Oracle Fusion Applications Setting Up A Minimal Enterprise Structure To Support Procurement Shared Services

An Oracle White Paper
May 2012
Oracle Fusion Applications

Setting Up a Minimal Enterprise Structure to
Support Procurement Shared Services
Setting Up a Minimal Enterprise Structure to Support Procurement Shared Services
Disclaimer
The following is intended to outline our general product direction. It is intended for information
purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any
material, code, or functionality, and should not be relied upon in making purchasing decisions. The
development, release, and timing of any features or functionality described for Oracle’s products
remains at the sole discretion of Oracle.
Warning
This document is intended to provide an introduction to the setup of a Shared Services Enterprise
Structure and is not a comprehensive setup document.
Executive Overview ........................................................................... 1

The Concept of Shared Service Centers ....................................... 1
Background ....................................................................................... 2
Procurement Modes that can be mapped in Fusion Applications ....... 3
Decentralized procurement ............................................................ 3
Procurement shared service .......................................................... 4
Payables and Procurement Shared Service -1 .............................. 5
Payables and Procurement Shared Service -2 ............................ 5
Case Study ........................................................................................ 7
Introduction.................................................................................... 7
Definition of the Enterprise Structure ............................................. 8
Locations ..................................................................................... 12
Inventory Organizations ............................................................... 13
Requisitioning Business Function ................................................ 14
Purchasing Business Function..................................................... 16
Service Provider Relationships .................................................... 18
Suppliers and Supplier Sites ........................................................ 19
Transactions Account Builder ...................................................... 20
Intercompany Transactions ......................................................... 24
Recommendations........................................................................... 25
Conclusion ...................................................................................... 27
References ...................................................................................... 28
Executive Overview
This document describes a minimal representation of an enterprise structure to support shared

sourcing and procurement services to requisitioners from multiple companies in multiple
divisions and in multiple countries. The document is targeted at implementation consultants,
particularly those deploying the Fusion Procurement offering and aims to provide an
introduction to the key concepts of shared services and complement this introduction with a
sample organization representation. In addition to procurement professionals, financial staff
in the deploying enterprise will also need knowledge of the deployment options and the
reasoning behind the selection of a particular model.
The Concept of Shared Service Centers
Shared Service Centers are corporate level organizations tasked with conducting common
operations that support the core lines of business of an Enterprise. The services provided can
be in the areas of Human Resources Management, Payroll, Payables Accounting, and
Procurement. The latter is the subject of this paper.
Consolidating procurement services into a single procuring entity that serves multiple business
units within an enterprise could, if properly implemented, result in the following benefits:
 Increased bargaining power, economies of scale, and cost savings
 Formation of a more focused procurement workforce
 Increase in buyer specialization and better generation of specifications, and more

accurate efficient catalog management
 Centralized and standardized Information deployed across the enterprise
 Centralized processes which could result in the reduction of redundancy and effort
duplication, and a more responsive procurement organization
1
Background
The issue this document aims to address is how much of an enterprise structure will need to
be set up for an enterprise with several lines of business, operating in several jurisdictions, and
whose sourcing and procurement transactions are conducted through a shared service
center.
As its the name suggests the purpose of this paper is to discuss the minimal setup
requirements for shared services procurement. Implementers should however be aware that
simpler implementations are also possible as listed below:
 No Subledgers, / No Legal Entities: if the only requirement that is fulfilled for a

company from Fusion Applications is the production of its financial statements, a
company may have a very lightweight implementation as a balancing segment within a
chart of accounts.
 No Subledgers: : If more functionality is supported for it such as tax reports it may

also need a more formal representation as a legal entity within the Legal Entity System.
 Subledgers: If other functionality is tracked for the company, such as its invoices and
payments it may need to have a representation in the subledgers. In general the
subledger transactions are managed by a business unit and a business unit may
process transactions on behalf of many legal entities. If you are processing an
invoice in an accounts payable department, there will generally be a legal entity that
the majority of those invoices are processed for. This default legal entity is part of the
business unit definition.
2
Procurement Modes that can be mapped in Fusion Applications
The tables that follow outline several modes of procurement that can be modeled in Fusion
Applications. The examples used are for illustrative purposes and do not exclude other
configurations not represented below.
 The Requisition Source is a Business Unit (BU) enabled to place requisitions
 The Procuring and Sourcing Organization represents the entity that manages the
sourcing process and that releases purchasing documents on behalf of the Requisition
Source BU.
 The Invoice and Payment column represents the “Sold to” organization that assumes
the liability for the payables Invoices and payments on behalf of the Requisition
Source BU.
 The Intercompany Column refers to required intercompany transactions. This is

applicable in cases where payments to suppliers are made from a BU other than the
Requisition Source BU. These scenarios are mentioned but not treated in this paper.
Decentralized procurement
REQUISITON PROCURING AND INVOICING AND PAYMENT INTERCOMPANY
SOURCE SOURCING
BU1 BU1 BU1 NONE
BU2 BU2 BU2 NONE
BU3 BU3 BU3 NONE
In decentralized procurement, various business units in the enterprise operate their

procurement functions independently.
3
Figure1. Decentralized Procurement
Procurement shared service
SOURCE SOURCING
BU1 BU4 BU1 NONE
BU2 BU4 BU2 NONE
In Shared Service mode, the procurement functions are carried out by a central organization
on behalf of several requisitioning organizations. Payables Invoices and Payments are
processed by the Requisitioning / Receiving Organizations. No Intercompany Transactions are
conducted in this mode. In this mode the balancing segment of the Chart of Accounts (COA)
needs to be mapped to the Legal Entities the BUs belong to
Figure2. Shared Services Procurement
4
Payables and Procurement Shared Service -1
SOURCE SOURCING
BU1 BU4 BU4 BU4 to BU1
The procurement organization can also act as a more comprehensive shared service center
managing global procurement as well as payables invoicing and payments on behalf of
requisitioning business units. In this mode, intercompany receivables and payables
Transactions are required for reconciliation, and the balancing segment of the COA needs to
be mapped to the Legal Entities the BUs belong to.
Figure3. Global Procurement - Example 1
Payables and Procurement Shared Service -2
SOURCE SOURCING
BU1 BU4 BU1 None
5
Other modes of procurement can also be modeled in Fusion Apps, for example The Invoicing
and Payment can be made by an organization other than the Procuring organization. In this
mode, intercompany receivables and payables Transactions are required for reconciliation,
and the balancing segment of the COA needs to be mapped to the Legal Entities the BUs
belong to.
Figure4. Global Procurement - Example 2
6
Case Study
Introduction
The subject of our case study is the InFusion Corporation which operates two worldwide
Divisions; Financial Services and Consulting Services. Each of these two divisions operates
in both India and the United States. All 4 legal entities that represent the resulting organization
structure, employ people and all employees raise requisitions. All sourcing and procurement
activities are conducted by the company’s two head offices in India and the US for their
respective companies.
Figure 5. In Fusion Corporation Enterprise Chart
7
Below are the key steps to model the above enterprise with two country based shared
Procurement and Sourcing Service Center.
Task List / Task
Establish Enterprise Structures
Manage Locations
Manage Inventory Organizations
Assign Business Unit Business Function
Manage Service Provider Relationships
Manage Mapping Sets
Manage Account Rules
Manage Transaction Account Definitions
Definition of the Enterprise Structure
Task List / Task Description Product Product

Family
Establish Enterprise Determine the high-level structures of HCM Configuration HCM

Structures the enterprise using an interview style Workbench
process.
Business Location
Business
Divisions Legal Entities Unit Set Reference
Units
Assignments Set
Figure 6.Navigational Flow of an Enterprise Setup in the HCM Configuration Workbench
8
Figure 7. Sample summary of an Enterprise setup prior to loading the enterprise data into Fusion Apps. The Report is
divided into sections listing the Divisions, Legal Entities, Business Units as well as additional information related to the
Enterprise.
In this task the Enterprise, along with its Legal Entities and Business Units is defined. For
InFusion we will setup two Divisions representing the two lines of Business. These Divisions
form part of the HCM Organizational Hierarchy which can be used to create Org Based
Security Profiles. We will set up four legal entities with two primary ledger one for each country
where InFusion operates and each serving two Legal Entities. We will create two Business
Units representing country operations. These Business Units will have for now all Business
Functions except Procurement.
Once the two representative Business Units mentioned above are created, we will need to
determine whether to combine our sourcing and procurement shared services with one of
9
these BUs or whether to create a separate shared services BU that serves as the
consolidation hub for procurement and sourcing activities.
In our example above, if the US Business Unit is geographically collocated with InFusion’s
Corporate headquarters then we would recommend combining the Procurement and
Requisitioning business Functions in the US Business Unit
Figure 8. Minimal Representation of an Enterprise with Procurement shared services
If on the other hand the US Business Unit is geographically distinct from the Corporate
Headquarters (For example a Corporate Head Office in a downtown area with an assembly
plant in an industrial zone, or a distribution center near a port or an airport, or a call center in
another State or Province), then a separate BU assigned the Procurement Business Function
would be recommended for better representation. This BU can be expanded at a later stage to
provide additional shared services.
10
Figure 9. Minimal Representation of an Enterprise with Procurement shared services where the
Procurement BU is distinct from the Operational BUs
For the remainder of this document we will assume that the Procurement BU is a separate BU
as in Figure 9 above, meaning that the Corporate Head Office in the US, where procurement
operations are conducted is different from the two US centers of operations
Since InFusion is a services organization there is no need to maintain Warehousing Inventory

Organizations. However we will see later in this document that Default Inventory
Organizations will be setup, but for the purpose of COA balancing segment value derivation
rather than for material control.
Note: Requisitioning Business Units are linked to Ledgers and in our example the two
countries have different ledgers, so having a single Business Unit is not feasible
Note: The Procuring Business Function on the other hand does not have a mandatory Ledger
Assignment
11
Locations
Task List / Task Description Product Product Family
Manage Locations Create and manage the Global Human HCM
locations relevant to your Resources

enterprise. For example,
create the locations where
people work as well as the
locations of your external
organizations.
Locations represent physical addresses of where employees work or facilities are located.
These locations are later associated to Inventory Organizations.
Figure 10. A Definition of a Location
12
Inventory Organizations
Manage Inventory Configure inventory Inventory SCM
Organizations organizations to describe Management

distinct entities within the
company such as
manufacturing facilities,
warehouses, or distribution
centers.
Inventory Organizations are created for each of the Legal Entities identified and modeled
above. The purpose of these inventory orgs is their use in the Transactions Accounts Builder
as a means to derive the appropriate Legal Entity value and populate it in the Company Code
segment for purchasing transactions. This is described in more detail later in this document.
Note:
 More than one Inventory Organization can be created and associate with a single
Legal Entity depending on the needs of the organization. In the case of InFusion we
will create a single Inventory Organization per Legal Entity
 Inventory Organizations defined for the purpose of Inventory Management and can
serve as their own the Master Orgs or can reference a separate Item Master Org. The
Item Master Organization holds the Master Item Records Data.
Note: Inventory Orgs must be assigned to the Business Units that manages Business
Functions in for their Legal Entities.
13
Figure 11. Sample Definition of an Inventory Organization and associated Location
Requisitioning Business Function
Assign Business Assign business functions to Financials Common Financials
Unit Business be performed by a business Module

Function unit, such as customer
invoicing and order capture.
Once the Enterprise is defined along with its associated Legal Entities and Business Units, the
requisitioning business function is assigned to the country business units to enable them to
process requisitions. In our case will not be doing global procurement, so the country business
units will also be granted the payables invoicing and payments functions.
14
Figure 12. This figure shows a sample Assignment of the Requisitioning and Payables Invoicing Business Functions to
a Business Unit, in addition to the assignment of its Default Legal Entity.
15
Purchasing Business Function

Family
Assign Business Assign business functions to be Financials Financials
Unit Business performed by a business unit, such Common

Function as customer invoicing and order Module
capture.
Just as we assigned the Requisitioning and Payables Invoicing business functions to the
country BUs, we will need to assign to the procuring business unit, whose role will include
supplier management, contract negotiation, and procurement order generation, the appropriate
business function, namely The Procurement and Procurement Contract Management Business
Functions.
A Procurement Business Unit does not necessarily need to be tied to a Legal Entity or have an
associated Primary Ledger
16
Figure 13. This figure shows a sample Assignment of the Procurement Business Functions to a Business Unit, in
addition to the lack of an assignment of a Default Legal Entity.
17
Service Provider Relationships

Family
Manage Service Assign service provider business Financials Financials
Provider units to client business units to Common
Relationships provide business functions such as Module
procurement, payables payments,
and customer payments.
After assigning Business Functions to our Procurement and Requisitioning BUs, we will now
create a relationship between them that determines the client (The Requisitioning BU) and the
service provider.
Figure 14. A sample client Organization (top left) and its Service Providers, and on the lower right, a Service
Provider and the clients it serves.
18
Suppliers and Supplier Sites
When Supplier Sites are defined, we associate to those sites the default Procurement BU (via
the Supplier Address definition) and the Client BU to Sold to BU relationship. In our example,
this is not required since we are not modeling a global procurement organization. However in
order to illustrate the relationship we have included Figure15 below.
Figure 15. Sample Supplier Address to Procurement BU Association
19
Figure 16. Global Procurement – Sample Sold To BU that assumes Financial Liability of Client BU by Supplier Site.
Transactions Account Builder
In our Example, and based on the customer’s business requirements, we have

decided to create a Chart of Accounts comprised of 7 segments:
Company Cost Center Account Sub Account Inter- Local Spare

Code Company Account
We now need to apply transaction based derivation rules on the values of the
segments of our COA. The Transactions Account Builder (TAB) is the engine that
allows us to implement an automated account derivation solution in line with our
model of the InFusion Corp with a Shared Procurement Service Center.
The Table below lists the distribution accounts in the first column and the three COA
segments with values automatically derived based on the attributes of the transaction
being completed.
To illustrate the intended result, assume the company codes for our India Legal
Entities are as follows:
20
Company Name Company Code

India Consulting Services Ltd 100
India Financial Services Ltd 102
If a requisition is placed by India Consulting Inc, the default charge account should
have the value 100 in the Company Code Segment, and if a requisition is placed by
India Financial Services the derived value for that segment should be 102. Both
Requisitions lines can then be added to two separate Purchase Orders owned by the
Procurement Business Unit.
Company Code Cost Center Account

Accrual MISPO Purchasing Company From the user's default
Account Code Account Rule For expense account or favorite
Charge Account (derives charge account, or the user
based on Inventory org) selects on requisition
Charge MISPO Purchasing Company From the user's default MISPO Purchasing
Account Code Account Rule For expense account or favorite Natural Account Rule
Charge Account (derives charge account, or the user for Charge Account
based on Inventory org) selects on requisition (two mappings that will
default the account
from the category and
in cases default a fixed
asset account based on
value)
Destination MISPO Purchasing Company From the user's default MISPO Purchasing
Charge Code Account Rule For expense account or favorite Natural Account Rule
Account Charge Account (derives charge account, or the user for Charge Account
based on Inventory org) selects on requisition (two mappings that will
default the account
from the category and
in cases default a fixed
asset account based on
value)
Destination MISPO Purchasing Company
Variance Code Account Rule For
Account Charge Account (derives
based on Inventory org)
Variance MISPO Purchasing Company
Account Code Account Rule For
Charge Account (derives
based on Inventory org)
Table1. Transaction Account Definitions for the Procurement Distribution Accounts
21
The two rules mentioned in the above table MISPO Purchasing Company Code Account Rule
For Charge Account and MISPO Purchasing Natural Account Rule for Charge Account are defined
to automate the selection of segment values. Refer to Figure 18 for an illustration of
how one of these rules is defined in the Transaction Account Definition
In TAB we start by creating a Mapping Set (Figure 17) which in our case is a rule that
creates the mapping between the Inventory Organizations and the Balancing Segment
Values (BSV) that will populate the Company Code segment in the COA.

Family
Manage Mapping Sets Create and maintain the rule that Subledger Financials
determines the segment or entire Accounting
account value based on certain
transaction attribute values. Mapping
sets are used in account rules.
Figure 17.Sample Mapping Set for the Rule used to derive the Company Code Value from the Transaction’s Inventory
Organization.
22
The next two steps in TAB are Definition of the Rule that specifies which Mapping Set
to use under which condition, followed by Setting up of the Transaction Account
Definition (Figure 18) as outlined in the Table 1 above.

Family
Manage Account Create and maintain the rules that Subledger Financials
Rules are used to determine the accounts Accounting
for subledger journal entries.
Manage Transaction Create and maintain the object that Subledger Financials
Account Definitions groups the account derivation rules Accounting
used to derive default accounts for
transactions of an application.
Figure 18. Sample Account Rules and Transaction Account Definition (TAD)
23
Intercompany Transactions
Intercompany Transactions become necessary where a Business Unit other than the
Receiving one bears the financial liability for purchases made. This topic will not be
addressed in detail in this paper.
24
Recommendations
The resulting organization chart and general flow of procurement transactions is illustrated
below and can serve as a model to consider when setting up a shared services procurement
and sourcing business unit.
Figure 19 InFusion Corporation Modeled in Fusion Apps
If we separate the Organizational Hierarchy from the Operational Hierarchy, the shared
services model is brought into focus
25
Figure 20 Operational and Enterprise Hierarchy
* In the Operational Hierarchy chart above, The BUs labeled “Requisitioning BU” perform
multiple other business functions such as sales, material Management, Payables and
Receivables Invoicing etc. They represent the full business operations.
26
Conclusion
Fusion Applications allows for one business unit to source and raise purchase orders on behalf
of many clients within the Enterprise.
In an implementation where the subsidiary companies have a strong representation in Fusion

Applications, or when the Ledgers of these companies are different, then those clients are
modeled as separate business units. From the Case Study used in this document, an example
would be In Fusion Financials USA and Fusion Financials India. These two legal entities have
different ledgers and therefore will be modeled as separate Business Units.
In an implementation where the subsidiary companies have a lighter weight representation in

Fusion Applications, or when the ledger of the companies are the same, those legal entities
serviced by the shared service center are modeled as balancing segment values and not
separate business units . From the Case Study used in this document, an example would be In
Fusion Financials USA and Fusion Consulting USA. The two legal entities have different
ledgers and therefore will be modeled as a single Business Unit.
A procuring Business Unit is setup to consolidated sourcing and procurement activities. This
Procuring Business Unit can be an independent entity as in the Case Study in this document,
or can be combined into a single Business Unit together with any of the operational
Requisitioning Business Units.
The legal entity on behalf of whom the purchase order is raised is identified through the
Inventory Organization associated to the delivery location on requisitions and purchase orders.
Accounting in the correct balancing segment is driven through the inventory organization, the
delivery location and the default expense account of the requestor that drives the expense
accounts on the requisition.
27
References
Oracle Fusion Applications Enterprise Structures Concepts Guide 11g Release 1 (11.1.3) Part
Number E22899-03
Oracle Fusion Applications Financials Concepts Guide 11g Release 1 (11.1.4) Part Number
E22893-04
Oracle Fusion Applications Procurement Guide 11g Release 1 (11.1.1.5.0) Part Number
E22658-01
Fusion Applications Setup Task Lists and Tasks Procurement
Fusion Applications Setup Task Lists and Tasks Financials
28
White Paper Title Copyright © 2011, Oracle and/or its affiliates. All rights reserved. This document is provided for information purposes only and the
May 2012 contents hereof are subject to change without notice. This document is not warranted to be error-free, nor subject to any other
Authors: Nigel King, Elie Wazen warranties or conditions, whether expressed orally or implied in law, including implied warranties and conditions of merchantability or
Contributing Authors: Mike Moran, Kathy Myers fitness for a particular purpose. We specifically disclaim any liability with respect to this document and no contractual obligations are
formed either directly or indirectly by this document. This document may not be reproduced or transmitted in any form or by any
Oracle Corporation
means, electronic or mechanical, for any purpose, without our prior written permission.
World Headquarters
500 Oracle Parkway
Oracle and Java are registered trademarks of Oracle and/or its affiliates. Other names may be trademarks of their respective owners.
Redwood Shores, CA 94065
U.S.A.
AMD, Opteron, the AMD logo, and the AMD Opteron logo are trademarks or registered trademarks of Advanced Micro Devices.
Worldwide Inquiries: Intel and Intel Xeon are trademarks or registered trademarks of Intel Corporation. All SPARC trademarks are used under license
Phone: +1.650.506.7000 and are trademarks or registered trademarks of SPARC International, Inc. UNIX is a registered trademark licensed through X/Open
Fax: +1.650.506.7200 Company, Ltd. 1010
oracle.com

Oracle Fusion Applications Setting Up A Minimal Enterprise Structure To Support Procurement Shared Services

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Oracle Fusion Applications Setting Up A Minimal Enterprise Structure To Support Procurement Shared Services

Uploaded by

Copyright:

Available Formats

An Oracle White Paper

Oracle Fusion Applications

Executive Overview ........................................................................... 1

This document describes a minimal representation of an enterprise structure to support shared

The Concept of Shared Service Centers

 Increased bargaining power, economies of scale, and cost savings

 Formation of a more focused procurement workforce

 Increase in buyer specialization and better generation of specifications, and more

 Centralized and standardized Information deployed across the enterprise

 No Subledgers, / No Legal Entities: if the only requirement that is fulfilled for a

 No Subledgers: : If more functionality is supported for it such as tax reports it may

Procurement Modes that can be mapped in Fusion Applications

 The Requisition Source is a Business Unit (BU) enabled to place requisitions

 The Intercompany Column refers to required intercompany transactions. This is

REQUISITON PROCURING AND INVOICING AND PAYMENT INTERCOMPANY

BU1 BU1 BU1 NONE

BU2 BU2 BU2 NONE

BU3 BU3 BU3 NONE

In decentralized procurement, various business units in the enterprise operate their

Figure1. Decentralized Procurement

Procurement shared service

REQUISITON PROCURING AND INVOICING AND PAYMENT INTERCOMPANY

BU1 BU4 BU1 NONE

BU2 BU4 BU2 NONE

Figure2. Shared Services Procurement

Payables and Procurement Shared Service -1

REQUISITON PROCURING AND INVOICING AND PAYMENT INTERCOMPANY

BU1 BU4 BU4 BU4 to BU1

BU2 BU4 BU4 BU4 to BU2

Figure3. Global Procurement - Example 1

Payables and Procurement Shared Service -2

REQUISITON PROCURING AND INVOICING AND PAYMENT INTERCOMPANY

BU1 BU4 BU1 None

BU2 BU4 BU1 BU1 to BU2

Figure4. Global Procurement - Example 2

Figure 5. In Fusion Corporation Enterprise Chart

Task List / Task

Establish Enterprise Structures

Manage Inventory Organizations

Assign Business Unit Business Function

Manage Service Provider Relationships

Manage Mapping Sets

Manage Account Rules

Manage Transaction Account Definitions

Definition of the Enterprise Structure

Task List / Task Description Product Product

Establish Enterprise Determine the high-level structures of HCM Configuration HCM

Figure 6.Navigational Flow of an Enterprise Setup in the HCM Configuration Workbench

Figure 8. Minimal Representation of an Enterprise with Procurement shared services

Since InFusion is a services organization there is no need to maintain Warehousing Inventory

Task List / Task Description Product Product Family

Manage Locations Create and manage the Global Human HCM

locations relevant to your Resources

Figure 10. A Definition of a Location

Task List / Task Description Product Product Family

Manage Inventory Configure inventory Inventory SCM

Organizations organizations to describe Management

Figure 11. Sample Definition of an Inventory Organization and associated Location

Requisitioning Business Function

Task List / Task Description Product Product Family

Assign Business Assign business functions to Financials Common Financials

Unit Business be performed by a business Module

Purchasing Business Function