Global Procurement:

Global Procurement is not meaning Requisitions BU and proc BU on a PO is different rather global
procurement is When Requisitions BU and Sold to Legal entity stamped on PO is different. Sold to Legal
entity is the LE which is responsible for the payment to supplier and Requisitions BU is the one that
consumes the material. So in simple word Global procurement means Material consumption BU and
Paying BU is different.

Whether a purchase is a global inter company or a local is generally not dependent on who (which
procurement BU) creates the PO. It is dependent on purchase drivers like supplier, supplier site,
destination, item, item category. SFO setups are based on profit center BU’s. Profit center BU of the ship
to organization is considered as the Receiving business unit in SFO and when PO invokes SFO we identify
an SFO Flow based on the Receiving Business unit and the qualifiers.

We often gets confused between Centralized procurement and Global procurement, I hope below
explains it in a basic manner:

Centralized Proc:
Let’s assume New York is proc BU and Florida is Req BU. Sold to Legal entity will always be Florida.
That means material consumption org and entity that will pay to supplier is same i.e. Florida. This is one
step payment process. This is centralized procurement.

Global Procurement:
When the payment will occur in more than one step. Let’s say new York is Proc BU, Florida is Req BU and
sold to Le is something other than Florida, let’s say China, in this case material will be consumed by
Florida but supplier will send invoice to China LE, i.e. payment will occur from China to actual supplier.
So material consumption org and entity that will pay to supplier is different, this is Global procurement.
Global procurement can happen across LE or within same LE but across two different PCBU within that
LE.

When we should use SFO:

1) If we want system to create intercompany AP/AR invoice automatically (as per above example if
intercompany AP/AR invoice should occur between Florida and china). If multiple parties involved in
payment and they want to track their own invoices and with making profit/loss.
2) And intercompany transfer will happen with markup or discount price compare to actual PO price
with supplier.

Whether a PO satisfy global procurement or not, this can be identified by:

When the PCBU belongs to the actual material Receiving org and Purchasing trade organization stamped
on PO belongs to two different PCBU either in same LE or across LE, this is Global procurement.
SFO flow set up:

The Requirement here is that material will be requisitioned/consumed by Singapore but the payment
will be made from Germany and intercompany transaction must involve here, hence we need to
establish the SFO flow for Singapore.

Transfer price rule:

Via this rule we can suggest system to markup or discount the intercompany transactions.
The below rule will transact the intercompany trx with 10% markup on the PO price.
Documentation and Accounting rule:
This Rule identifies whether intercompany AP/AR invoice will be created or whether the intercompany
profit will be tracked in a cost element etc. Based on this Rule the profit of 10% (as per transfer price
rule) will be tracked in inventory.

If there are multiple SFO flow exists, then system picks the one which qualifies that particular
transaction (based on qualifier) and which is having less priority.

Created a PO where Requisitions BU is Singapore and sold to LE is Germany.

Upon saving the PO, system checks if any SFO flow is satisfied for the trx or not, if there exist any it got
associated to the PO schedule and upon receipt of the PO that SFO flow will get executed and
responsible for creating the intercompany trx and accouting.

Receipt# 5016 created for the above PO.

SFO execution:

Now we need to run Transfer Transaction from Receiving to Costing, CMR process for Vision Germany
and Singapore Distribution Center to account the supplier ownership change from supplier to Vision
Germany and from vision Germany to Singapore distribution center and physical receiving of receipt into
receiving area.

First Transfer of ownership/supplier ownership change occurs to Vision Germany (Trade Receipt
Accrual) at PO price.
Then transfer of ownership/ Supplier change ownership occurs to Singapore Distribution Center (Trade
Receipt Accrual) with price defined on SFO flow as transfer price rule i.e. document price+ 10% markup.

PO price = 15
Markup 10% = 15 *10% = 1.5
internal transfer price per unit is 15+1.5 = 16.5
Total internal transfer price of 10 Qty = 16.5 * 10 = 165 Eur.
Based on below highlight and per current conversion rate 165 Eur = 1320 SGD
➔ 1 Euro = 8 SGD (currency conv rate on trx date).
Once the ownership change occurs to Singapore then the material is physically Received at Receiving
inspection area (Receipt into Receiving inspection) of Singapore distribution center i.e. D1 inv org with
internal transfer price.

Supply chain Execution flow status after CMR process run:

Now we need to run transfer transaction from inventory to costing and CST processor for both Vision
Germany org (E1) and Singapore distribution center org (D1) to account the logical in-transit
issue/Receipt between Germany & Singapore and physical receipt into D1 (Singapore) inventory.
E1 – Selling trade organization in SFO flow, which will account all costing transaction of logical in-transit
issue and in-transit receipt happened during flow into Vision Germany BU.
Cost org: PSR-CST-11

D1 – Organization belongs to Singapore Distribution center where material physically received.

Cost org: ZCST-SG

Once CST processor completes for Vision Germany and Singapore Dist center, the logical movement of
the material occurs from Supplier to Vision Germany (Trade In Transit Receipt) with cost of PO price.

After that Logical issue (Trade in transit issue) of the material take place from vision Germany to
Singapore Dist center with same PO price.
Then logical Receipt (Trade In Transit Receipt) of the material in Singapore Dist center will occur at the
price of transfer price mentioned in the SFO flow (i.e. here in this case document price, i.e. po price +
10%) and in the Document and Accounting Rule associated with SFO flow we have enabled profit
tracking so 10% will be bifurcated into Profit cost element.

As before we saw 1 Eur = 8 SGD, so total PO price i.e. 15*10 = 150 Eur (1200 SGD) tracked with material
cost element and profit 10% of po price i.e. 150 * 10% = 15 Eur (120 SGD) tracked with Profit in
inventory element.
After that Physical PO receipt (Purchase Order Receipt) will occur into D1 (Singapore inventory org).

Once all the Receipt accounting and Cost accounting transactions are costed, the SFO flow will initiate
the IC AR and AP invoice creation as shown below.

Now we need to run Import Autoinvoice for Vision Germany to create intercompany AR invoice with
source(ORA_Supply Chain Financial Orchestration) and once this is complete the next task to create
intercompany payable invoice will start.
Now run “import payables invoice” for Singapore distribution center with source “Supply chain financial
flow orchestration”.

Both Intercompany AR and AP invoice got generated and now SFO flow execution is completed.
Inter Company AP# 10003_Internal site-V is created in Singapore Dist center BU with supplier name of
Vision Germany.

Supplier & site records in AP invoice will come from below screenshot.
Inter Company AR invoice# 10003 created in Vision Germany BU with customer name of Singapore
Distribution center.

Customer & site records in AR invoice will come from below screenshot.