AP: Suppliers

First let’s see what is the literal meaning of the term supplier?

A person(s) or an organization(s) that “supplies”, “sells” or provides something, it can be goods or services or both, tangible items or intangible items. For Example:

1. A florist supplies flowers, bouquets and plants, and a gardener supplies its services of taking care of the garden.
2. Oracle Corporation supplies both products as well as services, Oracle EBS is a product and My Oracle Support(formerly Metalink) is a service.

Are we clear on what is the meaning of Supplier?
Now, here is what a Supplier is in Oracle Application:

• Theoretically, An entity to which your organization is Liable To, i.e. your organization has booked some liability against that party. Also the Supplier Setup form only shows natural account which has Liability as its nature. The reason for only one nature of account to display there is that Suppliers are you Creditors.
• In Oracle Apps a supplier can be:
  • General Supplier, Hardware Vendor, Raw Material Manufacturer, Stationary, Book Store, Insurance Companies, Leasing Companies, Workshops, etc.
  • Government Organizations
  • Tax Collecting Authorities. In case of Pakistan it would be Federal Board of Revenue(FBR), State Bank of Pakistan(SBP) and National Bank of Pakistan(NBP)
  • Utility Suppliers like Electricity Department, Cell Phone and Land Line Service Providers. In case of Pakistan PTCL, KESC, WAPDA, etc.
  • Organization’s Employees: Yes, your employee is also your supplier. Not logically but technically in case of Oracle Apps. You have to open your employee as a supplier when you to Reimburse the Expense claims of your employee.
  • Petty Cash Administrator: Another Employee opened as a supplier to pay Petty Cash Advances and maintain petty cash through Oracle Payables.
  • Petty Cash Supplier: We open this supplier (particularly in Pakistan’s scenario) to pay off all the petty expenses.
• Technically, a shared entity across all Oracle Applications
• In R12, Suppliers are owned by Oracle Purchasing module

We see suppliers mainly in Oracle Purchasing and Oracle Payables Module. Since Oracle Apps is designed to cater the variety of industries globally, so there is a supplier’s hierarchy to cater the global need of recording the liability as well.
Here is how Oracle Apps defines a Supplier’s Shared Entity. It divides the Supplier in to two portion:

1. Supplier Master or Header Level – Part of Trading Community Architecture and is visible across the instance.
2. Supplier Site Level – Visible only to the Operating Unit.
   

Both levels are required to define a supplier in the system. The transaction is performed at Site Level i.e. Invoice is booked against the supplier’s site.
Let’s take an example of a supplier to understand the Master and Site level concept. Suppose there is a Hardware vendor which has its branches in different cities and/or different countries. This hardware vendor has its Head Office in Karachi and sales offices in Lahore and Islamabad. This hardware vendor has its policy that all the purchase will be dealt from sales offices but the receiving of cash will done from Head Office as its finance department resides there. Now your organization purchase its hardware from Lahore but has to pay for it to the Head Office in Karachi. There are two types of document generated in this scenario.

1. Purchase Order
2. Payment Cheque [or Check as Oracle Apps says it in American English ;) ]

To deal with this, Oracle has concept of Supplier Site. For the above scenario, there will two sites for this vendor

1. Lahore Site, purpose of this site will be Purchasing
2. Karachi Site, purpose of this site will be Payment or Pay Site

In Oracle Purchasing you will only be able to raise the PO against the Lahore site and Karachi site will not be visible in the LOV in Purchasing Module. And in Oracle Payables you will only be able to enter invoice and pay check against Karachi site.
So you see the purpose of Site and Master. There is always one Master Record of supplier and multiple Sites depending on the scenario.
NOTE: Master record doesn’t mean it is Head Office and Site are Branches. Head Office and branches both are sites.
SUPPLIER SETUP
Now here are the setups steps for Suppliers in Oracle Payables. I will not be able to discuss “Each” option but only the ones necessary or is used in Pakistan particularly:

1. Setup an Inventory Organization which is part of Payables setups
2. Configure Payables System Setup
3. Create Supplier Master
4. Create Supplier Site
5. Configure Site options

Payables System Setup
These options are defaulted on supplier form. Most of the fields are optional but it is for ease of entering the supplier data. All the fields are changeable on Supplier form or Invoice workbench. You configure the following in this form

• Supplier Numbering: Auto or Manual. Alphanumeric or Numeric.
• Invoice Match Option: How you want to match the invoice with PO or after receiving items
• Payment:
  • Currency: A default payment currency.
  • Pay Group: This is the Grouping of suppliers in a category. For example, Utility Suppliers, Sundry Creditors, Chemical Supplies etc. But I use it for categorizing the invoices, so I don’t use it here as its an optional field as well. Pay group is defaulted to Supplier form and from supplier form to Invoice Workbench. You can change it on the workbench form.
  • Term Date: The date when system start calculating the payment terms thereby calculating the invoice aging.
  • Pay Date Basis: If your supplier is giving discount then you can setup a payment term with discount and set the pay date basis accordingly
  • Payment Term: A default payment term

This setup is across the instance and is DEFAULTED on every new supplier.
Supplier Master Setup

• Supplier Type: Oracle bifurcates supplier in two types, Standard and Employee. The supplier types I’ve mentioned above are Organization Type like Utility, Manufacturing, Tax Authority. etc.
• Organization Name: It’s the name of the supplier. For example Oracle Corporation
  • NOTE: Naming convention should be strictly followed. Oracle itself emphasizes on setting up a naming convention for suppliers becuase for the application “Oracle Corp.” and “Oracle Corporation” are two different suppliers.
• Country: Do I need to explain this?
• Tax Registration Number: This field is also self explanatory.
• Taxpayer ID: Again a self explanatory field. In Pakistan we use this field as NTN
• Alias: I haven’t used this field yet.
• URL: Self explanatory.

Once done with the master. A detailed web form open with Company Profiles, Banking Details etc.
Here you can configure the option for both Master and Site and to do so you have to create a site.
Supplier Site and Detail Setup

• To create a site you have to create an address. On the Supplier detailed web form there is a link “Address Book” on the left side bar. Go to this link and create an address.
  • Country: I don’t think I need to explain this field
  • Address Line 1: At least one address line is mandatory. You can use the other four lines as well.
    • NOTE: Do not enter city in any of the address line. City field is given separately.
    • NOTE: Do not use the commas at end of the address line because the system automatically puts one after each Address Line.
  • Address Name: This is basically Site Name. This name will appear on the invoice form.
    • NOTE: You can enter a larger text but the invoice form will only displays 15 characters. So be careful while naming the site.
  • Address Purpose: The site you are adding is for what purpose? RFQ, Purchasing or Payment
  • After you are done with address creation then you have to attach this site to and Operating Unit.

Now you are able to setup various options like following

• Tax Details: For enabling Withholding Tax and Sales Taxes
• Accounting Controls: For Liability account, Prepayment account and Distribution Sets
• Payment Terms: Different sites can have different payment terms
• Payment Methods: Define the method of payment medium used for this site. Like Check, EFT or Bank Instruction.

Remember: Some options requires configuring both Master and Site level. Like Payment Methods and WHT.
I will elaborate the Setup of Supplier in this same entry later. If you have any questions email it to me.
That’s All :)