The Organizational Model within Oracle E­Business Suite R12.

The Organizational Model in EBS R12.

What is Organization in E-business R12?

The term organization serves a double purpose:  It is everyday meaning refers to a company, corporation, government agency, or charity, 2nd one is the Oracle E­Business Suite model, organizations in Oracle E­Business Suite can be Ledgers, legal entities, operating units, or inventory organizations.

Following levels of hierarchy followed to setup Multi Org Access Control [MOAC].

• Business groups
• Primary ledgers (as defined in Accounting Setup Manager)
• Legal entities / GRE
• Operating units
• Inventory organization

Example 1 in Organization in R12:

In below picture,

1. Business group: 1
2. Ledgers: 2 [ Canada, India]
3. Legal entities: 2 [Canada & India]
4. Operating units:  2 in Canada, 1 in India.
5. Inventory Organizations:2 in Canada, 1 in India

What is Business Group?

1. A Business Group is the highest level in the organization hierarchy structure, usually representing the consolidated enterprise, an operating company, or a major division.
2. The business group secures the employee information in all applications except for HR.

Example: Total number of employees working in organization.  If there is a Group of Companies and they all are using a single instance of Oracle Apps then every employee in each company will be defined at BG level. Each employee will then be assigned a responsibility. That responsibility determines which company that employee belongs to and what type of transaction can be carried out.

What is Ledger?

1. Formerly called Set of Book in R11i. Ledger is an accounting book.
2. There are 4C’s concepts in Ledger.
1. Chart of Account (Particulars of Goods)
2. Currency (Amount)
3. Calendar (Date)
4. aCcounting convention  [Sub ledger Accounting Convention (Cash / Accrual)]
3. Oracle General Ledger resides at this level.

What is Legal Entity?

1. A legal entity is a company for which, by law, you must prepare fiscal or tax reports, including a balance sheet and a profit­and­loss report.
2. In accounting terms, the legal entity is the smallest business unit for which you need to be able to produce a balanced set of accounts. For nonprofit organizations the legal entity is equivalent to a fund.
3. In R12, you assign a Legal Entity to a Ledger. In R11i I Legal entities consist of one or more operating units.
4.  In Oracle EBS a company is also referred to as GRE – Government Reporting Entity.
5. Oracle says anything can be your legal entity. Your manufacturing plant can be your legal entity, your departments can be your legal entity. Your inventory can be your legal entity. A legal entity is the one for which you want a Balance Sheet and Income statement.

What is Operating Unit?

1. Operating units represent buying and selling units within your organization. The operating unit concept is most apparent in Oracle Order Management, Oracle Receivables, Oracle Purchasing, and Oracle Payables. The transaction data that these modules hold—purchase orders, invoices, payments, and receipts—are partitioned by operating unit. That is to say that one operating unit cannot see the purchase orders, invoices, payments, and receipts for another operating unit, even if the same vendor or customer is involved.
2. A ledger can have many operating units assigned to it.
3. All the transactions for an operating unit must appear on the balance sheet of only one legal entity. There is no reason to split the liabilities and receivables of one operating unit across two legal entities. 

What is Inventory Organizations?

1. Inventory organizations are defined to manage stock levels and perform inventory stock movement transactions.
2. The capability to stock materials, manage availability levels, ship to external parties, and account for all of these is an inherent Inventory Management task.
3. The inventory organization is a unit that has inventory transactions and balances, and possibly manufactures or distributes products. The inventory of an organization consists of the finished products that are ready for sale, all parts that are in stock waiting to be assembled into finished products, and all the assemblies of parts that are currently being assembled in the factory.
4. You must have a location (address) when creating an inventory organization, or any other organization. E-Business Suite does not intrinsically distinguish between a physical and a logical location. This means that it is not a one-to-one relationship and more than one organization can have the same location.
5. In R12 an inventory organization can point to only one operating unit

What is Sub-inventory Organization?

1. Sub inventories are sub locations within an inventory organization. Typically an inventory organization reflects a physical location of a warehouse or storage facility. Sub inventories on the other hand are logical locations within that physical location that help identify specific areas where materials are stored. This is purely a logical definition.