International and Global Oracle

Implementations
Myths and Reality

Hans Kolbe
Celantra Systems
Hanskolbe@celantrasystems.com
(415) 846-2623
 What I will cover today

- Multi-Org impact
- Legal Compliance choices
- Implementation Strategies

Not Covered today

- Language
- Character sets and Multi-Byte
- Technical Architecture
 A Typical Wish-List
- “create a multi-national multi-language finance and logistics
system
- global chart of accounts and accounting standards
- global supply chain visibility
- compliance with local regulations and statutory demands for
accounting and reporting
- shared regional logistics and financial service centers to use
economies of scale wherever possible
- allow effective operational support for international and
intercompany transactions while complying with regulations
for inter-company pricing
- provide effect structures for regional logistics and production
centers while avoiding unproductive data duplication.”
 Myth: Global Implementations are
not successful
• Success: Texas Instruments - International Roll-Out after US
implementation in 16 countries (Europe and Asia). Single install, Version
11.03, 12 months to go-live. Achieved global planning and Europe-wide
logistic and finance visibility.
• Success: Rational Software - International Roll-out after US implementation
to 23 countries with 11I upgrade (Europe and Asia). Single install, 10
months to go-live. Achieved international order and logistics visibility
• Mixed: PPG - After US template 9 country roll-out in Europe. Version
10.7. Separate instance. 2 ½ years implementation country by country.
Parallel Australia and Latin America. Areas of fragmentation remain in
Order and PO management.
 Key Differences in Design and their
Impact - Examples

• INTERNATIONAL TRADING MODEL,

INTERCOMPANY TRANSACTIONS AND
ORACLE MULTI-ORG STRUCTURE
• LEGAL AND STATUTORY COMPLIANCE
STRATEGIES, LEGACY SYSTEMS AND ORACLE
GLOBALIZATIONS
• IMPLEMENTATION STRATEGY – GLOBAL OR
REGIONAL VERSUS COUNTRY BY COUNTRY
Issue 1: International Trading
Model and Multi-Org Strategy
 Global Trading Model and Multi-
Org Impact – Myths

• If employed globally, Oracle Applications will give us

global visibility automatically (optimistic).
• With a correct setup, Oracle will give operations, planning,
finance, and reporting what they need. (optimistic)
• We have a working US Implementation. With some minor
adjustments it will be our global template. (optimistic)
 Reality
• Supply Chain visibility across entities and countries – must impact
multi-org strategy.
• Shared service center requirements must impact multi-org setup
strategy. Data Visibility and Access for users is restricted by SOB and
Multi-Org constraints.
• Intercompany requirements must impact multi-org setup strategy.
Oracle Intercompany functions are limited.
• There is not ONE correct setup for international implementations.
• Balancing planning, operational, finance and legal requirements is
important.
• Early impact analysis is needed to achieve global objectives
 Standard ERP Multi-Org Model - Silo
PPG Europe

PPG FR PPG
PPG FR PPG ES PPG DE PPG NL PPG IT
Sypsy UK

OU OU
OU OU OU OU OU
3x
OM, AR, OM, AR, OM, AR, OM, AR,
OM, AR, OM, AR, OM, AR, IC,
IC, PO, IC, PO, IC, PO, IC, PO,
IC, PO, AP IC, PO, AP PO, AP
AP AP AP AP

Issues:
- duplicate setups and maintenance
- no visibility for order management across OU boundaries
- no Blanket PO’s across OU boundaries
- logistics operations are limited to one OU at a time
- business reporting across OU only through financial consolidations or special tools –
Purchasing data base, Toad, etc.
- Duplicate inter-company transactions without value to the business
 Multi-Org Proposal - The Challenge
Traditional Situation

Traditional ERP implementation models have been built on

the basis of separate legal entities and country organizations.
These entities cooperate and exchange goods and services.
Essentially all subsidiaries operate as independent units.

The “Silo” model is assumed in most of Oracle applications,

including existing inter-company, localization and
globalization functionality as well implementation and
training models.
This model is the base for the standard Multi-Org Setup in
Oracle applications.
 Regional Operating Unit Model – The Alternative
Direct Regional View of all Business Transactions, All Business Transactions
Orders, Revenue, Purchasing, Expenses, Margins including Order
Management and Customer
Transactions, Cost of Sales,
European Operating Unit Margins; Purchases and
Vendor Management are
handled through European
AR, INV, PO, AP, OM, OPM Operating Unit

External Bolt-On manages IC relations,

prints required document and directs
entries to Local Entity books

PPG BV,
PPG IT PPG SA, FR PPG GmbH, DE PPG ES PPG UK
NL

Legal Set of Books,

Local Legal Adjustment Entries General Ledger Entries, Trial Balance Submission
are booked at country level for Corporate Reporting and Consolidations,
Statutory Reporting
 Impact of Regional Operating Unit
Model – 1 -

Simplify – Eliminate Duplication:

• Simplify Implementation and Ongoing Maintenance (no
duplication and continual synchronization of setups)
• Simplify Shared Service Centers (Customer Service,
Procurement, Finance) - no changing responsibilities
• Simplify and Speed up Monthly Closing, only one sub-
ledger
 Impact of Regional Operating Unit
Model – 2 -
Cross-Entity Visibility
• Order View and Fulfillment
• Accounts Receivable and Collections
• Backlog, Allocations and Release Management
• Vendors, PO’s and Contracts (buy and receive
anywhere)
• True external Revenue and Margins without
intercompany distortions

Automate Intercompany Transactions

• Intercompany Transactions (Commissionaire, Buy/Sell,
Agent) are automatically generated on both entities
 Impact of Regional Operating Unit
Model – 3 -
Risk Potential:
- Common processes and setups across entities may be
very difficult to establish.
- Correct Intercompany and Legal Entity statutory
reporting must be ensured through external add-on
process (see case studies).
- Business may operate in single entity mode. Evaluate
business performance measures and analysis.
- Cross-entity visibility, reporting, and access may not be
desired.
 Multi-Org Options

The Standard Multi-Org Setup fits well, when

- Subsidiaries operate essentially as independent entities.
- Data separation through Operating Unit Entity is
desired for security and reporting reasons.
- Intercompany sales and purchases are handled much in
the same way as external ones.
- Business Model and Organization can be changed to fit
the Oracle “independent entity” approach.

Standard Multi-Org Setup will not always avoid

the need for extensions or bolt-ons.
 Multi-Org Options

Alternative Approach needs to be investigated

when:
- Multi-Tier trading model is used (supply chain through
subsidiaries with specialized production and sales
entities)
- Commissionaire structure is employed or fluctuating IC
pricing
- Shared Services across entities and countries, cross-
entity purchasing, cash settlements, or IC settlement
automation are desired.

Intercompany Simplification can be established

within traditional setup. Multi-Org options can
be mixed and individualized.
 Issue 2: International Legal
Compliance with Oracle Apps
 International Legal Compliance Issues
with Oracle Apps – Myths
• We have a US Implementation. With some minor
adjustments it will be our global template (optimistic).
• Oracle has a plug-in set (Globalization, Localization) to
take care of most local compliance issues (optimistic).
• Major customizations are needed for compliance in
difficult countries (Italy, China, Brazil, Israel, Portugal) –
(pessimistic)
• MRC is needed in international implementations (only in
very specific circumstances)
 Chart of Accounts and Accounting
Standards
• Government recommended COA in France, Spain, Belgium, Greece, China,
Korea and Japan.
• Inventory Accounting, Accruals, Depreciation, Year End closing are
different in most countries.
• Not all US accounting principles are readily accepted.

Mechanism needed for dual posting and recording of adjustments:

• Separate Set of Books for legal reporting with use of consolidation
functionality or AX Global Accounting Engine
• Use of separate balancing segment within the same Set of Books
• External Bolt-On application for legal compliance transformation and
reporting
• Custom Extensions to be built or re-used from other implementations
 Issues in Global COA Implementation
* One US to many Local Accounts - One Local to Many US
Accounts (Payroll and Benefits)
* Accounting Method Differences
- Purchasing and Inventory Receipts (total purchase price vs
standard cost +- Variances)
- Cost of Sales and Inventory
* Accounts don’t exist in Fiscal Accounting Books (example:
Goodwill)
* Value Differences - separate accounts (1,2,3 codes), (example
Depreciation) - separate entries - risks and options
* Date Differences - (example Period Closing/accruals) separate
entries - risks and options
 Legal Compliance – Transactions Tax
(VAT and Sales/Use Tax)
• Different requirements on VAT reporting, VAT assessment and
offsets. Detail review in each country required. Validation of
Oracle Globalization needed in each country. Special
attention to be given to VAT calculation and reporting on
adjustments, discounts, bonuses., pre-payments, credits,
refunds.
• Synchronization of VAT requirements across Europe and Asia
can be achieved. (See Case Study Texas Instruments). One set
of parameters across Europe with consolidated VAT and Intra-
stat reporting and country specific formats.
 Legal Compliance – Other Issues
• Fiscally Required Audit Reports (Libro Giornale, Grand Livre) may not be
immediately available through Oracle Standard Applications or
Globalizations. AX Global Accounting Engine may be needed.
• Sequencing requirements for VAT and Journal Reporting may force
additional setup work or custom programming to ensure compliance (Italy,
Spain, France)
• HR reporting - payroll, contractors, data privacy laws
• Bank formats, AP payments, AR receipts, future dated payments, bill of
exchange
• International customs, duty, and export control regimes may impose
complex additional requirements, depending on business and trading model.
• Language of screens, reports, and data may be regulated.
Issue 3: Global Implementation
– Strategies and Decisions -
 Implementation Stages
 Objectives

 Template  Ongoing Support

Objectives transformed into Scope

Implementation turns into
and Template by
Support by
- Technology / Apps Versions
- System in Production
- Business Priorities and Involvement
- Project Team transforms
- Resources
 Implementation - Evaluation of
- Time Line
Implementation
- Measure against Scope and
Template is transformed into Implementation by Template
- Program and Project Team - Assess future requirements
- Deployment Sequence for objectives and scope
- Adaptation of Local Differences - Assess changes in
- Changes in Objectives, Scope, Technology, Resources, Objectives and Resources
Time Line
- Test Sequence and Quality Standards
 Define Global Deployment Model

 External
• Global Trading Model
• Supply Chain Planning
• Sales Management/Customer Relations
• Purchasing and Vendor Relations

 Legal

 Mechanism and Compliance Standards

for Statutory and Legal Requirements (Accounting and
Reporting)
 Define Global Deployment Model
 Internal
• Logistics
 Shared Services
 Chart of Accounts, Intercompany, Consolidations
 “Virtual Close”, Financial Analysis

 Systems • Technical Base

(Servers, Databases, Connectivity)
• Legacy Systems and Interfaces

 Implementation
• Implementation Strategy (central, regional,
local)
• Program and Project Management