Back-to-Back Supply Creation and Fulfillment

A Guide to Key Application Setups

ORACLE WHITE PAPER | APRIL 2017
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BACK-TO-BACK SUPPLY CREATION AND FULFILLMENT – A GUIDE TO KEY APPLICATION SETUPS

Table of Contents

Disclaimer 1

Introduction to Back-to-Back supply creation and fulfillment 2

Back-to-Back supply creation process 2

Application set ups for Back-to-Back supply creation and fulfillment 3

Generic setups for Back-to-Back supply creation and fulfillment 4

Item setup in Product Information Management 4

Available to Promise (ATP) Rules setup in Order Promising 5

Sourcing Rules setup in Order Promising 6

Collect Planning Data in Planning Central 8

Refresh and Restart Order Promising Server 9

Preparer for Procurement in Order Management Parameters 10

Specific setups for Back-to-Back Buy 10

Customer Sales Order Fulfillment in Procurement 10

Charge Account setups in Procurement 11

Blanket Purchase Agreement in Purchasing (Optional) 12

Specific setups for Back-to-Back Make 13

Work Definition in Manufacturing 13

Other important factors to consider 14

Conclusion 15

1 | BACK-TO-BACK SUPPLY CREATION AND FULFILLMENT – A GUIDE TO KEY APPLICATION SETUPS

Introduction to Back-to-Back supply creation and fulfillment
Back-to-Back supply creation and fulfillment is an advanced fulfillment process in which an
organization procures goods from an internal or external supplier to a specific warehouse from where
those goods may be combined with others to create a single shipment to the customer.

At a high level, Back-to-Back fulfillment is a three-step process:

 Creation of a customer sales order (source of demand)

 Creation and fulfillment of supply document (source of supply) to the fulfillment warehouse

 Shipment of sales order from the warehouse to customer

Back-to-Back supply processes are similar to regular supply processes that deliver supply to a
warehouse except for one difference; the Back-to-Back supply is always reserved to an Order
Management sales order line. The different variants of the Back-to-Back process are:

 Buy supply type - Procurement from an external supplier

 Make supply type - Production or assembly at an in-house manufacturing location

 Transfer supply type - Transfer from another warehouse

 On hand supply type - Reservation of on-hand supply

To sum up, the Back-to-Back supply creation and fulfillment is a complex, highly-integrated flow that
has multiple variants. This document seeks to lay down the key application setups that drive Back-to-
Back supply creation and fulfillment.

Back-to-Back supply creation process

The Back-to-Back flow begins with order capture, wherein an order entry specialist enters a customer sales order for
an item that is designated for Back-to-Back fulfillment in Order Management. Upon booking of the sales order, the
order promising application is invoked. Global Order Promising (GOP) performs two key tasks at this point. First,
GOP promises orders for back-back items by choosing the best possible sources across the supply chain, while
considering Sourcing Rules, ATP Rules and other constraints. Second, GOP releases supply recommendations (or
the supply picture) to Supply Chain Orchestration (SCO). These supply recommendations are based on how GOP
pegs supply in the supply chain against the Back-to-Back sales order demand. Once the sales order fulfillment line
is scheduled, Order Management releases fulfillment line information (or the demand picture) to SCO.

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SCO processes the demand picture from Order Management and the supply picture from GOP to create a supply
order in SCO. The supply order then goes through an orchestration process that results in the creation of supply
document(s) in the supply execution application(s). Depending on how Sourcing Rules are defined and how GOP
sends its supply recommendations, the supply document could be a Purchase Requisition/Purchase Order (PR/PO)
in Procurement, Work Order (WO) in Manufacturing and/or Transfer Order (TO) in Inventory.

SCO tracks the creation of the supply document and immediately initiates a reservation request to tie the sales order
demand with the supply document. The reservation of supply to demand is made in Inventory and ensures that the
incoming supply is not ‘stolen’ or ‘wrongly allocated’ to any other demand source. It is to be noted that GOP will
respect the pegging between the supply document and the sales order during subsequent reschedules for the order.

Once the supply document is received into stock (PO receipt and put away, TO receipt and put away or WO
completion), the reservation for the sales order line switches from the supply document to on-hand that has been
created by the supply document receipt.

SCO tracks the fulfillment of the supply document and creation of inventory to ship the Back-to-back sales order.
During this tracking process, SCO sends supply status updates to Order Management until supply is available and
the sales order is ready to be shipped to the customer. Upon shipment of the Back-to-Back sales order, the sales
order fulfillment line interfaces with Receivables for billing.
The flow diagram given below depicts the generic Back-to-Back supply creation and fulfillment process.

Figure 1. High-level flow-diagram of Back-to-Back supply creation and fulfillment.

Application set ups for Back-to-Back supply creation and fulfillment

The Back-to-Back flow runs across multiple applications (Oracle SCM Cloud applications). Hence, the set ups that
support the Back-to-Back flow are also spread across multiple applications. Some of these set ups can be
performed in the Functional Set up Manager (FSM), while certain others are accessible only through application-
specific setup screens.

Considering that there are four variants of the Back-to-Back flow (Make, Buy, Transfer and On-hand) as mentioned
in the introduction section, setups for Back-to-Back can be broadly divided into

3 | BACK-TO-BACK SUPPLY CREATION AND FULFILLMENT – A GUIDE TO KEY APPLICATION SETUPS

 1. Common (or flow-agnostic) setups that include (and are not restricted to) setting up users, employees,
currencies, enterprise structures, security, general ledger, financials, payables, receivables, tax, subledger
accounting, costing, items, catalogs, units of measure, pricing, procurement, inventory, shipping,
manufacturing, carriers & shipping methods and transit times

2. Core application configuration like flexfields, profile options, document sequences, lookups and
attachments

3. Generic Supply Chain Management setups that apply for all Back-to-Back flow supply types, and

4. Specific setups that apply only to a particular supply type of the Back-to-Back flow

The scope of this document is restricted to setups that pertain to points 3 and 4 mentioned above. It is assumed that
all common setups and core application configurations have been completed before users begin setting up the
application specifically for enabling the Back-to-Back supply creation and fulfillment flow. If there are common
setups that have specific impact on Back-to-Back flows, for instance Transit Times, information pertaining to those
setups is provided in this document.

Let us first look at generic setups that apply to all variants of the Back-to-Back flow.

Generic setups for Back-to-Back supply creation and fulfillment

Item setup in Product Information Management

The specific set up that drives the Back-to-Back process is the Back-to-Back Enabled indicator on the item. During
item creation, organizations will have to determine if a customer ordered item in a warehouse is to be fulfilled by the
Back-to-Back process. The Back-to-Back Enabled item attribute has to be set to “Yes” for an item in an organization.

Navigation: Product Management > Product Information Management > Create Item

If this flag is set to “Yes”, Order Management will send a request for supply and GOP will send a supply
recommendation to SCO and the Back-to-Back fulfillment process will be executed. If this flag is not set, the
standard order fulfillment process in Order Management will be executed.

4 | BACK-TO-BACK SUPPLY CREATION AND FULFILLMENT – A GUIDE TO KEY APPLICATION SETUPS

Figure 2. Setting up an item in PIM for Back-to-Back fulfillment.

Available to Promise (ATP) Rules setup in Order Promising

Setting up of Available to Promise or ATP Rules to support the Back-to-Back flow is similar to how ATP Rules are
set up for standard order promising. However, there are certain points to note specifically for Back-to-Back order
promising.

Navigation: Value Chain Planning > Order Promising > Manage ATP Rules

 Select the Promising Mode “Supply chain availability search”. This option along with selecting the Supply
Type On Hand will ensure that any already available supply is used before new supply is created.
 Enable “Search Components and Resources” if “Make” recommendations are required (Mandatory for
Back-to-Back Make recommendations). This option ensures there are enough available components and
resources to complete the work order for a Make recommendation.
 Under Supply Types select all required supply types that must be considered during order promising
o On hand – if selected, existing on-hand quantities are considered for order promising.
o Purchase orders – if selected, open purchase orders will be considered for order promising.
o Standard work orders – if selected, open work orders will be considered for order promising.
 Under Demand Types select all required demand types that must be considered during order promising.
For Back-to-Back sales orders, the Fulfillment lines option should be selected.
 Set the Infinite Time Fence to a large value
o Since Back-to-Back items often require long lead times for manufacturing, or procurement, make
sure this definition is set with this in mind
o For example, if all Make orders require between 30 to 40 days to manufacture, and the time
fence is set to 20 days, orders with requested ship dates that are 21 days away will be promised
when in reality the goods will not be available until at least 9 days later. In this scenario, the
lowest number used for the infinite availability time fence definition should be 41 days lead time.

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Assign the ATP Rule either to a Category, Item, Organization or Item/Organization (Assignment Basis). This sets
the criteria for when this ATP rule will be used.

Figure 3. Setting up Available to Promise (ATP) Rules in Order Promising.

Figure 4. ATP Rule assignment in Order Promising.

Sourcing Rules setup in Order Promising

Setting up of Sourcing Rules to support the Back-to-Back flow is similar to how Sourcing Rules are set up and
assigned for standard order promising. A global sourcing rule is defined to determine the ship-from warehouse on
the sales order and a local sourcing rule in the ship-from warehouse determines how supply is created to fulfill the
Back-to-Back sales order. In the context of Back-to-Back fulfillment the focus is on the local rule since there are
certain points to be noted specifically for Back-to-Back order promising.

Navigation: Value Chain Planning > Order Promising > Manage Sourcing Rules

 The Sourcing Rule has to be a Local one (Organization Assignment Type)

 Provide effective Start Date and End Date (Optional) for the rule

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  Define supply sources (Buy from, Make at and Transfer from)
 Assign the Sourcing Rule to an Assignment Level in the Assignment Set (GOP Supports assignment at
multiple hierarchical levels)

Figure 5. Setting up Sourcing Rules in Order Promising.

Figure 6. Sourcing Rule assignment in Order Promising.

Examples of simple sourcing rules for different supply types are given below. Let us assume that these local rules
are defined in the sales order ship-from warehouse/organization, M6 – Houston.

1. Buy supply type

Type Supplier Supplier Site Allocation Percent Rank

Buy from Midtown Suppliers Midtown Chicago 100 1

In a Back-to-Back supply creation flow with the above sourcing rule, a Purchase Requisition and Purchase Order
would be created in Procurement with supplier Midtown Suppliers and supplier site Midtown Chicago.

2. Transfer supply type

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Type Organization Allocation Percent Rank

Transfer from M7 - Cincinnati 100 1

For the above sourcing rule, a Transfer Order would be created in Inventory, to transfer the ordered item from M7 –
Cincinnati to the sales order shipping warehouse, M6 – Houston.

3. Make supply type

Type Organization Allocation Percent Rank

Make at M6 – Houston 100 1

When a “Make at” sourcing rule is set up for Back-to-Back supply creation, a work order would be created in M6 –
Houston, for fulfilling Back-to-Back sales order demand.

Please note that each of the above examples assume that there is only one source to fulfill the item. Practically, a
sourcing rule for Back-to-Back fulfillment may include combinations of ranked sources (of different source types)
with splits in allocation percentages.

Collect Planning Data in Planning Central

Promising of Back-to-Back sales order is entirely dependent on data that has been collected by Value Chain
Planning or Planning Central. To ensure accuracy of promising data it is recommended to collect data for planning
at frequent intervals as determined by average order fulfillment cycle times of an industry or organization. The
frequency of collecting data for planning may also be driven by the rate of changes that occur in reference data
(items, organizations, suppliers, work definitions etc) and supply planning data (on hand, purchase orders, transfer
orders, work orders etc). Once the frequency of collecting data for planning is determined, the Collections Job Set
should be scheduled and monitored. If the Collections Job Set is not run frequently enough, the data used to create
the Back-to-Back supply recommendation will be inaccurate – for example, planning may recommend using on hand
supply that is not actually available.

Navigation: Value Chain Planning > Planning Central > Collect Planning Data

 Choose the Source System and Collection Type. Running “Net Change” collections (Collection Type = Net
Change) is a bare minimum to keep planning data up-to-date with changes made in non-planning source
applications.
 Select collection filters (optional)
 Select all reference data entities
 Select all supply planning entities
 Submit and monitor the status of the Collection Job Set until successful completion

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Figure 7. Collect Planning Data in Planning Central – Reference Data and Supply Planning Data.

Refresh and Restart Order Promising Server

It is important not only to collect data for planning from source systems, but also to ensure that the collected
planning data is updated to the Order Promising server or datastore. The task of updating the Global Order
Promising (GOP) datastore is done by the Enterprise Schedule Service (ESS) called Refresh and Start the Order
Promising Server. The accuracy of order promising depends on how often the GOP order promising server or
datastore is refreshed with changes in reference data and transactional supply planning data. Just like collections,
scheduling of the ESS to refresh the order promising server will have to be driven by organizational considerations.

Navigation: Scheduled Processes > Schedule New Process

 Search for and select ESS job Refresh and Start the Order Promising Server
 Select all entities in the ESS parameters page and submit (this might require downward scrolling)
 Monitor the status of the ESS job until completion

Figure 8. Refresh and Start the Order Promising Server.

9 | BACK-TO-BACK SUPPLY CREATION AND FULFILLMENT – A GUIDE TO KEY APPLICATION SETUPS

Preparer for Procurement in Order Management Parameters
For Back-to-Back Buy and Transfer flows, the values for preparer and deliver to requestor on the purchase
requisition and transfer order respectively are defaulted from an Order Management Parameter called Preparer for
Procurement. This is a mandatory setup for Back-to-Back flows.

Navigation: Setup and Maintenance > Manage Order Management Parameters

 Search for setup task Manage Order Management Parameters

 In the General tab, navigate to the order management parameter called Preparer for Procurement
 In the section titled Preparer for Procurement: Values, select the business unit and assign preparer
name.

Figure 9. Preparer for Procurement.

Specific setups for Back-to-Back Buy

There are additional setups that enable the Back-to-Back Buy flow. Some of these setups are optional and may be
performed depending on particular organizational needs.

Customer Sales Order Fulfillment in Procurement

While configuring the Procurement offering, ensure that the feature Customer Sales Order Fulfillment is enabled.

Navigation: Setup and Maintenance > Configure Offering > Procurement > Select Feature Choices

10 | BACK-TO-BACK SUPPLY CREATION AND FULFILLMENT – A GUIDE TO KEY APPLICATION SETUPS

Figure 10. Customer Sales Order Fulfillment in Procurement.

Charge Account setups in Procurement

It should be noted that the Back-to-Back Buy flow does not require specific charge account setups. These should be
handled as a part of configuring the Procurement application. For every new organization defined, it is mandatory to
define a valid charge account for the new organization in order to be able to create a purchase requisition/purchase
order. Based on your business need, you may choose to have a unique charge account for each organization or just
define a default charge account that will be applicable for all organizations.

Navigation > Implementation Projects

 Open the implementation project and expand ‘Manufacturing and Supply Chain Materials Management’
offering
 Navigate to Define Cost Accounting > Define Subledger Accounting Rules > Define Subledger Accounting
Methods > Manage Mapping Sets
 Click on ‘Go to Task’ and set the scope to ‘Cost Management’.
 Now set the charge accounts for the following accounts:
o Accrual Account – Organization
o Cost of Sales Account – Organization
o Expense Account – Organization
o Expense Accrual Account – Organization
o Invoice Price Variance Account – Organization
o Material Account – Organization

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Figure 11. Manage Mapping Sets: Cost Management

Figure 12. Define Charge Account for Accrual Account – Organization

Repeat the process for all other accounts - Cost of Sales Account – Organization, Expense Account – Organization, Expense
Accrual Account – Organization, Invoice Price Variance Account – Organization, Material Account – Organization.

Blanket Purchase Agreement in Purchasing (Optional)

Creation of Blanket Purchase Agreements (BPAs) is an optional setup and may be considered necessary in an
organization that requires complete automation in the Purchase Requisition to Purchase Order conversion process.
By setting up a BPA with a specified supplier/supplier site for a Back-to-Back item, the process of creation of
purchase orders from purchase requisitions and the approval process of the purchase orders can be automated. If
the Automatically Generate Orders option is not selected on the BPA, a user (functionally a Buyer) will need to
manually create a purchase order from each requisition. If the Automatically Submit for Approval options is not
selected on the BPA, a user will need to manually submit the purchase order for approval.

Navigation: Procurement > Purchasing > Create Agreements

In the Blanket Purchase Agreement, ensure that the BPA controls are set up to automate PO creation.

12 | BACK-TO-BACK SUPPLY CREATION AND FULFILLMENT – A GUIDE TO KEY APPLICATION SETUPS

Figure 13. Blanket Purchase Agreement set up in Purchasing.

Specific setups for Back-to-Back Make

Additional setups that enable the Back-to-Back Make flow are included in this section.

Work Definition in Manufacturing

For GOP to recommend a Back-to-Back Make supply source, Work Definitions should be defined and collected. Any
item that is designated as a candidate for the Back-to-Back Make flow should have a Work Definition in
Manufacturing.

Navigation: Manufacturing> Work Definition > Manage Work Definitions

 Create Work Definition for the Back-to-Back item

 Set up standard operations that constitute the Work Definition

Figure 14. Work Definition set up in Manufacturing.

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Figure 15. Standard Operations for the Work Definition.

Other important factors to consider

In addition to the Back-to-Back specific setups detailed above, the following common application setups are also
recommended:

1. Item Templates: In general, all items identified for Back-to-Back fulfillment should be MPS/MRP planned
in the item’s Planning specifications in Product Information Management (PIM). An optimal method of
ensuring that such items have all requisite item attributes set is to apply, at the time of creating a new item,
either the seeded “Purchased Item” template or the seeded “Finished Good” template or both depending
on the Back-to-Back flow variants implemented.

2. Default Buyer and List Price: For items identified for the Back-to-Back Buy flow, it is recommended to set a
default buyer and a list price for the item in Purchasing specifications in Product Information Management
(PIM).

3. Running Collections: The frequency at which planning collects data and this data is refreshed to the order
promising server has a significant impact on order promising accuracy and results. The decision on the
frequency at which both these activities are scheduled will primarily depend on organizational
considerations.

4. Transit Times and Default Shipping Method: Another key factor that governs order promising is transit
times. Ensure that transit times are set up (with default shipping method) to account for movement of
goods between two internal locations, from suppliers (external locations) to internal locations and from
internal locations to external locations (customers). Transit times can be set up at multiple hierarchical
levels and judicious planning in setting them up can help in ensuring coverage for lead times involved in
movement of goods. Setting up transit times is a common SCM setup that has to precede setups for Back-
to-Back supply creation and fulfillment.

5. Item Costing: It is important to complete all item costing setups prior to using an item in the Back-to-Back
flow. Not only do item costs impact margin analysis, they are critical for certain Back-to-Back flows. For the
Back-to-Back Transfer flow it is vital to ensure that the ordered item has a cost associated to it at least in
the source organization. The transfer price of the item is derived based on its cost in the source
organization.

6. Release Planning Recommendations: While executing the Back-to-Back flow, an ESS job called Release
Planning Recommendations has to be scheduled to run at regular intervals to initiate the supply creation

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 process. This ESS job releases supply recommendations from Global Order Promising (GOP) to Supply
Chain Orchestration (SCO) for scheduled Back-to-Back sales order lines.

Conclusion
Most of the issues that are encountered in the Back-to-Back supply creation and fulfillment flow can be addressed
by ensuring that the setups mentioned in this document are performed as advised. Not only does this serve as a
checklist of setups that have to be executed at the time of an implementation, these can be handy in troubleshooting
issues that occur in the maintenance and sustenance period post-implementation.

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Back-to-Back Supply Creation and Fulfillment – A guide to key application setups

April 2017
Author: Sandeep Kurur
Contributing Authors:

2 | BACK-TO-BACK SUPPLY CREATION AND FULFILLMENT – A GUIDE TO KEY APPLICATION SETUPS