Multi Organization Architecture in Oracle

Applications R12
May 18

What Is Multi organization Architecture:

Multi Organization is a feature of oracle applications which Provides Implementation,

Maintenance and operations of Multiple Business Units in an Enterprise within a single
installation of Oracle Applications, taking Appropriate care of Data security and data separation.
Below mentioned are certain salient features of Multi Organization functionality.

 Any number of Business Units in an Enterprise can be supported within a single

installation of Oracle Application even if they have different Ledger, Legal Entity, HR
data.
 User can access the data corresponding to and limited to the operating unit of the user.
 Transactions like Procurement, Receiving, Selling, Shipping Etc. with the same Party
Can be Performed through Different Organization and can be managed internally through
intercompany postings.
 Reporting can be managed at different organization levels like, Business Group, Ledger,
Operating unit etc.

The Multi Organization structure should not only be compliant from legal perspective but should
also be effective from operational management and accounting perspective. Multi organization
Architecture provides support for multiple organizations in a single Installation of Oracle E-
Business Suite on the basis of the relationships defined between multiple organizations entities in
an Enterprise. It provides a hierarchy that specifies how different organization entities interact,
and how transactions flow between them. Various types of organizations supported in the Multi
organization Architecture are mentioned below.

Business Group:

Business group is the highest level in the Organization Structure and is used for managing
human resource information. It can be setup to represent a consolidated Enterprise, A major
Division or an Operating Company. There is no impact of Business group on Accounting. It is
required to have At least one business group defined for an oracle applications Installation.
Multiple Legal Entities, Ledger, operating Units Can relate to a Single Business group.

Ledger:

Ledger is a financial reporting entity, which represents an accounting representation for an

organization that is accountable in a self-contained way. Ledger is the highest level which
impacts accounting. Ledger uses below mentioned components to secure and Manage the
transaction information such as Journal entries and Balances) by ledger
  Chart of accounts
 Functional currency
 Accounting calendar
 Subledger accounting method.

Ledger represents the core of a Company’s financial records where every transaction flows
through.  It provides balanced ledger accounting for the accounting entity and serves as a
repository of financial information. Multiple Legal entities can be assigned to a Ledger. A
Ledger can be associated with multiple Legal Entities and operating Units.

Legal Entity:

Legal Entity represents a legal company for which Fiscal and Tax reports are prepared. A Legal
Entity can Model to an Enterprise, a Designated Legal unit which is recognized by legal
authorities in a country. Legal entity is a business entity that is known to exist to the outside
world. Internal organizations or divisions are not legal entities themselves, but are just part of it.
In the Multi Organization structure various legal entities could share the same ledger. Both legal
entities and operating units are associated with the ledger and the relationship between the legal
entity and operating unit is derived based on the ledger.

Operating Unit:

An operating Unit represents a business unit in an Enterprise which has a business need to secure
transaction data, Setups and Seed data. It can be a major division, sales office, a department, or a
separate company within an enterprise. Since the transaction Information is secured at operating
unit level for the various modules within Oracle applications, A single application responsibility
can access, process, and report on data for one or more operating units that is assigned to its
Security profile. An Operating unit can be associated to a Single Legal Entity and Ledger. But
multiple operating units can be Associated to a Single Legal entity and Ledger.

Balancing Entity:

Balancing Entity is a business entity in an operating unit for which the Balance sheets are
prepared. There can be Multiple Balancing entities within an Operating unit and each of them
must balance within themselves. It could be a company or a division in an Enterprise. A
Balancing entity is represented by Balancing Segment value in the Accounting Flexfield
Structure (Chart of Accounts Structure). If there is intercompany transaction within an operating
unit, appropriate intercompany entries will be automatically created in the Ledger so that the
balancing Entities are in Balance.
Inventory Organization:

An Inventory organization represents a business entity of an enterprise for which the inventory
transactions and inventory balances are tracked. It could be modeled to a Manufacturing plant,
warehouse, Distribution center, Sales Office Etc. All the Oracle Application Products which
include inventory transactions and inventory balances secure information at Inventory
Organization Level. An inventory Organization points to only one Operating Unit but can be
referenced by any Operating unit within the same Ledger.

The Organization Structure for Office Smart

Defining Organization structure is the first step in any ERP implementation and is the most critical part
of any implementation. You have to carefully study and understand the companys' reporting
requirements, management hierarchy, business geographies, legal requirements, data security etc while
finalizing it's organization structure.

Checkpoints to identify Multiple Operating unit requirement: 

The following requirements / scenarios identify the design for multiple Operating Units -

Decentralized Accounting - If the division performs the Accounting functions like Payable
and Receivables accounting independently and generates individual Trial Balances which are
subsequently consolidated at the LE / Business group level in GL

Decentralized Purchasing – If the division independently raises a Purchase Order and the item
can be received in another division and the Receiving / Inventory AP Accrual accounting is done
in the Receiving division

Decentralized Sales – When you enter sales orders, you can choose any inventory organization
as the shipping warehouse. The shipping warehouse may be in a different legal entity than the
operating unit that enters the sales order, and it may post to a different set of books.

Data Security - You can limit users to information relevant to their division. For example, you
can limit access for users to sales orders / Purchase Orders / Sales or purchase invoices
associated exclusively with their division.

Inter-company Accounting - Sales orders created and shipped from one legal entity to a
different legal entity automatically generate an inter company invoice to record a sale between
the two organizations. If the business scenario needs generation and accounting of Inter company
Sale (Receivable) and Purchase (Payable) invoices it points to a multiple operating unit design

Legal Requirements: Does your organization have the knowledge of legal and fiscal
requirements of all countries in which you operate? If yes, and there are diverse legal and fiscal
requirements which need to be segregated from each other, then it is proper to go in for multiple
operating units 
The following is the brief about the Multi-Org.

Multi-Org is a server side enhancement, which enables the Multiple Organizations in an

enterprise to use a single installation of Oracle Applications products while keeping transacting
data separate and secure

In 11i the Multi-Org Structure

Business Group -> Set of Books -> Legal Entity -> Operating Unit -> Inventory Organization

In R12 the Multi-Org Structure

Business Group -> Ledgers -> Legal Entity -> Operating unit -> Inventory Organization

The difference in 11i and R12 is : Set of Books are replaced by ledgers in R12. Ledgers are
created using Accounting Setup Manager. Further Operating Unit can also be created in
Accounting Setup Manager itself.

Business Group - It represents the highest level in the organization structure, such as the major
division. Multiple ledgers can share the same Business Group if they share the same Business
Group attributes, including HR Flexfield structures.

Ledgers - Ledgers may be Primary or Secondary. It determines the Currency, Chart of Accounts,
Calendar, Ledger processing Options and Subledger Accounting method.

Legal Entity - A Legal company for which you prepare Fiscal or Tax Reports

Operating Unit - An Organization that uses Oracle Subledger's and releated products

Inventory Organization - An Organization for which you track Inventory transactions and
balances

Pre-requisites:

Define Organization, Define Legal Entity, Access to Responsibilities HRMS, GL, Purchasing,
System Administrator, Inventory etc

Steps:

1. Design a Structure

2. Define a Location
3. Define Business Group

4. Define or Use existing Accounting Flexfield

5. Create Legal Entity

6. Create Ledgers

7. Create and Assign Operating Unit and Legal entity

8. Create Inventory Organization

9. Run Reports - Replicate Seed Data, Multi-Org setup Validation Report

In R12 we have a feature call MOAC(Multi-Org Access Control) which allows the user to
submit requests, enter, view and access data of different Operating Unit without having to switch
between responsibilities.

Profile Options:

MO: Operating Unit - It will restrict the access through responsibility to only one Operating Unit

MO: Security Profile - It enables the user to get access on more than one Operating Unit by
defining a security profile with Multiple Operating Unit and assigning it to the responsibility (If
MO: Security Profile is set, then MO: Operating Unit is ignored by the system)

MO: Default Operating Unit - It is used when we have more than one OU attached to a
responsibility through security profile, among whihc you want a particular OU to be defaulted
during transaction entry stages. When the responsibility is assigned with only one OU then that
will become the default OU, without setting the profile option MO: Default Operating Unit

HR: User Type - It limits the access on windows shared Oracle Human Resources and Other
Applications

HR: Business Group - We associate a Business Group with a responsibility using this profile
option. It should be done for all responsibilities

HR: Security Profile - When we define a new Business Group instead of modifying the
predefined setup Business Group, you need to set the HR: Security Profile option to point the
Security profile for the new Business Group. Oracle HRMS automatically creates a security
profile with the Business Group name when you define a new Business Group

 
Information Shared Across Organizations
The following information is global. It must be set up once for the enterprise:
• Flexfield definitions
• Customer Header (customer site is at the operating unit level)
• Supplier Header (supplier site is at the operating unit level)