This chapter contains the following:

An item master organization lists and describes items that are shared across several inventory organizations or item organizations.

The following example shows the choice between inventory organizations that track inventory transactions, stored in two warehouses, and item organizations that just track items, listed in two sales catalogs.

The figure shows the difference between inventory organizations
that track inventory transactions, stored in two warehouses, and item
organizations that just track items, listed in two catalogs.

For the most efficient processing, you should:

  • Have a single item master.

  • Include an item and its definition of form, fit, and function only once in the item master.

  • Separate the item master organization from organizations that store and transact items.

Note: Oracle Fusion permits multiple item masters, however, use this capability cautiously. If you acquire a company, there may be value in keeping the old item master for a transition period. If you manage your subsidiaries as separate businesses, there may be reduced value in a single item master.

Item Organizations

An item organization defines an item when inventory balances aren't stored and inventory storage or inventory movement isn't reflected in the Oracle Fusion Applications. For example, you would use an item organization in a retail scenario, if you need to know the items that are listed by and sold through each retail outlet even though inventory and transactions are recorded in another system. In sales applications, item organizations are used to define sales catalogs.

  • Items belong to an item organization.

  • Item attributes that are associated with financial and accounting information are hidden from the item if it exists within the item organization.

  • Item organizations can be changed by administrators to an inventory organization by updating the necessary attributes. There's no difference in the way items are treated in these two types of organizations except that there can't be any financial transactions in the downstream applications for items that are assigned to an item organization.

In Oracle Fusion, storage facilities, warehouses, and distribution centers are implemented as inventory organizations.

Inventory organizations are:

  • Managed by a business unit, with the materials management business function enabled.

  • Mapped to a legal entity and a primary ledger.

Two types of inventory organizations exist.

Storage and manufacturing facilities are related to other organizational entities through a business unit that stores, manufactures, and distributes goods through many factories, warehouses, and distribution centers. The material parameters are set for both the facilities, enabling movement of material in the organization. This business unit has the business function of Materials Management enabled. Oracle Fusion Applications permit many inventory organizations to be assigned to one business unit.

Distribution Center as an Inventory Organization

A distribution center can store inventory that;s the responsibility of different business units. In this situation, assign an inventory organization to each business unit as a representation of the inventory in the distribution center. The multiple inventory organizations representing the inventory are defined with the same location to show that they're a part of the same distribution center.

In the following figure the two business units, Air Compressors and Air Transmission, share one distribution center in Atlanta. The two inventory organizations, Air Compressors and Air Transmission represent the inventory for each business unit in the Atlanta distribution center and are both assigned the Atlanta location.

The figure illustrates the distribution centers within
the business units acting as inventory organizations for the respective
business units.

Legal Entities Own Inventory Organizations

A legal entity owns the inventory located in a storage or manufacturing facility. This ownership is assigned through the relationship of the inventory organization representing the inventory and the legal entity assigned to the inventory organization. The legal entity assigned to the inventory organization shares the same primary ledger as the inventory organization's business unit.

The inventory is tracked in the inventory organization owned by the legal entity of which the business unit is part. All transactions are accounted for in the primary ledger of the legal entity that owns the inventory.

This figure illustrates the inventory owned by InFusion Air Quality legal entity. The InFusion Air Quality legal entity is associated with the Air Compressors business unit, which is associated with the two Air Compressors inventory organizations. Therefore, InFusion Air Quality legal entity owns the entire inventory in both the Dallas and Atlanta locations.

The figure illustrates the default legal entity of a
business unit owns the inventory in the inventory organization of
the business unit.

Facility Schedules Are Associated with Inventory Organizations

A prerequisite to defining an inventory organization is to define a facility schedule. Oracle Fusion Applications permit you to associate an inventory organization with a schedule.

Facility schedules permit creating workday calendars for inventory organizations that are used in the Oracle Fusion Supply Chain Management product family. For example, use workday calendars in the scheduling of cycle counts and calculating transit time.

Cost Organizations

Cost organizations are used to establish cost accounting policies, data defaults, and user security policies for Oracle Fusion Costing. A cost organization can potentially be spread across several physical locations or inventory organizations.

For example, you created inventory organizations for your manufacturing facility, finished goods warehouse, and distribution centers. Then, you used average costs for your items in the manufacturing facility and the finished goods warehouse, but used standard costs for the same items after they have moved to the distribution centers. In this case, your enterprise has three inventory organizations, but only two cost organizations.

Accounting and business needs determine the different cost organizations, inventory organizations, and cost book combinations required, as well as the cost profiles used to calculate transaction costs.

All inventory organizations grouped in a cost organization must belong to the same legal entity. For every cost organization, you must designate one of its inventory organizations as the item validation organization, which means that all items in the cost organization use the item validation organization's units of measure for cost calculations. Define one or more cost organizations to meet your operational structure and reporting needs.

Note: A cost organization generally represents a costing department. Take costing departments into consideration when determining the setup of departments in Oracle Fusion Human Capital Management (HCM). No system dependencies on cost organizations and costing departments are require the same setup.