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Understanding Intercompany Orders

Understanding Intercompany Orders

Concept

An interbranch order is a sales order to a customer. You use interbranch orders when you sell from one location and ship from a separate location. For example, many companies have a central warehouse that ships all orders to customers, regardless of the location that takes the order.

 

An intercompany order is a purchase order to the supplying branch from the selling branch. Intercompany orders do not move inventory from one location to another; the orders track the costs between branches. Transfer orders track the movement of inventory from one location to another.

Procedure

In this topic, you will learn the intercompany process, the steps to set up intercompany and interbranch orders, and the programs used by the system to create intercompany and interbranch orders.

Step Action
This flowchart illustrates the flow of information for intercompany and interbranch orders.
You enter the interbranch sales order for the customer at the selling branch.
When the supplying warehouse ship confirms the product, the system creates the intercompany invoice and purchase order.
The system recognizes revenue at the supplying warehouse. The intercompany invoice and purchase order track the costs between the two branches.

Intercompany orders are an internal process that does not impact the customer.

To enter a sales order and ship from another branch, you can simply enter a standard sales order with the billing branch in the header and change the detail branch to the shipping branch.

The primary purpose of interbranch orders is to facilitate accounting rather than the distribution of goods. The intercompany and interbranch orders are not required to ship from another warehouse.

Step Action
This chart compares intercompany and transfer orders.
Intercompany orders do not move inventory from one location to another; the orders track the costs between branches.
Transfer orders track the movement of inventory from one location to another.
You can use branch sales markups to set up additional costs that are associated with an intercompany or transfer sales order.

Step Action
This chart compares interbranch with direct ship orders.
The difference between interbranch orders and direct ship orders is the supplying location.
Direct ship orders use an outside supplier to ship the goods directly to the customer.
Interbranch orders use a supplying warehouse within your organization to ship the goods to the customer.

Step Action
This flowchart shows the steps to set up intercompany and interbranch orders.
You use standard stock item line type for interbranch sales orders, such as S.
For intercompany purchase orders, you use a direct ship item inventory interface, such as line type D. D indicates that the line item is an inventory item, but does not affect availability or quantities.
For intercompany invoices, you use a line type with a non-stock item inventory interface, such as line type IC.

You select the Edit Item Master for Non-Stock Items option on the Line Type Constants Revisions form for the system to verify the item number in the Item Master File table (F4102), retrieve cost and price information from the Item Cost (F4105) and Item Base Price (F4106) tables, and write transactions to the general ledger offset account that is set up for intercompany orders.

Based on system setup, the system assigns these document types when you enter interbranch and intercompany orders:

• SI: Interbranch sales order

• SK: Intercompany invoice

• OK: Intercompany purchase order

Set up order activity rules for the document type and line type combinations.
Set up a next number bucket for direct ship orders. In the Next Numbers program, use system 42 for the JD Edwards EnterpriseOne Sales Order Management system.
Create a version of the Shipment Confirmation program (P4205) with processing options set for intercompany orders.
Create a version of the Sales Update program (R42800) with processing options set to create intercompany orders.

Step Action
This table provides an example of order activity rules for interbranch sales orders using document type SI and line type S:

• 520: Enter sales order

• 540: Print pick slip

• 560: Confirm shipment

• 580: Print invoice

• 620: Sales update

• 999: Complete and ready to purge

Step Action
This table provides an example of order activity rules for intercompany invoices using document type SK and line type IC:

• 520: Enter sales order

• 585: Print interbranch invoice

• 600: Invoice journal

• 610: Print general ledger sales recap-detail

• 620: Sales update

• 999: Complete and ready to purge

Step Action
This table provides an example of order activity rules for intercompany purchase orders using document type OK and line type D:

• 220: Enter purchase order

• 440: Record matching voucher

• 999: Complete and ready to purge

You must set up order activity rules for each document type and line type combination.

Step Action
For interbranch and intercompany orders, the system retrieves price information based on the price method that you specify in the processing options in the Sales Order Entry program (P4210).
For interbranch orders, the system retrieves price information from the F4106 table for the supplying branch/plant based on the base price preference hierarchy. You can define the base price preference hierarchy to search for prices based on the ship-to or the sold-to address book number.
The system also retrieves cost information from the F4105 table based on the detail branch/plant (supplier).
When you create an intercompany order during shipment confirmation, the unit cost of the interbranch order is the unit price of the intercompany order.
To create intercompany orders, verify that you set the processing options in P4210 to use the appropriate pricing method and intercompany order types, and verify that you specified whether the system creates intercompany invoices in addition to customer invoices.
Processing option combinations can specify one of these options:

• Use the cost markup price, but do not generate an intercompany invoice.

• Use the cost markup price and generate an intercompany invoice.

• Use the interbranch price, but do not generate an intercompany invoice.

• Use the interbranch price and generate an intercompany invoice.

Step Action
Companies can apply additional costs to interbranch sales. The additional costs that you set up in the Branch Transfer Markup program (P3403) are the amounts that the branch/plant charges in addition to the base price.
You can set up base prices in the F4106 table for interbranch orders based on ship-to or sold-to information at the supplying branch/plant. The cost markup is a specific price that you set up in the Branch Relationships Master File table (F3403) between the selling and supplying branch/plant. The system applies the markup to the inventory cost.

Step Action
This flowchart shows the sales order business process for interbranch sales orders.
You must use a version of the sales order entry program that has the Intercompany Invoice processing option set to 1 for the system to create the intercompany invoices after the shipment confirmation process.
You must use a version of the P4205 program that specifies whether the system creates intercompany orders when you enter new sales order lines. If you leave the Call the Create Intercompany Sales Order processing option blank, the system does not create intercompany orders.

If you leave the Enter the version of the Create Intercompany Sales Order (R4210IC) processing option blank, the system uses version ZJDE0001.

The system processes interbranch orders based on the document type and line type combination that you set up for interbranch orders. For intercompany orders that are created during shipment confirmation, the system enters the last status as 914 (Added in Shipment Confirmation). You can edit order activity rules to continue order processing for interbranch and intercompany orders.
You specify whether the system creates interbranch batches or accounts receivable and accounts payable batches in the processing options of the R42800 program.
If you set the processing option to create interbranch batches, the system creates an ST batch type. The ST batch records the transactions between the selling and the supplying branches. Use this option when intercompany orders have not been created.
If you set the processing option to create accounts receivable and accounts payable batches, the system creates accounts payable and accounts receivable journal entries for the selling branch and creates accounts receivable journal entries for the supplying branch.
Each document (SI, OK, SK) must go through each step in the sales order process separately to finish the sales cycle. Remember, the process is set up using order activity rules for each document type and line type.
In summary, you use interbranch orders to sell an item from one location and ship from another. You use intercompany orders to track the costs between the selling and shipping branches.

End of Procedure.

Ayman Refat
Over 20 years of experience in IT area, working as Oracle JD Edwards Developer with expertise in Windows Server, SQL Server and Microsoft Exchange Server, experience in Linux operating systems (Debian and Redhat), VMWare ESX / ESXi, Novell Netware, relational databases like Oracle 10/11g and backup solutions from Computer Associates. Large experience in high-end servers from Dell and HP, having the following certifications: Microsoft: MCP, MCSE, MCDBA, MCSA and MCT (2008 ~ 2013), Computer Associates: Technical Specialist – Storage and Backup Solutions,
http://www.AymanRefat.com

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