Introduction
Introduction
Logistic oriented intercompany is a different, more advanced kind of intercompany. It requires a virtual company, an operations company, where all the transactions are performed as if all customers, vendors and locations were owned by one single company. In return, this kind of intercompany setup is scalable in an easy matter. It is also very integration friendly, due to the fact that most of the integrations can be handled by the virtual company itself.
Logistic oriented intercompany is based on 2 different parameters:
- Ownership setup for customers, vendors and locations
- Transfer pricing setup for the products between different legal companies
Each customer is owned by one of the legal comanies in the setup. The same applies for vendors and locations. This ownership defines the legal flow of internal transactions performed when posting a transaction in the virtual company across different ownerships.
Logistic oriented intercompany supports the following transactional areas, centralized from the virtual company:
- Sales documents
- Purchase documents
- Transfer orders
- Item transactions
- Item transfers
- Assembly orders
- General Journal
- Interim postings of goods receipt (optional)
The following transactional areas are, with advantage, performed in the legal companies:
- Reevaluation of items
- Item charge application based on account level purchase invoice
Ownership of concepts
To be able to simplify the intercompany processes, an ownership agreement regarding entity concepts must be implemented in the physical organization.
| Concept | Description |
| Physical Inventory Quantity | Physical inventory is solidly owned by the virtual company, ie the operations company. This is due to the fact that item transactions on receipt and shipment is not pushed to the legal companies before invoicing. |
| Available Quantity | Owned by the virtual company by the same reason as above. This is actually an advantage from an integrational point of view, where all integrated systems can subscibe to this concept from one single point of truth. |
| Invoiced Quantity | This concept is reflected in the legal companies, but still owned by the virtual company. An adjustment to an invoiced quantity must be berformed in the virtual company, since it will affect the available quantity. |
| Inventory Value | This value exists only in the legal company. All item reevaluations must be performed in the legal companies. |
Sales transactions
Based on ownership of the sales customer in combination with the selected goods warehouses on the sales lines, intercompany transactions are created for the corresponding legal companies. One sales transaction can include multiple different warehouses, which will result in several internal transactions to the customer facing legal company.
Note that sales shipments are handled in the virtual company only, and it is at first when the sales invoice is posted that the legal companies will be affected.
Purchase transactions
Based on ownership of the purchase vendor in combination with the selected goods warehouses on the purchase lines, intercompany transactions are created for the corresponding legal companies. One purchase transaction can include multiple different warehouses, which will result in several internal transactions to the vendor facing legal company.
Note that purchase receipts are handled in the virtual company only, and it is at first when the purchase invoice is posted that the legal companies will be affected.
Transfer orders
Based on ownership of the warehouses (from, to, transit) on the transfer order, several intercompany transactions are created for the corresponding legal companies.
Item transactions
An item transaction normally affects one single warehouse location. A corresponding transaction will be created for the warehouse legal company, reflecting the original transaction details.
Item transfer
An item transfer is similiar to a transferorder, but only containing one single sku. It goes from one warehouse location to another, and creates similiar intercompany transactions reflecting the original transaction details.
Assembly orders
An assembly order is a simple production order where a product is produced based on a number of different components. The assembly order itself is reflected into the legal company identified by the ownership of the produced item’s warehouse location. The components are transfered from their corresponding legal companies to the producing legal company with a number of internal transactions.
General journal
The logistic oriented intercompany solution do support redirecting general journal bookings from the virtual company to corresponding legal companies. The legal company is in this case identified by one of the global dimension codes. Each code connects to a ownership. And when one booking contains records from different dimensions and differens ownerships, an Intercompany balance account is used as intermediate account.
Interim postings of goods receipt
Since the legal companies are not affected by goods receipts, it is possible to enable interim postings. Interim postings results in a general ledger posting being performed in the legal companies. The account indicates that goods have been received in the warehouse but no invoice have been received from the vendor yet. When the invoice has arrived and booked, the interim posting will be reversed together with the invoice booking.
Scenarios
Below are some different scenarios where the logistic oriented intercompany solution provides value.
Scenario 1
An ECOM sales order for the swedish market is posted and delivered by the primary ECOM warehouse. The warehouse is owned by the same legal company that owns the ECOM market.
This scenario results in a single sales invoice in the ECOM legal company.
Scenario 2
An ECOM sales order for the norwegian market is posted and delivered by the primary ECOM warehouse. The warehouse is owned by the same legal company that owns the ECOM primary market. But the norwegian market is owned by a norwegian legal company.
This scenario results in an internal invoice beeing posted in the primary ECOM legal company, towards the norwegian legal company. A corresponding purchase invoice is also posted in the norwegian legal company, along with the consumer invoice.
Scenario 3
A POS sales transaction is posted and containing 1 single item ledger entry with entry type ”Sale”.
This scenario results in a posted item journal in the legal company owning the warehouse location of the sales transaction. The posted ledger entries will look exactly the same as in the virtual company, besides from the cost of the item.
Monitoring
All intercompany transactions are prepared in real time, when the original posting is done in the virtual company. This preparation reflects the outcome per legal company. This means that the content of the result, for example the above scenarios, are preared per transaction per company. Each original transaction can correspond to 2, 3 or more actual intercompany transactions, all filtered by the original document number.
The logistic oriented intercompany comes with the posibilities to monitor all of these intercompany transactions in real time, with tracking of postings in all of the legal companies in the same view. Plain, simple and straight forward. Historical transactions can here be analyzed and, if an invoice or credit memo, printed as a PDF document.
Failed postings are easily presented in a separate view, depending on legal company or all at once. On top of this manual posting is possible in regards to error checking and posting setup.
Updated: 2025-05-05 14:04 by Håkan Bengtsson
