Oracle Supply Chain Financial Orchestration
Transfer Pricing
Customer Connect Session: July 2019
Mani Venkatraman
Senior Principal Product Manager, Supply Chain Financial Orchestration
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Agenda
Significance of Transfer Pricing
Transfer Pricing Configuration
Transfer Pricing Rule in Financial Orchestration
Pricing Strategy in Fusion Pricing
Third Party Pricing Service
Transfer Price Currency
Transfer Price integration for Intercompany Transfers
Q&A
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Global Companies Are…
• Increasingly looking at post- As a Result…
tax revenue as a key
performance indicator A single physical movement of goods may
involve multiple transfers of ownership
• Continuing to optimize the Physical Movement
physical supply chain to (Shipment, Receipt)
lower cost and improve
customer responsiveness
Financial Ownership
(Orders, Invoices, Payments)
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Delivering Profitable Innovation
Modeling & Executing Your Tax Efficient Supply Chain in Oracle SCM Cloud
• Define configurable trade relationships –
transfer pricing, intercompany
Model Supply Chain documentation and ownership transfer
Financial Flow points for profit center business units
Physical movement
• Create multi-node financial routes
• Automate financial accounting within
Separate Physical from Oracle SCM Cloud
Financial Transactions • Without interfering with the execution
transactions
Financial ownership
Monitor & Report • Monitor and audit financial orchestration
transactions
Supply Chain Financial Orchestration
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Transfer Pricing
Intercompany Business Flows
Global Procurement Internal Material Transfer
Supplier Org A Org C
Org A Org B
Org B
Sold to BU Receiving BU
Transfer Price Transfer Price
Transfer Price
Internal Drop Shipment Drop Ship with complex Shipment and Procurement
Supplier Customer
Org A Org B Customer
Org A Org B Org C
Shipping BU Selling BU
Sold to BU Receiving BU Selling BU
Shipping BU
Transfer Price
Transfer Price Transfer Price
Physical Flow Financial Flow
Note: there could be one or more financial nodes that may be used. The figure above uses one intermediary node for an illustration
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Physical Shipment
Transfer Pricing
Financial Route
Margin Margin Margin
$20 Each $40 Each $15 Each
Vision China Vision Ireland Vision USA Customer
Cost Price Price Price
$60 Each $80 Each $120 Each $135 Each
True Margin Vision USA
$75
Price $135
Cost $120
Profit $15
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Agenda
Significance of Transfer Pricing
Transfer Pricing Configuration
Transfer Pricing Rule in Financial Orchestration
Pricing Strategy in Fusion Pricing
Third Party Pricing Service
Transfer Price Currency
Transfer Price integration for Intercompany Transfers
Summary
Q&A
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Transfer Pricing Configuration Options
Transfer Pricing Rule in SFO Static Mark Up Percentage based on Transaction Cost or
Source Document Price
• Maintain Price List with Price Tiers and Attribute based
Pricing Strategy in Fusion Pricing adjustments
• Source Document Price based mark up or discount
• Derive Pricing based on specific transactional attributes
•
Third Party Pricing Service Derive Transfer Price from an external Pricing application
by registering the custom web service with the
corresponding client security policy
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Transfer Pricing Rule in SFO
Transfer Pricing Rule can be
defined with the
calculation basis as either
cost or source document
price
Specify the Mark up % that
gets applied on transaction
cost or source document
price
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Transfer Pricing Rule in SFO
Assign the Transfer Pricing Rule to the financial agreement created for a business process type
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Transfer Pricing Rule in SFO Qualifier Rules to derive transfer price based on
different parameters
Use Case:
Business Process: Internal Material Transfer
Source BU: Vision China ; Destination BU: Vision USA
Ship To Org Mark UP
001 Cost + 10% Qualifier A
002 Cost + 15 % Qualifier B
Trade Agreement A Trade Agreement B
Qualifier A Qualifier B
Transfer Pricing Transfer Pricing
Rule-10 Rule-15
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Transfer Pricing Rule in SFO
Assign the Qualifier Rule to the financial agreement created between two nodes for a business process type
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Transfer Pricing Configuration Options
Transfer Pricing Rule in SFO Static Mark Up Percentage based on Transaction Cost or
Source Document Price
• Maintain Price List with Price Tiers and Attribute based
Pricing Strategy in Fusion Pricing adjustments
• Source Document Price based mark up or discount
• Derive Pricing based on specific transactional attributes
•
Third Party Pricing Service Derive Transfer Price from an external Pricing application
by registering the custom web service with the
corresponding client security policy
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Transfer Pricing using Pricing Strategy
Configure the Transfer Pricing
Rule as Pricing Strategy in
Trade Agreement Trade Agreement
Define a Price List
Base Transfer Price
Cost + Mark up/down
Source document price +
Pricing Strategy Mark up/down
Pricing Strategy Assignments Attribute Based Pricing
Assignment Level = Line Define a Pricing Strategy and
Context = Material associate price list
Transfer
Price List Pricing strategy for a set Assign the Pricing Strategy to
of conditions
a set of configurable
conditions
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Transfer Pricing using Pricing Strategy
Select Pricing Strategy as the Transfer Pricing rule in financial agreement
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Transfer Pricing using Pricing Strategy
Create a price list for items choosing any of the
below options
Define a Transfer Price directly
Select calculation method as Cost and add
mark up or mark down
Select calculation method as source
document price and add mark up or mark
down
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Transfer Pricing using Pricing Strategy
Define a direct transfer price
Discount % based
on source
document price
Source document
based Transfer Price
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Transfer Pricing using Pricing Strategy
Mark up %
based on Cost
Cost defined
for the item in
Cost list
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Transfer Pricing using Pricing Strategy
Quantity based
price adjustments
Attribute based price
adjustment
Attribute based pricing is
supported with pricing
algorithm extension
using seeded algorithm
“Price Material
Transfers” for
Intercompany transfers
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Transfer Pricing using Pricing Strategy
Assign the Price List to a Pricing Strategy
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Transfer Pricing using Pricing Strategy
Associate the Price List
and Cost List to the
same pricing strategy
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Transfer Pricing using Pricing Strategy
Create a Pricing Strategy Assignment at line level for the pricing context “Material Transfer”
Assign the Pricing Strategy to a configurable set of parameters
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Transfer Pricing using Pricing Strategy
Configurable conditions
for Pricing Strategy
Assignment
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Transfer Pricing Configuration Options
Transfer Pricing Rule in SFO Static Mark Up Percentage based on Transaction Cost or
Source Document Price
• Maintain Price List with Price Tiers and Attribute based
Pricing Strategy in Fusion Pricing adjustments
• Source Document Price based mark up or discount
• Derive Pricing based on specific transactional attributes
•
Third Party Pricing Service Derive Transfer Price from an external Pricing application
by registering the custom web service with the
corresponding client security policy
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Third Party Pricing Service
Select Third-Party Pricing Service as the Transfer Pricing rule in financial agreement
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Third Party Pricing Service
Specify the wsdl of 3rd party application from
where pricing has to be called and choose
the client security policy
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Agenda
Significance of Transfer Pricing
Transfer Pricing Configuration
Transfer Pricing Rule in Financial Orchestration
Pricing Strategy in Fusion Pricing
Third Party Pricing Service
Transfer Price Currency
Transfer Price integration for Intercompany Transfers
Summary
Q&A
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Transfer Pricing Currency
Transfer Price Currency
rate determined based
on this conversion type
Selling Node Buying Node Trade Agreement Currency Option Currency
Line No.
Vision China Vision Ireland 1 Buying Node EUR
Vision China Vision Ireland 1 Source Document USD
Vision Ireland Vision USA 2 Selling Node EUR
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Transfer Pricing Currency
Ireland Business Unit Ireland Legal Entity Dublin IDS-CH-IR
2 Ireland Business Unit Ireland Legal Entity IDS-IR-US
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Agenda
Significance of Transfer Pricing
Transfer Pricing Configuration
Transfer Pricing Rule in Financial Orchestration
Pricing Strategy in Fusion Pricing
Third Party Pricing Service
Transfer Price Currency
Transfer Price integration for Intercompany Transfers
Summary
Q&A
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Transfer Pricing integration for Intercompany Transfers
Create Requisition Transfer Pick and Ship Receive
Order Transfer Order Transfer Order
No
Is ownership
Create Inter- change Create Inter-
org Shipment event = org Receipt
Shipment?
Yes
Transfer
Estimated Transfer Price Pricing Actual Transfer Price
Receive Create Internal
Pick and Ship Sales
Create Global PO Purchase Drop Ship Sales
Order
Order Order
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Transfer Pricing for Internal Material Transfer
Create Ship Transfer Receive Transfer
Transfer Order
Requisition Order Order
Transfer Pricing
Does material
Yes Does Trade
transfer happen
Agreement
across the
exist?
PCBU?
Yes
No
Derive
Transfer
Pricing Rule
Get price from Get price from
Derive Item Cost Get Item Cost Pricing external
Strategy service
Create Inter-org Create Inter-org
Shipment Receipt
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Summary
Maximize profits using Transfer Pricing
Utilize different Transfer Pricing Configuration Options
Seamless Integration through out the Intercompany Transfer Flows
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Q&A
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