Difference between PARTY and CUSTOMER in Oracle EBS?

Difference between PARTY and CUSTOMER?

1. When we create New Customer in ERP, why a PARTY will be created automatically?
2. Can I create a Customer without Party?
3. Can I create a Party without Customer?

Oracle as a company was basically into ERP solutions only. As part of its efforts and vision to branch out into every other application such as SCM, CRM and other domains, it started acquiring smaller companies. It acquired Siebel which was one of the industry leaders in the CRM domain. Just to provide some insight into CRM, it is an acronym for Customer Relationship Management. Any CRM is basically a marketing tool. If you understand the definition of the word “marketing”, you will easily understand the difference between a party and customer.

Marketing is the process of identifying, creating and retaining a customer. CRM tools essentially deal with that process. It is used by companies to identify potential customers, make them buy something from the company, maintain effective relationships with them to retain them for repeat purchases as well. This is what CRM does.

But an ERP like oracle does not have any relationship with a person unless he buys something from the company. A customer is someone who has a buying relationship with the company. So how do we distinguish between a person who has bought something and someone who hasnt purchased anything from you? This is where the party definition comes into picture. A party is anybody that exists. He/She/It does not have to have bought something from the company earlier. In fact, they do not have any relationship whatsoever with the company. So how does the company make them buy something? This is where CRM helps. It helps the company in identifying such people, create some marketing campaigns to make them buy something and convert them into the company’s customers, and keep maintaining relationships with them so that they will keep buying from them in the future as well.

Oracle purchased Siebel CRM to target these companies which require CRM tools to create, maintain and retain new customers. Prior to 11i, Oracle had the customer tables only. It did not have to deal with non-customers. Anyone who purchases becomes a customer and is stored in the ar customer tables. When Oracle bought CRM, it needed to incorporate the concept of a ‘potential” and “repeat” customer into the existing data model. It could not have had separate schemas or databases for CRM tools and ERP tools. Since CRM and ERP have to talk to each other, they wanted one single model to incorporate customers who bought and people who have not purchased. So they created a layer over the customer definition called party and said “Anyone who exists is a party”. Once this party buys something, it becomes a customer. Kindly note that it is still a party. It is both a party and customer as well after the purchase is made. So for a person to become a customer, he has to exist first. Only then he can make the purchase and become a customer.

So the process would be like this. A company wants to create some new customers. So it first uses some CRM tools to identify new people it thinks can be targeted. It uses some CRM modules like marketing, telesales, telemarketing etc… to target the customer and finally convinces the customer to make the purchase. So, this person has entered the oracle database. Remember he has not bought anything yet. He is only a party for now. How does he buy now? CRM does not have any modules to place or process orders and payments. The party has to place an order in the ERP module Order management. Once he places an order, he becomes a customer too. So he is now both a party and customer. I hope this helps in understanding why some companies need CRM and ERP, and why Oracle bought siebel CRM. Oracle can target companies which deal with a lot of customers in its business like retailers (Walmart, Amazon, Target) and can sell them both CRM and ERP packages as part of a wholesome solution. since ERP and CRM are sold together, they need to communicate effectively and easily with each other and hence one single data model for customers called the “Party model”.