OSCFO - Transfer Pricing

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
Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Oracle Confidential – Internal/Restricted/Highly Restricted
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)

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

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

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
Oracle Confidential – Internal 7

Agenda

 Summary
 Q&A
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

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

Assign the Transfer Pricing Rule to the financial agreement created for a business process type

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

Assign the Qualifier Rule to the financial agreement created between two nodes for a business process type


•

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

Select Pricing Strategy as the Transfer Pricing rule in financial agreement

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
Define a direct transfer price
Discount % based
on source
document price
Source document
based Transfer Price

Mark up %
based on Cost
Cost defined
for the item in
Cost list

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

Assign the Price List to a Pricing Strategy

Associate the Price List

and Cost List to the
same 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

Configurable conditions
for Pricing Strategy
Assignment


•

Third Party Pricing Service
Select Third-Party Pricing Service as the Transfer Pricing rule in financial agreement

Third Party Pricing Service
Specify the wsdl of 3rd party application from

where pricing has to be called and choose
the client security policy

Agenda

 Summary
 Q&A
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

Transfer Pricing Currency
Ireland Business Unit Ireland Legal Entity Dublin IDS-CH-IR
2 Ireland Business Unit Ireland Legal Entity IDS-IR-US

Agenda

 Summary
 Q&A
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

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

Summary
 Maximize profits using Transfer Pricing
 Utilize different Transfer Pricing Configuration Options
 Seamless Integration through out the Intercompany Transfer Flows
Q&A

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Oracle Supply Chain Financial Orchestration

Customer Connect Session: July 2019

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. |

 Transfer Price integration for Intercompany Transfers

• Continuing to optimize the Physical Movement

lower cost and improve

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. |

Monitor & Report • Monitor and audit financial orchestration

Supply Chain Financial Orchestration

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. |

Supplier Org A Org C

Org A Org B Customer

Org A Org B Org C

Physical Flow Financial Flow

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. |

Margin Margin Margin

Vision China Vision Ireland Vision USA Customer

Cost Price Price Price

Oracle Confidential – Internal 7

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. |

 Transfer Price integration for Intercompany Transfers

• Maintain Price List with Price Tiers and Attribute based

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. |

 Specify the Mark up % that

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. |

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. |

Business Process: Internal Material Transfer

Source BU: Vision China ; Destination BU: Vision USA

Ship To Org Mark UP

Trade Agreement A Trade Agreement B

Transfer Pricing Transfer Pricing

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. |

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. |

• Maintain Price List with Price Tiers and Attribute based

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 Configure the Transfer Pricing

 Define a Price List

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Select Pricing Strategy as the Transfer Pricing rule in financial agreement

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Create a price list for items choosing any of the

 Define a Transfer Price directly

 Select calculation method as Cost and add

 Select calculation method as source

Define a direct transfer price

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Copyright © 2018, Oracle and/or its affiliates. All rights reserved. |

Attribute based price

Attribute based pricing is

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Assign the Price List to a Pricing Strategy

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Associate the Price List

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 Assign the Pricing Strategy to a configurable set of parameters

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• Maintain Price List with Price Tiers and Attribute based

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