white paper service procurement

Services ProcurementAn Oracle White Paper[Jan 2008]

Services Procurement

EXECUTIVE OVERVIEW

There has been a demand for an integrated platform for services procurement that automates and streamlines the process for sourcing, procuring and managing the payment of services including contingent labor, professional services and business services: facilities management, marketing. There have been enhancements made to Services Procurement to provide such an integrated platform in order to increase customer satisfaction, to lower maintenance costs and to drive revenue by increasing customer adoption and future sales. To address current customer escalations and avoid future escalations and to ensure customer satisfaction for future implementations, Oracle Services Procurement supports assigning time cards to multiple projects. The contractor skill set and the various phases of project for which the workforce is used, do not have to be a single project is a prevalent business practice. This has been a major pain point of customers where the Purchase orders need to be assigned to the contingent worker via HR assignment form where only one Purchase order can be associated to a contingent worker. Oracle Services procurement solution provides a solution where more than one Purchase order can be assigned to a contingent labor by simplifying the flow without breaking the security considerations.There are numerous occasions when business need arrives where in time entry should be allowed for multiple purchase orders. Oracle Services Procurement flow enables the users to create time card for multiple purchase orders.

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INTRODUCTIONThe objective of this paper is to provide a detailed analysis of the services procurement requirements and highlight Oracle’s Solution that addresses these requirements. This analysis will be presented in the form of Functional flow together with set up and business example. Oracle Services Procurement is an application released in EBS 11.5.10 to enable complete control for services spending. Key capabilities include maximizing preferred supplier savings, cutting processing costs and eliminating over-billing and creating visibility for services spending: end-to-end services procurement process support integrating with Human Resources Management, Time and Labor, and Project Management.The entire procure to pay flow from requisition creation to sourcing to payment (including integration to Procurement products) is automated.Oracle service procurement provides the flexibility to users to capture job and skill requirements, assignment information and optionally a statement of work. It also leverages the existing infrastructure in Oracle Purchasing for automatic conversion of approved service requisitions into purchase orders. Hiring Managers may view and manage their contractors from iProcurement. Critical information for each contractor such as remaining budget and amount billed to date is summarized on a single page. Users can drill down to supporting documents including purchase order, timecard and access to the full requisition lifecycle.Oracle Human Resources enable the users to manage contingent workers differently from other workforce. The users can enter and maintain information about the contingent workers in an enterprise and reference purchase orders created in Oracle Purchasing to track supplier and rate information for a worker’s assignment. Oracle Human Resources provides the infrastructure to monitor and track the assignment history of contingent workers including breaks in assignment.Contingent workers can now input time into Oracle Time and Labor. Timecard entries are validated against the purchase order to ensure the timecard does not exceed pre-authorized amounts. Once timecards are approved, the

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purchase order is updated, depleting the budget of the approved time. Contingent worker can now select any project to create a time card based upon the project set up irrespective of whether it is associated to purchase order or not.Studies show that more than 50% of service invoices are not accurate. So either vendor are being billed at a non-agreed rate or the amount of service billed is not inline with what has been authorized. Reconciling these invoices is time consuming.Oracle has provided a solution where the invoices may automatically be generated from the approved timecard thereby eliminating invoice errors. Suppliers may view and download approved timecards through Oracle iSupplier Portal. Invoice errors and over billing are minimized by automatically creating invoices from service receipts.

SET UP STEPSiProcurement

Setup for service line types in iProcurement is done in Oracle Purchasing: (Setup>Purchasing>Line Types). Optional Set up:o Create information templates in Oracle Purchasing:

(Setup > Information Templates). Common attributes such as supplier, price, currency, description of service and category are always captured on a service request. Any additional unique attributes are captured via the information template. For example, when buying company repair services, the user may want the requester to include details on the location of the copier and the make of the copier. When purchasing visa services, the user may want the requester to include details on the person who is applying for the visa, and their nationality. The user can make any attribute either mandatory or optional and may reference default values.

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o Create service templates in iProcurement:

Service Templates are created by the Catalog Administrator in Oracle iProcurement. (Optional). iProcurement> Catalog Administrator> iProcurement Administration Home Page> Stores> Smart Forms and link the template to stores in iProcurementUser can create as many service templates as required and optionally associate the templates with a store. Service templates can be accessed from the non-Catalog request page or via a store link. Values that user include on the service template can be locked down so that they cannot be changed. The values may also be default values but users are allowed to update the value during the request process. More than one template can be associated to a store. Stores are listed on the iProcurement Home Page For example, the user can create different services template for procuring services like legal services, painter, interior decorator etc. He can create those templates once and use them whenever required. Legal services for visa applications, home purchases and will preparation could all be requested from the Legal Services Store. Each type of legal service could have an individual template so that the appropriate preferred supplier is communicated to the user and/or to ensure all mandatory attributes are captured on the service requisition.

Purchasing:For Services Procurement, the buyer can create Purchase Order for Procuring rate based services. The basic general Setup Tasks for procurement of services are as follows:o Enable profile option PO: Enable Services Procurement

Oracle Services Procurement: Yes indicates that Services Procurement is installed, implemented, and active in Oracle Purchasing.

Figure 1: Page Layout: Profile Option

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o Setup line types in Oracle Purchasing:

Line types are created in Oracle Purchasing (Setup>Purchasing>Line Types). For Rate based temporary labor, Billing is based on a per unit rate such as per hourRate differentials such as overtime, holiday, shifts, etc. may be captured along with the base rate. Labor and expense budgets may be tracked separately

Figure 2: Page Layout: Line Type

o Create Purchasing Category and assign to Category Set:

Setup > Items > Categories > Category Codes > NewFor every item, there has to be a Purchasing Category set where the user can define Structure name, Category, description and enablement for iProcurement. These categories can be assigned to Purchasing category sets

o Associate jobs to purchasing categories:

Setup > Purchasing > Job Category AssociationJobs are created in Human Resource Responsibility. Only jobs that are defined in Human Resource Responsibility

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and assigned to a Purchasing Category can be procured through Services Procurement.When assigning a purchasing category, the user can assign a short job description and optionally define additional job details such as skills and experience requirements. Job descriptions and details are displayed to the requester and are also communicated to the supplier.

Figure 3: Page Layout: Association of Jobs with Purchasing Category

o Enable Profile option: PO: UOM class for Temp Labor ServicesSet the profile option for restricting unit of measure for the line types with a rate value basis

Figure 4: Page Layout: Profile option for UOM Class for Temp Labor Services

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o Enable/Disable price differential lookup codes

A pre-defined list of price differentials is seeded. Users may disable some price differentials or create additional price differentials. Price differentials are expressed as a multiplier of the base rate. For example if the normal/base rate for a software engineer is 60USD per hour and the overtime rate multiplier is 1.5, overtime is charged at 90USD per hour (60 * 1.5)

o Define approved supplier list:

(Supply Base> Approved Supplier List: Purchasing ResponsibilityThrough Define Approved Supplier List, the buyer can optionally negotiate long-term service agreements in Oracle Sourcing. Define one or multiple approved suppliers for each service category Display approved suppliers during the contractor request flowRequests are released against the long-term service agreement using the pre-negotiated rates and termsApproved suppliers are displayed to the requester during the requisition process. If a long-term agreement also exists for the supplier, the pre-negotiated rates are also displayed to the requester.

o Enable supplier(s) for pay on receipt:

Supply Base> Suppliers

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If the user needs to create invoices automatically from service receipts, ensure the supplier is enabled for Payment on Receipt. Pay on receipt is enabled through the supplier site form within the purchasing tab.

Figure 5: Page Layout: Pay on Receipt

HR ResponsibilityThe basic set up flow covers the following steps:o Create jobs:

Human Resource Responsibility: Work Structure> Job> Description. Only jobs that are assigned a purchasing category can be procured or negotiated through Services Procurement.

o Creation of Contingent Worker: Human Resource Responsibility

(N) People > Enter and Maintain > NewUsing Human Resource responsibility, the first step is to create a contingent worker with all his details such as Last and First Name, Birth Date, Social Security No., Action Type and Latest Start Date.

o Creation of Assignment:

Assignment Tab in (N) People > Enter and Maintain > New

Create an assignment in which the details like organization, job details, location, status, super visor name, and set of books are entered.

Figure 6: Page Layout: HR Assignment

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o Create Contingent Worker as a user and assign responsibilities to him: System Administrator > Security > User > DefineWhen the contingent worker is created as a user, you can assign the Self Service Time and Labor responsibility to him so that he can create timecards:Set up for Task Flow: The user needs to use Function ‘PO_CWK_ASSOCIATIONS’ for the new Contingent worker Association Page to create a task flow setup.Create an entry into Application Utilities Lookups [Lookup Table] for the function in the HRMS responsibility. Create a Task Flow Unit for the lookup just defined. Define the Global Parameters you want to go to the page, which will be passed page parameters. 1. G_ASSIGNMENT_ID – Mandatory. 2. G_EFFECTIVE_DATE Security> Task Flow node for the unitSecurity > Task Flow Definition. Navigate to the Proper parent node For example for ‘Enter and Maintain’ screen go to US HRMS PERSON TASKFLOW NAME, then query up the node name to be added. To create a child node to this, first create the child as a node. Make a new Node name and enter the new node [PO_CWK_ASSOCAITION]. Now query the existing node NASSIGN for assignment page and then add new node [PO_CWK_ASSOCAITION] to the existing node [NASSIGN].

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Oracle Time and LaborThe set up in OTL is based on the preferences link, which enables the user to define rules about how individual workers, or groups of workers can use the application. To learn more about the Oracle Time and Labor, read the Oracle Time and Labor Implementation and User Guide.

ProjectsFor integrating Services Procurement flow with Projects, the following are the basic set up steps: o Allow CWK Time card with Purchase Order Integration:

Projects Accounting>Setup>System>Implementation Options.The user has to Navigate to Expand/Costing tab and selects the check box Import Contingent Worker Timecards with Purchase Order Integration.

Creation of Project: Projects>Projects Definition>Projects

The user can define the project with details of Project Name, Number, Expenditure Type, Task and other project related details.

o Set up for time card as a basis for project accounting:

Set up> System> Implementation Options.Check the checkbox “Import Contingent Worker Time Cards with Purchase Order Integration”

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Set Up> Project >Project Types, Check the checkbox ‘Contingent Worker Enabled’

Figure 7: Page Layout: Contingent Worker Enabled

FUNCTIONAL FLOW iProcurementCreating a Request for Service RequisitionPreparer/ Requester enters the request for services from iProcurement. He can opt for appropriate store on the home page or to the Non-Catalog Request Page or to a contractor request.Figure 9: Page Layout: Create Requisition via Stores

The flow for Contractor Request is iProcurement> Shopping Cart> Contractor RequestThe basic fields to be filled are line type and the job field, start date, end date, Requester and Contact Information.

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After clicking the ‘Continue’ button, in Supplier Information Page Region, the user should be able to select either Preferred Supplier or Suggest Supplier and Contractor.

Figure 10: Page Layout: Contractor Request

After adding a Supplier / Contractor to a request, there is no change in the existing standard checkout flow of creating a requisition where the requester can associate Project information to a requisition and the approval flow remains the same.Service requests are added to the shopping cart and are submitted for approval using the standard checkout flow."Require Candidate Screening" checkbox is used in the case where the buyer needs to contact the supplier and review/verify candidate (contingent worker) resumes, requirements, and other details of the job. This is an "off line" activity that needs to be completed before the Purchase Order is created.Based on the ASL created in core Purchasing for this specific category, the supplier and site information defaults. Also included are the source details and rate based on the Global BPA.Based on the option ‘ Suggest Supplier and Contractor’ the user needs to create a Purchase Order manually for that particular requisition.The user can opt for a rate differential. If he is selecting any of the Preferred Suppliers, he can view the rate differentials

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defined for the suppliers. Otherwise requester can select the Allow Rate Differential option.Once the requisition is created and approved, either it can be negotiated with the suppliers or purchase order can be directly created from it. In this flow, we are directly creating a Purchase order from a requisition.Approved requisitions are automatically generated into POs using the Automatic Document Creation Engine embedded in Oracle Purchasing or the buyers can manually create the Purchase Orders.

PurchasingCreating a Purchase Order For Service RequestThe basic flow for Purchasing commences with Purchase order creation where the buyer can select the line type as Rate Based Temp Labour. There should be a job already defined in the HR responsibility and associated to a Purchasing category, which the buyer can select during Purchase Order line creation. During Purchase Order line creation, the buyer needs to enter the Start date in Temporary Labour. This step is mandatory. Optionally he can enter the name of Contingent Labour in the Purchase order. The user can create multiple shipments and distributions with multiple project details. The user can associate one project to each distribution line on a purchase order. The user can create multiple distributions with the same or different project details. As a part of R12.1 project, there has to be at least one dummy project with the CWK enabled checkbox selected. During creation of Purchase order, the Users can add the Contingent Labour name to the PO line. The users need to record the start date of the PO Line and this is a mandatory step.In the PO Distribution, the user can associate a project to the particular distribution line. The account generation will happen base on the account generator workflow.

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Once the Purchase Order is complete, the user can save it and submit it for approval.

Figure 11: Page Layout: Purchase Order

After the successful creation of time card, the user runs the concurrent program ‘Retrieve time from OTL’ (Figure 12). The retrieval process defines the data that Oracle Purchasing can retrieve from the time store. As a result of this program, the user can view the number of quantity received in Purchase order.

The optional parameters for this programme includes:

o Start Date

o End Date

o Supplier

o Transaction Date

Note: Oracle Services Procurement rate-based line types can only be received using the Retrieve Time from Oracle Time and Labor process.

Figure 12: Page Layout: Retrieve Time From OTL

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HR ResponsibilityThe PO and the PO line are associated to a Contingent worker in the HR responsibility. Along with the purchase order and line details, supplier name, supplier site and effective start date and end date details are also provided

The status of the assignment for a contingent worker must be active.

As a part of R12.1 enhancement, there is one to many relationships between Purchase order and HR Assignment. The Workforce Task Manager can assign more than one PO, PO lines to the Contingent worker. There is no change in the existing functionality of assigning one Purchase orders / PO line to the CWK.

The various attributes for the new UI ‘Associate Purchase order to a contingent worker’ covers Purchase order, Purchase order line, document style, business unit, description, amount, currency, start date and status. For the Contingent labor to select a PO / PO line during creation of time card, the status must be active.The status field is attached by a dropdown list, which will contain ‘Active’ and ‘Inactive’ The user is able to ‘Add’ ‘Update’ and ‘Delete’ the PO, PO lines in the HRMS responsibility.Once the time card is created, the user cannot change any of the details in HR assignment for a PO, PO line and status.

FIGURE 13: PAGE LAYOUT: HR ASSIGNMENT

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Figure 14: New UI for PO / PO line Assignment

Oracle Time and LaborOracle Time and Labor is a system for collecting, storing, approving and auditing time and labor data.

Once the purchase order is assigned to the Contingent Worker, he can create a time card for the same selecting the project and purchase order details.

There is no validation for entering the project and the purchase order details in the time card. The user is allowed to enter any real project along with the task associated to it.

As a part of R12.1, the contingent worker is able to create Time card for all the purchase order lines containing with various distributions and same project details.

Creation of Time Card

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In Time Card Layout, time can be captured as a total number of hours for a given day. Also, the following lists of values (LOV) should appear for each line of time entry:

ProjectProject information is any valid project. It can be the same project from the PO distributions or any other valid project

TaskProject task can be dependent on the selected project (LOV).

PO/PO Line

This is a single LOV with 3 columns – PO, PO line number, and description. The POs that display in the results should be valid POs as documented in the validation rules section

The LOV should only show those POs that have been assigned to the contingent worker via the HR Assignments form. If at least one day of the timecard period falls within the effective start/end dates of the assignment, the PO should appear in this LOV. Otherwise, it is assumed that the assignment is no longer effective and the user should not be able to select the PO from the LOV.

PO lines must be using the rate-based temp labor line type.

Users should be able to search by either PO number or PO description

The following validation rules should be applied to time entered in OTL for purchasing use:

The PO number and line reference must point to an approved PO shipment. Also, the PO should not have any of the following control statuses:

o Cancelled (header/line/shipment level)

o Finally Closed (header/line/shipment level)

o Hold (header level)

o Closed for Receiving (header/line/shipment level)

The PO must be currently active. The date in which the time is recorded must fall within the start and end dates of the PO line.

The date in which time is recorded must not fall within a closed Purchasing or GL period.

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The calculated receipt amount should be within the receiving amount tolerance specified for the PO.

Rate Type

The rate type LOV should show those rate types associated with the selected PO Number/Line plus the Standard rate type.

Figure 15: Page Layout: Time Card

Correction / Deletion of Time CardThe contingent worker is able to correct as well as delete the time cards. For more details, please refer to Oracle Time and Labor Implementation and User guide.

Approval of Time CardOnce the time card is created, it is submitted for approval based on approval rules defined in the system and which allows the user for identifying which records need to be sent for approval.

ProjectsThe user enters the Project information in Requisition/ Purchase order. During Purchase order creation, the project details are entered in PO. Distributions where the buyer enters project name, task, type, expenditure organization, date and quantity.During creation of time card, the CWK can select any valid real project for time entry along with purchase order details. This scenario will work only if the project accounting is based on the time card accounting.

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There is no change in the existing process of purchase based project accounting where the CWK can select only those projects, which are associated to purchase orders.For pulling the data into projects, transaction import process concurrent program runs.For each valid transaction, transaction import imports the transaction and creates corresponding expenditure records in Oracle Projects expenditure table, expenditure record include expenditure batches, expenditure and expenditure items. For each invalid transaction, transaction import rejects the transaction and updates the transaction in the interface table with a status of Rejected and rejection reason.

Accounts PayableOnce the time card is approved and Retrieve time from OTL program is successfully run, the project information of the time card gets passed on to Invoicing in case of ERS invoicing from receiving tables. The application will not consider the project information mentioned in the Purchase order distribution. In case of manual creation of invoice, the project information derived from the purchase order has to be reversed and the invoice should be created with the project details of time card.

BUSINESS EXAMPLEABC Inc. is a construction industry located in Hyderabad and Bangalore has engaged in construction of buildings, bridges and dams. It has taken a contract for construction of a building.

For hiring the labor, the preparer has created a requisition.

The company has created a requisition for 1000 hours with rate based as a line type. There is no candidate screening procedure during requisition creation. The requisition is approved by the Manager, Labor Section.

Either the company can negotiate the rates with suppliers through oracle sourcing or can directly create a Purchase Order.

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ABC Inc. has created a Standard Purchase order for 1000 hrs with Price @ $10/- with line 1, Shipment 1 and 2 distributions of 600 hrs and 400 hours each. The Purchase order is created with a Supplier name as XYZ and Supplier Site as Hyderabad.

The line type is rate based line type and with job as a graphic designer and job category as OTL Designer.

As there are several projects on which the company is working on, the buyer is not aware of the actual project during time card creation that has to be charged upon. He has entered a dummy project A in Purchase order distribution for 600 hours and a real project B for Purchase order distribution of 400 hours. Once the purchase order is created, a PO charge account is generated for further recording in.

The Purchase order gets approved with a PO No 5625.

In HR Assignment form, the Purchase order is assigned to a Contingent Worker ‘AMY’.

More than one Purchase orders can be assigned to a contingent worker with the enhanced functionality of R12.1.

During timecard creation, the Contingent worker can select any real project. In this scenario, say he has selected the real project C for the Purchase order No 5625, Line 1 for 200 hours.

The timecard is approved and then the user runs the concurrent program ‘Retrieve time from OTL’. As a result of this program, the user can view the number of quantity received in Purchase order. The accounting entry would be:

Debit Credit

(Debiting the PO Charge Account and crediting the accrual account)Hence the purchase order will be updated by 200 hours as received quantity.During the pulling of data into projects, Transaction import processor runs. The accounting entry for the same would be

Debit Credit

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PO Charge Account(01-840-7430-0000-

Accrual Account (01-000-2220-0000-000)

Labor Cost PO Charge Account(01-840-7430-0000-

(Debiting the Labor cost account and crediting the PO Charge account)

During auto generation of invoice, the invoice will be created with the project information to be derived from the time card. The invoice is generated for the amount of hours for which the time card is created.During the invoice generation, the accounting entry would be:The accounting entry for the same would be

Debit Credit

(Debiting the accrual account and crediting the AP Liability account)During payment of invoice, the following accounts will get debited and credited:

Debit Credit

(Debiting the AP Liability account and crediting the bank account)

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Accrual Account (01-000-2220-0000-000)

AP Liability Account

AP Liability Account Bank

ACCOUNTING APPENDIX

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White Paper Title[Month] 2008Author: [Vasvi, Srikanth ]Contributing Authors: [OPTIONAL]

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