Operational Transfer Pricing in Oracle EPM: The OTP Journey Continues - Defining Rule Sets and Rules

Published August 12 2020 by Andrew Laferla
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In our last blog, we introduced our Operational Transfer Pricing (OTP) Profitability and Cost Management Cloud Services (PCMCS) dimensional outline and started the discussion on how to structure our Rule Sets and Rules within PCMCS to ensure the successful execution of our OTP methodologies.

In this blog, we are going to go into the very core of our OTP solution; how we create Rule Sets and Rules that can be executed to satisfy our OTP requirements and expectations. We will very briefly introduce what Rule Sets and Rules are in PCMCS, and then introduce a configurable framework for the OTP solution’s Rule Sets and Rules.

Introduction to Rule Sets and Rules

Let's begin with some quick background information on what Rule Sets and Rules are in PCMCS:

  • Rule Sets in PCMCS help organize calculation logic by assigning similar rules together in a set. Rule Sets are run in a user-defined sequence and control how rules within the set are run, i.e. as serial, parallel, or iterative. Rule Sets can also be enabled or disabled upon demand.
  • Rules in PCMCS form the calculation logic within the application and are the means of driving data to and from different intersections within the application, i.e. the allocations and calculations. The rules within Rule Sets are executed in the order of their sequence numbers to which they are assigned within that Rule Set.

In PCMCS, there are two types of Rules we have available to us:

  • Allocation Rules:
    • Allocation Rules form the core of an Oracle PCMCS application. They determine how allocated data flows and how drivers determine allocation amounts.
    • Allocation rules are used primarily for those cases where the allocation logic can be fit into the standard formula framework and where traceability is required (the ability to see the source and target value by integrating the data).
  • Custom Calculation Rules:
    • Custom Calculation rules enable users to define calculations to be performed in a certain region of the database with results posted to a specific member(s).
    • Custom Calculation rules provide a user-friendly mechanism to create new data such as calculated drivers, rates, or any other value that is not calculated via the standard formula implicit to an allocation rule.

A somewhat overly simplistic way to explain when to use an Allocation Rule or Custom Calculation Rule is that we use Allocation Rules when we are moving (allocating) data from one intersection to another and we use Custom Calculation Rules when we are creating data at an intersection (in the case of drivers or Price x Quantity calculations).

So now that we know what Rule Sets and Rules, are let's introduce a configurable framework for our OTP solution Rule Sets and Rules.

OTP Rule Sets and Rules

Every client is different and will, by nature of their calculation and reporting expectations, have slightly different configurations of Rule Sets and Rules. Similar to our dimensionality approach, Alithya’s OTP content has pre-built Rule Sets and Rules that can be configured by clients to adhere to these differences.

Ultimately Rules Set and Rules in PCMCS enable us to move and create data at various intersections to accommodate our calculation and reporting expectations. However, an element that is often overlooked is traceability; OTP calculations must be traceable, we need to be able to easily explain how we calculated our charges and the way we structure the flow of data through our dimensionality is critical to enabling this. The below diagram illustrates the flow of data through the dimensionality in our solution; from the importing of the data from the General Ledger(s) and statistical data sources, through the allocations/calculations and finally to the output to Reports and downstream General Ledgers(s):

How we configure our Rule Sets and Rules in our solution is critical to controlling the flow of data through our solution and ultimately calculating the correct charges that are represented in reports and exported to the downstream systems. Similarly, setting up the Rule Sets, and their corresponding rules, in the correct sequence is critical in successfully calculating our OTP charges. The below table illustrates a framework of Rule Sets and types of Rules that are utilized in our OTP solution:



As noted earlier, every client will have different requirements with different levels of complexity being introduced into their OTP application, the above table represents a Rule Set and Rule framework that can be configured to a client’s individual needs. Similarly, some clients may require additional Rule Sets to be introduced to accommodate concepts such as the elimination of incurred costs at the Recipient Entity, pass-through charge flows, and other similar concepts.


No two clients have identical OTP calculation and reporting expectations, and as such, no two clients will have identical Rule Sets and Rule configurations. In this blog, we introduced a framework, based on the Alithya OTP solution, that can be utilized as a starting point in the configuration of an OTP’s applications Rule Sets and Rules. These Rule Sets and Rules form the very core of our OTP solution and are critical in not only providing the post-calculated OTP charges that are distributed in invoices and reports but also in the ability to answer difficult questions on how those charges were generated through the clear transparency and traceability.

In our next blog, we will dive into the world of OTP Reporting, discussing the different types of reports that are generated in PCMCS for our OTP solution model validation, auditing, internal reporting, and invoices requirements.

 For comments, questions, or suggestions for future topics, please reach out to us at infosolutions@alithya.com.  Visit our blog regularly for new posts about Cloud updates and other Oracle Cloud Services such as Planning and Budgeting, Financial Consolidation, Account Reconciliation, and Enterprise Data Management.  Follow Alithya on social media for the latest information about EPM, ERP, and Analytics solutions to meet your business needs.

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