Example of Intercompany Purchase Order With Formal Documentation

Using a financial orchestration flow, you can increase tax efficiency in your supply chain by automatically routing your purchases from a supplier in a given country through one or more legal entities registered in favorable tax jurisdictions.

This can be formalized using Oracle Fusion Supply Chain Financial Orchestration to:

Enforce the sold-to legal entity on a purchase order using an eligible financial orchestration flow.
Control the usage of a financial orchestration flow based on rules authored using attributes such as supplier country and item category.

Scenario

Business units 1 and 2, US West Coast Distribution and US East Coast Distribution, roll up to legal entity 1, Vision United States. Purchase orders are issued by either of these requesting business units to a Chinese supplier site, China Supplier Site 1. The purchase orders have the sold-to legal entity set to a Chinese subsidiary, Vision China. The immediate liability for the purchases isn't assumed by the requesting organization, rather it's assumed by the Chinese subsidiary. In such cases, the requesting organization typically doesn't have direct relationship with the supplier site fulfilling the order. Instead, it's the subsidiary that enters into a contract with the supplier site to buy the ordered goods.

This figure shows the transaction in a flow diagram. The requesting entity is Vision United States, US East Coast Distribution unit. They are legal entity 1, business unit 2. The sold-to legal entity with liability for the purchase is Vision China, China Distribution unit. They are legal entity 2, business unit 3.The supplier is Beijing Specialties. They are China supplier site 1.

Diagram showing Vision China, China Distribution unit, as the sold-to legal entity on a purchase order to a Chinese supplier, Beijing Specialties. The requesting legal entity is Vision United States, US East Coast Distribution unit.

This scenario describes a financial orchestration flow (essentially a trade agreement) created in Oracle Fusion Supply Chain Financial Orchestration between two legal entities. A purchase order is created using attributes that the application can use to identify an orchestration flow. The associated sold-to legal entity is placed on the order. On each schedule the financial orchestration flow and the purchasing trade organization is captured. Based on receiving transactions, intercompany payables and receivables invoices are created.