2010 KPIT Cummins Infosystems Limited

Best Practices within Oracle Application

Module/s PO/SS/ASCP
Author
Ravindra Dande
Consultant Oracle Apps
Reviewed By
Dheeraj Sharma
Senior Consultant-Oracle Apps
Creation Date:29
st
May 2010
Version: 1.0
KPIT Cummins Infosystems Limited
Plot No. 35/36, Rajiv Gandhi InfoTech Park,
Phase I, MIDC, Hinjwadi, PUNE-411057, India
Tel: +91 20 6652 5000, Fax: +91 20 6652 5001
www.kpitcummins.com
Topic Name: Centralized Purchasing
2010 KPIT Cummins Infosystems Limited
Business Challenges:
Deciding a key Sourcing strategy like whether to go for Indigenous
procurement or to Import the material, Manufacture in house or out source
the material, Buy at lower cost and not to compromise on quality of product,
buy at lowest price or meet the promised delivery date.
There are several influencing factors in identifying/applying correct
sourcing or procurement strategy like
- What should be optimal level of inventory & carrying cost?
- What should be the cost of buy items ?
- How to meet customer demand effectively ahead of competitors?
- How to establish a balance between quality , cost and delivery?
- How to develop new suppliers and minimize time of sourcing components?
and so on
Abstract of the Best Practice:
Centralized purchasing : The control by a central department of all the
purchasing undertaken within an organization.
Has the advantages like
-Reducing duplication of effort
-Pooling volume purchases for discounts
-Enabling more effective inventory control
-Consolidating transport loads to achieve lower costs
-Enhancing relationships with suppliers.
2010 KPIT Cummins Infosystems Limited
Centralized Procurement is a functionality delivered in 11.5.10 ,where
buyers are able to leverage Blanket Purchase Agreement prices across operating
units but Purchase Order creation is only possible in the operating unit where
demand originated. This functionality allows procurement operations to be run
and maintained from a single location sometimes referred to as a Shared
Service Center. Purchase Order creation can be performed in one central
operating unit
and then received by another operating unit where the requisition was raised.
Key Set ups:
- Profile : HR: Cross Business Groups profile to Yes.
- Define a supplier site for the supplier in both Requesting and Procuring
Operating Units.
- Create an approved Global Agreement in the Procuring or Negotiating
Operating
Unit.
-Create Sourcing rules, sourcing rule assignment set entries and ASL entries
-Create a Requisition against your global agreement in any organization that is
enabled.
How It Works in Oracle Applications:
2010 KPIT Cummins Infosystems Limited
Business Benefits:
References:
Center-led procurement Oracle 11i.pdf
-Centralized purchasing avoids duplication hence less buying cost.
-Local purchasing are relieved from the burden of negotiations and
contracts with suppliers.
-Transportation cost and carrying cost become economical, because all
purchases are made in bulk quantities.
- More trade discount can be availed due to bulk purchase.
- Local purchasing has only to raise requisitions for the item with
specified quantity and receive against the global agreement.
- Economy in document management.
Risks & Mitigation:
- Transportation costs needs to be considered in case the locations are too far.
- However well established supply chain logistics can mitigate the risk.
-There can be changes in some business process ,Oracle purchasing documents.
-Global Blanket Agreements creates a releases as in standard purchase orders
,integration with ASCP, Supplier scheduling needs to be reviewed.
-Advance shipment notice from suppliers against standard purchase orders
needs to be evaluated.