Centralized Procurement in Oracle Fusion

With the organizations operating across globes and manufacturing business adopting to sub-contracting, the organizations are looking at procurement apart from their existing markets. All this lead to introduces the need for centralized procurement function which helps organization to achieve better purchasing efficiency through better control over organization spend and central management of supplier contracts. Oracle Fusion Procurement comes up with shared service center model that assist organizations to efficiently manage their procurement functions.
Business Units (BU) definition: A business unit is a unit of an enterprise that performs one or many business functions that can be rolled up in a management hierarchy. A business unit can process transactions on behalf of many legal entities. Normally, it will have a manager, strategic objectives, a level of autonomy, and responsibility for its profit and loss.
In Fusion Procurement context, oracle leverage the following types of business unit:
1. Procurement BU
2. Requisitioning BU
3. Bill-To BU
4. Client BU

Procurement BU: Procurement Business Unit responsible for the procurement business function. Like, supplier management, purchase agreements and contracts negotiation.
Client BU: All Business Unit that needs to be serviced by the Procurement business unit required to be defined as the Client Business Unit. If you are using Oracle Shared Services model which allow your organization to centralized the Procurement services to one Business unit, the Procurement business unit will serve all the requisitions from all the associated Client Business Unit.

Requisitioning BU: Requisitioning business unit is responsible to raise the requisition for the goods or services that it needs to the Procurement business unit. Yes, you will say, that the Requisitioning business unit is same as the Client business unit that will be serve by Procurement business unit.

Bill-To BU: As the name suggest, Bill-To business unit is responsible to perform invoicing. In other words, Bill-to BU represents the organization that assumes the liability for the purchases made on behalf of the Client business unit. In most cases, the Client business unit and the Bill-To BU are same. Sometimes, the Requisitioning business unit may be responsible for the financial impact of the purchase, in which case it will also be defined as the Bill-To BU. In case there is another business unit which takes the financial responsibility of the purchase then, this Bill-To BU will be different from the Requisitioning business unit.

Centralized Procurement
Each business unit in Oracle Fusion, is associated with a set of business functions. Using these business functions, you can define which business unit is responsible for various business function. In procurement context, there are three main business functions:
1. Requisition business function
2. Purchasing Business functions
3. Payable business functions
There are many procurement business model, when deploying shared service center model. One of the most common is of the form Producer-Consumer where one of the business units will consume the services offered by another.

Shared Service Center model

So, a business unit with requisition business function can consume the services of another business unit that has purchasing business function.

Understanding Supplier
Along with the relationship between Business units, another important relationship that drives procurement functions is the relationship of the business units with the suppliers and supplier sites. In Fusion, a supplier is defined at global level and can be accessed across business units using reference set. However, a supplier site is defined at the business unit level. Each supplier site is owned by a Procurement business unit.
Site Assignments
Supplier site is owned by Procurement business unit and can be assigned to one or more requisitioning BU that the specific procurement BU serves. Site assignments control which Client BUs can transact with the site and the Bill-to BU associated with the Client BU defines which business unit will own the liability for the purchases made on behalf of requisitioning business unit.

Supplier Site

Procurement Agent
With the introduction of Shared service center model, organization need to ensure that someone in purchasing must have proper authorization to perform all the procurement business function across business units. Defining an employee as a ‘Procurement Agent’ will suffice the purpose. A procurement agent is associated with one procurement business unit and has given access to one or more or all the required upstream requisitioning business units which needs to be serviced by that procurement business unit. An agent must be an employee and can be a purchasing manager or any other role that a procurement organization chooses to define. But as a pre-requisite all procurement related roles will be assigned to the employee to be defined as procurement agent.
Once the procurement agent is ready to perform authorized functions, will access all requisitions that will come from all the requisitioning organizations associated with procurement business unit that she/he has been given access to.

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