Use Source Document as Transfer Price Basis for Orders in Back-to-Back Intercompany Transfers

You can now derive intercompany transfer prices for back-to-back internal material transfers directly from the originating sales order. This feature lets you use the source document unit price as the transfer price basis and apply an optional markup or markdown. For example, sales price minus 5%. By aligning transfer prices to the customer facing sales order, organizations can maintain predictable margins in the shipping business unit, improve costing accuracy across back-to-back flows, and eliminate manual workarounds previously required to achieve consistent, margin driven pricing. 

The Financial Qualifier Rules page for the internal transfers business flow is enhanced with a new qualifier attribute Back-to-Back. This attribute can be used in a financial flow to narrow down and identify the agreements separately for back-to-back and regular transfers.

Financial orchestration qualifier with new parameter back-to-back.

Financial Orchestration Qualifier with the New Back-to-Back Parameter

The Transfer Price Rules page for the source document price basis transfer pricing option is enhanced to additionally select the option to use sales order price for back-to-back transfers in the financial flow setup for internal transfers business flow.

Transfer price rule with use sales order price for back-to-back transfers enabled.

Transfer Price Rule with Use Sales Order Price for Back-to-Back Transfers Enabled

You can use the new transfer pricing option of source document price basis with the above checkbox enabled in a financial flow agreement for internal transfers. However, the financial qualifier rule must have the value for the parameter Back-to-Back set to Yes.

Financial flow agreement creation in error when back-to-back parameter in qualifier rule isn't enabled.

Error Message When the Back-to-Back Parameter Isn't Enabled in Qualifier Rule

Financial flow created with transfer pricing rule source document transfer price and back-to-back qualifier.

Financial Flow Created with Transfer Pricing Rule Source Document Transfer Price and Back-to-Back Qualifier

You can now have predictable and margin-protected intercompany pricing for back-to-back flows by deriving transfer prices from the originating sales order. This improves profitability control, pricing transparency, and accounting consistency across BUs.

Steps to enable and configure

Use the Opt In UI to enable this feature. For instructions, refer to the Optional Uptake of New Features section of this document.

Offering: Manufacturing and Supply Chain Materials Management  No Longer Optional From: Update 26D

Tips and considerations

  • Once feature opt in is disabled, you won't be allowed to opt out if a transfer price rule is setup for source document price basis with the checkbox for Use sales order price for back-to-back transfers enabled.
  • If the transfer price rule with source document price basis having the checkbox Use sales order price for back-to-back transfers enabled is used in an active financial flow, you won't be able to change this option for accounting transfer price or disable the option to use sales order price for back-to-back transfers. You need to deactivate the existing financial flow using this transfer price rule and create a new financial flow agreement if your business warrants a change to the transfer pricing policy.
  • It's recommended to set up separate transfer pricing rules by business flow if you have both transfers and shipments flows and want to compute the transfer pricing based on the sales order price. 
  • You need to enable the Redwood version of the pages to use this new capability.

Key resources

  • Oracle Fusion Cloud SCM: Implementing Manufacturing and Supply Chain Materials Management Guide, available on the Oracle Help Center.
  • Oracle Fusion Cloud SCM: Using Supply Chain Cost Management guide, available on the Oracle Help Center.

Access requirements

Users who are assigned a configured job role that contains these privileges can access this feature:

  • Maintain Supply Chain Financial Orchestration Flow by Web Service (FOS_MAINTAIN_SUPPLY_CHAIN_FINANCIAL_TRADE_AGREEMENT_WEB_SERVICE)
  • Manage Supply Chain Financial Orchestration Flow by Web Service (FOS_MANAGE_SUPPLY_CHAIN_FINANCIAL_TRADE_AGREEMENT_WEB_SERVICE)
  • Manage Financial Orchestration Qualifiers  by Web Service (FOS_MANAGE_QUALIFIER_WEB_SERVICE)
  • Manage Transfer Pricing Rules (FOS_MANAGE_TRANSFER_PRICING_RULES)
  • Maintain Transfer Pricing Rules (FOS_MAINTAIN_TRANSFER_PRICING_RULES)

These privileges were available prior to this update.