Infosys’ blog on industry solutions, trends, business process transformation and global implementation in Oracle.

« ERP for SME – why and why now? | Main | When do we re-implement instead of upgrade? »

Demystifying Merchandise Accounts Payable

Merchandise Accounts Payable, a mouthful isnt it? This blog explains and simplifies the complex area of Merchandise Accounts Payable, often seen in Retailers or Wholesalers. It also presents a point of view on various Oracle Products and their fitment to this business area.

Retailers are companies that engage in sale of goods and/or services through established store fronts, physical or virtual. The key aspects of any retail business is having a wide variety of merchandise available through consumer friendly store fronts using mutiple channels of sales, online, physical store, Phone etc. Given this core aspect of merchandising, Retailers typically have thousands and thousands of suppliers that they source the merchandise from. In addition to the large number of suppliers, Retailers also have wide variety of supplying relationships, let us take a look at some common ones.

1. Manufacturers - Procuring directly from the manufacturer of goods/service.

2. Supplier - Often suppliers are engaged when sourcing internationally, these suppliers in turn have factories/agents through whom the actual merchandise is produced.

3. Exporters/Expeditors - These are accelerating entities within the supply chain, which retailers use to move the merchandise across geographies in a quick manner.

4. Raw Material Suppliers - These suppliers provided raw materials which then are routed through factories into finished merchandise.

A typical manufacturing unit would engage with a selected/approved vendor list, which makes managing the supplier base easy. But for retailers, who offer a wide variety be it Apparal, Electronics, Grocery or a mix of all, the complexity is multifold.

Not only is the supplier base large, the amount of Purchase orders and receipts created often run into millions per day! Given this huge volume, it is challenging to track what was ordered and what was received and hence decide what needs to be paid. This in summary is the core problem with Merchandise Accounts Payable!

Typically retailers go through a very complicated Invoice Matching process, wherein the Purchase Orders, Receipts and Invoices are iterated in a complex rules based matching process, and often five or six iterations are carried out before an Invoices is approved. Some of the rules are based on Payment Terms, Item quantities and Items.

Most retailers utilize custom applications for procuring merchandise, because of the high volume and store specific nature of the purchases, Oracle Retail Management System is often a system of choice for this procurement.  Inventory management is often the strength of Manhattan systems and other WMS systems.

This means that the eBusiness modules has to deal with the GL and AP processes, typically Invoices are imported after the Invoices matching is done, this matching is either done again in custom applications or using the Oracle Retail Invoice Matching solution, this is a new offering from Oracle.

Oracle AP is best suited to import the invoices and carry out the check printing/payment processing and post to GL.

Several retailers are trying to bring in the procurement and invoice matching solutions into Oracle eBusiness suite, but in my opinion the jury is still out in terms of proving this solution's effectiveness.

What is your take on Merch AP, have you seen similar challenges in other industries?

Comments

Good Insight into the Merchandise AP or Retailers process. Basics of merchandise AP sound clearer.

Thanks Sujit, I thought AP being common, it would be helpful to see Merchandise AP differently.

Well looking at volumes, it's better to keep it outside Oracle applications. With new payment modules, it is now more easier to make payments for such invoices as well as customer refunds.

I wanted to thank you for this great read!! I definitely enjoying every little bit of it I have you bookmarked to check out new stuff you post.

Post a comment

(If you haven't left a comment here before, you may need to be approved by the site owner before your comment will appear. Until then, it won't appear on the entry. Thanks for waiting.)

Please key in the two words you see in the box to validate your identity as an authentic user and reduce spam.

Subscribe to this blog's feed

Follow us on

Blogger Profiles