Pricing Based on Secondary UOM

An Oracle White Paper

Aug 2014

Executive Summary:

Manufacturing and distribution organizations can define global and product-specific unit of measure
conversions. On a product-by-product basis, default units of measure can be defined for various types
of transactions. This allows manufacturers and distributors to sell, purchase, manufacture, receive,
store, and ship in different units of measure with pre-defined conversions.
In Process Manufacturing business, a products nominal or average weight could be defined for
planning purposes. Customer sales orders could be placed for a specified number of packages or cases
of the given item. During the shipping process, the item could be picked & shipped on number of
pieces (Each) while the actual weight of the product is captured, and the customer could be billed
based on this actual weight. And most importantly the conversion rates from one UOM to the other
could vary from transaction to transaction. This process of ordering, shipping and invoicing based on
different units of measure with no fixed pre-defined conversion rates is called Catch Weight
Management.
Catch weight processing is mainly used by food processors and distributors to manage products where
an individual items actual weight varies due to external factors. These products would typically be sold
in one unit of measure though priced by secondary unit of measure, which is (usually) the weight of the
products being shipped.
The term "catch weight product" refers to a class of product (typically food) that cannot be portioned
to a predetermined quantity and hence is usually sold in packages of varying quantity. Ex: chicken,
meat, flowers, oils, etc.,
Oracle Order Management and Advanced Pricing support the catch weight functionality and provide
the flexibility for the business to generate the invoice based on the secondary UOM.
Catch Weight Processing Benefits
Recording of dual units of measure for inventory, sales and invoicing transactions.
Definition of a nominal or average weight per item
Recording of actual weights at time of shipment
Customers can order in one unit of measure such as packages or cases and be invoiced based
on per-pound (or Kg or ton) pricing, thus avoiding the ambiguity between the seller and the
buyer.
Customers who use items with catch weight can henceforth use Oracle Advanced Pricing to define the
price list with variable UOM. On a similar note the customer can use Oracle Order Management to
generate the Invoice based on the secondary quantity used during shipping.

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Introduction:

This document is an overview of how Catch Weight Management is implemented in Oracle Order
Management and Advanced Pricing.
Oracle Order Management & Advanced Pricing offer flexibility and extensibility in terms of handling
various pricing scenarios. Catch weight functionality is one of the business scenarios which Advanced
Pricing supports in terms of Pricelists defined in Secondary UOM.
Catch Weight Management applies primarily to the meat and dairy industries where the weight can vary
from piece to piece, either due to natural variations, or because of weight loss that occurs during
storage/shipping. Hence these items are ordered in certain units of measure such as Bundles or Boxes
but are priced by weight of the products shipped. In other words, catch weight functionality enables an
item to use two units of measure with a degree of freedom in converting from one to the other. A
default conversion factor is used with a deviation range limit.
Catch weight functionality for computer systems means that they can store two or more units of
measure parallel but independent from each other throughout each business transaction which is based
on actual data.
When dual UOM items or catch weight items are created in inventory, pricing unit of measure must be
defined along with the Primary & Secondary UOMs. The same Pricing UOM is used to create the
Pricelist for pricing the order.
Dual UOM items are defined in the Master Items form with a Primary UOM and Secondary UOM.
Pricing can be set to either Primary or Secondary.
Business Needs:

Catch weight functionality mainly comes into picture in industries such as dairy and meat where items
are tracked based on Dual UOMs and there is a variable conversion rate between Primary and
Secondary UOMs.
In this type of industry, even though the primary quantity remains same, the secondary quantity varies
because of various factors.
In case the secondary quantity varies, the item can be invoiced based on the secondary quantity
shipped.
In some business scenarios customers may order items in third UOM, for which the invoice should be
based on the secondary quantity shipped.
Whenever there is a change in secondary quantity, you must define the pricelist in Secondary UOM
with the Primary UOM check box enabled in the Pricelist. All pricing calculations for catch weight
items are performed with respect to the pricing unit of measure defined for that item.
Examples of catch weight items:
1) In the poultry industry, chicken will be measured in terms of Dual UOM like Each and Kg.
Consider One live chicken = 2 Kg, here we can define the Primary UOM as each; such that
One live chicken=One Each and Secondary UOM as Kg such that one live Chicken =2 Kg.

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Primary UOM Each indicates that one live chicken is always consistent in terms of Each, but the
chicken weight in Kgs may decrease or increase depending on the various conditions causing the bird
to either gain or lose weight. In this case the customer requirement would be to set the price as per the
secondary UOM.
2) Consider an example of a Box of flowers. The Primary UOM is always a Box, but the weight of the
box may vary depending on the environmental factors. The customer would prefer to be invoiced
based on the Secondary UOM Kg.
The UOMs used for the item Flowers are Box and Kg.
The conversions between the UOMs, Box and Kg, should also be defined so that the price will be
calculated based on Kg even if the customer places an order in a UOM that is Primary.

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Oracle Order Management and Oracle Advanced Pricing Solution for the above
Business Needs:

Defining Catch Weight Items:

A Dual UOM item is set with the tracking parameter in both Primary and Secondary UOMs. In this
example the Pricing parameter is set to Secondary UOM and Secondary UOM is Kg.
Using the UOM conversions form, define a standard item conversion as well as lot specific conversion
for the item (Refer to the screen shot displayed below).
The source unit will be derived from the Primary UOM of the Master item and base unit will be the
Secondary UOM given in the Master Item form.

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Define the conversion factor between the Primary and Secondary unit of measures,
1 Each=2 Kg as shown below

Define the conversion factor for 3rd UOM other than Primary and Secondary.
1Box=10 Each as shown below which is equal to 20 Kg.

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There are some business scenarios for which customers order items in UOM other than Primary and
Secondary UOMs such as Box or Dozens.
In some cases the standard conversion defined in the system for a 3rd UOM is used. For the above
example the item is ordered in Dozen. In this case if customer orders one Dozen then the secondary
quantity is defaulted to 24 (1Box= 12 Each =12*2=24 Kg).
If it is ordered in Box, 1Box=10 Each =10*2=20 Kg.
Define Pricelist:

Define the Pricelist for the Item in the Secondary UOM (Kg) with the Primary UOM check box
enabled with a value of 1 Kg=$10.
In the Master Item form the Pricing field is set to Secondary and Secondary UOM was given as Kg.
Note: The Primary UOM checkbox should be enabled else the same price will not be available for the
item and the system throws an error while entering the Sales Order.
The Pricelist is defined with UOM of Kg as shown below:

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Price Calculation in Sales Order Based on Secondary UOM:

Scenario#1
Price Calculation for Non Lot Controlled Dual UOM Item:
If a Customer orders a catch weight item in Primary UOM and due to catch weight effect if there is any
variation in the secondary quantity, then that variation of secondary quantity should also be invoiced to
the customer.
Input the primary quantity in the sales order based on the defaulting factor, secondary quantity will be
defaulted and here the conversion is derived from the standard item conversion defined.
Since the pricing is based on the secondary quantity order, total will be calculated as multiples of
secondary quantity and unit selling price.
Define an item with standard conversion of 1 Each = 2 Kg and Pricelist for 1 Kg=$10.
Enter a sales order for the same item for a quantity of 1 Each and secondary quantity defaults to 2 Kg.
Unit Price and Extended Price shown below are $20 (2Kg*10=20).

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While doing Transact Move Order, change the secondary quantity to 1.5.
Now Ship Confirm the Sales Order line, so that Secondary Quantity shipped is shown as 1.5 and also
the Price is calculated only for Quantity 1.5 with Unit Price changed to $15 and Extended Price
changed to $15 as shown below.

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Scenario#2
Price calculation for Lot Controlled Item:
Consider a scenario where a Sales Order is created for Lot Controlled Item. Initially when we enter
sales order for a quantity of 1 the secondary quantity is defaulted to 2 Kg as per standard conversion
and, the total order amount is calculated to $20 as shown in Figure below.

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In this case the Price is changed to the corresponding secondary quantity defaulted from Lot
conversion.
Once the lot is allocated, the secondary quantity shipped is changed to 1.5015 as per the lot conversion.
Similarly the total order amount is also changed based on the secondary quantity shipped; in this case it
is changed to $ 15.02 as shown below:

Scenario#3
If a customer orders a catch weight item in UOM different from primary and secondary and due to
catch weight effect if there is any variation in the Secondary Quantity that variation of secondary
quantity should also be invoiced to the customer.
Once the appropriate Lot is allocated to the sales order during picking, the catch weight functionality is
triggered, the secondary quantity changes and the secondary quantity defaults based on the Lot specific
conversion.
In this case the Price is changed to the corresponding secondary quantity defaulted from Lot
conversion.
Define a Conversion like 1Box=10Each=20 Kg and Pricelist for 1Kg=$10.
Initially when we enter sales order for a quantity of 1 for the third UOM which is Box the secondary
quantity is defaulted to 20 as per standard conversion, here the total order amount is $200.
Once the lot is allocated, the secondary quantity shipped is changed to 15.015 as per the lot conversion.
Similarly the total order amount is also changed based on the secondary quantity shipped; in this case it
is changed to $150.15.

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Scenario# 4
Consider a Case where an Item has more than 2 Lots for an item with different lot conversions.
Define a Dual UOM item with Primary UOM of Each and Secondary UOM of Kg.
Define 3 Lots with 3 different conversions for the above item each lot having different lot specific
conversions.
Create a Sales order with a quantity of 3 as shown below:

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Reserve 3 different lots for the 3 Line Quantities through Reservations form as shown below

Perform Pick Release and crosscheck the reserved lots and ensure that they are allocated and then
perform Ship Confirm.

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The Price is calculated from the following equations:

Unit price = [List price (specified for Secondary UOM) * the actual Secondary UOM quantity]/
Primary UOM Quantity

In the example: [10*5.59]/3 = $18.65

Extended Price = Unit Price * Primary UOM Quantity
In the example: 18.65 * 3 = $55.95

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Scenario#5: RMA for above scenario:

If a customer returns all the 3 Lots shipped in above scenario for a return reason of damaged product

Allocated all three lots during return.

Credit Memo is also created based on the lots returned as shown in below screenshot.

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Scenario#6
Calculation of Price in Sales orders for a Non Lot Controlled Item in Oracle Warehouse Management
(WMS) Enabled Process Organization:
In WMS Enabled Organizations picking and shipping of sales order lines are done via the Mobile
interface. While performing the Pick Release action, the user notes the change in the conversion factor
and enters the updated secondary UOM quantity to reflect the actual weight or quantity in the system.
Based on the secondary quantity entered price will be recalculated.
Define a Non Lot Dual UOM Item in a WMS Enabled Process Organization with a standard
conversion of 1 Each =2Kg and deviation factor and Pricelist for 1 Kg=$10.
Enter a sales order for the same item for a quantity of 1 Each and secondary quantity defaults to 2 and
Price shown will be $20.
While performing Pick Release using the Mobile interface, change the secondary quantity to 1.5 and
Ship Confirm. Based on the secondary quantity picked and shipped, the Sales Order Price is also
changed to $15.
Scenario#7
Calculation of Price in Sales Orders for a Lot Controlled Item in WMS and Process enabled
organization:
Consider a Lot Controlled Dual UOM Item in WMS enabled Process organization with a with standard
conversion of 1 Each =2 Kg and deviation factor and Pricelist for 1 Kg=$10.
Define a lot specific conversion such that 1 Each=1.5Kg.
Enter a sales order for the same item for a quantity of 1 Each and secondary quantity defaulted to 2,
Price shown is $20.
Initially when we enter the sales order quantity in the Primary UOM, the secondary quantity defaulted
will be based on Item specific conversion.
While performing Pick Release allocate the lot using mobile interface and here the secondary quantity is
changed to 1.5 based on the Lot Specific conversion.
Perform the ship confirmation using the mobile interface based on the secondary quantity, sales order
price is changed to $15.

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Scenario #8:
Intercompany Invoicing for Catch Weight Items:

In a scenario like Internal drop shipment to customer where items are shipped from a different
operating unit and the invoice will be given to the customer from different operating unit.
Invoice amount to the customer is based on the secondary shipped quantity, AP & AR invoice
amounts are based on the primary quantity shipped and these accounts payable and accounts receivable
invoice amounts are not changed depending on secondary quantity shipped.
Consider the below example where a customer orders a catch weight item from operating unit (OU1)

Customer

$100 Per KG Price List

OU 1

Transfer Price is 100SGD per KG

OU 2

Item is shipped from operating unit (OU2)

Let OU1 be Vision Operations with functional currency as USD
Let OU2 be Singapore Distribution Centre with functional currency as SGD
Consider a Lot Controlled Dual UOM Item with standard conversion of 1 each =10 Kg and deviation
factor and Pricelist for 1 Kg=$100.
Create a pricelist where Transfer Price as 1 Kg=100SGD.
Define a lot specific conversion such that 1 Each=8Kg for this item.
In this scenario sales order is created in OU1 with shipping from warehouse in OU2.
Enter a sales order for the same item for a quantity of 1 Each and based on that secondary quantity is
defaulted to 10, Price shown is $1000.
Allocate the Lot and Book the sales order. Then, Pick and Ship the line.
Based on the secondary quantity shipped, the Sales Order Price is changed to $800.

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Create Intercompany accounts payable and accounts receivable invoices for the sales order between the
two operating units OU1 & OU2.
The actual transactional qty is 1(Primary qty) and 10 (Secondary quantity) so the intercompany
accounts payable and accounts receivable invoice is generated for 1000 SGD.
Intercompany accounts receivable invoice is generated for 1000 SGD as shown below:

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Intercompany accounts payable invoice is generated for 1000 SGD as shown below:

Price Calculation in Sales Order when the Pricing UOM is set to Primary in Master Item
Form:

Oracle Order Management supports catch weight pricing for items which have their "Pricing UOM set
to secondary". If the Pricing UOM of the item is set as primary, then re-pricing will not happen on
the basis of secondary shipped quantity at the time of shipping the item. In this case Invoice is
generated based on the Primary shipped quantity.
Modifiers on Catch weight Dual UOM Items:

The Modifier application behavior (surcharge, discount, freight etc) for catch weight Dual UOM Items
will be same as in case of standard items.
RMA for Catch Weight Items:

Returns for catch weight items, pricing will consider the secondary quantity shipped and based on that
credit memo will be created for the customer.
When we enter a Credit To Invoice, the return primary and secondary quantity defaults to the quantity
on the invoice line, superseding the quantity defaulting from the reference source.
For example, we have an order for Primary quantity 1 : secondary quantity of 10; invoiced for 8
secondary quantity and invoice created for 8*100=$800. If a customer wants to return the full quantity
and receives an on account credit, referencing the sales order line would allow to return the full
quantity of primary 1 and secondary 8 on one return line.
The credit memo is created for the customer based on the secondary quantity i.e. 8*100=$800.

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Calculation of Price in Sales orders if Auto Allocate is set to Yes while Performing Pick
Release of the Order:

There are some business scenarios where customers will do Auto Allocate while performing pick
release of sales order instead of allocating manually by setting Auto Allocate Flag to Yes in the Release
Sales Order form.
In such cases while doing the miscellaneous receipt of items we must update the on hand quantity
based on the Lot conversion in the miscellaneous receipt form, this will cause conversion from
primary to secondary to happen automatically based on lot specific conversion.
Similarly price is calculated automatically based on the secondary shipped quantity.
Effect of the System Parameter "Over shipment Invoice Basis on Variation in
Secondary Quantity:

If the item is dual UOM controlled -Over shipment Invoice Basis does not come into play.
Independent of this, system parameter catch weight functionality will work.
If the system parameter "Over shipment Invoice Basis is either set to Invoice Ordered Quantity or
Invoice Shipped Quantity for catch weight items, then Invoice will always be generated based on the
secondary quantity shipped. You must choose one over the other and perform setup accordingly.
Limitations:

In case of partial shipments of lot specific quantities, the system calculates price based on item specific
conversion instead of lot specific conversion.
Consider a lot item with Primary UOM Each and Secondary UOM of Kg with a standard conversion
of 1 Each =10 kg and a lot specific conversion of 1 Each=8 Kg and a Price for 1kg= $100. Create a
sales order with the above lot item for 10 Each and perform a partial shipment for 5 Each and 40 Kg.
It is observed that Price is calculated as $5000 instead of $4000.
Conclusion:

Oracle Order Management enables the flexibility of pricing the order for catch weight items based on
the secondary shipped quantity if there is no fixed relationship between the primary and secondary
quantity. The catch weight items are priced based on the secondary shipped quantities after the
allocation of lot item.

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Pricing Based on Secondary UOM

August 2014
Author: Jala Prasad Devanaboina

Oracle Corporation
World Headquarters
500 Oracle Parkway
Redwood Shores, CA 94065
U.S.A.

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Worldwide Inquiries:
Phone: +1.650.506.7000
Fax: +1.650.506.7200
Web: www.oracle.com

This document is provided for informational purposes

only and the information herein is subject to change
without notice. Please report any errors herein to
Oracle Corporation. Oracle Corporation does not
provide any warranties covering and specifically
disclaims any liability in connection with this document.

Oracle is a registered trademark, and Oracle Order Management

is a registered trademark(s) of Oracle corporation.
All other names may be trademarks of their respective owners.

Copyright Oracle Corporation 2012

All Rights Reserved

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