Amortization and depreciation are two words that are often used synonymously. Is different or similar. How?

Deprecaition is the reduction in the value of a company’s physical assets-building, plant, cars,machines, pc that must be applied against Operating profit as a non cash expense as the goods are used.

Amortisation is a similar Charge related to intangible aseets like patents as well as loans and capital leases, and there associated intrested. Both are a burden to compnies because they lower net earning and earning per share. Companies sometimes review tangible and intangibale assets for impairment, hoping they are worth less than their current value in the balanace sheet. They then “write down ” or devalute, those asset and recognize the reduction as a large charge agaist earning.

You can understand Amortisation as : lets say a company’s did research and made a patent on medical equipment which has a life of 15 years. There are certian cost involved while creating the medical equipment, and that is spread out over the life of the patent, with each portion being booked as an expense on the company’s income statement.

This was yet another query asked by one of the reader..so thought to combine in a post so that others can also understand.

Lets try to understand these key terms from Oracle Apps Product side:

Back Orders

• The Oracle “term” backorder is a “status” on the order line or delivery line indicating that you have tried to release an order for picking in your warehouse, but that the pick release was UNSUCCESSFUL because there was no available inventory.(Backorder can be partial or complete). The Oracle term backorder does NOT mean that you have open purchase orders for the out-of-stock item from your vendors.
• The term backorder is also used in business a little differently than in Oracle. The term “An item is on backorder” usually means that the item is not in stock, but the shipping company has already placed purchase orders from their suppliers to restock the item.
• Back Order is when you do not fulfill the Sales Order, or if the inventory is out of stock for delivery to customer.

Drop Shipment

• Drop shipment on the other hand is a method of order fulfillment where the organization taking the order does NOT maintain their own inventory for the drop-shipped product, but fulfill their orders through 3rd party vendors who directly ship to the end customer ordering the product.

For example,

• A orders item x from B
• B orders item x from C
• C ships Item x to A.
• B bills A for the order, C bills B for the order

Back to Back Orders

In Back to Back order the shipment process is also completed through OM as a standard order after the item is received against a PO.

What is the major difference between drop shipment and back to back order ?

More on Drop Shipment & Back to Back Orders(Functional)

High Points for EBS Base Functionality for Drop Shipment

• Drop shipment order processing in EBS is managed using workflow
• Drop ship functionality is based on source type of an order line (Internal/External)
• You can automate your PO/BPA release creation based on ASL/sourcing rule information
• Drop ship process uses standard OM workflows.
• You can use Sales order Purchase order discrepancy report to identify discrepancies between the OM and the PO
• There is a links OM and PO to provide visibility through entire supply chain Flow.

The entire Drop shipment process flow can be best understood as figure below:

Points for Implementation Considerations

• Order line attribute: Source Type (need to be external). You can be defaulted from item or order type
  • Menu -> Responsibility Order Entry Super User/setup/Orders/Types
  • Setup an order type using the cycle defined in the previous step (a),an order number source, a valid standard value rule set.
• Item attributes (OM and Purchasing)

You need to do the setup for these attributes:

-Purchased (PO) Enabled
-Purchasable (PO) Enabled
-Transactable (INV) Enabled
-Stockable (INV) Optional
-Reservable (INV) Optional
-Inventory Item (INV) Optional
-Customer Ordered (OE) Enabled
-Customer Orders Enabled (OE) Enabled
-Internal Ordered (OE) Disabled
-Internal Orders Enabled (OE) Disabled
-Shippable (OE) Optional
-OE Transactable (OE) Enabled

• Setup requisition import parameters
• You can also use grouping by Vendor
• You can also set the multiple distributions set to No
• ASL and/or Sourcing rule relationship need to be setup for Automatic PO creation
• Oracle recommends using a logical organization for drop shipment. Exclude this organization for planning purposes. It can be worked around using non nettable Dropship subinventory

Back to Back Order

As mention above this is ability to create specific supply orders for customer sales orders.
These are main features avaible in EBS

• Designate specific items as B2B orderable
• Enter sales order lines for these items, and have the supply automatically created via a requisition
• Have the requisition converted into a Purchase Order or a release of a blanket Purchase Order
• View the requisition number or PO number and its status from the Sales Order (using reservation details window)
• Reserve the supply from the Requisition to the PO and finally to the Sales Order once the PO is received
• Pick, ship and finally invoice the customer for the product.
• Note to Buyer’s field in the requisition captures the Sales order information
• Line status information shows the progress of the order
  PO Req Created
  PO Req Requested
  PO Created
  PO Received
• If line is manually reserved it progresses to “Awaiting Shipping”
• Changes and Cancellations on sales orders:
  • Reservation is changed
  • Notification sent to Buyer

Hope this makes a clarity on topics.

Good news for those customer who are using or planning to use MasterCard Corporate cards , as they have upgraded online reporting service with the launch of MasterCard smartdata.gen2 some time back. This provides greater flexibility and the ability to exporting the expense data that can be used as to feed into company ERP system with i-Expense system. This is yet another options in place of Amex Corporate Card integration with ERP. Important to know, more and more company are now a days finding the way to integrate Corporate Card with iexpense.

High Points of benefits

• Transforms data into your BI : This provides powerful integrated reporting views and insights, leveraging transactional and enhanced data from hotel folios, airline, car rental, rail and other supplemental data procured from travel agencies.
• Provides a holistic view to global data — virtually anytime, anywhere through a secure web-based interface. Single sign-on capabilities enable easy access to the reporting solution through issuers’ websites.
• Multiple languages reporting :Available in 14 languages US and International English, Spanish, Castellano Spanish, French, Canadian French, German, Italian, Japanese, Dutch, Korean, Portuguese, Chinese, and Simplified Chinese.
• Multiple Currency :Supports transaction in virtually every currency in world circulation
• Provides spend data detail : transactions and line item details can be automatically viewed resulting in deeper spend insights and the ability to better analyze data for vendor negotiations and pre-population of employee expense reports.
• Streamlines the accounting process :accommodates multiple accounting systems and schemes resulting in powerful accounting capabilities that solve simple to complex requirements.
• Customizable expense monitoring : spend alerts, specific data analysis and filtering, and tailored reports based on specific parameters can be easily customized to monitor spend and help ensure compliance.
• Exporting Capability : This can be exported to software programs such as Microsoft Excel(R) which then after can be feed into ERP systems.

Suggested Reading

• Smart Data Solutions
• MasterCard Takes Reporting and Expense Management to the Next Level with MasterCard smartdata.gen2

Similar Post

• Credit Card functionality within i-expense

Most of us heard about e-commerce site like ebay,ubid.com,amazon,com which is very common place in advance countries like USA, UK & Singapore where people can sell or buy there product. Have you ever think ,what is similar situation in real world , when the the word ‘drop shipment’ comes to your mind. ……a business situation when the retailer or trader has no stock himself, instead giving customer details directly to the seller, and then saler than fills the order and send it to customer directly.How its sounds…

Drop shipping still remains a hot topic among SCM practitioner and apps Implementer , but even though it has many benefits, it isn’t the best option for every business. I am not going to walk through the pros and cons of the process , rather would like to walk through some of the key steps and processes which exist in real world which is important to understand the concept which helps during configuration with the product.

As in one of the last post , we have seen drop shipments is a method of fulfilling sales orders by selling products without the order taker handling, stocking, or delivering the products. The seller buys a product and the supplier ships the product directly to the seller’s customer .

In other word ,drop Shipment is a process where the customer places a purchase order on a company and this company instructs its supplier to directly ship the items to the customer.

Drop shipments are done because of the following reasons:

• Customer requires an item that is not normally stocked
• Customer requires a large quantity of the item which is not available with you
• It is more economical when the supplier ships directly to the customer

Types of drop shipment

If you see the real world scenarios this can be best categorize as mainly under three heads as:

• Type 1 : Full Drop Shipment

Where the seller sends the purchase order to the supplier for the full quantity that the customer had ordered

• Type 2 : Normal Shipments and Partial Drop Shipment

Under this scenario, If the seller has only part of the quantity available for shipping to the customer, then that quantity is shipped; a purchase order is created for the remaining quantity which the seller was not able to fulfill. This is typically true for single based item.

• Type 3 : Normal Shipments and Full Drop Shipment

In this scenario, the seller ships some goods from inventory to the customer, and the other goods are always shipped from an external source (supplier).

Process Flow for Drop Shipment (Adopted from User Guide)

Drop Shipments for Standard Items

1. Enter an order for drop ship item
2. Book the order
3. Run Requisition Import
4. Create a purchase order from the requisition
5. Approve the purchase order
6. Receive against the purchase order

Forward drop ship flow for ATO model

1. Enter a sales order for your drop shipped ATO model.
2. Select your options.
3. Schedule and book order (schedule date should default to request date for all lines).
4. Create you configured item by progressing your order ATO Model line or running the Autocreate Configuration batch process.
5. Verify order and line status.
6. Create a supply order (dropship requisition) by progressing your configuration item line or running the Autocreate Dropship Requisition batch process
7. Run the Oracle Purchasing Requisition Import to create a purchase requisition.
8. Create a purchase order for the requisition.
9. Approve the purchase order.
10. Receive the purchase order.

Forward drop ship flow for ATO Item

1. Enter a sales order for your drop shipped ATO item
2. Schedule and book order (schedule date should default to request date for all lines).
3. Create a supply order (dropship requisition) by progressing your configuration item line or running the Autocreate Dropship Requisition batch process.
4. Run the Oracle Purchasing Requisition Import to create a purchase requisition.
5. Create a purchase order for the requisition.
6. Approve the purchase order.
7. Receive the purchase order.

Non-SMC PTO model with drop shipped standard options

1. Enter a sales order for your PTO model.
2. Select options; source type on the components will default.
3. Schedule and book the order.
4. Run requisition import to create a purchase requisition.
5. Create a purchase order for the requisition.
6. Approve the purchase order.
7. Receive the purchase order.

Drop Shipment (Technical)

This section is going to help those who asked to provide some more granular details for drop shipment some time back.

As discussed above and in last post drop shipment is the process by which an organization takes orders from their customer and gets it fulfilled by a 3rd party. The selling organizatoin places a purchase order to teh 3rd party (supplier) who ships the ordered products to the end customer directly. There are a large number of tables that contain data related to drop ship orders. For example:

• oe_order_headers_all and lines_all (order info)
• po_requisition_lines_all, headers_all etc.( req. info)
• po_headers_all, lines_all (po info)
• oe_drop_ship_sources_all (this table contains the link between the req, po and the original order)

Moreover, there are many more tables involved in this therefore its better to have a understanding by corresponding ER diagram.

There is always a need to develop some of the custom report, therefore understanding of understanding table is very very important. Here are the same of underline tables details.

• PO_LINE_LOCATIONS_ALL
  • This table stores document shipment schedules for purchase orders, purchase agreements, quotations, and RFQs.
• PO_LINES_ALL
  • This table stores purchase document lines for purchase orders, purchase agreements, quotations, and RFQs.
• PO_HEADERS_ALL
  • This table stores document headers for purchase orders, purchase agreements, quotations, and RFQs.
• PO_DISTRIBUTIONS_ALL
  • This table stores purchase order distributions.
• PO_REQUISITION_HEADERS_ALL
  • This table stores requisition headers.
• PO_REQUISITION_LINES_ALL
  • This table stores requisition lines.
• PO_REQ_DISTRIBUTIONS_ALL
  • This table stores requisition distributions.
• PO_REQUISITIONS_INTERFACE_ALL
  • This is the Requisition Import interface table.
• OE_ORDER_LINES_ALL
  • This table stores information for all order lines in Oracle Order Management.
• OE_DROP_SHIP_SOURCES
  • This table stores relationships between order lines in oe_order_lines_all table and associated oracle purchasing requisitions in PO_REQUISITIONS_ALL and Oracle purchasing purchase orders in PO_LINES_ALL.
• RCV_SHIPMENT_LINES
  • This table stores receiving shipment line information.

Drop Ship @Release 12
There are no Changes in R12 for Drop Ship Flow same as R11 only

Date flow for Drop Shipment

• Understand “Drop Shipment” in Order Management?

Reference Notes

• Note 225434.1 : Drop Ship FAQ document
• Note 130702.1 :Drop Shipments process