Back-to-Back Orders inOracle Order Management

Back-to-Back Orders in Oracle OrderManagement

EXECUTIVE OVERVIEWIn today’s environment where lead times are often only amatter of 24 hours, many companies want to create aspecific supply order linked to each customer order and theywant these supply order created as soon as the customerorders have been booked. These companies want to havethe supply order “hard pegged” to the customer order that itis supplying, and once the supply reaches the warehousethey do not want it inadvertently taken by another order ordemand. They also need visibility to where the Sales Orderline is in the process at all times, so they can answer customerservice inquiries. We call this process ‘Back-to-back orders’,indicating that the Sales Order and the supplying PurchaseOrder are very closely linked, often where one PO is tied to oneSales Order. This paper shows you how you can model thisprocess using Oracle Order Management and Oracle Configureto-Order workflows.

INTRODUCTIONOften customers order products that you do not typically stockbut that you do not manufacture either. You may want topurchase that item specifically for this order, have the suppliership it to you, and then combine it with other items you mayhave purchased or stocked to create one shipment to thecustomer. This is a common scenario for WholesaleDistributors who use the S3 (Sell-Source-Ship) business modelas well as for other demand channels. We call this process‘back-to-back orders’ or ‘procure-to-order’.Keys to making this business process work are automating thePurchasing document creation, having accurate status of wherethe line is in the process, and pegging (or hard reservation) ofBack-to-Back Orders in Oracle Order Management Page 1

the supply to the demand, so that the inventory isn’t shipped toother customers once it is received.This paper attempts to explain how this business process hasbeen implemented in Order Management using Configure-to-Order workflows, and offers some insight into putting it to use.

WHAT IS SUPPLY-TO-ORDER?To satisfy this business need, we have modeled a processcalled ‘supply-to-order’ which includes both the familiar‘assemble-to-order’ process in which a specific work order iscreated to build the item and ‘procure-to-order’ (or back-tobackorders) whereby a specific purchase order is created tofulfill the sales order demand.‘Supply-to-order’ items are either standard items or (with OMFamily Pack H) models that have the ‘assemble-to-order’ item

attribute turned on. It is this attribute that launches the ATOworkflows that deliver this feature. PTO models by definitioncannot be ‘supply-to-order’, since turning on the ‘assemble-toorder’attribute would make them an ATO model. But you canhave the shippable components of a PTO model (the optionsand included items) be fulfilled via back-to-back orders bychecking the ‘assemble-to-order’ item attribute of thosecomponents.

BUSINESS NEEDSOracle Order Management and the Oracle eBusiness suiteprovide you with the features you need to meet and exceedyour requirements around back-to-back orders. With release11i7, you can:Designate the items you want to procure each time they arecustomer-ordered as ‘supply-to-order’.Set up a ‘buy from’ sourcing rule for those items or, if youdon’t set up sourcing rules, indicate that the item is a ‘buy’item rather than a ‘make’ item .Enter sales order lines for these items, and have the supplyautomatically created via a requisition. No user decisionmakingis required to make this happen.Have the requisition converted into a Purchase Order or arelease of a blanket Purchase Order, and have the PO orrelease sent to the supplier.Back-to-Back Orders in Oracle Order Management Page 2

View the requisition number or PO number and its statusfrom the Sales Order.Accept changes to the Sales Order and have the ability tonotify the buyer to take appropriate action on the associatedPO.Reserve the supply from the Requisition to the PO andfinally to the Sales Order once the PO is received.Pick, ship and finally invoice the customer for the product.

MAJOR FEATURESTo satisfy the above business needs, Oracle Order Managementand Configure-to-Order have combined to deliver the back-tobackbusiness flow with the following set of features:

Auto Create RequisitionsAn automatic process called ‘Auto Create Requisition’ isavailable that creates the requisition in Purchasing for the SalesOrder line. This process takes information from the sales orderline and puts it in the requisition import interface tables so thata purchase requisition can be created. This process can be runas a scheduled or on-request concurrent process, or can beinitiated online from the Sales Order line using ‘Progress Order’action.

Flow of Reservation Supply from Requisition to PO to InventoryThe supply for the reservation is first linked to the requisition,then moves to the PO, and finally to Inventory as the PO isreceived. Visibility to the supply for the reservation is providedin the View Reservations form.

Use of Workflow to Automate Process Steps

A new branch has been added to the existing Create Supplyworkflow subprocess in the seeded generic sales order lineworkflow. Previously, the Check Supply activity had results of‘Build’ or ‘Flow’. A new result of ‘Buy’ initiates the autocreatepurchase requisition processing. This new workflowfunctionality was released in 11i7.

SET UPThe following must be done to use Back-to-Back orders inOracle Order Management.Back-to-Back Orders in Oracle Order Management Page 3

Define ItemsUse the familiar Inventory Master Items form to define theitems that you wish to ‘supply to order’. The following itemattributes must be specified:Item must be marked as Customer Orderable on theOrder Management tab and Purchasable on thePurchasing tab.Item must be marked as ‘Assemble-to-Order’ on theOrder Management tab. (This attribute is actuallycalled ‘replenish to order’ in the database. There is anenhancement pending to change the prompt for thisfield on the Master Items form, to reduce confusion nowthat this flag also controls procure-to-order’.)Item must either have the make/buy flag on the GeneralPlanning tab set to ‘buy’, or else have a sourcing rulesaying that it is to be sourced from a vendor.

Define Sourcing RulesIf you define a sourcing rule for your ‘supply to order’ items,then the sourcing rule must be of type ‘buy from’. Also, youmay only define one single sourcing rule for your item, or thisprocess will not work.You must then add this sourcing rule to the assignment setwhich is specified as the MRP default assignment set in theMRP: Default Sourcing Assignment Set profile option.You may not have a combination of ‘buy from’ and ‘make’sourcing rules or more than one sourcing rule in the assignmentset for the same item. If you do that, Auto Create Requisitionwill error out, and will put details about what the problem wasin the log file.

PROCESSING ORDERS USING BACK-TO-BACK ORDERSSales Order ProcessEntering orders using ‘supply-to-order’ items is easy andstraightforward. Here are the steps:1. Enter the item on the Sales Order line as usual.2. When the line is scheduled, the ‘create supply’subprocess of the workflow will put the lines through the‘buy ATO item’ flow which contains the autocreateBack-to-Back Orders in Oracle Order Management Page 4

purchase requisition activity. AutoCreate Requisition canbe run as a concurrent program or can be initiated for anindividual order by using the ‘Progress Order’ action onthe Sales Order if it is in status ‘Create Supply Line –Eligible’. As stated above, AutoCreate Requisition takesinformation from the Sales Order line and loads the

Requisition Import interface tables.3. Next, Requisition Import must be run to create thepurchase requisition tied to the sales order line. This canbe done by manually submitting the Requisition Importconcurrent program, or you can schedule it to runautomatically.Requisitions created by this process all have an interfacesource type of ‘CTO’, so you can identify and segregatethese requisitions if you desire.The requisition column ‘Note to Buyer’ is populated bythe AutoCreate Requisition process with a message‘Supply for sales order: <order number>’, so you cansee what order number this line is for. You can addadditional custom text to the note by editing themessage dictionary for 'CTO Note to Buyer'. There arealso message dictionary entries for 'CTO Note toReceiver’ which can be populated with custom text.

Purchasing ProcessOnce the purchase requisition is created and identified as‘CTO’, the regular purchasing process takes place.1. A Purchase Order can be created and approved and sentto the necessary supplier, or else a release of apreviously created Blanket PO can be used.2. In either case, once the PO or release is received, theitems are recorded in inventory and a reservation isautomatically made to the sales order line.3. Throughout this process, you can know what sales ordergenerated this PO or release by viewing the ‘Note toBuyer’, as indicated above.The Sales Order can now be pick released, shipped andinvoiced just like other stocked items.

Sales Order Line StatusThere are several new line statuses that have been introducedBack-to-Back Orders in Oracle Order Management Page 5

as part of this functionality. These statuses help you trackwhere the line is in the process. The new statuses are:PO Req RequestedPO Req CreatedPO CreatedPO ReceivedIf you want to see the Requisition number or Purchase Ordernumber created by your Sales Order line, you must go to theReservations Details form to find that information.

RESERVATIONSKey to making this functionality work for you is how theinventory reservation is handled. This happens automatically,and can be traced from the sales order form by using Tools->Scheduling->Reservation Details as well as by directly usingInventory’s Supply/Demand forms.When Req Import processes, the purchase requisition isreserved to the sales order line. If you view the InventoryReservations form, supply tab, you will see the reservation islinked to a requisition, and you will see the requisition numberand line number.

When the requisition becomes a PO or a blanket release, thereservation moves with it. The Reservations form, supply tab,then shows the reservation is linked to a PO or a blanket, andyou will see the PO number or the PO and release number, aswell as the line number.When the PO is received into inventory, the reservation isautomatically transferred into Inventory, and it now looks likeany other reservation from a sales order to on-hand stock.Just as in the regular ATO process, if the user manually reservesthe sales order line to inventory, then the Create Supplyworkflow step will not do anything, and the line will progress toAwaiting Shipping without flowing through the requisitionprocess.

CHANGES OR CANCELLATIONSSo what happens if you need to make changes to the salesorder line that is in the back-to-back process? What if the orderline is cancelled? Or what if you need to make changes to thePO or the requisition?

If the sales order line is cancelled or the quantity is reduced,then the reservation is reduced and a notification isautomatically sent to the buyer explaining that there is now aPO outstanding for a higher quantity than what is needed forthe sales order. The buyer can then decide whether to cancelthe PO line, or to buy the product anyway and put it intoinventory.If the schedule date on the sales order line is changed, again anotification is sent to the buyer, who can then decide to eitherchange the date on the PO or cancel it or do nothing. If thebuyer decides to cancel the PO, then a new requisition will becreated the next time AutoCreate Requisition is run.If the PO is cancelled or a partial quantity is cancelled, then thereservation is cancelled or reduced appropriately. The nexttime AutoCreate Requisition is run, it will create anotherrequisition for the unreserved amount on the sales order.

MISCELLANEOUS TIDBITS AND TROUBLESHOOTINGHow about Internal Orders?Yes, you can put a ‘supply-to-order’ item on an internal salesorder, and it will process the same as on external sales order.

What about Drop Ship?How is this process different from Drop Shipments? In bothcases, your sales order line creates a requisition line thatbecomes a PO sent to your supplier. In a drop shipment,however, you instruct your supplier to send the item orconfigured item directly to your customer. The items neverphysically pass through your warehouse, and therefore you donot pick, pack or ship them yourselves. In the back-to-backscenario, you instruct your supplier to send you the goods, andthen you ship them on to your customer.

New Supply Type for ReservationsThis functionality added a new Supply Type of ‘ExternalRequisition’ to inventory reservations. It also added the abilityto show the purchase order or requisition that the reservation is

made to in the Inventory Reservations form.

DebuggingThe AutoCreate Requisition program and the new code inRequisition Import that processes reservations use the OMBack-to-Back Orders in Oracle Order Management Page 7

debug system. This means you can generate a debug file if youset the OM debug profile and the OM debug log directoryprofiles and then run those programs.PO has its own debug profile which is used by Req Import to logmessages, but any messages regarding the reservations arelogged using OM’s debug facilities.AVAILABILITYBack-to-back orders for ATO items were implemented withOrder Management Family Pack G and Discrete ManufacturingFamily Pack G for Release 11i. You must also implement POFamily Pack G to get all the changes made for this feature. Youdo NOT need to fully license APS if you are using the B2Bfunctionality on standard ATO items.Back-to-back orders for ATO models (and drop ship of models)are implemented with Order Management Family Pack H andDiscrete Manufacturing Family Pack H. You are required tohave APS if you are purchasing configurations, through the B2Bprocess or through APS. Without it, your planning andforecasting will be incorrect.

CONCLUSIONOracle Order Management combined with Configure-to-Orderworkflows lets you create and fulfill back-to-back orders in aseamless hands-off fashion that meets the needs of WholesaleDistribution and users with similar supply-to-orderrequirements.