Intercompany trading overview
When you create an intercompany order chain, Supply Chain Management traces all related purchase orders and intercompany sales orders.
For example, this feature is helpful if you want to view the status of the corresponding sales or purchase order if it's already picked, delivered, or received.
Different types of intercompany chain orders include:
Purchase order initiated intercompany chain (two-legged) - An intercompany chain in which the initiating order is a purchase order.
Sales order initiated intercompany chain (two-legged) - An intercompany chain in which the initiating order is a sales order.
Sales order initiated intercompany chain Intercompany with an external customer facing sales order - Also called the "Original sales order" (three-legged).
When you create an intercompany sales order, Supply Chain Management automatically creates a corresponding purchase order in the appropriate legal entity.
Similarly, when you create an intercompany purchase order, it triggers the automatic creation of a corresponding intercompany sales order.
In the preceding example, DEMF acts as the selling company. They need to buy goods to fulfill their customers' demands. USMF is the company from which DEMF purchases those goods. This concept is modeled in the intercompany relationship as USMF selling to DEMF, and DEMF buying from USMF.
In the intercompany relationship in Supply Chain Management, USMF is the selling company.
When DEMF creates a purchase order, and the vendor is USMF, the system automatically creates a purchase order-initiated intercompany sales order in USMF.
When USMF creates a sales order, and the customer is DEMF, the system automatically creates a sales order-initiated intercompany purchase order in USMF.
DEMF creates a purchase order because they have demand from their customers. Therefore, DEMF is the actual selling company who sells to external customers. However, DEMF needs to procure the goods to sell and deliver externally from USMF.
Therefore, DEMF is a selling company for their external customers. Through intercompany trade, DEMF procures from USMF so that USMF can sell to DEMF.
In business relations, such as intercompany trade, the trading partners must find a common base for their company data. The two legal entities in the intercompany relationship must set up a common language to communicate with each other and to ensure that they consistently share data.
To set up a common language, you must set up intercompany value-mapping parameters. Intercompany value mapping allows different legal entities to logically share master data to support intercompany processes.
Value mapping is required for data that legal entities don't share. Because legal entities share products, they don't require value mapping. However, they do require value mapping for other shared information, such as modes of delivery.
After you set up value mapping for the unshared data, you can sync it between legal entities.
Managing shared data is integral in the processes that involve intercompany transactions. Supply Chain Management syncs shared data between intercompany sales orders and intercompany purchase orders.
In an intercompany chain, you must transfer certain information, such as the customer information or prices and discounts.
You can also determine whether the customer, vendor, or both, in the intercompany chain can update prices and discounts.
Intercompany goods in transit
You can trace products that a legal entity dispatched from their shipping location, but haven't arrived at the delivery location, by using intercompany reporting.
Intercompany reports are based on the following assumptions:
The buying company owns the goods in transit.
Only packing slips on the shipping side can issue in transit.
Order lines that are return transactions are excluded. Essentially, sales order lines and purchase order lines with negative quantities don't count as in transit.
Only product receipts can deduct in transit.
The Inventory management > Inquiries and reports > Inventory value reports > Intercompany goods in transit totals report displays a period beginning balance, period ending balance, and net change within period.
The report groups balances and net change by vendor, which allows users to manually enter general ledger data directly from the report totals. The report also displays inventory value, liability, and variance to standard cost.
The Inventory management > Inquiries and reports > Inventory value reports > Intercompany goods in transit transactions report displays all shipments and receipts from in transit in a given period. The report shows calculated inventory value, liability, and variance to standard cost. You can reconcile each report total.
Intercompany billing and payments
After intercompany orders process, you can use intercompany accounting by going to General ledger > Posting set up for subsidiaries or branch offices. With intercompany accounting, you can create a single entry that posts to multiple companies.
Supply Chain Management provides features that help you set up intercompany financial accounts that you can use with intercompany orders. Intercompany accounting provides ledger transactions for companies that transact with one another, including the appropriate due-to and due-from transactions.
For more information, see Intercompany accounting in Dynamics 365 Finance.