Internal Order Process in Oracle Order

Management
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In multi-site companies, One of common business practices is internal fulfillment. There
is two common
scenarios that need Internal-Fulfillment from another operating unit:

Manufacturing facility is centralize but has multiple distribution sites.

Manufacturing operations are spread out from many locations.

The demand can come from marketing plan of distribution sites or by min-max planning
at source organization. In Figure below, Vision Singapore (Ledger Singapore) is a
distribution operation unit. Singapore Distribution Center(S2) follows the sales plan, it
need to replenish the good from Seattle Manufacturing (M1)

The Internal Orders process content following step:

1. According to Sale plan, Vision Singapore(VS) creates an internal requisition. This
internal requisition is transferred as internal sales order for Vision Operation (V1)
2. Vision Operation pick releases the internal sales order to Seattle Manufacturing
(M1)
3. M1 ships the goods to S2. S2 receives the goods.
4. V1 issues an AR inter-company invoice to VS at transfer price.
5. VS issues an inter-company payable to V1.

Setup Internal Order Process (Oracle

Order Managment)
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This post will guide thought how to setup an Internal Order Process in
Oracle Order Management and Oracle Inventory.
1-Create Item
-Navigate to Inventory -> Items -> Master Items
-Select organization V1 (Vision Operations)
-Enter Item Name and Description (starting with OVT as initials)
Item : OVT_Internal_Order1
Description : OVT Internal Order Flow 1
-Go to Tools -> Copy From: Apply the 'Purchased Item' template

-Go to the Order Management tab and select the checkbox for Internal Ordered
Internal Orders Enabled
-Save the record
-Go to Tools -> Organization Assignment -> Check M1 and D1
-Save the record
2-Internal Customer Setup

- Navigate to Customers -> Standard

Enter the following search criteria and click on Find
Name : Vision
Customer Number : 1021
- Click on Customer row
- Place cursor on the customer address starting with 3455 108th Ave., Seattle
- Click on that row
- Select the Business Purposes tab

- Place cursor on the Usage field Ship To and click Open

- Verify the Salesperson as No Sales Credit
- Notice the following information on the internal block (see screenshoot below)

Location : M1- Seattle

Organization : Seattle Manufacturing
This setup is to map the customer address to an internal receiving organization.
An internal sales order will appear like a regular order, however actual shipping
to an internal organization (in this case M1) is done by creating this association.
3-Setup Shipping Network between Inventory Organizations
- Navigate to Inventory -> Setup -> Organizations -> Shipping Networks
- Click on Find
- Place the cursor in the D1 to M1 row (this row will already exist in a Vision
environment) and verify the following or make changes where needed.

Transfer Type : Intransit

FOB : Receipt
Receipt Routing : Standard
Internal Order Required : checked
- Save the record if any changes were made
4-Define Inter-Location Transit Time
- Go to Inventory -> Setup -> Organizations -> Inter-Location Transit Times
- Go to View -> Find and enter

Origin Type : Location

Origin : D1- Singapore
Destination Type : Location
Destination : M1- Seattle
- Enter the Ship Method and Intransit Time such as :
Ship Method : DHL
Intransit Time : 7
Default Method : check
5-Open Inventory Accounting Periods
- Go to Change Organization and select M1 or D1 as necessary
- Navigate to Inventory -> Accounting Close Cycle -> Inventory Accounting
Periods

- Verify if the Sysdate is in an Open accounting period, else open the same by
clicking on the button Change Status, and clicking ok to the question "Open this
Period?"
6-Create On-hand for Item in Source Inventory Organization
- Go to Change Organization and select D1
- Navigate to Inventory -> Transactions -> Miscellaneous Transaction
- Create a miscellaneous receipt transaction with the following information
Item : OVT_Internal_Order1
Subinventory : FGI UOM : Ea Quantity : 1500 Account : Select the
account alias Miscellaneous (01-580-7740-0000-000)
- Save record
- Navigate to Inventory -> On-hand, Availability -> On-hand Quantity and verify
the on-hand quantity for the item
7-Define Transaction Type and Order Source in Purchasing setup
- Navigate to Purchasing -> Setup -> Organizations -> Purchasing Options
- Click on the Internal Requisitions tab
- Notice the Order Type and Order Source setup

Internal Requisition Order Type : Mixed (The internal sales order in OM will be
created with this order type)
Internal Requisition Order Source : Internal (The internal sales order will be
imported into OM with this order source)
8-Define Inter-Location Transit Time
- Go to Inventory -> Setup -> Organizations -> Intercompany Transaction Flows

- Click on Intercompany Relation

Intercompany Invoicing Setups

1. For a single process flow (one procure-to-pay cycle or order-to-cash cycle), you can
model Oracle to generate intercompany invoices between two or more operating units.
The building block of intercompany invoicing is the setup of intercompany transaction
flow.

The intercompany transaction flow establishes the physical flow of goods and financial
flow relationship between two operating units. The intercompany transaction flow
establishes the relationship between one operating unit (known as Start Operating Unit)
and another operating unit (known as End Operating Unit) about the actual movement of
goods. Similarly, it also establishes the invoicing relationship between Start Operating
Unit and End Operating Unit.
2. Intercompany transaction flow is of two types shipping flow and procuring flow. You
need to setup intercompany transaction flow of type shipping when selling operating unit
is different from shipping operating unit. You need to setup intercompany transaction
flow of type procuring when buying operating unit is different from receiving operating
unit.

3.1 By enabling advanced accounting for an intercompany transaction flow, you would be
able to generate multiple intercompany invoices between different operating units for the
same physical movement of goods.

Oracle supports intercompany invoicing for both shipping and procuring flows. However,
you need to use the Advanced Accounting option for enabling intercompany invoicing
for procuring flow even if it involves only two operating units. If you do not enable
Advanced Accounting option at the intercompany transaction header, then no logical
transactions will be generated and no intermediate nodes can be defined
3.2 You need to define intercompany relations between each pair of operating units in the
intercompany transaction flow. When advanced accounting is enabled for an
intercompany transaction flow, you will be able to define multiple intercompany
relationships between different operating units. If advanced accounting is set to No, then
an intercompany transaction flow can have only one intercompany relation (it is between
start operating unit and end operating unit).

At each pair of intercompany relationship, you will define the intercompany accounts,
and currency code to be used on AR and AP invoices.
Note that in Figure 3.1 - Intercompany Transaction Flow, physical goods never flow
through intermediate operating unit. Oracle creates Logical Material Transactions
between the operating units, based on which intercompany invoices between multiple
operating units are raised.
3.3 No logical transactions will be created when you do not choose Advanced
Accounting. For example, the transactions in Figure 4 can be broken down as depicted in
Figure 6.

Logical transactions are useful to record financial transactions between two operating
units without physical movement of goods. For example, in Figure 3.2 - Logical Material
Flow, Vision Japan is an intermediate operating unit through which no physical goods
flow. However, it is a financial intermediate node, which is involved in intercompany
invoice flow. To facilitate accounting in the intermediate OUs, logical intercompany

receipt and issue transactions are created. Similarly, logical receipt and logical sales order
issue transactions are created for those receipts and issues that are not accompanied with
physical receipt and issue of goods.
3.4 Advanced Accounting option is not available for internal requisitions internal sales
order business flow. Though you can set the Advanced Accounting flag at Intercompany
Transaction Flow header to Yes, system ignores the flag and does not generate any
logical transactions. This means you cannot have an intermediate financial node in the
intercompany transaction flow. Also, you cannot have intercompany invoicing for
internal sales order with direct transfer (in shipping network between the inventory
organizations) as an option. You have an flexibility to switch off intercompany invoicing
for internal sales orders by setting the profile INV: Intercompany Invoice for Internal
Orders to No.
Intercompany invoicing is possible for inter-org transfers of type In-transit only through
Internal sales Orders. No intercompany invoicing is possible if you perform org
transfers between two inventory orgs belonging two different operating units without
internal sales Orders. Also note that intercompany invoice cannot be raised for interorg transfers of type Direct Transfer through Internal sales Orders.
Customer and Supplier relationship
Intercompany invoicing is widely used in multinational organizations. Sometimes you
will find that these companies engage in a customer supplier relationship.

For example, in above Figure you need to define Vision Japan as a customer in Vision
China operating unit. Similarly, Vision China should be defined as a supplier in Vision
Japan. When you define an intercompany relationship between Vision Japan and Vision
China, actually you are establishing an internal customer and supplier relationship.
Similar is the case for every intercompany relationship in an intercompany transaction
flow. However, at present intercompany invoicing does not support any sales credit
check.