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Rule-Based Pricing

If you add items manually to a price list or item group, you can price items two basic ways. You can either calculate the list price and manually add it to the item, or use pricing rules and have Oracle Order Entry/Shipping calculate the list price.

When using pricing rules you create pricing formulas to establish your list prices. This is a powerful feature that reduces pricing maintenance. For example, if certain prices are based on other prices, you can define pricing rules to reduce the need to enter each price manually. If you change the rule, you can have Oracle Order Entry/Shipping recalculate the price for you.

Oracle Order Entry/Shipping provides the Pricing Attributes descriptive flexfield to capture information specific to product pricing. See: Flexfields in Order Entry/Shipping.

Pricing Rules Example

The following pricing matrix is an example of a pricing structure that uses pricing rules effectively.

Product Machine Class Version # of Users Price
A Small Computer 1.0 < 20 $10,000
A Small Computer 1.0 >=20 $15,000
         
A Small Computer 2.0 < 20 $10,000
A Small Computer 2.0 >=20 $15,000
         
A Medium Computer 1.0 < 20 $30,000
A Medium Computer 1.0 >=20 $45,000
         
A Medium Computer 1.0 < 20 $30,000
A Medium Computer 2.0 >=20 $45,000
         
B Small Computer 1.0 < 20 $ 5,000
B Small Computer 1.0 >=20 $ 7,500
         
B Small Computer 2.0 < 20 $ 5,000
B Small Computer 1.0 >=20 $ 7,500
         
B Medium Computer 1.0 < 20 $15,000
B Medium Computer 1.0 >=20 $22,500
         
B Medium Computer 2.0 < 20 $15,000
B Medium Computer 2.0 >=20 $22,500
Table 1 - 25.

Notice the pattern in this pricing structure. Each product on a medium computer is 3 times more than the small computer. If the number of users is greater than 20, the price is 1.5 times the price for fewer than 20 users. Our example follows through the steps to define the pricing rules to support the sample pricing structure.

Pricing Parameters

Pricing parameters represent all the possible attributes that can be used for pricing or discounting. Oracle Order Entry/Shipping automatically defines the parameters whenever you enable segments in your Item flexfield (System Items) or Pricing Attributes descriptive flexfield, but you must enable them for use in pricing using the Enable Parameters form.

In our example, Product is a segment of the Item flexfield, and Machine Class and Number of Users are segments of the Pricing Attributes descriptive flexfield. See: Enabling Parameters.

Pricing Rule Components

Pricing components represent the factors in the pricing formula. You define a pricing component as a single pricing parameter or a combination of pricing parameters. In our example, there are three separate pricing components: Product, Machine Class, and Number of Users. See: Creating Pricing Rule Components.

Name Column 1
Product Item (System Items Flexfield)
Machine Class Machine Class (Pricing Attributes)
Number of User Number of User (Pricing Attributes)
Table 1 - 26.

Pricing Rule Formulas

A pricing rule is simply a mathematical formula made up of valid mathematical operators and numeric operands, such as (1*2*3) or (1+2)*3. Each numeric operand in the formula corresponds to a pricing component, such as product or machine class. In our example, the mathematical formula is (1*2*3) representing

(Product * Machine Class * Number of Users).

Each pricing component can have many entries. In our example, the base price of Product A is $10,000 and the base price of Product B is $5,000. These are the entry values for the Product component (the currency is irrelevant to the pricing rule). The pricing pattern indicates the product is three times more expensive for a medium computer. Therefore, the value for small computers is one (no incremental difference), and that for medium computers is three.

The component and value combinations from our example are:

Component Factor Value
Product A 10,000
Product B 5,000
Small Computer Class 1.0
Medium Computer Class 3.0
< 20 users 1.0
>=20 users 1.5
Table 1 - 27.

Rule Priced Items

Add all your rule-priced items to your price lists. When using pricing rules, you add only the pricing rule, item, pricing attributes descriptive flexfield segments, and unit of measure. In our example, we would add four lines for each item to reflect all combinations of item and pricing attributes. See: Defining Price Lists.

Item Computer Class Number of Users
Product A Small < 20 users
Product A Small >=20 users
Product A Medium < 20 users
Product A Medium >=20 users
Product B Small < 20 users
Product B Small >=20 users
Product B Medium < 20 users
Product B Medium >=20 users
Table 1 - 28.

Pricing Rules Implementation

The pricing rule program calculates the list price of each price list line, using the formula in the rule specified. Run this program after you have created or updated the pricing rule and assigned it to an item line on the price list.

Using all this information, Oracle Order Entry/Shipping derives the list price of each item by computing the formula substituting the values for the entries associated with the pricing component. The list prices for the items in our example are computed as follows:

Component Product * Class * User * = List Price
Product A 10,000 1.0 1.0 10,000
10,000 1.0 1.5 15,000
10,000 3.0 1.0 30,000
10,000 3.0 1.5 45,000
Product B 5,000 1.0 1.0 5,000
5,000 1.0 1.5 7,500
5,000 3.0 1.0 15,000
5,000 3.0 1.5 22,500
Table 1 - 29.

To update a list price calculated using a pricing rule, you simply modify a parameter of the rule and rerun the pricing rule program. Using our existing example, if you wanted to double the price of Product A, you would change the product price from $10,000 to $20,000 and rerun the pricing rule program. The results are represented in the following table:

Component Product * Class * User * = List Price
Product A 20,000 1.0 1.0 20,000
20,000 1.0 1.5 30,000
20,000 3.0 1.0 60,000
20,000 3.0 1.5 90,000
Product B 5,000 1.0 1.0 5,000
5,000 1.0 1.5 7,500
5,000 3.0 1.0 15,000
5,000 3.0 1.5 22,500
Table 1 - 30. (Page 1 of 1)

If you only wanted to double the price if the product was purchased for the medium class computer, then you would modify the values for the medium class to 6.0 and rerun the pricing rule program. The results are represented in the following table:

Component Product * Class * User * = List Price
Product A 10,000 1.0 1.0 10,000
10,000 1.0 1.5 15,000
10,000 6.0 1.0 60,000
10,000 6.0 1.5 90,000
Product B 5,000 1.0 1.0 5,000
5,000 1.0 1.5 7,500
5,000 3.0 1.0 15,000
5,000 3.0 1.5 22,500
Table 1 - 31.

Whenever you apply a mass change to a price list, the changes are applied directly to the existing price list line; no history is maintained.

See Also

See: Updating Rule Prices

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