Skip to main content

LinkedIn Home

What is LinkedIn? Join Today Sign In

Main content starts below.

Oracle ERP User Network 58,017 members

Join Information and settings

Discussions Promotions Jobs Search

Have something to say? Join LinkedIn for free to participate in the conversation. When you join, you can comment and post your own discussions.

Thiru (Thirupath)

Pros and Cons of using one Operating Unit vs. Multiple Operating Units (one per Legal Entity) in a Country?

Thiru (Thirupath) Y.Senior Director IT, Program & CoE Lead

In Oracle EBS R12 environment, do you have suggestions, experience in defining Single OU (Operating Unit) vs. Multiple OU (Operating Units) , within a single country, where you have multiple Legal Entities? What is the best practice?How do you manage Inter-company transaction in a Single OU with multiple Legal Entity situation?

Flag as Inappropriate

Like Comment (31) Share

Share this discussion

October 30, 2011 Close viewer

Comments

Skip S., Shailesh J. and 9 others like this

31 comments Jump to most recent comment

Rajesh

Rajesh A.

Seasoned Oracle Procure to Pay SME/Architect

Thiru, Depends how you are reporting. For each reporting entity you will have a legal entity. So let us say you have company A and Company B in the same legal entity and you only

http://lnkd.in

define one OU for both, but still want to segregate sub-ledger transactions for each company, here are the issues I have run into. Example 1. - you define one expense accrual account for purchasing options, every time a requisition/po is created you will need to modify the account generation to derive the correct expense account for each company. Example 2 - For every invoice entered, you will have to make sure the liability account is pointing to the correct company. If you are entering invoice batches the same holds true.

My two cents...go for multiple OUs. Hope it helps. Rajesh

Rajesh

Rajesh A.

Seasoned Oracle Procure to Pay SME/Architect

Expense accrual account I mean in my first example

-

- -.

You will also need to look at your processes and config around bank acounts and tax codes - VAT reporting would need particular attention if this is a European implementation. Oracle provide "Automatic Offset" functionality (see Metalink and User Guides for info) which helps to segregate two entities within one OU

Goutam

Goutam B.

Project Manager at Transsys Solutions Pvt Ltd

R12 uses Legal Entity Identifier as Org Addl Info for each Operating Units.

If you are planning to have one OU for two different LE, pls advise how will you select LE Identifier in each OU Addl Info

Annappa

Annappa M.

IT Manager at Pride Mobility Products

We are currently implementing different Operating Unit in the same country without any Organization in 11i.Customers can be shared across operating units. You would need to setup different Order types(transaction types in 11i) and ship from different Organization(different Operating unit). There are different custom programs like Packing slip, Order Acknowledgement, Invoicing to be modified with different logo than other US operating Unit. You would not need to create a different organization with new Operating Unit. You could access all Items in different Organizations and save loading too much Bills,Items,Catalogs to the database. You save space issue in the database and use the capabilityof different operating Unit in the same country. I would go with 2 different Operating Units.

Annappa

Annappa M.

IT Manager at Pride Mobility Products

Let us know your thoughts

Siva

Siva K.

R12 Global Design Financial Lead Consultant at Emerson Climate '

Also to add, the mark ups between LE's with a single OU concept is not possible. Moreover we may need to go for account generator customizations since accounts (setup accounts) at OU level would become dummy.

Ken

Ken W.

Oracle Projects consultant

The main reason for having operating units is to segregate and "stripe" data. A major consideration in looking at the number of OUs and LEs will therefore be to look at the access and security considerations in the businesses concerned. I would have though that in most cases a separate LE would need at least a separate OU and possibly several. You may allow some users access across separate OUs fairly easily but if you only have one OU im plementing any security becomes rather more tricky.

Siva

Siva S.

Delivery Project Executive at IBM

One more reason I prefer separate OU is that, when you go live at different times for each compny, you can minmize the shut down time for the organizations that are on production as data belongs to separate OU.

Salman

Salman A.

GIS Specialist at Telenor Global Shared Services

Dear Thriu, Operating Units are used to secure Subledgers Data, moreover if you want to use Subledgers like AP,AR etc along with GL then Definition of OU is must because Subledgers are except (HR and FA) are defined at OU Level and for defining OU, Legal Entity is also must so if you are using Multiple LE's then you should create atleast one OU under each LE. if you have only one OU but multiple Balancing Segment Values then you can use Intracompany Balancing Feature in R12 only....

Steve

Steve C.

Finance systems work stream lead at Specsavers

If you have separate LE's, from what I have seen in AP, you will struggle to use automatic offset functionality as suggested with one ou, as the BSV is not automatically corrected for the vat control account or the creditors control accounts, only the expense accounts, it seems partially implemented to me. Also, you need to check out what enquiry options there are for the users, I.e. you cannot search by LE in AP workbench, but you can by OU. You will probably end up with separate OUs, but the main downside is the amount of setup time required. If you have few dozen, then not so bad, but when you get into hundreds or more,it will need careful consideration.

Nitin

Nitin B.

Senior Consultant, Lansen Consulting AU

Thiru,

true 20 31 groupItem?seeMo

I am jumping into this bit late. Pl list out your key objectives for below - Period closure Reporting Inter co billing etc.

That will direct teh discussion to conclude. I do not see your comment to the inputs provided by experts so far. Let us know then.

Naveen

Naveen S.

Team Lead

We are on Oracle R12 (GL, XLA, AP, AR, PO, FA) mainly USD and we have multiple LE's and 1 OU, 1 Ledger. We like it in the sense it reduce the total time for the close. One close for AP and AR and GL.

But it is big challenge to segregate the data in AP,AR we can segregate the data in GL easily by security rules but not is AR and AP. We did some form personlizations for AR screen based on Transaction Type(TT) since we have TT based on legal entity. But that doe not look like a good solution for many more other LE that we will be bring in R12 from 11i.

Anybody has any idea how to segregate the data if you have 1 OU 1 ledger , multiple LE's. by legal entity.

Sandy

Sandy D.

Solution Architect Oracle E-Business Suite

Main question is the segregation of data within the company. Therefore Oracle created the OU. If companies are not allowed to see data of others, you best create multiple OU's.

For segregation of data within 1 OU with multiple LE's, you can decide to use SLS. Subledger Security. It's a seeded functionalitty within OPSFI. But be aware of the consequenses, it wil demand a large effort of testing and will sometimes have a larger impact then expected.

Naveen

Naveen S.

Team Lead

Thanks Sandy. I did little bit research on this and it seems like a big project. Would like to know if any body implemented SLS and how was the experience. Please let me know how long it took to implement the SLS and was it implemented by DBA team or Application developer (sysadmin team).

Any thoughts on SLS or other ways or securing Sub ledger data(AP/AR/PO) without having separate operating unit would be greatly appreciated.

Again we have 1 Ledger, 1 OU (Operating units) and many LE (Legal Entities). Would like to segregate the data based on Legal entity. It is only for 20 to 30 % that needs to separate out, majority is OK with current setup.

Nitin

Nitin B.

Senior Consultant, Lansen Consulting AU

Is It Possible To Use Subledger Security SLS Functionality On General Ledger without OPSFi ? (Doc ID 369791.1) Have you thought of look-up based personalisation to segregate data. If not a std feature, workarounds can be good for you since you are talking abt 20-30%. Thx.

Sandy

Sandy D.

Solution Architect Oracle E-Business Suite

We implemented SLS for a large ministry in the Netherlands. It's working good but with every change you'll need to take notice of it. Question: Why segregate data? It's 1 company with multiple LE's. If really necessary the must consider to use multiple OU's (with al it's consequences). When only for 20-30% you'll probably needs to do some personalisations like Nitin said. Only if you can identify the transactions needed.

Michele

Michele B.

Freelance Consultant and Business Owner

Please use your training credits if we are still asking these questions 6 years later. In the meantime see the Oracle guide understand what a legal entity is as per Oracle definition below:-

Legal Entity A legal company for which you prepare fiscal or tax reports. You assign tax identifiers and other legal entity information to this type of organization. You can define legal entities using Legal Entity Configurator or Accounting Setup Manager in General Ledger. See Using the Legal Entity Configurator, Oracle Financials Implementation Guide.

Oracle® E-Business Suite Multiple Organizations Implementation Guide Release 12.1 Part No. E13423-04

There are also various simplistic diagrams in this document that can help you.

Basically follow the to be Oranisation structure or the client if many legal entities then configure many legal entities if many operating units then configure many operating units if many fixed asset ledgers then configure many fixed asset book.

Note- see info on Tax, Bank account set up, Access controls and reporting then all will become clear. Hope this helps you out.

Please feel free to request expertise advice through linked in and my company details http://www.gtbus.co.uk

Naveen

Naveen S.

Team Lead

Thanks Nitin and Sandy. I completely agree with you on personalization and customization but you have to identify all the forms and reports and modify accordingly and we already did that for one LE as a proto type for AR (Only billing part) and it is working fine so far, but if we want to implement the same logic across (AP/AR/PO). It will be too overwhelming. Also as we all know personalization and customization comes with it's own cost of maintenance, upgrades etc.

Michele Thanks for pointing out the Training from Oracle. It is not about how to implement MOAC concept and the definition of legal entity, which I am very well converse with. It is existing issue and each client and organization has it's own peculiarity which some time does not fit into the exact definitions and best practice. And this is not the new implementation it is something already exists. There are many benefits that organization got by single operating unit. Only part is the security for 10 to 30% of the user. Which I guess will be better addresses by customizations, and we already implemented that just wanted to make sure from other experts that this is the only way for this specific situation or not. Other option mentioned by Sandy is SLS. Will analyze both option and see which one better fits to the situation.

WALID

WALID Y.

Oracle Financial/HCM Consultant and Implementer

I am using 4 LEs and consider them as 4 Companies differentiated in GL company segment for repoting. each LE has its own lines of businesses that called Operating Units. Data are segregated as per OU at the level of Sites fro security and reporting. at the same time, the header is common between OUs. in R12, Not only you can secure R11 subledgers but also GL consider as SLA and can be attached to OU for any GL entry.

as to Ledger (SOB), We use one ledger account which mean one closing. I recommand to use ledger at the level of LE or OU as per requirements

regards, walid

Michele

Michele B.

Freelance Consultant and Business Owner

Naveen

I am even not sure what you are saying is technically feasable what about Cash Management and Fixed Assets? How will the Payments be made and how will the data flow into fixed asset registers? and as Thuri pointed out what about AGIS? each Legal entity should have a separate Operating unit.

true 30 31 groupItem?seeMo

Home

Functional Skills Process Acumen o Domain Knowledge Business Acumen

o Leadership Skills Management Acumen

o ToolKit TechnoFunc Resources

o HomeERPOracle Applications: Identifying the Multi-org structure For Any Organization – Best

Practices and Guidelines

Oracle Applications: Identifying the Multi-org structure For Any Organization – Best Practices and GuidelinesPosted in ERP

joomla 3.5

новогодние поздравления sмs

How to design the multiorg structure in Oracle. Best Practices and guidelines for an effective

multi-org organizational structure in Oracle Applications. Defining the Organizational

Structure in Oracle Applications using Multiorg functionality, Some Basic MO entity

Definition: 

The Oracle Applications organization models define organizations and the relationships among them

in arbitrarily complex enterprises. This organization model serves as the cornerstone for design of all

the Oracle Applications products. It dictates how transactions flow through different organizations

and how those organizations interact with each other. 

The Multi org Structure in Oracle Applications supports the following basic business Needs  

Use a single installation of any Oracle Applications product to support any number of

organizations, even if those organizations use different sets of books.Define different

organization models

Support any number of legal entities within a single installation of Oracle Applications.

Secure access to data so that users can access only the information that is relevant to them.

Sell products from a legal entity that uses one set of books and ship them from another legal

entity using a different set of books, and automatically record the appropriate inter company

sales by posting inter company accounts payable and accounts receivable invoices.

Purchase products through one legal entity and receive them in another legal entity.

You can create an internal requisition (sales order) in one organization, then ship from

another organization, with correct inter company invoicing.

You can run your reports at the set of books level, legal entity level, or operating unit level 

1. Business Group in Oracle

The business group represents the highest level in the organization structure, such as the

consolidated enterprise, a HR major division, or an operation company. The business group secures

human resources information. For example, when you request a list of employees, you see all

employees assigned to the business group of which your organization is a part.

2. Legal Entity in Oracle

A legal company for which you prepare fiscal or tax reports. You assign tax identifiers and

other legal entity information to this type of organization. 

3. Balancing Entity in Oracle

Represents an accounting entity for which you prepare financial statements. This is a segment in the

Accounting Flexfield structure (usually the Company segment) at which all accounting  entries must

balance. There may be multiple companies within the same structure, and each of these must

balance within itself. Each legal entity can have one or more balancing entities. 

4. Operating Unit in Oracle

An organization that uses Oracle Cash Management, Order Management and Shipping Execution,

Oracle Payables, Oracle Purchasing, and Oracle Receivables. It may be a sales office, a division, or

a department. An operating unit is associated with a legal entity. Information is secured by operating

unit for these applications. 

5. Inventory organization in Oracle

An organization for which you track inventory transactions and balances, and/or an organization that

manufactures or distributes products. Examples include (but are not limited to) manufacturing plants,

warehouses, distribution centers, and sales offices. 

6. HR Organization in Oracle

HR organizations represent the basic work structure of any enterprise. They usually represent

the Functional Management, or reporting groups that exist within a business group. 

7. Project Organization in Oracle

Oracle Projects allows you to define organization hierarchies to reflect your company’s organizations

structure. You can add Oracle Projects– specific organization types to the organization hierarchy (for

example, projects organizations or Expenditure organizations) to help you to better manage your

project control requirements. You assign project and expenditure hierarchies to operating units. 

8. Asset Organization in Oracle

An asset organization is an organization that allows you to perform asset–related activities for a

specific Oracle Assets corporate depreciation book. 

Checkpoints to identify Multiple Operating unit requirement: 

The following requirements / scenarios identify the design for multiple Operating Units -

Decentralized Accounting - If the division performs the Accounting functions like Payable

and Receivables accounting independently and generates individual Trial Balances which are

subsequently consolidated at the LE / Business group level in GL

Decentralized Purchasing – If the division independently raises a Purchase Order and the item can

be received in another division and the Receiving / Inventory AP Accrual accounting is done in the

Receiving division

Decentralized Sales – When you enter sales orders, you can choose any inventory organization as

the shipping warehouse. The shipping warehouse may be in a different legal entity than the

operating unit that enters the sales order, and it may post to a different set of books.

Data Security - You can limit users to information relevant to their division. For example, you can

limit access for users to sales orders / Purchase Orders / Sales or purchase invoices associated

exclusively with their division.

Inter company Accounting - Sales orders created and shipped from one legal entity to a different

legal entity automatically generate an inter company invoice to record a sale between the two

organizations. If the business scenario needs generation and accounting of Inter company Sale

(Receivable) and Purchase (Payable) invoices it points to a multiple operating unit design

Legal Requirements: Does your organization have the knowledge of legal and fiscal requirements

of all countries in which you operate? If yes, and there are diverse legal and fiscal requirements

which need to be segregated from each other, then it is proper to go in for multiple operating units 

Information shared across Operating Units:

1. Flexfield definitions

2. Customer Header (customer site is at the operating unit level)

3. Supplier Header (supplier site is at the operating unit level)

4. Employee Definition 

Information specific to each Operating Units:

Cash management

1. System parameters

2. Bank accounts

3. Bank transaction codes

4. Bank Statement open interface

5. Reconciliation open interface

6. Forecasting open interface

7. Cash forecasting templates 

Order Management

1. Hold sources

2. Order types

3. Holds 

Payables

1. Supplier sites

2. Matching tolerances

3. Distribution sets

4. Bank accounts

5. Tax names and groups

6. Financial options

7. Expense report templates

8. Payable options 

Receivables

1. Auto Accounting

2. Contact phones

3. Customer address

4. Customer relationships

5. Customer bank accounts

6. Customer call information (call records, topics)

7. Distribution sets

8. Transaction sources

9. Lockbox definitions

10. Memo lines

11. Receipt sources

12. Receivables activities

13. Remit to address

14. Remittance bank accounts

15. Salesperson, sales territories assigned to salespersons

16. System options

17. Tax exemptions and exceptions

18. Tax codes

19. Tax rates

20. Tax names and groups

21. Transaction types

22. VAT taxes 

Projects

1. Implementation options

2. Expenditure types

3. Non–labor resources

4. Usage cost rate overrides

5. Expenditure type cost rates

6. Employee rates

7. Burden schedules

8. Bill rate schedules

9. Resource list

10. Project types

11. Project templates

12. Auto Accounting 

Purchasing

1. Supplier sites

2. Financial options

3. Receiving Options

4. Control rules/groups

5. Purchasing options

6. Job/position controls

7. Freight carriers

8. Document controls 

India Localization

1. Organization Additional Information

2. Tax Codes

3. Tax Category

4. Item Category

5. Supplier Additional Information

6. Customer Additional Information

7. Income Tax Authority

8. Customs Authority

9. Excise Authority

10. TDS Sections / Codes

11. TDS Details

12. TDS year Information

13. BOE Agent

14. Bond Registers

15. Assessable Price Lists 

Approach and Techniques for MO Design:

Below mentioned is the approach to identify the current Financial and Operating structure of the

organization, which needs to be translated into a Multi Org design within Oracle Applications 

The Current Financial and Operating Structure portray the legal and operating entity

structures, business organizations, financial operating environments, revenue and cost

centers, and financial consolidation path. It may also catalog other operating entities.

Information about current and proposed organization structures may have been discussed

during the applications acquisition cycle, and may have been one of the deciding factors in

the selection of the application package. Be sure to gather this information, if available. 

Start the internal organization analysis by interviewing the highest-ranking financial official

possible, since that position will likely have the most knowledge of the financial and

operating structure of the organization.

The financial statements will reflect the operating structure to allow profitability, balance

sheet and cash flow reporting, and analysis against that structure. Reporting and analysis

begins by capturing and valuing operational transactions that occur at the specific event

level.

Once you create a clear picture of the organization structure, and have mapped it to the

Application Multi Org design, you may want to reexamine the project plan for the application

implementation, especially in the case of a financial implementation. It may make more

sense to implement sequentially by organization, rather than simultaneously across the

entire enterprise.   This may also impact the Application Deployment Plan, which occurs later

in the project. 

Some Specific Business Scenarios which influence the MO design:

Shared Services

Any organization will have a shared services function and it is always a debate as to what are the

cost benefits involved if we try to centralize these shared services function, which means we

implement them in a single Operating Unit structure. The questions, which will drive the strategy,

are: 

Types of transactions to centralize

Location for Shared Services

Interaction with Business Units 

Business Drivers behind implementation of Oracle Apps in Shared Services (Single

Operating Unit Mode) are: 

Economies of scale

Technology leverage

Processes re-engineered with best practices

Processes standardized

Greater span of control

Increased focus on process measurement

Leverage specialized skills

Sharing of information and resources across businesses

Customer service focus 

Typical functions included in shared services 

The initial scope of Shared Services is typically focused on non-customer transactional services.

Financial Processes Shared Services

1. Accounts Payable

2. General Ledger

3. Fixed Assets

4. Accounts Receivable

5. Analysis & Reporting

6. Billing/Credit

7. Procurement

8. Treasury

9. Tax 

Human Resources Shared Services

1. Payroll

2. Travel & Expense

3. Benefits Admin 

Common back office functions can be streamlined using various solutions –

1. Document Management (Imaging and Workflow using)

2. AP Invoice Scanning

3. Routing for coding

4. Routing for approvals

5. Electronic storage

6. Expense Report receipt management 

Interaction with Business Units

In case we are deciding to implement a single operating unit structure, then create a Service Level

Agreement between the Shared Service Center and the Business Unit:

1. Turnaround time on transactions

2. Different transactions included

3. Month-end closing procedure

4. Month-end closing timeline

5. Define owners for each transaction- Learn more at www.technofunc.com. Your online source

for free professional tutorials.