what is RETROACTIVE PRICING and How to Change the Blanket agreement price after approve?

                                                             

RETROACTIVE  PRICING

Prices for items on blanket agreements can change over the effective period of an agreement as a result of ongoing negotiations between the buyer and the supplier. In fact, it is common practice in certain industries to initiate and execute against an agreement with an interim price. A firm price may get finalized several months into the life of the agreement. In these scenarios it is possible that the updated price is applicable retroactively. Oracle Purchasing allows buyers to make price changes on global blanket agreements and on blanket agreements.

Oracle Purchasing can optionally update prices on orders (Blanket Releases & Standard POs) to reflect the latest agreement price, even if there has been receiving and invoicing activities against them. Additionally, for orders that have been received, Oracle Purchasing automatically adjusts the accrued liability to reflect the latest pricing. Finally, for orders that have been invoiced, Oracle Purchasing automatically generates price adjustment invoices in Oracle Payables. Depending on the nature of the change, the Payables department can then process either a payment or a debit memo request against the price adjustment invoice.

 SETUP:

1.     Set the profile option(PO: Allow Retroactive Pricing of Pos’) to purchasing responsibility

2.     Set the Retroactive Price Adjustment Account in the receiving options.

3.     While creating blanket po uncheck the cumulative pricing option under agreement tab.

To set the profile option PO: Allow Retroactive Pricing of Pos’  to purchasing resp

If we set ---àALL RELEASES, the it effects all releases for that particular blanket po including existing matched invoices also.

            -----àOPEN RELEASES, it effects only those releases which are not matched with invoices

To set the RETROACTIVE PRICE ADJUSTMENT ACCOUNT in the receiving options

To create blanket purchase agreement.

Here we are creating blanket purchase agreement against item123 with the price 20 and amount agreed is 100000

Disable the cumulative pricing in the agreement tab

The purchase order(3) has been approved

To release(1) the purchase order against existing blanket po(3)

Here we are releasing 1000 items at the price 20. The total release for release 3-1 IS 20000.

To release(2) the purchase order against existing blanket po(3)

Here we are releasing 500 items at the price 20. The total release for release 3-2 is  10000.

To release(3) the purchase order against existing blanket po(3)

Here we are releasing 1500 items at the price 20. The total release for release 3-3 is 30000.

We are releases an amount of 60000 for PO-3. Now I am receiving the items for release-1 and release-2

And for release-1 I inspected the items and send to the inventory.

Creating invoice(123) against release-1

Here we paying the amount for invoice 123

Querying the invoice, it shows the amount is paid

Query the blanket po(3) and Now we are changing the price of an item (20 to 25) in that agreement

After modifying the amount it asks for reapproval

While approving the PO, enable apply price update to existing po’s and releases under additional options

After approving the PO, till it shows the amount released is 60000.

For changing the released amount in the blanket PO, we have to run a program “workflow background process”

Under parameters,--à item type should be PO APPROVAL

----àprocess deferred should be YES

Now check the blanket PO(3) released amount. It shows 75000 instead of 60000.

 Now verify the release-1, it shows the total released amount as 25000 instead of 20000

And it shows the billed amount as 20000. Because we paid only 20000

Check the status of release-2. It shows 12500 instead of 10000

We ordered 500 and received 500

Check the status of release-3

Now verify the invoice (123),it shows still the price is 20

For changing the item cost in the existing invoices, we have to run “create adjusting documents in payables program”

After completing the request query the invoice(%123%)

We get two invoices for that po, one is standard(already paid) and another one is PO PRICE ADJUSTMNET

The price for invoice 123 is still shows as 20.but for extra 5 rupess it creates new invoice PPA-123-1

TO CHECK THE PO CHANGE HISTORY:

Purchase orders-àpo change history

Verify the changes in that particular supplier.

Select the compare to po for release 3-1

This is the process for price adjustments are exists after the blanket agreement