Use Financial Orchestration and Pricing Administration to Price an Internal Transfer

Learn how to use Financial Orchestration and Oracle Pricing to price an item that you transfer between organizations that are part of the same company.

Note

• Use Financial Orchestration to represent your financial flow between the shipping business unit and the selling business unit.

• Use the Transfer Pricing Rule attribute on your flow and specify to use a pricing strategy to set the price for your financial flow. For example, if the shipping business unit is Vision Shanghai Manufacturing, and if the selling business unit is Vision Operations, then use a pricing strategy to automatically price an item that flows from Shanghai Manufacturing in China to Vision Operations in the United States. The flow will call Oracle Pricing to price the item at run time.

• Pricing will include any price lists, discount lists, cost lists, and shipping charge lists that you add to the strategy.

• For example, if you want to price according to cost, add a cost list, not a price list. If you need to calculate the margin, then use Cost Plus Pricing instead. For details, see Manage Cost Lists and Cost Plus Pricing.

• Mark up or mark down the price when you add the price list.

• Price standard items or configured items.

You do the rest of your setup in Pricing Administration.

Note

1. Create a price list specifically for your Shanghai factory. Use the price list to set charges for each item that Shanghai builds. For example, add the AS54888 to the list, then set the values, such as set the Calculation Method to Source Document Cost, and add a 10% discount.

2. Create a pricing strategy specifically for your Shanghai factory. Add the price list to the strategy.

3. Assign the pricing strategy for each order line that includes a material transfer for your internal orders.

   Create a condition.

   If you receive a shipment from Vision Shanghai Manufacturing, then assign the PS-D1 pricing strategy.

Modify Predefined Objects to Meet Your Requirements

Use Pricing Administration to modify predefined objects and meet your specific requirements.

Predefined Object	Description
Price Material Transfers pricing algorithm	Processes a financial flow that includes a material transfer. It uses the source document that you specify when you set up the financial flow.
Line Pricing Strategy Assignment matrix class	Specify conditions and results, such as how to identify the To Business Unit, From Business Unit, Agreement Type, and so on.
MaterialTransfer service mapping	Specify entities, attributes and their values during a financial orchestration flow that involves pricing.

Summary of the Setup

1. Assign the pricing strategy.

2. Create the price list.

3. Set up the financial flow.

4. Test your set up.

Here's your scenario for the example in this topic.

• Assume you're the supply chain controller for an organization that builds items in Shanghai, but most of your customers are in the United States. You ship the AS54888 Desktop Computer directly from the factory in Shanghai to your customer in the United States.

• You need to set up a financial flow that orchestrates the intercompany transaction between the shipping business unit and the selling business unit. You capture the financial transaction that happens between the Vision Shanghai Manufacturing business unit in Shanghai and the Vision Operations business unit in the United States.

• You need a rule that adds a 10% discount off the selling price that Shanghai charges.

• Assume you already have a pricing strategy for Shanghai. You will assign it, create a price list and financial flow, then test your set up.

For more about.

• Learn about financial orchestration. For details, see Overview of Supply Chain Financial Orchestration.

• Examine a similar example for drop ship. For details, see Set Up Financial Flows for Drop Ship.

1. Assign the Pricing Strategy

Set up a rule that assigns all shipments that come from the Shanghai business unit to your pricing strategy.

1. Go to the Pricing Administration work area.

2. Click Tasks > Manage Pricing Strategy Assignments.

3. On the Manage Pricing Strategy Assignments page, click Actions > Add Row, set the values, then click Save.

   Attribute	Value
   Assignment Level	Line
   Pricing Context	Material Transfer
   Transaction Type	Internal Order In this example, Vision Corporation is the organization. This transaction happens between two different business units that are part of Vision Corporation. A sales order that stays in the same organization is an internal order, so we will use this rule to assign the strategy only for internal orders.

4. Click Create Assignment Matrix.

5. In the Create Assignment Matrix dialog, make sure these options have a check mark, then click OK.

   • From Business Unit

   • Agreement Type

6. In the Pricing Strategy Assignment Rules area, click Actions > Add Row, then set the values.

   Attribute	Value
   From Business Unit	Shanghai Manufacturing
   Agreement Type	Shipment
   Pricing Strategy	PS-D1 Assume you already created a pricing strategy named PS-D1.

7. Click Save and Close.

2. Create the Price List

Create the price list that you will use as part of the financial flow.

1. Click Tasks > Manage Price Lists.

2. On the Manage Price Lists page, click Actions > Create.

3. In the Create Price List dialog, set the values, then click Save and Edit.

   Attribute	Value
   Name	Price List for Shanghai Manufacturing
   Type	Segment Price List
   Currency	USD
   Business Unit	Vision Operations

4. On the Edit Price List page, click Price List Lines.

5. In the search results area, click Actions > Add Row, then set the values.

   Attribute	Value
   Item	AS54888
   Pricing UOM	Each
   Line Type	Buy

6. Click Create Charge.

7. In the Charge area, set the values, then click Save.

   Attribute	Value
   Pricing Charge Definition	Sale Price
   Calculation Method	Source Document Cost In this example, the sales order is the source document, so this value says that we're going to get values from the sales order when we calculate the charge.
   Calculation Type	Discount Percent
   Cost Calculation Amount	10% Here we are saying to discount the charge by 10% when we calculate the cost for the AS54888 from the sales order.

8. Click Save and Close.

3. Set Up the Financial Flow

1. Make sure you have the privileges that you need to administer Financial Orchestration.

2. Go to the Financial Orchestration work area.

3. Click Tasks > Manage Financial Orchestration Flows.

4. On the Manage Financial Orchestration Flows page, click Actions > Create.

5. In the Create Financial Orchestration Flow dialog, set the values, then click OK.

   Attribute	Value
   Name	Shanghai to USA Flow
   Business Process Type	Shipment
   Priority	1
   Separate Primary and Financial Route	Doesn't contain a check mark.

6. In the Primary and Financial Routes area, click Actions > Add Row, then set the values.

   Attribute	Value
   Shipping Business Unit	Shanghai Manufacturing
   Selling Business Unit	Vision Operations
   Selling Trade Organization	Vision Operations
   Transfer Pricing Rule	Pricing Strategy This value instructs Financial Orchestration to call Oracle Pricing, and to use the pricing strategy that you set up in the Pricing Administration work area.
   Documentation and Accounting Rule	Standard
   Receivables Invoice Type	Intercompany
   Receivables Credit Memo Type	Credit Memo
   Payment Terms	50/50 Select whatever value that meets your needs.

   Leave the other attributes empty.

7. Set the value, then click Save and Close.

   Attribute	Value
   Status	Active

4. Test Your Set Up

1. Go to the Order Management work area and create a sales order.

   Attribute	Value
   Customer	Computer Service and Rentals
   Business Unit	Vision Operations

2. Add the AS54888 to an order line.

3. Click Shipment Details > Supply, set the value, then click Save.

   Attribute	Value
   Warehouse	Shanghai Manufacturing

4. Click Actions > View Pricing Strategy and Segment.

5. In the View Pricing Strategy and Segment dialog, verify the value.

   Attribute	Value
   Strategy Name	PS-D1

6. On the order line, in the Amount column, click the value.

7. Verify that the Amount dialog contains the values.

   Attribute	Value
   Base List Price Applied from Price List for Shanghai Manufacturing	500
   Discount Applied from Price List for Shanghai Manufacturing	50
   List Price	450
   Your Price	450