Oracle Apps Order Management - Pricing Components

Qualifiers

Qualifiers control who receives benefits. They can assign discounts and promotions to:

• Specific customers
• Customer groups
• Order types
• Order amount
• Specific customer or group of customers

Qualifier Groups

Qualifier groups allow you to group multiple conditions and to assign them to a single benefit. For more information.

Pricing Attributes

Pricing attributes control what is being priced or modified on a price list or modifier list.

Price Lists

Price lists contain prices and currencies associated with products and services. Each price list contains basic header information with one or more item lines. Price lists can have:

• Prices for specific products and services or for product groups
• Prices as absolute values, percents of other prices, or as formulas
• Prices applicable to the entire organization or to one operating unit
• Negative prices

Modifiers

Pricing modifiers control how the pricing engine can modify the pricing requests and pricing request lines. The modifiers are:

• Discount: Reduces the price by a fixed amount or percentage or provides a new price.
• Surcharge: Increases the price by a fixed amount or percentage or provides a new price.
• Item upgrade: Replaces an ordered item with another item for the same price as the original item.
• Other item discount: Gives a price adjustment or benefit to a specified item on an order when the customer orders one or more specified items on that same order.
• Coupon: Issues a coupon as an offer of discount on other goods and services which is redeemable on a future pricing request.
• Terms substitution: Upgrades payment, shipping, and freight terms.
• Freight/Special charges: Charges for shipping and miscellaneous situations, for example, duty, handling charges, and insurance
• Promotional goods: Adds a new item to an order and gives this item a price adjustment or benefit when the customer orders one or more specific items on the same order.
• Price break: Applies a variable discount or surcharge price adjustment to a pricing request based on the break type and condition met. You can use both point- and range-type breaks.

The following table shows scenarios with examples of the qualifiers, modifiers, and pricing attributes that support them:

Table: Scenarios where Qualifiers,Modifiers, and Pricing Attributes are Used

Scenario	Qualifier	Modifier	Product Hierarchy	Pricing attribute
XYZ corporation gets 10% discount on all the products	Customer = XYZ Corporation	10% discount	Null	Null
If Order_Type = Return and customer class = Retail then apply 15% surcharge for all the "Electronic" items.	Order Type = ReturnCustomer Class = Retail	15% Surcharge	Electronic Items	Null
Grade B Motor Oil gets $20 off	Null	$20.00 discount	Motor Oil	Grade B

Formulas

Pricing formulas allow the pricing engine to determine item prices based on the following:

• A combination of pricing attributes and factors based on the value of a pricing attribute
• The list price on the price list line to which the formula is attached
• The list price on any specific price list line
• A numeric constant
• A customizable function

You can also attach a formula to a modifier line for the pricing engine to use to calculate discounts.

You can use two types of formulas:

• Static: You specify the formula and execute a concurrent process which calculates absolute price values.
• Dynamic: You specify the formula and the pricing engine uses the formula in its calculations each time that someone orders the product.

Pricing Service Items

The pricing engine prices service items in the same way that it prices inventory items. In Oracle Order Management, the parent item is the serviceable item and must be in the install base. Oracle Order Management passes both the serviceable item and the service item to the pricing engine; the pricing engine first prices the serviceable item and then prices the service item.

You can price service items as follows:

• Unit price: You set a list price for the service item.
• Percent price: You set a percentage; the price of the service item is that percentage of the serviceable item list price.To use this method, select the flag Service Item in the Service tab when you define the item.

When pricing service items, attend to the following order management attributes when pricing service items. They are passed through the pricing engine application program interface (API):

• Ordered Quantity (API: P_Line_Tbl.Line_Quantity): The order quantity of the service item expressed in the in the serviceable item unit of measure.
• Ordered UOM Code (API: P_Line_Tbl.Line_Uom_Code): The unit of measure in the time scale.
• Service Duration and Service Period (API: P_line_Tbl.UOM_Quantity): The duration of the service being ordered, for example, to order Computer Maintenance for one year, set Service Duration to 1 and Service Period to Year. You set these values in the Service tab when you enter the item in the order. In the API, P_line_Tbl.UOM_Quantity is the service duration expressed in Ordered UOM Code service period.

Oracle Order Management Service Item Pricing Example

Price list setup for laptop computer:

• Product: Laptop Computer
• Application Method: Unit Price
• UOM Code: EA
• List Price: 1000 currency units

Price list setup for computer service--unit price method:

• Product: Computer Service
• Application Method: Unit Price
• UOM Code: Month
• List Price: 10 currency units

Price list setup for computer service--percent price method:

• Product: Computer Service
• Application Method: Percent Price
• UOM Code: Month
• Percent Price: 2

Order line:

• Product: Computer Service
• Ordered Quantity: 1
• Ordered UOM: Month
• Service Period: Year
• Service Duration: 1
• Serviceable Item: Laptop Computer

List price calculation for computer service:

• Unit price method: 10 currency units per month * 12 months service period/duration = 120 currency units
• Percent price method: (1000 currency unit laptop computer * 2% computer service percent price) * 12 months service period/duration = 240 currency units

Implementation Planning

Visualizing the price bands of an organization may assist you in developing an effective implementation plan for Oracle Advanced Pricing. The following table provides a visual guide for mapping the modifiers of an organization to the components of Oracle Advanced Pricing.

The source pricing data is based upon the assumptions that item "Super Wine" has an item category of Wine. An order for a quantity 15 was placed on 15-Jun-2000 for a customer XYZ Corporation, who belongs to a customer class VIP.

Table: Implementation Planning:

Buckets	Pricing Phases	Incompatibility Group	Qualifiers/ Product Attributes (Precedence)	Modifiers/ Price List	Discount	Sub Total
Base Price	List Line Base Price	EXCLUSIVE	Customer Class - `VIP' (310)Item Code - `Super Wine' (220)	Corporate List - $1000	Null	Null
Base Price	List Line Base Price	EXCLUSIVE	Item Category - `Wine' (290)	Preferred Vendors - $800	Null	Null
Base Price	List Line Base Price	Null	Null	Null	Null	$1,000
Bucket 1	List Line Adjust-ments	Level 1	Item Quantity > 10 (800)Item Code - `Super Wine' (220	4th July Promotion 10%	$100	Null
Bucket 1	List Line Adjust-ments	Level 1	Customer Class - `VIP' (310)	Summer Promotion 15%	Null	Null
Bucket 1	List Line Adjust-ments	Level 2	Customer id - `XYZ Corp' (260)	VIP discount $40	$40	Null
Bucket 1	List Line Adjust-ments	Level 2	Customer id - `XYZ Corp' (260)	Weekday Discount $20	Null	Null
Bucket 1	All Line Adjustments	Level 1	Item Category - `Wine' (290)	General Discount - $20	$10	Null
Bucket 1	All Line Adjust-ments	Exclusive	Order Date < `01-Dec-2000' (510)	Seasonal Discount - $10	Null	Null
Bucket 1	Header Level Adjustments	Level 1	Null	Preferred Customer 10%	100	Null
Bucket 1	Line Charges	Level 1	Null	Handling Charge $20	$20	Null
Bucket 1	Header Level Charges	Level 1	Null	Null	Null	Null
Bucket 1	Header Level Charges	Null	Null	Null	Null	$750
Bucket 2	Adjustments	Level 2	Null	High usage surcharge 2%	($15)	Null
Bucket 2	All Line Adjustments	Level 2	Null	Null	Null	Null
Bucket 2	Header Level Adjustments	Level 2	Null	Null	Null	Null
Bucket 2	Line Charges	Level 2	Null	Null	Null	Null
Bucket 2	Header Level Charges	Level 2	Null	Null	Null	Null
Bucket 2	Header Level Charges	Level 2	Null	Null	Null	Null
Bucket 2	Null	Null	Null	Null	Null	$765

The following factors should be considered when planning your implementation. For more information on setting up, see: Oracle Advanced Pricing Implementation Manual.

• List price: Decide whether your prices are at an individual product level or at the product hierarchy or both. Also, determine the precedence levels in your organization. Determine if you base list prices on the volume purchased. Plan the number of price lists. To get a better performance, minimize the number of price lists and price list lines by using a combination of qualifiers, modifiers, pricing attributes, and formulas.

Based upon the source pricing data, product attribute Item Code - "Super Wine" for "Corporate" price list has a product precedence of 220, where as product attribute "Item Category - Wine" for "Preferred vendors" price list has a product precedence of 290. Pricing picks up a list of lower precedence and hence $1000 from "Corporate List" is returned. This is because the pricing phase "List line base price" has "Precedence" for resolving the incompatibility.

• Modifier types: Categorize your discounts and promotions into the appropriate modifier types; each modifier type produces different results. For example, the Other Item Discount requires the customer to order the original item as a prerequisite to offering the discount; however, the Promotional Goods discount adds a new line to the order.
• Buckets: The pricing engine may calculate different selling prices depending on how you group your discounts into buckets. Plan your cascading discounts so that you can assign discounts to buckets based on the subtotal on which each discount needs to be applied.

Based upon the source pricing data, 4th July promotion of 10% defined in Bucket 1 is applied on the list price of $1000, where as High Usage surcharge of 2% defined in Bucket 2 is applied on the subtotal $750 from bucket 1.

• Phases: Decide to which event and phase each discounts and promotions belong. For example, Oracle recommends that you place:
• Line level discounts in the Line Adjustments phase
• A promotion such as Buy item A and item B and get a discount on Item C in the All Lines phase
• Modifiers to apply when orders ship in a ship event

Phases are also tied to the order events. To apply a discount only when an order is shipped, assign the modifier to a phase which is executed in SHIP event.

• Incompatibility groups and exclusivity: determine the pricing bands to which the various discounts and promotions belong. Determine which discounts and promotions apply on top of one another, are incompatible, or are exclusive. Analyze all discount schemes and promotions to determine the impact.

Based upon the source pricing data, the bucket Bucket 1 and pricing phase List Line Adjustments has two Incompatibility groups called Level 1 and Level 2. Level 1 has two promotions: 4th July Promotion and Summer Promotion. The 4th July Promotion has a product precedence of 220 and Summer promotion has a qualifier precedence of 310. The 4th July promotion is picked from incompatibility group Level 1 because it has the lower precedence.

Incompatibility Group Level 2 has two discounts: VIP discount and Weekday Discount, both with a qualifier precedence of 260. Pricing resolves the incompatibility by picking the best discount.

The bucket Bucket 1 and pricing phase All Line Adjustments has two incompatibility groups: Level 1 and Exclusive. Although General Discount in Level 1 has a lower product precedence, Seasonal discount for $10 which is in the Exclusive bucket is picked up by the engine.

Note: The pricing engine determines incompatibility and exclusivity within phases.

• Modifier levels: Categorize the modifiers into line, group line, and order modifiers. How the pricing engine treats a modifier can change depending on your classification.
• Automatic, Override, Asked for, and Accrual flags: It is very important that you understand how the pricing engine operates with these flags so that you can set them to reflect your business needs. Analyze all of your discounts, promotions, and charges in terms of these features.
• Other setups: Precedence preferences, profile options, break types, and pricing attribute control the pricing engine behavior. Determine the values for these settings that reflect your business needs.
• Precedence setups: Evaluate default precedence values for qualifiers and product hierarchy and change them to reflect your business needs.

• Unit of Measure: Decide the pricing units of measure for each item because:
• Whether the pricing engine selects a modifier depends on the unit of measure
• The list price in the order unit of measure overrides the precedence. When it processes a pricing request, the pricing engine first chooses eligible price list lines whose unit of measure matches the calling unit of measure. If there are multiple price list lines with matching unit of measure, the pricing engine chooses the price list line with the better precedence. If there are no price list lines with matching unit of measure, the pricing engine looks for price list lines with selected primary unit of measure flag for that item, then chooses the best precedence price list line.

Determine whether you need to set up new qualifier segments and mapping rules. While Oracle Advanced Pricing has certain qualifier segments and mapping rules seeded, you may need to define discounts, promotions, and charges based on other qualifier segments.