Customer Agreements in Oracle Order Management

An Oracle White Paper November 2000

Customer Agreements in Oracle Order Management

EXECUTIVE OVERVIEW

Customer Agreements are Order Management/Advanced Pricing entities that allow you to record special pricing, discounts and other terms that you have set up with your customers. In Release 11 and earlier, the Oracle Order Entry product contained a feature called Agreements whose main use was to serve as a defaulting source for various order attributes. In Release 11i Order Management and Advanced Pricing have significantly enhanced the scope of customer agreements. This paper shows you all the features of the new improved Customer Agreements, and how they can help you manage your relationships with your customers.
INTRODUCTION

Users familiar with Order Entrys Agreements will be pleasantly surprised by the wealth of new features contained in the new Customer Agreements. All the functionality that was present in Release 11 has been retained, but much more has been added. The R11i Order Management Users Guide gives a good explanation of the setup forms and fields, but doesnt completely explain how you would use agreements within the Order Management environment . This paper attempts to explain all the key functional points regarding Agreements included in Order Management and Advanced Pricing, and offer some insight into putting them to use.
BUSINESS NEEDS

Oracle Order Management and Advanced Pricing provide you with the features you need to meet and exceed your requirements around customer agreements. With release 11i, you can:

Record customer agreements. Classify agreements into different types for easy reporting, and control agreement availability by order type. Assign various terms to the agreements, including freight terms, freight carrier, payment terms, salespersons, invoicing rules and accounting rules. Use agreements as a source for defaulting information on sales orders.

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Make revisions to the original terms of the agreement, and maintain those changes and their reasons using separate revision numbers. Attach an already existing standard or agreement price list to the agreement or define new prices that can only be used via this or other agreements. Define the items in an agreement price list using customer part numbers as well as inventory item numbers. Attach optional price breaks by quantity. Set effectivity dates for agreement terms. Assign agreements to customer commitments.

MAJOR FEATURES

To satisfy the above business needs, Oracle Order Management and Advanced Pricing have delivered Customer Agreement functionality with the following set of features:
Agreement Types and Agreements

You can create Agreements and classify them by Agreement Types. Agreement Types can be used to limit which agreements can be entered on particular order types. Agreements can be defined to be generic agreements, which means they can be used by any customer, or customer family agreements, which means they can be used by the customer you enter on the Agreement form and all of their related customers. Agreements and Agreement Types are set up using forms from Oracle Advanced Pricing. These forms are generally accessible via the Order Management menus. See the section on Set Up below for more details about how to set up Agreements and Agreement Types.
Price Lists and Agreements

There are two flavors of Agreements, differentiated by the type of Price List associated with them. They are Standard Agreements and Pricing Agreements. You indicate which type of Agreement you are creating by choosing a Price List Type on the Pricing tab of the Pricing Agreements setup form. Once you have saved an agreement, you cannot change it from one type to another, although you can change the price list associated with it. Standard Agreements are agreements with basically the same functionality as was in R11 Order Entry. These types of Agreements are associated with standard price lists, and those price list lines are viewed and maintained using the regular Price List Line setup User Interface. You would use Standard Agreements when you

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want the agreement to bring in special terms and conditions, but use prices that can be available to other orders. Pricing Agreements are agreements that are associated with Agreement Price Lists. Agreement Price Lists can only be entered, viewed and maintained using the Pricing Agreements form. Agreement Price Lists can be shared among Pricing Agreements, but cannot be used by orders not associated with a Pricing Agreement. Oracle Advance Pricing automatically creates a qualifier for the Agreement Price List of the Agreement Number, so that it cannot be used by nonagreement order lines. You would use Pricing Agreements when you had special pricing that you wanted to be used only with an agreement, and not be available for other types of orders. You can enter Agreement Price List lines by specifying a customer item number, as well as an inventory item identifier, if you wish to price this way. If you make a change to prices on an Agreement Price List (which you have to do using the Agreement form), then those changes affect all Pricing Agreements that use that Agreement Price List (since the Agreement Price List can be shared among multiple Pricing Agreements).
Track Revisions to Agreements

You now have the ability to create different revisions (versions) of Agreements. There is a revision number on the Agreement header, and when a significant change occurs to an agreement, you can end-date the previous revision and create a new revision. This is all controlled manually you decide when a change warrants a new revision. You can optionally record a reason for the revision when you create it. Revision Reason is a Pricing Lookup code. There can only be one revision of an Agreement active at any one time. For Pricing Agreements (which are the agreements that use Agreement Price Lists), you can also create revision numbers and enter revision reasons at the price list line level.
Use Agreements on Orders

When you enter or import an order for a customer, you can reference an agreement at the header level or at the line level. An agreement at the header only serves as a defaulting source for the agreement at the line level. You can reference different agreements for different lines on the order, if you need to. You can choose generic agreements or agreements that have been set up for the customer on the order or its related customers. The agreement at the line can serve as a defaulting source for various other agreement data, such as freight terms, payment terms, invoicing and accounting rules, etc. depending on how you have set up your defaulting rules.
SET UP Define Agreement Types

You define Agreement Types by using the Lookups menu item under the Pricing sub-menu. Once the Oracle Pricing Lookups form opens, find the

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QP_Agreement_Types Lookup Type using the flashlight icon, and then enter whatever Agreement Types you want to define.
Define Agreements

You define Agreements by choosing the Pricing Agreements menu item under the Pricing sub-menu. The Oracle Order Management Users Guide gives thorough information about the form and all the fields on the form, so that information will not be duplicated here. Information about which fields are optional, and what those fields do, is not to be found in the Users Guide, so it is presented here. Customer is an optional field on the Agreement. If you enter a customer, then this agreement is valid only for that customer and its related customers. If you do not enter a customer, then any customer can use the agreement. If you dont enter a customer, then fields such as Contact, Invoice-to location and Invoice Contact cannot be entered, and you cannot enter agreement lines using a customer item number. Fields such as Purchase Order, Salesperson, Freight Carrier, Freight Terms, Invoicing Rule and Accounting Rule are not required, but if entered, can serve as defaulting sources for the order lines that use this agreement. Agreement Type is not required, but it should be used if you want to restrict order types to certain agreement types, or if you want to do reporting by agreement type. See below discussion on Order Transaction Types. Price List Type is how you say whether you are creating a Standard Agreement or a Pricing Agreement. Price List Type is required and cannot be changed once the agreement header has been saved. Price List is where you pick an existing price list to be referenced by this agreement, or, if you are creating a Pricing Agreement, you can create a new price list here and give it a name. The LOV for Price List is restricted by the Price List Type you entered. It isnt obvious that you can create a new Agreement Price List here, but this is where you do it! Currency is a required field on the agreement header, and there can only be one currency per agreement. If you have agreements that can be used in other currencies, you need to create different agreements. The currency defaults from the price list you select, or you set it here if you are creating a new Agreement Price List. Accounting and Invoicing Rule Override Flags check either or both of these checkboxes if you want the Invoicing Activity to use the accounting and/or invoicing rule from the order line (which may have been changed by defaulting or by the user). If the boxes are unchecked, the Invoicing Activity will get the rule or rules from the Agreement, even if they have been changed on the order line.
Define Order Transaction Types

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When you define your order types in Order Management using the Transaction Types form, there are two Agreement-related controls you can choose. There is a checkbox called Agreement Required as you might suspect, if you check this box, an agreement is required to be entered on orders of this order type. The presence of an agreement at the Order Header is validated at the time of Booking. There is also a place on the Transaction Types form in the Document block of the Main tab where you can select an Agreement Type. If you select an Agreement Type here, users will be limited to entering agreements of this type on orders of this order type. This is handy if you need to segment your orders and agreements by line of business, and you want users of one order type to only have visibility to a certain subset of agreements. If you do not need to restrict agreement access during order entry, leave this field blank when you define the order type. Then Order Management will let you choose from any agreement type when entering orders for this order type.
Defaulting Rules and Processing Constraints

Order Management comes seeded with defaulting rules that default Agreement at the order line from Agreement at the order header. In addition, various line level attributes such as accounting rule, invoicing rule, price list, freight and payment terms have seeded defaulting rules whose first source sequence is the corresponding attribute on the Agreement. This means that typically, without your having to do anything special, non-null agreement attributes will default into order lines that use those agreements. In addition to this, there is a defaulting dependency defined between these fields and the agreement, which means that if you change the agreement at the line, all those dependent fields will be cleared and re-defaulted. See the Oracle White Paper on Using Defaulting Rules in Order Management for more information about how to create Defaulting Rules and how dependencies work. If you use agreements, and you want to prevent a user from overriding any of the terms or the price list that came from the agreement, then youll want to set up some Processing Constraints that prevent users from modifying those attributes. For example, you might set up an agreement with special payment terms. You could define a Validation Template for Processing Constraints that says something like agreement exists on line, and then define a constraint that says a user cannot change the payment terms on the line if the condition agreement exists is true. Be sure to allow the system to make changes, in case the agreement is changed so that defaulting can re-default. See the Oracle White Paper on Using Processing Constraints in Order Management for more information about how to create Processing Constraints and Validation Templates.
ENTERING ORDERS USING AGREEMENTS

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Sales Order UI

Note that in the Sales Order User Interface, agreement is a hidden field on the order header default folder for the other tab. If you intend to use agreements heavily, you might want to show this field using folder tools. Agreement at the line level is a visible field in the default lines folder, pricing tab.
Sales Order Entry

Entering orders against your agreements is easy and straightforward. Enable the Agreement attribute at the Order Header, if you intend to use the same agreement for all order lines. Then use the LOV on this column to select the agreement. Order Management will list in the LOV all generic agreements and the customer family agreements that are defined for the customer youve entered on the Order Header. The Defaulting Rules that have been seeded will carry the agreement name down to each line, and will also copy agreement terms to the corresponding line attributes.
REPORTS

As of this writing, there is no Advanced Pricing or Order Management report specifically for Agreements or Agreement Activity. Several Order Management reports print the agreement if it is present on an order. These reports include the Sales Order Acknowledgment, the Order Discount Summary, the Comprehensive Order Detail Report and the Salesperson Order Summary Report. The Order Discount Summary and the Salesperson Order Summary Report allow you to select orders to print based on the Agreement on the Header.
USING AGREEMENTS WITH COMMITMENTS

Commitments are Receivables transactions that record prepayments for a customer. When you create a commitment in Receivables, you can reference an Agreement. You would do this if, for example, the prepayment was only for certain items for which you have a firm pricing agreement with the customer. There is a column on the order line to reference a commitment when you want to indicate that a line is to be paid by drawing down the commitment. Commitment is a hidden field in the pricing tab of the line default folder of the Sales Order form. When you enter an order in Order Management, if there is an agreement on the line, then the LOV for the Commitment field will be restricted to those commitments that reference that agreement and that have a balance greater than zero. If the line does not reference an agreement, then the Commitment LOV will show all commitments for this customer and its related customers, regardless of whether the commitment reference an agreement.

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Both the agreement and the commitment are passed to Receivables during Invoice Interface.
EXAMPLE

All right now, lets see how you can use Agreements in real life. Lets look at an example of using a Standard Agreement (R11 type) and then one using a Pricing Agreement. Heres the first business requirement: You have millions of lines in your corporate price list, and you use that price list for all your customers. You enter into an Agreement with one customer, Customer A, to give them a particular discount and special payment terms and freight terms when they order from you during a certain period of time and ask for a particular agreement code. Heres how youd do this: 1. Create an agreement (Agreement A) and specify Customer A as the Customer on the agreement header. Choose an agreement type if you want to report by agreement type. Enter effectivity dates for the agreement, which will limit the time when the agreement can be used. Go to the Pricing tab and choose Standard Price List for the Price List Type, and then choose Corporate as the Price List to use. Select the freight terms you want to give with this agreement. On the Payment tab, enter the Payment Terms you want to give. Leave all other fields null. Create a pricing modifier for the discount that you want to give with this agreement. Set it up to apply automatically. Create a qualifier of Agreement A for this modifier. Modify the default folder for the Sales Order form, header other tab to show the Agreement field. Enter orders for this Customer, and select Agreement A as the agreement to apply for orders when the customer asks for that agreement code. The seeded defaulting rules will cause the freight terms and payment terms from Agreement A to default to the order. As you enter lines, the discount created in step 2 will get automatically applied to the prices.

2.

3. 4.

Heres the second example: You enter into an Agreement with one customer, Customer B, to give them a particular pricing on a small group of items, as well as special payment terms and freight terms when they order from you during a certain period of time and ask for a particular agreement code. These prices are not available to other customers. Heres how you could do this:

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1.

Create an agreement (Agreement B) and specify Customer B as the Customer on the agreement header. Choose an agreement type if you want to report by agreement type. Enter effectivity dates for the agreement, which will limit the time when the agreement can be used. Go to the Pricing tab and choose Agreement Price List for the Price List Type, and then type in a new price list name as the Price List to use. Select the freight terms you want to give with this agreement. On the Payment tab, enter the Payment Terms you want to give. Leave all other header fields null. Go to the lower section of the Agreement form and enter price list lines for the items you are pricing using this agreement. You can enter price breaks for the items, if that is part of the pricing you want to give for this agreement. Modify the default folder for the Sales Order form, header other tab to show the Agreement field. Enter orders for this Customer, and select Agreement B as the agreement to apply for orders when the customer asks for that agreement code. The seeded defaulting rules will cause the freight terms and payment terms as well as the new agreement price list from Agreement B to default to the order. As you enter lines, the pricing created in step 2 will get automatically applied to the lines.

2.

3. 4.

MIGRATION/UPGRADE

Agreements from R11 and earlier are being upgraded to Standard Agreements, as defined above.
CONCLUSION

Oracle Order Management and Advanced Pricing give you powerful new features to allow you to manage the Pricing Agreements you set up with your customers. You can continue to use Agreements as they existed in R11 by defining Standard Agreements, or you can take advantage of a tighter control over items and pricing by using Pricing Agreement functionality.

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Customer Agreements in Oracle Order Management November 2000 Author: Charlene Chandonia Contributing Authors: Oracle Corporation World Headquarters 500 Oracle Parkway Redwood Shores, CA 94065 U.S.A. Worldwide Inquiries: Phone: +1.650.506.7000 Fax: +1.650.506.7200 Web: www.oracle.com This document is provided for informational purposes only and the information herein is subject to change without notice. Please report any errors herein to Oracle Corporation. Oracle Corporation does not provide any warranties covering and specifically disclaims any liability in connection with this document. Oracle is a registered trademark, and Oracle Order Management is a trademark(s) or registered trademark(s) of Oracle corporation. All other names may be trademarks of their respective owners. Copyright Oracle Corporation 2000 All Rights Reserved