Centralized Procurement with Oracle Fusion
With the business expanding across globes and with manufacturing organizations resorting to sub-contracting, there is a need for organizations to look at procurement beyond their current markets. This introduces the need for a centralized procurement function for better purchasing efficiency, better control over organization spend, and central and simpler management of contracts with suppliers. Oracle Fusion Procurement introduces new and better features that aid organizations to better manage their procurement functions. The following are the advantages of a centralized procurement function:
- Better control over organization spend
- Consolidated purchasing across business units
- Leverage volume discounts by consolidated demand
- Better supplier relationship management
- Single point of contact in buying organization for supplier
- Centralized contracts - easier implementation and better management
- Consolidated measurement of supplier performance
- Reduced overheads
Centralized Procurement in Oracle Fusion
Oracle Fusion uses the concept of Business Units and each business unit (BU) will be associated with a set of business functions. The model also allows defining relationships between two business units as shown in the figure below.
The relationship between two BUs will be of the form Producer-Consumer where one of the business units will consume the services offered by another. So a BU with requisition business function can consume the services of another BU that has purchasing business function.
In addition to the relationship between BUs, another important factor that drives purchasing functions is the relationship of the BUs with the suppliers and supplier sites. In Fusion, a supplier is defined at global level and data related to a supplier can be accessed across BUs. However, a supplier site is defined at the business unit level. Each supplier site is owned by a Procurement BU. These supplier sites can then be assigned to one or more requisitioning BU that the specific procurement BU serves.
With the above infrastructure that Oracle Fusion provides, it becomes easy now to define a centralized procurement organization (and even a centralized payables organization). Fusion allows defining an employee as a 'Procurement Agent'. A procurement agent will be associated with one procurement BU and given access to one or more or all of the upstream requisitioning BUs of that procurement BU. An agent can be a category manager, a VP of Purchasing or any other role that a procurement organization chooses to define. But all procurement related roles will require the employee to be defined as an agent as a pre-requisite.
An agent will then access all requisitions that flow in from the upstream requisitioning organizations that s/he has been given access to. The Process Demand page (formerly called the Demand Workbench in R12) will provide a single point access to all requisitions that the agent has access to. The process demand page will allow the agent to either auto-create POs or use document builder to create a purchase order, blanket agreement or a sourcing negotiation as the agent may seem fit to meet the demand.
While creating a purchase order or a blanket agreement, Fusion ensures that the BU that raised the requisition is stamped on the document provided the supplier site assignment has the requisition BU also as the sold-to BU (see figure below for supplier site assignment). If the sold-to BU is different, then the purchase order or blanket agreement will carry the Sold-to BU name instead of the Requisitioning BU. In other words, the liability will remain with the organization that will make the payment to the supplier/site. This is illustrated in the image below.
As can be seen from the above illustration, Oracle Fusion Procurement allows an organization to easily model its procurement function based on its needs. This model allows setting up a basic, straight forward set-up of a business unit catering to its procurement needs to a complex set-up that may address global procurement needs. Oracle Fusion also ensures that organizations that wish to set up a centralized procurement unit can do so with no issues related to ownership of liabilities, received goods or legal issues related to payment and international trade.