-Catalog Request AutoSource From Contract? (Workflow attribute) Does Contract Exist and Allow Creation from Contract? (Yes as it is there in Core purchasing)

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PO Create Documents Workflow in Sourcing

The PO Create Documents Workflow is used in Sourcing to create the releases from BPAs and standard purchase orders from Quotations automatically. The wft file involved is poxwfatc.wft. Follow the below steps in order to configure the PO Create Documents Workflow 1. 2. 3. 4. Open the Workflow file in Workflow Builder. Expand Attributes. Double Click on the attribute Is Automatic Creation Allowed? Specify the Value as Y

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Following attributes need to be set for A) Generating Release from a BPA in Sourcing

Sr No 1 2 3

Attribute Name Is Automatic Creation Allowed? Should Workflow Create The Release? Is Automatic Approval Allowed?

Value Y Y Y

Required Yes Yes Optional

If the Attribute Is Automatic Approval Allowed is set to Y then releases that are created will be automatically submitted for approval. Whether the Release is approved automatically or not depends on if Buyer that defaults on the Release has approval authority at the time of Release creation. If the Buyer does not have authority the Release will be forwarded in an IN PROCESS status to the next approver in the Buyer` s Approval Hierarchy. B) Generating Standard Purchase Orders from Quotation Sr No 1 Attribute Name Is Automatic Creation Allowed? Value Y Required Yes

C) Generating Standard Purchase Order from a Contract Purchase Order in iProcurement Sr No 1 2 3 4 Attribute Name Is Automatic Creation Allowed? Should Contract be used to autocreate Doc? Should non-catalog requests be auto sourced from contract? Is Contract Required on Requisition Line? (This is an optional item attribute it can be setup to Yes or No and the system can still create PO` s from Requisitions that have contracts steup Value Y Y Y N Required Yes Yes Yes No

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The attribute SEND_CREATEPO_TO_BACKGROUND should be set to Y if the PO Autocreation has to be sent to Background.

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Advanced Features of Automatic Sourcing

Oracle Purchasing enables the automatic creation of Sourcing Rules, Sourcing Rule Assignments and Approved Supplier List entries during Blanket Agreement approval submission. The system automatically creates the relevant entries, once the Blanket Agreement is approved. 1) A new Profile Option "PO: Allow Auto-generate Sourcing Rules and ASL" has been introduced. The default value is ' None' . In order to activate this feature, the profile option value needs to be set to either "Create Only" or "Create and Update". If the value is set to "Create only" then the "Enable Automatic Sourcing" checkbox and the "Release Generation Method" field are visible and can be updated on the Approval window. If the value is set to "Create and Update", then the "Enable Automatic Sourcing" Checkbox, the "Update Sourcing Rule and ASL Entries" checkbox and the "Release Generation Method" field are visible and can be updated on the Approval window. Note: If the Archival mode being used for Blanket Agreements is "Archive on Print", this feature cannot be used and the new fields and checkboxes would not be visible in the Approval window. User must select "Archive on Approve" to use this feature. 2. Sourcing Rule Name Prefix can be customized. The prefix value is read from the activity attribute "PO Sourcing Rule Name Prefix" in PO Approval Workflow. The default value is "PURCH". Note: The new Sourcing Rules will be assigned at the Item Level and will be added to the assignment set that is specified in the profile option "MRP: Default Sourcing Rule Assignment set". The ASL will be created as a Global ASL. This process will update existing Sourcing rules only if all of the following are true: 1. The sourcing rule is not assigned to any other item. 2. The Blanket purchase order Start and End Dates are not null. 3. If the update requires extension of any existing effective period in the Sourcing Rule, there can be only one Supplier/Site for that effective period and must match the supplier/site on the blanket purchase order. 4. The blanket effective period do not overlap multiple effective periods in the Sourcing Rule. The process will try to create or update Approved Supplier List entries even if Sourcing Rule creation/update failed for the Blanket Agreement line item.

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For exception reporting, run the Purchasing Interface Errors report with a source type of ' ASR - Automatic Sourcing Rule Builder' to view the exceptions encountered during the creation of sourcing rules and/or approved supplier list entries.

Steps to implement Automatic Sourcing

i) Create an Item. ii) Set the Profile Option PO: Allow Auto-generate Sourcing Rules

iii) Set the Profile Option MRP: Default Assignment Set to the Set in which Sourcing Rule will get attached.

iv) Create a BPA. Ensure that the effectivity dates are specified v) Approve the BPA. In Approval window check the checkbox Create Sourcing Rule and select the Release Generation method

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Note: Please note that this checkbox will only be enabled when the Profile Option PO: Allow Auto-generate Sourcing Rules is set. vi) Run the Workflow Background Process for item type = PO Approval ( even if the sytem is setup to use PO approval in online mode this background process must be run to create or update the ASL / Sourcing Rules for the data on the Blanket Purchase Order submitted for approval.

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vii) ASL is automatically generated with the document attached in the Attribute. Release Generation Method has also been populated automatically.

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viii) Sourcing Rule is also generated and attached to the assignment set specified in Profile Option MRP: Default Assignment Set.

ix) The Sourcing Rule will show the same Supplier/Supplier Site with 100% allocation and same effectivity dates as that of BPA.

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Tables involved in Sourcing

1. PO_APPROVED_SUPPLIER_LIST PO_APPROVED_SUPPLIER_LIST stores the relationship between an item or commodity; a supplier, distributor, or manufacturer; ship-to organizations; and approval/certification status. 2. PO_ASL_ATTRIBUTES PO_ASL_ATTRIBUTES stores all information for the supplier/item/organization relationship defined in PO_APPROVED_SUPPLIER_LIST. This information is maintained separately to allow each organization to define its own attributes, even if using a Global ASL entry for the supplier/item relationship and approval status. 3. PO_ASL_DOCUMENTS PO_ASL_DOCUMENTS stores sourcing references to supply agreements, blanket agreements, and catalog quotations associated with particular suppliers and items in PO_APPROVED_SUPPLIER_LIST. 4. PO_ASL_STATUSES PO_ASL_STATUSES stores the user-defined approval/certification statuses for the ASLs. 5. PO_ASL_STATUS_RULES PO_ASL_STATUS_RULES stores the business rules associated with each defined ASL status. 6. MRP_SOURCING_RULES MRP_SOURCING_RULES stores sourcing rule names and descriptions. The Define Sourcing Rule form populates this table. 7. MRP_ASSIGNMENT_SETS MRP_ASSIGNMENT_SETS stores information about Sourcing Assignment Sets. The Define Assignment Sets form populates this table. 8. MRP_SR_ASSIGNMENTS MRP_SR_ASSIGNMENTS stores the assignment of sourcing rules or bills of distribution to items, organizations, category, or at the global level. The Assign Sourcing Rules Form populates this table.

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9. PO_ASL_ATTRIBUTES_VAL_V (view) PO_ASL_ATTRIBUTES_VAL_V is a view used by the Create Documents workflow that is created from table PO_ASL_ATTRIBUTES and table PO_APPROVED_SUPPLIER_LIST

Summary
Purchasing provides great flexibility in implementing Sourcing. To use this feature successfully, business needs and supply chain strategy should be identified. With the correct setups and different techniques of Sourcing outlined in this paper, you have greater flexibility than ever before to make this feature suit your business processes. By implementing this sourcing functionality employer will give full access to the users and free up the purchasing department to concentrate on securing the best deals for the organization.

Acknowledgement
We wish to record our sincere appreciation towards: Mike Williams, Linda Johnston, Lisa Oinonen and Starr Smelley of Procurement Team for reviewing this paper and for making it complete with their feedback. We are grateful to Adiraju Sastry and Chandu Tadanki for their constant encouragement and support.

References
Oracle Purchasing User' s Guide Release 11i (Part No.A82913-04)

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ASL-Sourcing in Procurement November 2004 Author: Nandini basu & Rajiv Arora (CPIM) Oracle Corporation World Headquarters 500 Oracle Parkway Redwood Shores, CA 94065 U.S.A. Worldwide Inquiries: Phone: +1.650.506.7000 Fax: +1.650.506.7200 www.oracle.com Oracle is a registered trademark of Oracle Corporation. Various product and service names referenced herein may be trademarks of Oracle Corporation. All other product and service names mentioned may be trademarks of their respective owners. Copyright 2003 Oracle Corporation All rights reserved.

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