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Customer Agreements in OracleOrder Management

An Oracle White PaperNovember 2000

Customer Agreements in Oracle Order Management Page 1

Customer Agreements in Oracle Order Management

EXECUTIVE OVERVIEWCustomer Agreements are Order Management/Advanced Pricing entities thatallow you to record special pricing, discounts and other terms that you have set upwith your customers. In Release 11 and earlier, the Oracle Order Entry productcontained a feature called ‘Agreements’ whose main use was to serve as adefaulting source for various order attributes. In Release 11i Order Managementand Advanced Pricing have significantly enhanced the scope of customeragreements. This paper shows you all the features of the new improved CustomerAgreements, and how they can help you manage your relationships with yourcustomers.

INTRODUCTIONUsers familiar with Order Entry’s Agreements will be pleasantly surprised by thewealth of new features contained in the new Customer Agreements. All thefunctionality that was present in Release 11 has been retained, but much more hasbeen added. The R11i Order Management User’s Guide gives a good explanationof the setup forms and fields, but doesn’t completely explain how you would useagreements within the Order Management environment .

This paper attempts to explain all the key functional points regarding Agreementsincluded in Order Management and Advanced Pricing, and offer some insight intoputting them to use.

BUSINESS NEEDSOracle Order Management and Advanced Pricing provide you with the featuresyou 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 controlagreement 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.


• Make revisions to the original terms of the agreement, and maintain thosechanges and their reasons using separate revision numbers.

• Attach an already existing standard or agreement price list to the agreement ordefine new prices that can only be used via this or other agreements. Definethe items in an agreement price list using customer part numbers as well asinventory item numbers. Attach optional price breaks by quantity.

• Set effectivity dates for agreement terms.

• Assign agreements to customer commitments.

MAJOR FEATURESTo satisfy the above business needs, Oracle Order Management and AdvancedPricing have delivered Customer Agreement functionality with the following set offeatures:

Agreement Types and AgreementsYou can create Agreements and classify them by Agreement Types.

Agreement Types can be used to limit which agreements can be entered onparticular order types.

Agreements can be defined to be generic agreements, which means they can beused by any customer, or customer family agreements, which means they can beused by the customer you enter on the Agreement form and all of their relatedcustomers.

Agreements and Agreement Types are set up using forms from Oracle AdvancedPricing. 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 Agreementsand Agreement Types.

Price Lists and AgreementsThere are two ‘flavors’ of Agreements, differentiated by the type of Price Listassociated with them. They are Standard Agreements and Pricing Agreements.You indicate which type of Agreement you are creating by choosing a Price ListType on the Pricing tab of the Pricing Agreements setup form. Once you havesaved an agreement, you cannot change it from one type to another, although youcan change the price list associated with it.

Standard Agreements are agreements with basically the same functionality as wasin R11 Order Entry. These types of Agreements are associated with standard pricelists, and those price list lines are viewed and maintained using the regular PriceList Line setup User Interface. You would use Standard Agreements when you


want the agreement to bring in special terms and conditions, but use prices thatcan 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 thePricing Agreements form. Agreement Price Lists can be shared among PricingAgreements, but cannot be used by orders not associated with a PricingAgreement. Oracle Advance Pricing automatically creates a qualifier for theAgreement Price List of the Agreement Number, so that it cannot be used by non-agreement order lines. You would use Pricing Agreements when you had specialpricing that you wanted to be used only with an agreement, and not be availablefor other types of orders. You can enter Agreement Price List lines by specifying acustomer item number, as well as an inventory item identifier, if you wish to pricethis way. If you make a change to prices on an Agreement Price List (which youhave to do using the Agreement form), then those changes affect all PricingAgreements that use that Agreement Price List (since the Agreement Price List canbe shared among multiple Pricing Agreements).

Track Revisions to AgreementsYou now have the ability to create different revisions (versions) of Agreements.There is a revision number on the Agreement header, and when a significantchange occurs to an agreement, you can end-date the previous revision and createa new revision. This is all controlled manually – you decide when a changewarrants a new revision. You can optionally record a reason for the revision whenyou create it. Revision Reason is a Pricing Lookup code. There can only be onerevision of an Agreement active at any one time. For Pricing Agreements (whichare the agreements that use Agreement Price Lists), you can also create revisionnumbers and enter revision reasons at the price list line level.

Use Agreements on OrdersWhen you enter or import an order for a customer, you can reference anagreement at the header level or at the line level. An agreement at the header onlyserves as a defaulting source for the agreement at the line level. You can referencedifferent agreements for different lines on the order, if you need to. You canchoose generic agreements or agreements that have been set up for the customeron the order or its related customers. The agreement at the line can serve as adefaulting source for various other agreement data, such as freight terms, paymentterms, invoicing and accounting rules, etc. depending on how you have set up yourdefaulting rules.

SET UP

Define Agreement TypesYou define Agreement Types by using the Lookups menu item under the Pricingsub-menu. Once the Oracle Pricing Lookups form opens, find the


QP_Agreement_Types Lookup Type using the flashlight icon, and then enterwhatever Agreement Types you want to define.

Define AgreementsYou define Agreements by choosing the Pricing Agreements menu item under thePricing sub-menu. The Oracle Order Management User’s Guide gives thoroughinformation about the form and all the fields on the form, so that information willnot be duplicated here. Information about which fields are optional, and whatthose fields do, is not to be found in the User’s Guide, so it is presented here.

Customer is an optional field on the Agreement. If you enter a customer, thenthis agreement is valid only for that customer and its related customers. If you donot enter a customer, then any customer can use the agreement. If you don’t entera customer, then fields such as Contact, Invoice-to location and Invoice Contactcannot be entered, and you cannot enter agreement lines using a customer itemnumber.

Fields such as Purchase Order, Salesperson, Freight Carrier, Freight Terms,Invoicing Rule and Accounting Rule are not required, but if entered, can serve asdefaulting sources for the order lines that use this agreement.

Agreement Type is not required, but it should be used if you want to restrictorder types to certain agreement types, or if you want to do reporting byagreement type. See below discussion on Order Transaction Types.

Price List Type is how you say whether you are creating a Standard Agreement ora Pricing Agreement. Price List Type is required and cannot be changed once theagreement header has been saved.

Price List is where you pick an existing price list to be referenced by thisagreement, or, if you are creating a Pricing Agreement, you can create a new pricelist here and give it a name. The LOV for Price List is restricted by the Price ListType you entered. It isn’t obvious that you can create a new Agreement Price Listhere, but this is where you do it!

Currency is a required field on the agreement header, and there can only be onecurrency per agreement. If you have agreements that can be used in othercurrencies, you need to create different agreements. The currency defaults fromthe price list you select, or you set it here if you are creating a new AgreementPrice List.

Accounting and Invoicing Rule Override Flags – check either or both of thesecheckboxes if you want the Invoicing Activity to use the accounting and/orinvoicing rule from the order line (which may have been changed by defaulting orby the user). If the boxes are unchecked, the Invoicing Activity will get the rule orrules from the Agreement, even if they have been changed on the order line.

Define Order Transaction Types


When you define your order types in Order Management using the TransactionTypes form, there are two Agreement-related controls you can choose.

There is a checkbox called ‘Agreement Required’ – as you might suspect, if youcheck 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 ofBooking.

There is also a place on the Transaction Types form in the Document block of theMain tab where you can select an Agreement Type. If you select an AgreementType here, users will be limited to entering agreements of this type on orders ofthis order type. This is handy if you need to segment your orders and agreementsby line of business, and you want users of one order type to only have visibility to acertain subset of agreements. If you do not need to restrict agreement accessduring order entry, leave this field blank when you define the order type. ThenOrder Management will let you choose from any agreement type when enteringorders for this order type.

Defaulting Rules and Processing ConstraintsOrder Management comes seeded with defaulting rules that default Agreement atthe order line from Agreement at the order header. In addition, various line levelattributes such as accounting rule, invoicing rule, price list, freight and paymentterms have seeded defaulting rules whose first source sequence is thecorresponding attribute on the Agreement. This means that typically, without yourhaving to do anything special, non-null agreement attributes will default into orderlines that use those agreements. In addition to this, there is a defaultingdependency defined between these fields and the agreement, which means that ifyou change the agreement at the line, all those dependent fields will be cleared andre-defaulted. See the Oracle White Paper on ‘Using Defaulting Rules in OrderManagement’ for more information about how to create Defaulting Rules and howdependencies work.

If you use agreements, and you want to prevent a user from overriding any of theterms or the price list that came from the agreement, then you’ll want to set upsome Processing Constraints that prevent users from modifying those attributes.For example, you might set up an agreement with special payment terms. Youcould define a Validation Template for Processing Constraints that says somethinglike ‘agreement exists on line’, and then define a constraint that says a user cannotchange the payment terms on the line if the condition ‘agreement exists’ is true. Besure to allow the system to make changes, in case the agreement is changed so thatdefaulting can re-default. See the Oracle White Paper on ‘Using ProcessingConstraints in Order Management’ for more information about how to createProcessing Constraints and Validation Templates.

ENTERING ORDERS USING AGREEMENTS


Sales Order UINote that in the Sales Order User Interface, agreement is a ‘hidden field’ on theorder header default folder for the ‘other’ tab. If you intend to use agreementsheavily, you might want to ‘show’ this field using folder tools. Agreement at theline 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 theAgreement attribute at the Order Header, if you intend to use the same agreementfor 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 customerfamily agreements that are defined for the customer you’ve entered on the OrderHeader. The Defaulting Rules that have been seeded will carry the agreementname down to each line, and will also copy agreement terms to the correspondingline attributes.

REPORTSAs of this writing, there is no Advanced Pricing or Order Management reportspecifically 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 DiscountSummary, the Comprehensive Order Detail Report and the Salesperson OrderSummary Report.

The Order Discount Summary and the Salesperson Order Summary Report allowyou to select orders to print based on the Agreement on the Header.

USING AGREEMENTS WITH COMMITMENTSCommitments are Receivables transactions that record prepayments for acustomer. When you create a commitment in Receivables, you can reference anAgreement. You would do this if, for example, the prepayment was only forcertain 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 toindicate that a line is to be paid by drawing down the commitment. Commitmentis a hidden field in the pricing tab of the line default folder of the Sales Orderform.

When you enter an order in Order Management, if there is an agreement on theline, then the LOV for the Commitment field will be restricted to thosecommitments that reference that agreement and that have a balance greater thanzero. If the line does not reference an agreement, then the Commitment LOV willshow all commitments for this customer and its related customers, regardless ofwhether the commitment reference an agreement.


Both the agreement and the commitment are passed to Receivables during InvoiceInterface.

EXAMPLEAll right now, let’s see how you can use Agreements in real life. Let’s look at anexample of using a Standard Agreement (R11 type) and then one using a PricingAgreement.

Here’s the first business requirement:

You have millions of lines in your ‘corporate’ price list, and you use that price list forall your customers. You enter into an Agreement with one customer, Customer A, togive them a particular discount and special payment terms and freight terms when theyorder from you during a certain period of time and ask for a particular ‘agreementcode’.

Here’s how you’d do this:

1. Create an agreement (Agreement A) and specify Customer A as the Customeron the agreement header. Choose an agreement type if you want to report byagreement type. Enter effectivity dates for the agreement, which will limit thetime 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’ asthe Price List to use. Select the freight terms you want to give with thisagreement. On the Payment tab, enter the Payment Terms you want to give.Leave all other fields null.

2. Create a pricing modifier for the discount that you want to give with thisagreement. Set it up to apply automatically. Create a qualifier of Agreement Afor this modifier.

3. Modify the default folder for the Sales Order form, header ‘other’ tab to showthe Agreement field.

4. Enter orders for this Customer, and select Agreement A as the agreement toapply for orders when the customer asks for that agreement code. The seededdefaulting rules will cause the freight terms and payment terms fromAgreement A to default to the order. As you enter lines, the discount createdin step 2 will get automatically applied to the prices.

Here’s the second example:

You enter into an Agreement with one customer, Customer B, to give them a particularpricing on a small group of items, as well as special payment terms and freight termswhen 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.

Here’s how you could do this:


1. Create an agreement (Agreement B) and specify Customer B as the Customeron the agreement header. Choose an agreement type if you want to report byagreement type. Enter effectivity dates for the agreement, which will limit thetime 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 listname as the Price List to use. Select the freight terms you want to give withthis agreement. On the Payment tab, enter the Payment Terms you want togive. Leave all other header fields null.

2. Go to the lower section of the Agreement form and enter price list lines forthe items you are pricing using this agreement. You can enter price breaks forthe items, if that is part of the pricing you want to give for this agreement.

3. Modify the default folder for the Sales Order form, header ‘other’ tab to showthe Agreement field.

4. Enter orders for this Customer, and select Agreement B as the agreement toapply for orders when the customer asks for that agreement code. The seededdefaulting rules will cause the freight terms and payment terms as well as thenew agreement price list from Agreement B to default to the order. As youenter lines, the pricing created in step 2 will get automatically applied to thelines.

MIGRATION/UPGRADEAgreements from R11 and earlier are being upgraded to Standard Agreements, asdefined above.

CONCLUSIONOracle Order Management and Advanced Pricing give you powerful new featuresto 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 StandardAgreements, or you can take advantage of a tighter control over items and pricingby using Pricing Agreement functionality.

Customer Agreements in Oracle Order ManagementNovember 2000Author: Charlene ChandoniaContributing Authors:

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