White Paper Services Procurement

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Services ProcurementAn Oracle White Paper

[Jan 2008]


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White Paper Title Page 2

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 flowwithout 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.

INTRODUCTION

The objective of this paper is to provide a detailed analysis of the services

procurement requirements and highlight Oracles Solution thataddresses 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


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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 workers 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 purchase order is updated, depleting the budget of the approved

time.

Contingent worker can now select any project to create a time card based uponthe 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.


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SET UP STEPS

iProcurement

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.

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 iProcurement

User can create as many service templates as required and optionally

associate the templates with a store. Service templates can be accessedfrom 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.

,


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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

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 hour

Rate 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


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o

Create Purchasing Category and assign to Category Set:Setup > Items > Categories > Category Codes > New

For 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 Association

Jobs are created in Human Resource Responsibility. Only jobs that are

defined in Human Resource Responsibility 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 Services

Set the profile option for restricting unit of measure for the line types with

a rate value basis


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Figure 4: Page Layout: Profile option for UOM Class for Temp LaborServices

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 Responsibility

Through 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 flow

Requests are released against the long-term service agreement using the

pre-negotiated rates and terms

Approved 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

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.


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Figure 5: Page Layout: Pay on Receipt

HR Responsibility

The 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 > New

Using 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

o Create Contingent Worker as a user and assign responsibilities to him:

System Administrator > Security > User > Define


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When the contingent worker is created as a user, you can assign the SelfService 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_IDMandatory.

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].

Oracle Time and Labor

The 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 theapplication. To learn more about the Oracle Time and Labor, read the Oracle

Time and Labor Implementation and User Guide.

Projects

For 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


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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

Set Up> Project >Project Types, Check the checkbox Contingent Worker

Enabled

Figure 7: Page Layout: Contingent Worker Enabled

FUNCTIONAL FLOW

iProcurement

Creating a Request for Service Requisition


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Preparer/ Requester enters the request for services from iProcurement. He canopt 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

Request

The basic fields to be filled are line type and the job field, start date, end date,

Requester and Contact Information.

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


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After adding a Supplier / Contractor to a request, there is no change in theexisting 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 createa 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 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.

Purchasing

Creating a Purchase Order For Service Request

The 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.


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The user can create multiple distributions with the same or different projectdetails. 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 optionally add the Contingent

Labour name to the PO line. The users need to record the start date of the

assignmentPOLineand 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.

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 definesthe 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


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

Figure 12: Page Layout: Retrieve Time From OTL

HR Responsibility

The PO and the PO line are associated to a Contingent worker in the HR

responsibility.

7.Along with the purchase order and line details, supplier name, supplier site

and effective start date and end date details are also provided

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

6.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.

Formatted:Bullets and Numbering


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FIGURE 13: PAGE LAYOUT: HR ASSIGNMENT

Figure 14: New UI for PO / PO line Assignment

Oracle Time and Labor

Oracle 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.


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

Creation of Time Card

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:

Project

Project information is any valid project. It can be the same project from the PO

distributions or any other valid project

Task

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

PO/PO Line

This is a single LOV with 3 columnsPO, 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 tolerancespecified 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 Card

The 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 Card

Once the time card is created, it is submitted for approval based on approval rulesdefined in the system and which allows the user for identifying which records need

to be sent for approval.

Projects

The 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 accountingwhere 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 Payable

Once the time card is approved and Retrieve time from OTL program issuccessfully 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 EXAMPLE

ABC 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.

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.


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As there are several projects on which the company is working on, the buyer is notaware 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

(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:

PO Charge Account(01-840-7430-0000-000)

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

Labor Cost PO Charge Account(01-840-7430-0000-000)


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The accounting entry for the same would beDebit 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)

ACCOUNTING APPENDIX

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

AP Liability Account

AP Liability Account Bank


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

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