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+LJK�/HYHO�6XPPDU\The objective of the Exchanges function category within R/3 IS-Oil Downstreamis to build on the functionality within the Core SAP R/3 product to enable theprocessing and management of exchange agreements between oil companiesinvolved in downstream activities.

The IS-Oil System provides:

q Support for a company using SAP-System R/3 to exchange productswith another company to their mutual benefit.

q Capability for maintenance of exchange inventory positions. It is possibleto monitor the exchange position for a product, agreement or exchangepartner. It is possible to view the balance to-date for each agreement andto view the movement details that have affected that balance.

q Pricing is enhanced to handle exchange fees and to allow fees to bemaintained or revalued at all stages in the sales or purchasing processflows.

q Capability to have invoicing at specified intervals and to net those A/Rand A/P invoices for:m Exchange feesm Product valuem Excise taxes and VAT

q Management of global quantities and prices on an annual contract whileallowing monitoring of exchange position and volumes on a periodic(e.g. monthly) basis.

q Exchanges and swaps for like and unlike products and location.

q Integration into the Transportation and Distribution functionality as ofrelease 1.0D.

q Checks and controls over product lifting entitlements.

q Capability to produce an exchange statement detailing the exchangeactivity for a period.

q Capability to assign a base product to individual items (subproducts) inan exchange to allow the exchange to be monitored at the base productlevel.

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.H\�)XQFWLRQ�%HQHILWVThe integration of Exchanges functionality within the Core SAP Systemallows the oil company to manage exchange balances on a timely andaccurate basis by ensuring data integrity, through one time data entry,between Exchanges and Inventory Management, Financial Accounting,Order and Delivery Tracking and Invoicing.

The specific benefits of the Exchanges functionality are:

Online tracking of Logical Inventory Balances for pure exchanges - byautomatically updating the logical inventory balance whenever a movementis posted against an exchange and providing online transactional display,the system allows the user to view and manage exchange positions from aquantity viewpoint.

Online automation and integration of exchange accounting provides thefoundation for allowing the oil company to monitor and manage theprofitability of its exchange business on a timely basis.

Lifting controls at the sales and purchase outline agreement level within anexchange contract allow the credit exposure to a particular exchange partnerto be accurately managed. These controls are in addition to the financialcredit limit checks which could also be enforced.

By providing flexibility in terms of the range of types of fees and differentialsthrough the use of price condition techniques and by providing currentexchange balances, the system allows the oil company to be responsive tomarket forces in terms of the deals it can negotiate and manage with exchangepartners.

Valuation and revaluation of logical inventory enables the system toautomatically manage the financial accounting aspects of “pure” exchanges.The system is therefore able to account for “Logical Inventory Adjustments”,logical inventory clearances and to capture the financial implication, loss orgain, associated with these transactions.

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.H\�,6�2LO�)XQFWLRQV�6XSSRUWHG�E\�WKH5��,6�2LO�'RZQVWUHDP�(;*�&RPSRQHQWAn exchange agreement is represented within IS-Oil Downstream by theassignment of SAP R/3 sales and purchase outline agreements under anexchange header. This is illustrated in the figure below.

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Note that:

q Oil company 1 is a SAP IS-Oil user with an exchange partner; oilcompany 2

q It has entitlement to lift product at the oil company 2 location Y

The following Exchange functionality is provided by the Exchanges categorywithin R/3 IS-Oil Downstream System:

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Within the oil industry an exchange is an agreement between oil companies toallow lifting of product at one time and location in exchange for entitlement tolift product at another time and location.


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R/3 IS-Oil Downstream supports the linking of entitlements to lift productfrom an exchange partner (purchase agreement) and entitlements of theexchange partner to lift product from the oil company (sales agreements)under an exchange agreement.

It is possible to define lifting and receipt entitlements at multiple locationswithin the same exchange agreement. It is also possible to define multipleagreements at the same physical location. For this reason, R/3 IS-OilDownstream offers the possibility to explicitly state, or to select via a pop upwindow, which purchase agreement should be used to supply product to anexternal customer.

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Definition of fee types and rates - Within Exchanges, many different typesof fees are encountered. The R/3 IS-Oil Downstream component incorporatesprice condition techniques into the definition of fee types. This allows theuser, or system configurer, to define the combination of circumstances (e.g.method of delivery, location, exchange type etc.) upon which the fee ratewill depend for a particular fee type.


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The system also allows the user to define the fee rate for each combination ofcircumstances encountered and provides the option to propose new valuesfor fees, based on up-to-date condition record values. The effective daterange for each fee is user definable.

Assignment of fees to exchange agreements - The fees are assigned to theindividual entitlements to lift product, i.e. within the line items of theindividual sales and purchase agreements assigned to the exchange contract.

This level of granularity allows maximum flexibility in terms of fee assignmentwithin an exchange contract.

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Controls by contract - Within a particular exchange agreement, it is commonto schedule the volumetric entitlement to lift product, especially on theexchange partner side, into periodic quantities.

For this reason, a Quantity Schedule is created at the level of the line itemswithin the sales and purchase agreements. This enables the user to schedulethe entitlement quantity into freely definable periods (usually monthly) overthe length of the agreement.

This control is invoked when attempting to create call-offs (nominations)against the purchase or sales agreement.

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R/3 IS-Oil Downstream tracks exchange balances by product, exchangereceipts minus exchange deliveries, at the individual exchange agreementlevel. The exchange balance is updated real-time and is available on-line.This functionality is integrated with the standard SAP R/3 System materialmovement transactions and is therefore seamless to the user.

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Accounting for Fees - The user can specify by exchange type whether feesshould be invoiced, or netted, independently of how the material price shouldbe treated. In the oil industry, it is common to invoice for fees and not toinvoice for material cost, i.e. a “pure” exchange where fees are invoiced.

When invoice matching for purchase agreements, the system allows the userto match fees both at the summary level and at the individual fee line itemlevel and automatically posts any matching differences back to theappropriate account as gains or losses.

Accounting for Materials - As with fee accounting, the user can specify byexchange type whether the material cost should be invoiced, netted, orneither (a pure exchange). In the case of non-invoiced exchanges, theexchange balance is treated as “logical” inventory.

Accounting for Taxes - It is common practice in the oil industry to invoiceand be invoiced for excise taxes receivable and payable due to movementsagainst exchange agreements even in the case of pure exchanges where thematerial cost is not invoiced. R/3 IS-Oil Downstream therefore allows theuser to define for pure exchanges whether the excise duty payable orreceivable will be invoiced.

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As of release 1.0D the R/3 IS-Oil Downstream component allows the user toassign a purchase contract or call-off for the supply of product against acustomer order. The purchase contract or call-off can be explicitly assignedwhen the delivery note is scheduled (as described above).

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If the contract is not explicitly assigned, then the system displays a list ofavailable contracts when the delivery note is loaded (issued to the customer).

This transaction automatically ensures that the quantity called-off andreceived against the selected purchase contract is equal to the quantityissued against the customer delivery.

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It is common for oil companies not to invoice an exchange partner after eachindividual movement against a particular exchange. Such exchange typesmay be netted, i.e settled periodically. R/3 IS-Oil Downstream allows theuser to define for an exchange type whether or not the exchange should benetted.

Periodically the payables and receivables can then be netted and only the netbalance posted to the exchange partner account. This can then be invoiced orpaid as required.

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When exchange balances are built up against “pure” exchanges, it is usual tovalue the assets and liabilities associated with the goods movements as ifthey were actual inventory for financial accounting purposes. The reasoningbehind this is that the payable or receivable in the case of pure exchanges isa quantity of product and not a financial amount.

Under R/3 IS-Oil Downstream the system records and tracks the value oflogical inventory at the prevailing inventory carrying price when the materialmovement was created. The system ensures that the integrity between thequantity balance owed or owing, i.e. the quantity of logical inventory, and thefinancial value of the logical inventory is always maintained.

If no own inventory is carried at a location, the receivable and payablevolumes can be valued at the current value at a “reference plant”, which isnormally a nearby plant at which you hold inventory.

The system supports both standard priced and moving average pricedinventory valuation strategies.

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Oil companies often value physical inventory using a standard cost thatrepresents the calculated production cost. However, this production cost isrecalculated on some periodic basis. It is therefore a requirement that the oilcompany can change the inventory carrying price of their physicalinventory.

If logical inventory is to be valued as if it were physical inventory, then thecarrying cost of the logical inventory may also need to be changed. IS-Oilfunctionality allows the user to change the inventory carrying value of thelogical inventory and automatically records the loss/or gain from revaluationto P&L.

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Oil companies manage their logical inventory balances by periodicallyposting exchanges of a quantity of product owed for a quantity of productowing. A negotiated payment or receivable may or may not be included inthe transaction. It is also possible to balance an exchange in which differentproducts have been exchanged against different volumes, e.g. 100,000barrels of regular unleaded for 80,000 barrels of premium unleaded.

The system supports this type of transaction both at the exchange agreementlevel and across exchange agreements for an exchange partner. The systemautomatically updates the logical inventory balance and captures theresulting loss/or gain on the transaction.


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6XE�3URGXFW�%DVH�3URGXFW�)XQFWLRQVA base product can be assigned to each delivered product (sub product)within an exchange agreement. In this case the exchange balance is updatedfor the base product, and the base product price is used for the logicalinventory posting as well.

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The following reporting capabilities are included within the exchangesfunctionality under R/3 IS-Oil Downstream:

Exchange Statement - The exchange statement is a document that can begenerated and sent to the oil company’s exchange partner. It summarizes theexchange activity for a period, listing movements, financial transactions andexchange adjustments. It is a tool to aid in the reconciliation of an exchangewith the partner.

Exchange Balance - The user is able to report total liftings, receipts andbalances against exchange agreements and to summarize this data bymaterial, exchange type, exchange partner, exchange number and location.This functionality is mainly used across pure exchange types where itenables the user to track the logical inventory balance real-time and on-line.

Exchange Movements - The system allows the user to display all physicalmovements of product against exchange agreements for a particularmaterial. The list of movements displayed may be selected by severalparameters including location, exchange type, exchange partner and methodof delivery.

Exchange Entitlement - Entitlement to lift product is defined as the openquantity against an exchange nomination, i.e. the open purchase call-off


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quantity for purchase agreements assigned to exchange contracts. Thesystem allows the user to narrow the search of exchange entitlements for aparticular product by location, exchange partner, method of delivery andexchange type.

Matchcodes - Several matchcodes have been provided that can be used toselect based on exchange related criteria, for instance:

q Purchasing/Sales contracts

q Purchasing/Sales call-offs

q Netting documents

q Delivery and goods movements

.H\�,6�2LO�)XQFWLRQV�6HUYHG�E\�WKH�&RUH�5��6\VWHPThis section summarizes the relevant functionality supported by the CoreR/3 System.

q Creation of Exchange Partners

An exchange partner is represented by the linking of a customer andvendor account.

q Creation of Contract Outline Agreements

The creation of sales and purchase outline agreements is a capability of thestandard system. This functionality is enhanced to allow the inclusion offees, differentials and lifting controls.

In addition to the basic outline agreement and order handling functionality,the Core R/3 System has the following capabilities within the exchangesarea:

q Incorporation of Price Condition Techniques within Purchasing

The inclusion of price condition techniques within both purchasing andsales allows R/3 IS-Oil Downstream to use these techniques to definefees, and differentials, within exchange agreements. This base capabilityis enhanced to allow the user to specify the fee types to use within theline items of the purchase or sales outline agreement.

Repricing functionality has been enhanced, particularly on the purchasingside, to allow fee values to be recalculated at each stage in the delivery/receipt process.


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This section describes the overall conceptual framework for the proposedR/3 IS-Oil Downstream component for handling exchange agreements. Thesection builds on the simple exchange business scenario introduced in theprevious section and intends to set the functionality identified in this sectionin the wider context of the system functions as used in exchange handling.The section then describes the specific exchange functionality introduced inthe previous section in greater detail.

Exchange agreements are represented and handled by the assignment ofsales and purchase outline agreements, allowing management of exchangedeliveries and exchange receipts respectively to an exchange header.

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The system functions (see figure 1-9) that form a typical exchanges businesscycle are:

q Create Exchange Agreement Header

In system terms, an exchange agreement header is a document linkingone or more purchase contracts with one or more sales contracts. Theprocess of exchange header creation is detailed in the section “CreateExchange Agreement Header”.

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q Create Contracts (Outline Agreements)

Create Sales Contacts - Agreements to supply specified amount(s) ofproduct(s) within a specified delivery schedule. When an exchangerelated sales contract is created, the following can also be specified:

m Fees and differentials that apply to exchange deliveries (see also“Handling and Definition of Fees and Differentials”).

m Lifting controls that apply to the exchange deliveries at the contractlevel(see also “Lifting Controls and Checks”).

Create Purchase Contracts - Agreements to receive specified amount(s)of product(s) within a specified schedule.

m Define fees and differentials that apply to exchange receipts (seesection“Handling and Definition of Fees and Differentials”)

m Define lifting controls that apply to the exchange receipts (see section“Lifting Controls and Checks”).

q Create Call-offs

Create Sales Call-off - This is the process of creating an actual salesorder against the sales outline agreement (sales contract). The fees anddifferentials applying to the call-off are copied from the contract.

In order to schedule the deliveries into periodic quantities, it is possibleat this stage to create further lifting controls for the deliveries againstthis call-off.

Create Purchase Call-off - This is the process of creating an actual purchaseorder against the purchase outline agreement (purchase contract). The feesand differentials applying to the call-off are defaulted from the contract.

In order to schedule the deliveries into periodic quantities, it is possibleat this stage to create further lifting controls for the deliveries againstthis call-off.

q Sales Flow

Create delivery notes. The delivery note indicates to the system:m Order item/product to be delivered

m Date to be delivered

m Location from which the delivery is made, i.e. the SAP deliveringplant/store location

m Quantity to be delivered - at this point quantities are checked to seethatthey do not violate contract or scheduled quantities.


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Post confirmed delivered quantity/create goods issue.

m Change the delivery note quantity to the confirmed deliveredquantity.

m Create goods issue for the delivery note. This generates the requiredinventory accounting entries automatically.

Accounting for exchanges is detailed in the section “FinancialManagement of Exchange Agreement”.

Create invoice (for invoiced partners). This process posts the invoice tothe customer account and generates an entry in a file ready for printing.

When using a billing due list, additional exchange-specific selectioncriteria are available to specify the range of documents relevant forinvoicing.

q Purchase Flow

Receive Goods - The following two scenarios are relevant to exchangesin this area:

1. Post Goods Receipt - In the simple case where oil company 1 takesownership of the goods at the exchange partner location.

2. Perform load balancing - Where the purchase call-off is used to fill asales delivery (to one of oil company 1’s customers) from theexchange partner location (as of Release 1.0D).

Post Invoice Receipt (for invoicing partners) - This process posts thepayable to the partners’ vendor accounts ready for standard systempayments processing. At this time, the accrual generated at the time ofposting a goods receipt is cleared.

For automatic creation of invoice verification documents, the EvaluatedReceipt Settlement (ERS) process has been enhanced to handle exchange-related transactions. ERS with Exchanges includes:

m Handling fees and repricing those fees

m Selecting goods receipt documents by exchange number or a rangeof exchange numbers

m Collecting invoice items by exchange number

m Split invoice verification

q Netting

Where an exchange is flagged for netting, all the sales and purchasinginvoices will be flagged as blocked for payment.

The netting process allows those payables and receivables to be reviewed,selected or deselected and then cleared. The difference between the sum ofvalues of the payables and the sum of the values of the receivables isposted as a single entry to either payables or receivables as appropriate.

In movements-based netting, the system uses goods movements whichreference the exchange agreement as the selection method for collectingreceivables and payables.


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The exchange agreement header provides a framework to link one or moresales contracts with one or more purchase contracts (see figure above). Whencreating the exchange header the user must specify the type of exchangeagreement that is being created. The system holds default parameters for theexchange type but these may be overridden by the user when the exchangeheader is created. The parameters identified at this stage are:

q The posting rules for the material - This is explained in the section“Financial Management of Exchange Agreement”

q The posting rules for the fees - see section “Financial Management ofExchange Agreement”

q The posting rules for the taxes

q Whether or not netting is performed and the Netting cycle - see section“Netting”

q The breakdown proposal for the quantity schedule

q Sub product to base product edit rules

q VAT on internally posted movements indicator

q Partner reference

q General purpose text

q Base location (for example specifying a point on a pipeline from whichexchange differentials are calculated)

The posting rules for fees and materials determine how to accrue forpayables on goods receipt and how to account for receivables on goodsissue. The reason for this flexibility is that it is anticipated that an installationwould use different accounting entries depending on whether the exchangemovement is expected to be invoiced or merely carried forward as in a pureexchange. The separate posting rules for fees and materials allow them to betreated differently for accounting purposes where for example fees areexpected to be invoiced and materials carried forward.

In order to allow exchange header creation, a new transaction has beencreated. During creation of the exchange, the above entries are specified. Theexchange agreement number may be numbered by the system (internallynumbered), or numbered by the user (externally numbered).

It is possible to assign sales and purchase contracts to an exchange header intwo ways:

q Branch directly to the create sales and purchase contract transactionsfrom the create/maintain exchange header transaction.

q Assign existing contracts to the exchange header from the maintain salesand purchase contracts transactions.

In either case, the system cross references the sales and purchase agreementsto the exchange header by copying the exchange number and type into the

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sales and purchase agreements and prompts the user to specify anyadditional data required by an exchange.

Moreover, it is possible to create an exchange agreement with reference to analready existing one. Sales and purchase contracts assigned to the referencedexchange agreement can also be selected for copying.

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IS-Oil supports the payment or collection of fees and differentials in additionto the value or quantity of product identified in the exchange.

Definition of Fee Categories

A fee category is defined by the creation of a price condition record type.This enables the parameters upon which the fee rate depends to be definedwhen configuring the system.

The existing Core System capabilities surrounding pricing condition recordsare retained. These are not detailed here but may be summarized as:

q Condition tables - Key structures for access of the fee condition recordsmay be defined during configuration.

For example, it is possible to configure by specifying a price conditionstructure with these parameters in the key, a fee type that depends upon:

m Delivering location

m Exchange type

m Method of delivery

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q Access sequences - If required, the oil company may define that a feecategory has more than one key structure. In this case, it is necessary todefine which should be used in preference.

For example, an individual fee may be defined within a key structure of:

Location/Method of delivery/Exchange type

However, if the rate for this key is not found, then the company maywish to define that a generic rate for location/method of delivery shouldbe used.

Definition of Fee Rates

Within a fee type, the user is able to create condition records that specify thefee rate for the determining parameters and data range. This is illustrated bythe figure below:

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Accounting for Fees

Accounting for fees is explained in greater detail in the section “FinancialManagement of Exchange Agreements”.

Sales Side

On the sales side it is necessary to specify the fee revenue account to be usedwhen invoicing or netting for the fees following exchange pickups by ourexchange partner.

It is possible to specify the fee revenue account to be used at the fee typelevel.

Purchasing side

On the purchasing side, it is necessary to define whether a particular feetype is expensed or included in inventory on goods receipt. This is explainedin more detail in the accounting section.

It is possible to specify the accounting policy whether to expense or includethe fee amount in inventory and the account to be used, if the fee is to beexpensed, at the fee type level.


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Assigning Fees and Differentials to Exchange Agreements

The fees and differentials to be used are specified within the line items of thesales and purchase contracts that are assigned to a particular exchangeagreement. This is illustrated by the figure below. When creating or assigninga sales or purchase outline agreement under an exchange agreement, the useris taken into a fee definition screen. The fees and differentials to be invokedwhen posting movements against the outline agreement must be specified.

The system displays the currently applicable rates. Depending on configurationoptions the rates will be copied into subsequent documents with or withoutrepricing. Again, depending on configuration options, the user may have theoption to override these rates manually.

IS-Oil supports the payment or collection of fees and differentials in additionto the value or quantity of product identified in the exchange. A series ofindicators, called invoicing cycles, makes it possible to allocate differentpayment terms to the various pricing conditions (taxes, fees, etc.).

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Lifting Controls by Contract

The standard purchase and sales contract creation and amendment transactionswere enhanced to allow the user to enter a “Quantity Schedule” whenever acontract is assigned to an exchange. The result of a typical sales contract creationtransaction is shown in the figure above.

The Quantity Schedule allows the user to schedule the sales or purchaseoutline agreement into periodic (usually monthly) parts. The breakdown isproposed from the exchange type but this default may be overridden by theuser. In addition, the user may modify the scheduling periods manually asrequired. System calculated breakdown indicators are:

q Daily

q Weekly

q Monthly

If any of these parameters are chosen, then the system pro-rates the contractitem quantity across the proposed periods. The system allows the user to

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amend the scheduled quantities for each period for the validity of thecontract. The system performs various checks when a quantity schedule iscreated:

q Check that the total scheduled quantity is not greater than the contractquantity

q If the scheduled quantity is less than the contract quantity, then the useris warned

q The scheduling periods must fall within the validity period of thecontract

The scheduled quantity in any period is the maximum permissible call-offquantity for the contract in the period. If the user attempts to call-off morethan the permitted quantity in any scheduling period, then the system issuesa warning message. However, the call-off may still be created.

In addition to the quantity schedule checks, it is possible to specify whetherit is permitted to over call-off against the contract item total quantity.

Update of the Contract Quantity Schedule

The contract quantity schedules are updated whenever a call-off is created.The call-off quantity schedule is updated automatically when a delivery noteor a goods receipt is posted.

Lifting Controls in the Call-off

In similar fashion to that created in the contract, it is also possible to create aquantity schedule to schedule a call-off quantity into periodic quantities. Thecreation and validation are the same as for the creation of a quantityschedule within the contract. However, the call-off quantity schedule isvalidated to ensure that it falls wholly within a contract scheduling period,i.e. it is not possible to create a call-off schedule that crosses more than onecontract scheduling control period.

Clearly then, the delivery schedule for the call-off has to use a smaller periodthan the corresponding contract schedule. It is possible in the contractschedule to specify a proposed breakdown indicator for the call-off(s) (i.e.daily, weekly, monthly). If this has been specified, then the systemautomatically proposes a call-off schedule broken down into periods of thislength and falling within the validity period of the relevant contract line.This can be overridden by the user if required.

Update of the Call-off

The sales call-off quantity schedule is updated when a delivery note iscreated against the call-off. If the delivery note quantity is subsequentlychanged, the system does not update the call off quantity schedule.

The purchase call-off quantity schedule is updated when the goods receipt iscreated.

In addition, for purchase call-offs, the intended (from delivery note) field isupdated when the call-off is assigned to the supply of a delivery note (see“Load Balancing/Rescheduling”). The quantity is transferred to the receivedfield when a goods receipt is created against the purchase call-offs.


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Schedule Checking

The entitlement checking and schedule updating process relevant to deliverynote creation is shown in the figure below. Clearly schedule checking onlyapplies to call-offs where a quantity schedule is created.

The system locates the call-off scheduling period corresponding to therequested delivery date and verifies that the requested delivery quantity isless than or equal to the available quantity for the period. If the requestedquantity is greater than that available for the period then:

The system will react in the way the user customized the quantity schedulemessage. There can be either no reaction, a warning or an error. Thepossibility to customize the System’s reaction applies to all respectivemessages of the quantity schedule for sales and purchase.

Please see the update of the QS in the following figure. That is as well whenthe System checks the quantity of the QS.

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The system keeps track of the exchange balance within a specific database(S036) that is updated whenever one of the following system events occurs:

q Goods receipt against an exchange agreement - for the actual receivedquantity

q Goods issue against an exchange agreement - for the confirmeddelivered quantity

q Posting of a Logical Inventory Adjustment transaction

The system therefore only updates the exchange balance when the physicalmovement of goods has occurred and the confirmed movement quantity isknown, or when the logical inventory balance is updated within the LogicalInventory Adjustment transaction.

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The key to this database segment, which defines the lowest level at whichthe exchange balance is tracked, is:

Client/Period/Material Group/Material/Plant/Exchange Partner/ExchangeType/Exchange Agreement Number/Base Product

This allows the user to view the exchange balance at any higher level bysummarizing the information held at this level (see “Reporting againstExchanges”).

The update of S036 following goods issue is illustrated by the figure below.

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For each exchange agreement created in R/3 IS-OIL Downstream, financialaccounting is governed by the posting rules defined for the fees, materialsand taxes. These rules determine how to accrue for payables on goodsreceipt and how to account for receivables on goods issue.

There are four key factors that can affect the type of postings that are madefor an exchange:

1. Material posting rules - Internal/External

2. Fee posting rules - Internal/External

3. Fee accounting policy

4. Excise duty posting rules

The default account processing with respect to the above is determined foreach exchange type, but may be overridden by the user at the time ofexchange header creation.

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q The posting rules for the fees and material indicate whether to use thestandard accounts for posting the receipts and deliveries of product (andtherefore invoicing the exchange partner and being invoiced), or whetherto use internal payables/internal receivables accounts. In this case it is aBorrow/Loan exchange agreement, so invoices are not created.

q The separate posting rules for fees and materials allow them to be treateddifferently for accounting purposes. For example, in the oil industry it iscommon for fees to be invoiced (posted externally) and materials carriedforward (posted internally) as in the case of a pure exchange.

q If material is posted internally the excise duty posting rules can be eitherspecified as posted externally (Invoice for Excise Duty is created) orinternally (no invoice is created for Excise Duty).

q The accounting policy for fees defined against purchase agreementswithin an exchange allows the user to define whether the fee should beexpensed or included in inventory at the time of posting the goods receipt.

In the figure below a business scenario is shown for the following posting rules:

q Material internal

q Fees external

q Excise Duty external

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Accounting for Material

The user can specify in an exchange agreement whether material cost shouldbe invoiced, or posted internally (not invoiced). In the case of non invoicedmaterials the exchange balance (quantity which is moved between theexchange partners) is treated as logical inventory and posted on internalaccounts receivables and internal accounts payables.

Sales Agreement (Goods Issue)

The goods issue automatically creates financial accounting entries to recordthe diminution of stock.

1. The product is expected to be invoiced - Standard accounting entries areposted.

2. The product is expected not to be invoiced - the internal receivablesaccounts is used as offset to the inventory account.

3. The product is expected to be netted.

Create Financial Accounting Entries

The financial postings that occur in the goods issue stage for each of theabove scenarios is indicated below. The key points to note are:

q The postings to the internal receivables account are not cleared byinvoice issue or netting. The balance on the internal receivables accountmay be cleared down by, for example, a Logical Inventory Adjustmentposting.

q Where invoicing is expected to occur, the goods issue merely transfersthe stock value from the inventory account (balance sheet) to theconsumption account (P&L). No posting is made at this stage torecognize the exchange partner liability. This posting is made by theinvoice processing function.

Financial Postings

q Product to be invoiced

m Credit - Stock (inventory account)

m Debit - Cost of Goods Sold

q Product not to be invoiced

m Credit - Stock (inventory account)

m Debit - Internal Receivables account

Purchasing Agreement (Goods receipt)

The accounting entries on goods receipt:

1. To reflect the increase in inventory

2. To accrue for the liability to the supplier


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The receipt of goods automatically triggers the required general ledgerpostings, however it is important to note the following:

q The inventory account for a particular material is automatically inferredfrom the material master details.

q Material to be invoiced (externally posted)

m Debit - Inventory account

m Credit - GR/NI (Goods received/not invoiced) material clearingaccount (to be cleared by invoice receipt processing)

q Material not to be invoiced (internally posted)


m Credit - Material Internal Payables account

Accounting for Fees

Within an exchange agreement, the user specifies whether fees should beinvoiced or posted internally. These fee posting rules are independent ofaccounting for materials.

The user can specify by fee type whether fees should be expensed orincluded in inventory for the purchase side and which revenue account isapplicable in the sales side.

Sales Agreement (Goods Issue)

The purpose of posting the goods issue is to record the actual quantity ofproduct delivered to the customer. This process automatically triggers therequired general ledger postings to reflect the issue of stock.

Create Financial Accounting entries

The key points to note about posting fees during a goods issue are:

q There are no fee postings on goods issue unless the fees are internallyposted, i.e. are not invoiced. If the fees are internally posted, then thesystem generates a fee posting to the fee internal receivables account andan offset to the appropriate fee revenue accounts.

q The postings to the fee internal receivables account are not cleared byinvoice issuing or netting.

q The fee revenue account may be specified for each fee type.

Financial postings

Under R/3 IS-Oil Downstream, there are three scenarios to reflect theposting of fees during a goods issue:

q Fees to be invoiced (externally posted)

m Nothing done at time of goods issue, fee revenue account is postedby invoice processing

q Fees not to be invoiced (internally posted)

m Credit - Fee Revenue accounts

m Debit - Fee Internal Receivable account


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Purchasing Agreement (Goods receipt)

The purpose of posting the goods receipt is to record the actual value ofproduct received from the supplier. This process automatically triggers therequired general ledger postings to reflect the receipt of stock.

The fee accounting policy is determined for each type and determineswhether the fee is to be expensed or included in stock at time of posting thegoods receipt. Note that the system therefore allows, within the samepurchase order line item, that some fees should be expensed and someincluded in the inventory carrying cost.

Create Financial Accounting entries

Under R/3 IS-Oil Downstream, these are the postings of fees during a goodsreceipt:

q Fee to be invoiced (externally posted)

m Debit - Stock or Fee expense account (depends on whether fee is tobe expensed or included in stock at time of posting the goodsreceipt)

m Credit - Fee clearing account (fees to be cleared by invoice receiptprocessing)

q Fee not to be invoiced (internally posted)

m Debit - Stock or fee expense (depends on whether fee is to beexpensed or included in stock at time of posting the goods receipt).

m Credit - Fee Internal Payables account.

Invoice Verification

During invoice verification the system allows the user to edit fees both at thesummary level and at the individual fee line item level and automaticallyposts any matching differences back to the appropriate account as gains orlosses.

When an invoice is received (detailing fees) and the fees don’t match theposted fees receivable (fees clearing account) then the user is able to specifythe clearing amount against each fee in the line item.

Accounting for Taxes (In a Pure Exchange)

It is common practice in the oil industry, in the case of pure exchangeswhere the material cost will not be invoiced for the excise duty taxes due tomovements against exchange agreements to be invoiced since they have tobe given to the government. R/3 IS-Oil Downstream allows the user todefine, for pure exchanges, whether excise duty is invoiced or (like thematerial costs) posted internally. See the chapter on TDP for more detail onexcise duty handling.


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The receipt and issue of goods automatically triggers the required generalledger postings to account for the above scenarios as follows:

q Internally posted duty on goods receipt (on pure exchange wherematerial is also posted internally)


m Debit - Excise Duty Inventory

m Credit - Material Internal Payables (material amount + excise dutyamount)

q Externally posted duty on goods receipt


m Debit - Excise Duty

m Credit - GR/NI (excise duty value)

m Credit - Material Internal Payables account (material amount)

q Internally posted duty on goods issue

m Credit - Inventory

m Credit - Excise Duty Inventory

m Debit - Material Internal Receivables (material amount + excise dutyamount)

q Externally posted duty on goods issue

m Credit - Stock

m Credit - Excise Duty Inventory

m Debit - Excise Duty Cost of Goods Sold (excise duty amount)

m Debit - Material Internal Receivables (material amount)

Invoice/Invoice verification for excise duty

Where excise duty is externally posted the following accounting entries aremade:

Invoice issue:

q Credit - Excise Duty Revenue

q Debit - Exchange partner account

Invoice receipt:

q Debit - GR/NI

q Credit - Exchange partner account


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The purpose of load balancing is to cope with the business scenario where itis desired to use an existing purchase contract/call-off to fulfill a customerorder. The business scenario is illustrated below:

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Two variations of the illustrated scenario are envisaged:

q IS-Oil Transportation and Distribution functionality is used. Typicallythis is where the delivery is carried by a truck that is under our controle.g. one of our own or an independent carrier employed by us. Exchangeloading integrates the exchange functionality into the delivery creation,the shipment scheduling and the load confirmation processes, so thatwhat is loaded onto the vehicle is the quantity receipted under theexchange.

q Without IS-Oil Transportation and Distribution functionality (i.e. usingstandard Core Delivery processing). Typically this is where the delivery iscarried out by a vehicle that is not under our control, for example thecustomer picks up the product. Exchange loading integrates the exchangefunctionality into the delivery creation and the goods issue processes, sothat what is issued to the customer is the quantity receipted under theexchange.

The details of transportation processing are discussed more fully in thechapter on Transportation and Distribution.

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Assignment of Exchange Contract

The exchange can be assigned to the customer delivery note in two places:

q When creating or changing the delivery note an assignment of one ormore exchange contracts/call-offs can be made to the delivery item. Thisassignment causes the quantity schedule of the contract/call-off to beupdated with the intended delivery quantity. This ensures that therequired quantity of product is reserved against the total available forcall-off against the purchase contract/call-off.

q When scheduling a delivery to a shipment (TD only) an assignment canbe made or modified. This updates the quantity schedule in the samemanner as per creating or changing the delivery note directly.

There are two methods of assigning the exchange:

q A user exit will allow user written code to automatically choose theexchange depending on criteria from the delivery note item. If the IS-Oiluser has specific strategies for determining which exchange is relevant incertain circumstances (for example Exchange call-off 12345 is only to beused for product issued from plant ABCD during June 1997) than thiscan be programmed.

q The exchange contract/call-off can be explicitly specified via a popupwindow. If no user exit exists or no applicable strategy can be determinedthen the exchange can be manually specified or changed.

The system will check that there is sufficient availability against the exchangequantity schedule which ever method is used.

Loading or Goods Issue

At load confirmation (TD relevant) or goods issue (non-TD) the quantity thatis loaded onto the vehicle or issued out to the customer is confirmed.However before this happens that quantity needs to be received from theexchange partner. To do this the system performs the following functions:

q Checks the exchange assignment. If the date of the delivery has changedor the quantity has increased the exchange assignment may no longer bevalid.

q Amends the delivery note quantity to the entered loading/goods issuequantity.

q If a purchasing contract has been assigned then a call-off is created.

q Updates the quantity schedule of both the purchase call-off and thecontract as appropriate.

q Posts the goods receipt against the purchase call-off.

q Posts the loaded quantity into in-transit (TD relevant) or against thedelivery note for invoicing (non-TD).


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IS-Oil functionality allows multiple invoices to be generated from a singledelivery for different pricing components. For example fees can be invoicedseparately from taxes, and importantly the fee invoices can have differentpayment terms than the tax invoices.

This functionality is not restricted to exchanges but is available for all salestransactions.

An invoicing cycle can be assigned to pricing conditions and a billing typecan be assigned to process one or more invoicing cycles. So for example allexchange fee condition types can be assigned invoice cycle 1 and all taxcondition types assigned to invoice cycle 2.

At the customer material level or on the sales documents the payment termcan be set for each invoicing cycle. In addition user exits allow user writtencode to set the payment term if specific criteria exist, such as the rules for UStaxes, and also allow the netting cycle indicator to be set, so for example feeinvoices could be netted but tax invoices billed.

The flow of processing for split invoicing is:

q (Customisation of condition types and billing types to set invoicingcycles.)

q Order taking: Payment terms for each invoicing cycle may default infrom Customer Material Info records or may be manually set. Invoicingcycle on price conditions may be manually overridden.

q Delivery processing (no change).

q First invoicing run: Only the pricing conditions with the invoicingcycle(s) matching those on the billing type used for the invoicing areprocessed. The other pricing conditions are calculated but set to“statistical”.

q Profitability (COPA) updated with full invoice item quantity but onlyvalue for first cycles.

q Delivery status and document flow refelct the cycles processed.

q For subsequent invoicing runs, the processing is the same exceptprofitability is only updated for value (and not quantity).

q When all invoicing cycles have been run the delivery status is then set to“complete”.

Split invoice verification is also supported on the MM-side as of Release1.0D. With split invoice verification, you can calculate the freight costs andexcise duties separate from the material value and the fees for a goodsreceipt, and you can provide different terms of payment each time.

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Netting functionality allows payables and receivables for an exchangepartner to be summed up and subtracted from each other. So instead ofinvoicing the exchange partner for each outward movement and receivingan invoice from them for each inward movement and then processing allthose payments, only one either payable or receivable open posting need tobe processed.

The user specifies when creating an exchange agreement whether sales andpurchases with the exchange partner are to be netted or invoiced. Thenetting functionality consists of four areas of functionality:

q Financial Netting Process - Periodic clearing of the payables/receivables(netting) to generate a single open item for the balance

q Specification of netting criteria

q Blocking the invoices for automatic payment

q Selecting the payable/receivable items for netting

Specification of Netting Criteria

The payment blocking indicator is used to block invoices for payment andenhanced by IS-Oil to indicate that these invoices are to be netted. Differentvalues can be used as blocking indicators to specifiy different nettingcriteria. This is flexible and can be specified by exchange partner. Forexample blocking indicator “A” may be used to specifiy that all B/Lexchange type transactions dated between the 16 th of the previous monthand the 15 th of the current month are netted together for exchange partnerABCD.

Blocking the Invoices for Automatic Payments

The netting indicator (or payment blocking indicator) is set in the exchangeheader and defaults into the sales and in the exchange header and defaultsinto the sales and purchasing documents. Depending on customising, it maybe changed or removed in these documents, if required. Within the splitinvoicing functionality there is a user exit that also allows the indicator to beset depending on criteria relevant to the invoicing cycle. For example, thisallows fees to be netted but taxes to be invoiced/paid.

Selecting the Payable/Receivable Items for Netting

Before the payable and receivable items are netted it is possible to review thedocuments and deselect anything that is not to be netted in this run. Thisallows items that are in dispute (i.e. not agreed with your exchange partner)to be netted later or manually processed.

Netting of Payables and Receivables

The result of the financial netting process is shown in the figure below. Thepurpose of this functionality is to periodically, e.g. monthly, net off thepayables and receivables for an exchange partner and post a single documentto represent the difference.

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The key aspects of the financial netting functionality are:

q The netting process reads the netting relevant payables and receivablesfor the exchange partner.

q This balancing document can be processed as a normal payable orreceivable, i.e. by payment/collection processing, or left on the accountto be carried forward and netted off against future transactions.

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As of Release 1.0D, the collection of receivables and payables in an exchangefor netting can be carried out based on the actual exchange-related goodsmovements which took place.

Instead of financial documents being selected, the financial values that are tobe offset against each other are derived from goods movements which havebeen selected by the exchange partners to be included in netting.

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9DOXDWLRQ�RI�/RJLFDO�,QYHQWRU\Logical inventory balances are updated whenever one of the following systemevents occurs:

q Goods receipt against a pure exchange agreement - for the actualreceived quantity

q Goods issue against a pure exchange agreement - for the confirmeddelivered quantity

q Posting of a Logical Inventory Adjustment transaction

The financial value of the logical inventory balance is held in a new database(OIA7) which is keyed by Company Code/Plant/Material and contains thequantity, value and moving average price of the logical inventory.

q Material internal receivables - For physical goods issues, the quantity oflogical inventory owed to us by our exchange partner is valued at theprevailing physical inventory carrying price, regardless of any pricingdetails in the exchange sales contract.

q Material internal payables - For physical goods receipts, again thequantity of logical inventory owed by us to our exchange partner isvalued at the prevailing physical inventory carrying price or at the price ofthe material at a specified reference plant (a reference plant is commonlyused when no inventory is normally held at the receiving plant).

This valuation strategy recognizes that logical inventory represents a quantityof product, and not a financial amount, owed or owing and therefore shouldbe valued as if it were physical inventory.

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Moving Average Price

The system tracks the moving average price of the logical inventory balancesat the company, plant, product level. This strategy is illustrated by the figurebelow and ensures that the integrity between the system held logicalinventory quantity balance and the logical inventory financial balance isalways maintained, i.e. if all of the quantity balance were cleared, then thesystem held financial value would be zero. The strategy ensures that IS-Oilcan handle both standard priced and moving average priced physicalinventory valuation strategies.

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Revaluation of Logical Inventory

IS-Oil functionality incorporates an enhanced price change transaction thatcan be invoked as required to post a new inventory carrying price for logicalinventory within a particular plant.

The effect of posting a revaluation of logical inventory is illustrated by figure20. In the above example, the logical inventory carrying price is changed to1.00 USD/lt. The difference between the logical inventory value at the oldcarrying price and that at the new carrying price is calculated by the systemand posted to a P&L account.

In this case the difference is:

(Old price x quantity) - (New price x quantity) = 3,062 - 2,800 = 262

This is recorded as a loss on revaluation.

Sub/Base Product Handling

IS-Oil functionality offers the flexibility of creating an exchange agreementcontaining multiple products referencing a single base product. This is usedfor example with exchanges of gasolines with different octane levels but forease of monitoring, reconciliation and valuation all transactions are basedupon a mid grade gasoline.

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When sub/base product functionality is used the logical inventory isupdated in terms of the base product. For example if an exchange contractcontains the following products:

- UN87H0 87 octane gasoline



all referencing UN90H0 as a base, an issue or receipt for either UN87H0 orUN93H0 will update the logical inventory for UN90H0.

The value posted to logical inventory will be based upon the inventory carryingprice for UN90H0 and the difference between that and the material’s normalinventory carrying price is posted as a loss/gain. All reporting is centered uponthe base product with the sub product generally only being reported asadditional information.

/RJLFDO�,QYHQWRU\�$GMXVWPHQWVThe Logical Inventory Adjustment transaction allows the oil company toadjust the logical inventory they have recorded against an exchange partner.Typically this is to record the swap of the ownership of a specified quantity ofone product for the ownership of a specified quantity of another product or tocorrect a movement that was incorrectly posted against an exchange, or totransfer the balance from an expired exchange agreement to a new exchangeagreement. The adjustment may or may not include a monetary payment. Nophysical product movement is involved in the settlement only a logicalinventory movement.

The product(s) to be balanced result from unequal or incorrect call-offs onsales and purchase contracts, assigned to pure exchanges only, at one ormore locations. This means the internal payables and receivables logicalinventory accounts are used for the exchange contracts to control valuationof product logical inventory.

The three components of a Logical Inventory Adjustment are:

q A specified quantity of an over-received product(s) to be swapped in

q A specified quantity of an over-delivered product(s) to be swapped out

q A monetary payment (issue or receipt)

Usually, at least two of the three components would be defined for a LogicalInventory Adjustment, although the system allows any combination of theabove.

The logical inventory effect of posting a Logical Inventory Adjustment isillustrated by the figure below.

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Specifications to be Made in the Logical InventoryAdjustment Transaction

The user specifies the exchange partner with whom the Logical InventoryAdjustment is being made on entry to the Logical Inventory Adjustmenttransaction. For each over-received product to be swapped out and eachover-delivered product to be swapped in, the user must specify:

q The location at which the posting should be made

q The exchange type against which the Logical Inventory Adjustmentshould be posted

q The product to be swapped

q The quantity to be swapped

In addition, the user has the option of specifying the exchange agreementnumber against which the Logical Inventory Adjustment clearance shouldbe posted. If this is not specified, then the Logical Inventory Adjustmentclearance is posted at the summary level for the exchange partner.


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Quantity Posting Made By the Logical Inventory Adjustment Transaction

When entry is complete the exchange product quantity balances are updated.This is illustrated by the figure below. The entry for an over-delivered producthas the effect of reducing the delivered quantity rather than increasing thereceived quantity. Conversely the entry for an over-received product has theeffect of reducing the received quantity rather than increasing the deliveredquantity.

If the user attempts to swap in more product than has been received or swapout more than has been delivered, the system issues a warning. The user maychoose to ignore this warning and post the Logical Inventory Adjustment inany case.Financial Postings Made By the Logical Inventory Adjustment Transaction

The financial postings made by the Logical Inventory Adjustment transactionare illustrated by the figure below. The logical stock valuation is updated oneach product’s valuation record (see section “Valuation of Logical Inventory”).

For over-delivered products the internal receivable account is credited. Forover-received products the internal payable account is debited. The offset isto a P&L account called “Exchange Balance” representing the gain/loss onthe Logical Inventory Adjustment.

The negotiated payment details, if entered, causes an invoice posting eitherto payables or receivables, in order to request a payment by ourselves or theexchange partner. For an invoiced payment request to the exchange partnerthe customer account is debited. For an invoiced payment request from theexchange partner the vendor account is credited. In either case the offsetaccount is again the P&L “Exchange Balance” account.

If the negotiated payment is a receivable an invoice document can be generatedthat contains details of the adjustments made and the value that is owed by theexchange partner. This document can then be sent to the exchange partner.

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The exchange statement is a document or series of documents used to reportthe activities of an exchange over a certain period. Typically the exchangestatement is sent to the exchange partner and forms the basis for the periodicreconciliation of the exchange. It will contain information such as:

q the details of the movements (issues and receipts): material, plant,quantity, data, document no., etc.

q the financial information relevant to the exchange partner for thesemovements: fees, differentials, etc.

q adjustments: LIAs

q opening and closing balances

q net amount owed or owing for the period

It is highly customisable so that the amount of information sent to theexchange partner can be controlled and formatted as required. For the samedata different formats and levels of information can be output. So it ispossible to send a summarised version of the exchange statement to theexchange partner but generated a detailed version for internal use.

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Display Exchange Balance

The system strategy for quantitative tracking of exchange balances isexplained in the section “Quantitative Tracking of Exchange Balance”. The

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exchange balance display transaction enables the user to display the S036segments held at the exchange agreement level and therefore to summarizeup to higher levels of detail.

The key to this database segment, which defines the lowest level at whichthe exchange balance is tracked, is:

Client/Period/Material Group/Material/Plant/Exchange Partner/ ExchangeType/ Exchange Agreement Number/Base Product

This allows the user to view the exchange balance at any higher level bysummarizing the information held at this level.

The Logistics Information System (LIS) is used for reporting purposes. Thisis a flexible, customisable reporting system that allows the exchange balancedetails (i.e. lifts, receipts and balances) to be reported and summarised byany combination of the key fields.

Display Exchange Movements

The display exchange movements transaction allows the user to display allexchange related movements. In SAP terms, the deal related movements are:

q Goods Issue

q Goods Receipt

q Logical Inventory Adjustment

The user is able to narrow the range of selected movements by specificationof one or more of the following selection criteria:

q Material Number (or matchcode)

q Plant

q Exchange type

q Movement type

q Range of posting dates

q Exchange Partner

Display Exchange Entitlement

The exchange entitlement transaction supports the IS-Oil user in findingopen entitlements. An entitlement to lift product from an exchange partneris represented by the open quantity against a purchase call-off. For each call-off, the open entitlement is defined by:

Exchange entitlement = Scheduled quantity - Intended quantity - ReceivedQuantity

where,

Scheduled Quantity = Maximum quantity available in any schedulingcontrol period

(see section “Lifting Controls and Checks”)

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Received Quantity = The quantity already received against the call-off

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The user can narrow the range of the call-offs selected by entering one ormore of the following selection criteria:

q Product

q Plant

q Exchange Partner

q Exchange type

q Method of delivery

The system displays the open entitlement on all exchange related purchasecall-offs that meet the entered selection criteria. It is also possible to drilldown on a particular call-off to display the underlying scheduling quantityschedules (see section “Lifting Controls and Checks”).

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A pure exchange is one where the liability incurred due to a receipt ofproduct from an exchange partner, or the asset acquired due to the deliveryof product to an exchange partner, is a quantity of product owed or owingand not a financial amount. The assumption is that over time the quantitiesowed and owing balance although periodic or ad hoc settlements againstthis type of exchange are possible. The implication is that “pure” exchangesare managed with respect to the quantity of product owed or owing due tophysical or logical movements against the exchange agreement.

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A non pure exchange is one where the financial amount owed or owing dueto an exchange receipt or delivery is to be paid or netted. For this reason, thequantity balance against this type of exchange is not be cleared down overtime. The implication is that non “pure” exchanges are managed withrespect to the financial value owed or owing due to physical movementsagainst the exchange agreement. This type of exchange may be netted orinvoiced.

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A netted exchange is a non pure exchange within which an oil companyperiodically invoices only the net balance owed or owing due to the movementsagainst the exchange as opposed to invoicing for each individual movement.

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In a borrow/loan exchange, materials are only posted internally, they arenot invoiced to the partner. A logical inventory is set up. Excise duty andfees incurring with the material movements will generally be invoiced. Aborrow/loan exchange is also known as a “pure” exchange.

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This is a broad grouping of similar types of fees. The fee category correspondsto an SAP price condition record type and therefore allows the user to definethe key parameters on which the fee rate should depend, e.g. individual feesdepends upon method of delivery, exchange type, and delivery location.


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This identifies the type of fee within a fee category, e.g. types of individualfees are wharfage, truck filling and demurrage.

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This is represented as exchange balances owed or owing against pureexchanges. The inventory is valued, and revalued, as if it were physicalinventory but is tracked against a separate balance sheet account forbalances owed (due to exchange deliveries) and balances owing (due toexchange receipts).

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+LJK�/HYHO�6XPPDU\The SAP R/3 Logistics modules, Materials Management (MM) and Sales andDistribution (SD), provide a comprehensive information system for theeffective and efficient management of all standard activities within thesupply chain. The objective of the Inventory and Hydrocarbon ProductManagement (HPM) functionality within the R/3 IS-Oil Downstreamcomponent is to enable these Core modules to address certain specific oilindustry requirements.

With regard to general hydrocarbon inventory management, IS-Oil amendsexisting Core SAP functionality in order to:

q Incorporate ASTM/API petroleum measurement standards. Thesestandards are used to convert volume quantities and product densitiesat ambient temperatures to volume quantities and densities at welldefined standard temperatures for material movements and measure-ments.

q Provide additional quantity fields enabling stock balances to be stored inmultiple units of measure (for example volume at ambient temperature,corrected volume based on standard temperature and apparent mass).

q Allow stock balances to become negative as the result of a movement,and handling the financial impact of such a movement.

q Provide a tracking function to link material movements from one plantto another in order to calculate and post gains and losses (two-steptransfer).

.H\�)XQFWLRQ�%HQHILWVThe key function benefits are outlined below:

HPM’s functionality can be viewed as a tool for creating business benefits inother design categories within IS-Oil. Principally, it allows oil companies toeffectively manage their supply chain of continuous and discrete product tominimize costs and maximize the reliability and quality of service providedto the customers.

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The ASTM/API calculation function enables highly accurate automaticconversions between alternative units of measure, based on internationallyaccepted petroleum measurement standards (ISO 91-1), which areperformed within the SAP R/3 System. Thus, the company gains savings interms of time and effort by not having to perform these calculations outsidethe system.

As there is no limit to the number of units of measure that can be calculatedfor a material, the system provides complete flexibility for tracking andreporting material quantities.

The ability to calculate material quantities using the ASTM/API conversionsin HPM provides a high level of integration with the other modules. Thisenables the company to view the product in the particular unit of measure(UoM) desired.

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The ability to convert units of measure and to post movements of materialsimultaneously provides the company with accurate quantity levels ofmaterial in real time.

The weight ( i.e. apparent mass) and volume of a product required forshipment is calculated and saved to aid in the delivery and shipping process.

Issues and receipts for plant-to-plant transfers are linked by R/3 IS-OilDownstream functionality.

The enhancement to the intra-company movement (plant-to-plant transfer)functionality enables an issue quantity from one plant and a receipt quantityat a second plant to be reconciled, and the resulting gain/loss associatedwith the movement to be automatically calculated and posted.

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.H\�,6�2LO�)XQFWLRQV�6XSSRUWHG�E\�WKH,6�2LO�'RZQVWUHDP�+30�&RPSRQHQWThe following HPM enhancements are provided within the R/3 IS-OilDownstream component:

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IS-Oil incorporates an interface to ASTM/API c-code routines to convertvolume quantities and product densities at ambient temperatures to volumequantities and densities at standard temperatures for material movementsand inventory measurements. The system supports the standard ASTMTables 53 and 54, including the German rounding rules, ASTM Tables 23and 24 for relative densities and ASTM Tables 5 and 6 for API gravitycalculations. The calculation is performed on goods movements relating to“oil materials”, with the ability to calculate specific units of measure. Theuser can configure whether the calculations are performed in display mode,or in the background, and whether the values calculated can be overwrittenby manual entry or not. The system also provides an ASTM/API desk topcalculator to perform quantity conversions when no goods movement hasoccurred.

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Storing of multiple units of measure is made available through additionalappendix tables to the material master for each material, thereby providingadditional information for ABAP reporting capability.

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Issues and receipts for plant-to-plant transfers are linked by R/3 IS-OilDownstream functionality. The enhancement to the intra-company movement(plant-to-plant transfer) functionality enables an issue quantity from one plantand a receipt quantity at a second plant to be reconciled and the resultinggain/loss associated with the movement to be automatically calculated andposted.

Material movements can occur between plants belonging to the same company,or between storage locations within a single plant. These movements can bemonitored in the R/3 IS-Oil Downstream system.


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A transaction exists in R/3 IS-Oil Downstream in which the issue from thefirst plant is linked by a transfer tracking number to the receipt of thesecond. Thus, the tracking number allows for the calculation of gains andlosses associated with a company movement, as well as tracking the statusof the material movement. The corresponding excise duty gain/loss is alsocalculated.

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Negative inventory allows for stock balances to become negative as a resultof a goods movement. This allows an issue of a material to be made eventhough there is insufficient stock available in the system to complete theissue.

For example, if a hydrocarbon movement occurs over several days, certaintransactions will be booked several days after the initial part of the movement.This could result in a shortage of inventory, from a system perspective, if agoods issue is made.

.H\�,6�2LO�)XQFWLRQV�6HUYHG�E\�WKH�&RUH�5��6\VWHPThe following features in the Core R/3 System are particulary applicable tothe oil and gas industry.

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The ability to change the material code of a product when two differentproducts are mixed together, creating a new product, or to change thedescription of one product to another.

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Post to physical inventory balancing is simplified in R/3 by the detail storedin the inventory. All movements and physical counts are retained by thesystem, which provides for numerous ABAP reports to be developed forinventory reconciliation. R/3 also provides the flexibility of a companydefined grouping of products that enable the company to create customABAP reports.


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Consignment and subcontract stocks are easily accounted for and tracked inthe standard R/3 System, regardless of their actual physical location (forexample, stocks at customer or vendor sites). Functionality available forspecial stocks is similar to that of normal inventory stocks, which includesphysical counts, stock reservations, and pricing.

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LIFO/FIFO valuation is provided by R/3 IS-Oil as part of the Core System.


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Within the SAP R/3 System, much of the master data information isstructured within a common hierarchy. This hierarchy consists of four levels:client, company, plant and storage location. All information in the hierarchyapplies equally to all lower levels. Thus, the hierarchical structure ensuresthat data redundancy is kept to a minimum.

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The common hierarchy is applied to several different master file structures,one of which is the location structure.

Clients and Companies

For any given organization, there may be a variety of ways that the locationstructure could be represented within the SAP R/3 System. This is done bymirroring current or desired organizational structures of the business. Thedecision is driven primarily by how corporate information is gathered,aggregated and reported.

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An oil company (the SAP client) may have divided its organization intobusiness functions. Thus, the SAP companies would be the independentbusiness units of the oil company, as illustrated in the figure below.

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Alternatively, separate SAP companies could be used to represent eachnational subsidiary of a multi-national organization (the SAP client).

Plant

A plant is a strategic business unit. The plant is the highest level in thehierarchy where inventory balances are stored, so the assignment of plantswill determine how an organization’s inventory position can be reflected.The plant field is a four digit alphanumeric field. For an oil company, typicaluses of the plant entity in SAP might be to define:

q Crude storage terminals

q Finished product marketing terminals

q Refineries and manufacturing complexes

q Pipelines, or pipeline segments

In addition to these “physical” sites, where an organization’s inventory ismaintained and reported, it is possible to define so called “logical” plants.An oil company might use logical plants:

q To store and report inventory in a summarized manner

q To represent third party inventory sites, for example exchange partnerlocations

q To store in-transit inventory, possibly by mode of transport


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Storage Location

A storage location is a subdivision within a plant, enabling inventory to bemanaged at a more detailed level. Each plant must contain at least onestorage location. The storage location field is a four digit alphanumeric field.Storage locations enable the management of inventory in smaller units.

Within a “physical” plant, an oil company might use storage locations:

q To track and report volumes of individual product, for example establishindividual or groups of tanks at a terminal (plant) as storage locations.

Within a “logical” plant, an oil company might use storage locations:

q To define individual third party sites (within a summary third partyplant)

q To define stock being transported by different modes of transport(within an in-transit plant)

The assignment of a company’s physical and logical inventory sites as plantsor storage locations is completely flexible within the SAP R/3 System. An oilcompany would assign entities as plants or storage locations dependent onfactors such as:

q The number of inventory sites to be defined in the SAP R/3 System

q The level of inventory tracking and reporting required at the inventorysite


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This is another area to which the common hierarchy is applied in thematerial master record.

Client

The Client level is the highest level at which material information can bemaintained. Information maintained at this level includes:

q Material number and description

q Stockkeeping unit of measure

q Material type

q Industry sector

q Quantity calculation method

The stockkeeping unit of measure is the base unit of measure, or the unit inwhich the stock is managed. The standard system converts all quantitiesentered in other units to this unit. In R/3 IS-Oil Downstream, for “oilmaterials”, these conversions can be performed using ASTM/API conversionroutines (see the section “Quantity Conversions Incorporating ASTM/APIProcedures”). All implicit financial transactions (material valuations, accountspayable updates, etc.) associated with a goods movement are performedbased on the quantity in the stockkeeping UoM.

The material type provides one method for grouping materials together inthe SAP R/3 System. Examples of material types are raw materials, tradinggoods and finished products. The material type defines certain features of

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the material and has important control functions. For example, the materialtype determines which department-specific data the user can enter for thematerial.

Company

In the oil industry, a requirement exists to hold material information at thecompany level, since some information, for example, that pertaining to taxand excise duty, is country-specific. R/3 IS-Oil Downstream provides thefollowing information at that level:

q Additional units of measure for maintaining inventory quantities inmaster files and reports

q Conversion group

The units of measure that are calculated automatically for a material (inaddition to the stockkeeping unit) when a material movement occurs, aredefined at this level.

It is possible to group individual units of measure, by a key, simplifying theassignment of the units of measure to a country code. The units of measurethat are reported in the standard stock reports (see the section entitled“Inventory Information and Reporting”) are also defined at this level.

The R/3 IS-Oil Downstream System provides a number of methods forconverting between the different units of measure defined for a material (seethe section “Quantity Conversions Incorporating ASTM/API Procedures”).The conversion group defines which set of formulas will be used in theconversion calculations.

Plant

The plant level is the highest level in the SAP hierarchy where stock balancesare stored in the SAP R/3 System. Material information held at this levelincludes:

q Stock balances, in stockkeeping unit of measure, for different types ofmaterial quantity

q Stock balances in additional unit of measure for total stock and valuatedstock with unrestricted use

At plant level, stock balances in the stockkeeping unit of measure are held fora number of different types of stock. These include total stock, unrestricteduse stock, stock in transfer, consignment stock and reserved stock.

In addition to these quantities held in the stockkeeping unit of measure, thetotal stock and valuated stock with unrestricted use are held in theadditional UoM and are available for reporting.

The batch managed indicator is maintained at plant level. If this indicator isset, then a material is managed in batches.


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Storage Location

Information maintained for a material at this level in the R/3 IS-OilDownstream system includes:

q Stock balances in stockkeeping UoM for different types of materialquantity

q Stock balances in additional UoM for total stock and valuated stock withunrestricted use.

Batches

Storage location stock can be subdivided into batches in order to facilitatethe management and valuation of inventory at a more detailed level.

Special Stocks

SAP R/3 provides functionality to manage stock owned by third parties, orstocks stored at third party locations. Special stocks are typically stored inthe system as “logical” plants and storage locations, as described in thesection entitled “Location Hierarchy”. Some examples of special stocksinclude:

q Vendor Consignment Stock - Stock owned by a vendor, but stored atyour site

q Subcontract Stock - Stock owned by your company, but stored at a sitebelonging to a supplier

q Customer Consignment Stock - Stock owned by your company, butstored at a site belonging to a customer

q Supplier’s and Customer’s packaging to be returned

q Project Stock - Stocks allocated to projects defined in the SAP R/3project system

One example of the way special stocks could be used by an oil company is asfollows: customer consignment stock could be used to keep track ofinventory quantities at certain dealer-operated retail stations. After deliveryof the product, it is still owned by the delivering company until it is finallysold. Inventory at retail stations can be tracked in the system using customerconsignment stock.


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In the oil industry, it is a requirement to be able to hold material quantitiesin multiple units of measure (UoM). The volume quantities and densities ofoil materials are temperature-dependent; Raising the temperature of a liquidor gaseous material increases the material’s volume and thus decreases itsdensity. In order to compare one volume quantity of material to anothervolume quantity of the same material, the comparison must be made at acommon temperature.

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Thus, it is usual (and a legal requirement for excise duty calculations) tomaintain inventory balances in a UoM at a fixed temperature (for exampleliters at 15° Celsius, L15). However, most goods movements occur at ambienttemperature, with the temperature at which the movement occurred beingmeasured along with the density of material moved. The quantity correctionfunctionality provided by R/3 IS-Oil Downstream system enables conversionbetween volumes measured at different temperatures into UoM at a standardtemperature, for inventory management and reporting. It is also possible tocalculate the weight of a material. All UoMs relevant to a material can bedefined and calculated automatically when a movement of the material takesplace.

Functions Utilizing Different Units of Measure

A particular UoM may be required in order to calculate the excise duty. TheTDP functionality uses the conversion routines to calculate and reportinventory balances in the required UoM.

A company’s marketing department might require various UoMs, due topricing procedures for different customers in international markets.

The pricing functionality in MAP can use any of the UoMs as the basis forpricing.

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Since all UoMs defined for a material are calculated for every movementtype, the Exchanges functionality is able to track exchange balances inmultiple UoMs.

Quantity Calculation Method

The following description of the quantity conversion routines applies to “oilmaterials”. These are defined by assigning a conversion group to thematerial master record of the material. If this group is set to indicate an oilmaterial, then the quantity conversion routines will be performed for thematerial.

Quantity Determination

There are two possibilities for entering quantities in the R/3 IS-OilDownstream system:

The first is to enter the movement quantity along with the density andtemperature of the material when the movement occurred. Automaticinternal conversion routines then convert this quantity into all the UoMmaintained for that material.

The alternative is to enter all quantities required, with associatedtemperature and density information, directly in the system. This procedureis used if the quantities are calculated outside of the SAP R/3 System. Thesystem checks all mandatory fields for a manual entry of that kind.

Quantity Conversion

The automatic conversion of one UoM to another UoM can be performed inone of two ways:

The R/3 IS-Oil Downstream system contains ASTM/API conversionroutines. This functionality performs conversions based on the rules andformulas defined by the American Petroleum Institute (API), based on thedescriptions created by the American Society for Testing and Materials(ASTM). The system supports the standard ASTM Tables 53 and 54,including the German rounding rules, the ASTM Tables 23 and 24 forrelative densities and ASTM Tables 5 and 6 for gravities. The conversioncalculations use formulas based on these standard tables.

The alternative is to perform the calculations by an external customerfunction module.

An external interface to the SAP R/3 System allows conversions that are notsupported by the ASTM/API routines, as described above.

The two methods are illustrated in the following diagram.


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Units of Measure Available

The standard UoM for a material is the stockkeeping unit defined at clientlevel in the material master record. This is the base UoM for storing andreporting inventory balances. R/3 IS-Oil Downstream enables an unrestrictedadditional number of UoMs to be defined for each material. The systemautomatically converts transaction quantities to these UoM for each goodsmovement of the material. Quantity balances are maintained for the materialin all of these additional UoMs, as described below.

The total stock and available stock balances are held in the additional UoMat the following levels:

q Plant

q Storage location

q Batch level

q Special stock

The transaction quantity in the following transaction types are converted tothe additional UoM:

q Material movements: goods receipts, goods issues, . . .

q Deliveries

q Physical inventory documents


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Material-Specific Information Used in the Quantity Conversion Calculations

The quantity conversion routines require the material density and temperatureto perform their calculations. This information may be obtained from theconversion routines in one of the following ways:

q The values for density and standard temperature can be stored at, anddefaulted from, plant, storage location and batch-level. This informationcan be updated at those hierarchical levels, based on the date.

q For each individual goods movement, it is possible to manually enter thetemperature and material density associated with the transaction.

Carrying out the Quantity Conversion Calculations

For some transactions, it is a requirement to be able to enter temperature anddensity measurements made at the time of the goods movement. The R/3 IS-Oil Downstream system provides this capability. Dependent on transactiontype, it is possible to configure the R/3 IS-Oil Downstream system to performthe quantity conversion calculations by one of four different methods:

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Automatic Conversion Calculation

The system uses default values for density and temperature. The quantityconversions are performed in background calculations, based on thetransaction quantity and associated UoM.

Semi-Automatic Conversion Calculation

The system uses default values for density and temperature. The quantityconversions are performed in background calculations, based on thetransaction quantity and associated UoM. The results of the calculations aredisplayed to the user and can be changed manually before being posted.


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Manual Conversion Calculation

The system uses default values for density and temperature. The systemdisplays these values to the user, and may be changed by manual input. It isalso possible to manually input values for the transaction quantity in any ofthe alternative UoMs. The system then performs conversion calculations tothe UoM that have not been manually input. The results of the calculationsare redisplayed and can be changed by the user.

Semi-Manual Conversion Calculation

The system uses default values for density and temperature and allows onlythese values to be changed. The system performs the volume conversions inthe background, based on the transaction quantity and associated UoM.

Calculation of Gross/Net Weights and Volumes

The R/3 IS-Oil Downstream system performs automatic ASTM/APIcalculations of weights and volume in the shipment process.

Base Sediment and Water Calculation

Base Sediment and Water (BS&W) is a percentage of the total quantity that isnon-oil material. This value is to be subtracted from the ASTM-correctedquantity and is applied to volumes when activated. Activation takes placeby product type specified in a table. The BS&W is an integral part of allmaterial movements. The meter calibration factor is applied to all targetvolumes, when BS&W is activated.

Gain/Loss Handling with Plant-to-Plant Transfers

The two-step plant-to-plant transfer functionality has been enhanced toenable the reconciliation of individual goods issues and goods receiptsassociated with a physical shipment.

Performing Quantity Conversion Calculations When No GoodsMovement Has Occurred

The R/3 IS-Oil Downstream system provides the functions for performingquantity conversions when no goods movement has occurred. A “desk topcalculator” is provided to perform stand-alone calculations, using eitherASTM/API or customer conversion function modules.

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Checking the Results of Quantity Conversion Calculations

Functionality is provided to be used for checking the results of systemcalculations, performed either using the ASTM/API or the customerfunction modules. The result is a report that compares the system calculationwith values in the standard ASTM/API tables.

The following table illustrates the use of the R/3 IS-Oil Downstreamquantity conversion functionality. In this example, a material has astockkeeping UoM of barrels at 60 degrees Fahrenheit (B60), while goodsmovements of the material are recorded in barrels at ambient temperature(BBL). The material has an API gravity of 40 and the initial stock of theproduct is 500 B60. The table shows the changes in quantity for the followingscenario:

A supplier delivers 950 BBL of the material. The temperature measured atthe time of delivery is 50 degrees Fahrenheit. Subsequently, 500 BBL of thematerial is issued to a retail station. The temperature measured at the time ofissue is 70 degrees Fahrenheit.

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Standard Inventory Information Available

The R/3 IS-Oil Downstream component provides extensive functionality forstoring and reporting inventory information. The inventory informationstored at the different levels of the common hierarchy were discussed in thesection entitled “Product Hierarchy”. Other inventory management functionsand the reporting capabilities of the system will now be considered.

Physical Inventory

The real-time nature of SAP inventory functionality assumes that transactionsare entered into the SAP R/3 System as they occur.

When a goods movement occurs, the corresponding posting should be madeimmediately, to ensure that the system reflects an accurate view of the trueinventory position. Thus, all transactions for a given location must beentered into the system before a physical inventory count is performed atthat location. The physical inventory count consists of the following steps:

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q Select the materials and locations to be included in the count

q Perform the physical inventory count and record the results in thephysical inventory document

q Enter the physical inventory measurements in the system. These can beentered either manually, from the physical inventory document, or usingan interface to the SAP R/3 System. The quantity conversion routines,discussed in the section “Quantity Conversions Incorporating ASTM/APIProcedures” are used to calculate measured quantities into the UoMdefined for the material

q Create a „post to physical inventory difference list“

q If possible, correct the physical inventory measurements, for example ifdifferences can be traced to input errors

q Post the differences. This involves adjusting the book inventory to reflectthe physical inventory measured and the generation of the associatedfinancial adjustments.

All physical inventory results are stored in a physical inventory documentfile. The document file can be displayed online, covering multiple years.Inventory information is stored in the storage location, batch and specialstock segments of the material master.

Inventory Balancing

Each material movement is posted in the SAP R/3 System as a document,and stored in a movements history file. Material movements are categorizedby movement type. The movement type defines the nature of the movement,for example goods issue to production or plant-to-plant transfer.

Inventory balances are updated in real-time, as each transaction is recordedin the system. This ensures that the risk of reconciliation errors is small. It isassumed that any errors will ultimately be identified during physicalinventory counting.

The user can reconcile transactions and physical balances using themovements history file and the physical inventory history file. CustomizedABAP reports could be produced to display information from these files ifrequired, for example, for estimating production and consumption, storagelosses and gains or trend analysis.

Inventory Reporting

The inventory balances that are held at each level of the location hierarchywere discussed in the section “Product Hierarchy”. These balances can bedisplayed through the location structure using the stock overviewtransaction. This transaction provides an inventory on-line report, for asingle material number, at all, or selected, levels of the hierarchy.

The user can “drill-down” in the hierarchy to see all of the product inventoryfor the company, plants and storage locations within a plant. Individualbatches at a storage location are also displayed by this transaction.

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enables inventory balances in additional UoM, as well as the stockkeepingUoM, to be reported.

The SAP R/3 System provides several capabilities for assigning a material to auser-defined product grouping, for example material group. This functionalityallows the user to create his or her own product hierarchy. Customized ABAPreports can then be produced to report material balances within the user-defined hierarchy.


Blending is a common transaction in the oil industry. Product blendingincludes:

q The mixing of two different materials to obtain a new material

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Rebranding is available as a function of the Standard SAP R/3 System.

The blending (mixing) of products is supported by a bill of materials withsub-items for a given delivery of a product. The density for the new materialis recalculated based on the sub-item densities.

The rebranding is provided by a material-to-material transfer posting. Inorder to perform a material-to-material transfer posting in R/3, it isnecessary that both materials be managed in the same stockkeeping unit.

ASTM/API quantity conversions are provided for both functions.

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+LJK�/HYHO�6XPPDU\The objectives of MAP within IS-Oil Downstream are to enhance the basicMarketing, Accounting and Pricing (MAP) functionality within the CoreSAP R/3 System. The Core R/3 pricing functionality is flexible enough tosupport many business scenarios. However, the MAP enhancements sup-port functionality specifically required by the downstream oil industry.

q The ability to define the pricing date as any one of a range of dateswithin the sales cycle, i.e. it is possible to price sales deliveries based onorder, invoice, goods issue, delivery note posting, loading, delivery noteconfirmation or invoice creation dates.

q Ability to set and obtain prices by date in combination with time as wellas day of the week in combination with time.

q The abillity to determine whether a customer’s price is to be based onlocal pricing or the customer’s head office pricing rules.

q Ability to base pricing on geographical elements linked to the deliverylocation. These elements are part of a location code which is stored in thecustomer master.

q Ability to have contract-specific pricing.

q The ability to calculate and store customer specific material lists,including pre-defined quantities usually ordered and generate a pricelist out of this.

q The ability to determine whether a price condition is to apply to gross orto net volumes.

q Ability to print temperature, density and volume in all the units ofmeasure which are used for pricing.

q Capability to utilize average value calculations or user-defined formula& average pricing for products which can be based on external pricequotations (e.g. Platts, Reuters, ...). Possibility to recalculate formulaprices at month-end for invoicing purposes.

q Exclusion techniques enhanced to choose highest price.

q Capability to properly bill or exempt U.S. Federal and State Excise Taxes.

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.H\�)XQFWLRQ�%HQHILWVEnhancements to the degree of pricing sophistication allow the oil company,supported by IS-Oil, to tailor its pricing strategy, policy, and tactics to suit itscost base and its individual customers’ circumstances very precisely. Thisfeature of the system enables the sales organization to maximize the quantityand quality of revenue generated. The specific benefits are detailed below:

By allowing a variety of pricing dates at invoice creation and the ability toset prices related to a time as well as a date, the system allows a moreflexible approach to price setting. The nature of the oil products market issuch that the price of products can vary by relatively significant amountsover the period between order placement and delivery. This flexibilityallows the supplier to guard against making a loss on the trade or thecustomer being charged an uncompetitive price (and thus prejudicingfurther sales).

The head office/branch level pricing functionality improves the flexibility ofthe pricing process and allows pricing to be based on head office level ratherthan defaulting to specific prices and procedures set for the branch level.

The inclusion of the location-specific Differential Reference Code (DRC)allows prices, discounts, surcharges and taxes to be calculated based on anaccurate description of the location of where the goods are delivered.

The use of customer-specific price lists eases the process of informingcustomers of the applicable prices for a list of regularly ordered products.The provision of this facility speeds up the time taken to answer customerinquiries, thereby improving customer service and reducing business costs.

The provision of formula & average value-based pricing allows greaterflexibility in price setting. When discussing pricing with a customer, theability to set prices based on market averages is an added benefit whichassists in the selling process.

The contract-specific pricing allows the oil company to identify, target andtailor the service it provides to specific high priority customers according tothe sales strategy it is pursuing. Negotiating medium to long term contractswith key target customers can ensure mutually beneficial continuity ofbusiness. By attaching a pricing element to the contract this businessrequirement can be fulfilled.

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The following MAP enhancements are provided within the IS-Oil DownstreamSystem:

The Core R/3 System currently proposes order pricing with the defaultinvoice pricing date. If required, this date can be manually overwritten witha value entered by the user. If the user chooses to change the pricing date,the system recalculates pricing for the invoice.

In the oil business, the order cycle from posting the order through to orderdelivery could take several days during which the price could changesubstantially. Hence, functionality is required to allow a variety of dates tobe chosen for calculating the price when the invoice is created. These defaultdates include the order date, the goods issue date, the date of loading,delivery date and invoice date. In addition, the user can set prices during thesales cycle based on the date and time, or based on the day of the week andtime.

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Some organizations choose to make pricing arrangements at their headoffice and at the branch office level. Therefore, when making a sale to acustomer who has a headoffice, it is necessary to define whether to use thepricing arrangements negotiated with the head office, or those negotiatedwith the branch.


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The pricing arrangements can be broken down into two components:

q Pricing procedure

q Customer-specific prices

The head office and the branch customer may be assigned different pricingprocedures and the customer-specific prices may also be different.

IS-Oil delivers the tools for using the head office prices and/or pricingprocedure when selling to the branch.

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The location-specific pricing functionality (technically implemented usingthe Differenctial Reference Code - DRC) allows a more accurate definition ofthe location of each sale. This enables pricing to take into account othergeographical factors than those that are standard in the customer master.

This functionality allows pricing conditions to be based upon the DRC codeitself, or upon one of the location grouping attributes of the DRC. Forexample, a wide area pricing zone could be used to determine surcharges ordiscounts applicable to deliveries in that area. The DRC has six differentattributes. They are:

q Country

q Region/State

q Metropolitan Indicator for specific city or region

q Wide area pricing zone: groups DRCs together, for example for pricingof discounts


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q State license fee zone: groups DRCs together, for example for pricing oftaxes

q Pricing DRC: for referring one DRC to another DRC

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Contract specific pricing allows pricing conditions to be set for a customerand then to be applied to all call-offs from that contract. This ensures thatwhen pricing is done (at order or invoice creation), the correct contract-specific price is used.

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The customer price list allows net prices to be calculated for a pre-definedlist of products. The price list contains the quantity usually ordered by acustomer, along with the unit of measure.

The price list is not part of an order transaction; it is created for customerinformation purposes only. The list does, however, use the pricingfunctionality in the same way as the order or invoice creation transaction.

The materials and quantities are defined as master data, and cannot bechanged at the time that the customer price list transaction is run.

When the price list transaction is executed, the user has to specify pricingrelevant data like customer, sales area, order type and pricing date and time.

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The ability to invoice customers based on either gross or net volumedelivered is required by oil companies in some countries for eithermarketing or legal reasons. Gross volume is for example ambient liters andnet volume is for example liters corrected to 15C.


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The key factor is generally the country and region where the ownership ofthe product changes. However, some customers have a special arrangementwhich may override the general rule.

The IS-Oil Downstream enhancement allows the maintenance of a singlecondition record in either a gross or net unit of measure. The system thenuses criteria, defined by configuration, to determine whether the gross or netvolume is used during pricing when calculating the condition value.

The print program for invoices has been enhanced to enable you to displayHPM data. This allows the temperature and density information from thedelivery to be displayed on the invoice.

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IS-Oil Downstream functionality includes pricing based on the (average)value of externally quoted materials over a defined period of time.

External price quotations from organizations such as Platts, Reuters, etc. canbe interfaced to the SAP system. This is achieved by means of a configurableroutine delivered by IS-Oil. The quotations are then referenced in thecreation of pricing formulas.

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The formula pricing functionality is integrated into the creation of pricecondition records using the core condition technique. Formula and averagepricing functionality is available within the Sales & Distribution (SD)Module, and is integrated with Core pricing in the Material Management(MM) Module and exchange fees.

A condition type can be configured as “formula based”, which then allowsdefinition of a formula rather than a rate when creating a condition recordfor this condition type. Once a formula based price condition record exists inthe system, it is possible to retrieve the formula using the conditiontechnique during transactions in the Core System.


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The formula and average condition type can be included in pricingprocedures in the same way as standard condition types. At the time that thepricing takes place, the “formula pricing engine“ evaluates the formuladefined for each formula based condition type to give the rate which is thendisplayed on the pricing screen.

As in the daily business practices of a company, the average period may notbe over at the time of order/invoice creation so that the price calculated canbe a provisional price rather than the final price. The status of the formulaevaluation, i.e. final price or provisional price is indicated by a statusindicator, which is held on the formula value display screen in thedocument.

There is additional functionality to define provisional calculation rules,which allows the user to specify a different average period for calculatingthe provisional price if this is required. It is possible to create a differentialinvoice in SD, which debits/credits the difference between the provisionaland final prices.

A pricing formula is made up of two parts: the formula definition, whichdefines a reference to the quotations and the calculation rules, which definethe average period.

Formula Definition

The formula consists of two “terms“: the A term and the B term. Both containan unlimited number of component lines.

An external quotation may be referenced within each component line. Asurcharge may be added within each or as an individual component line,possibly with a different currency and UoM from the quotation.

A currency exchange rate type is assigned to each line item of the formulaterm. This is a core field and is customizable in the IMG global settings. Acurrency exchange rate type represents a source of information on currencyexchange rates. The exchange rate type is used to convert both the quotationand the surcharges.

The total price for each term is determined by adding the value of thecomponent lines together. The value of the component line may be positiveor negative, thus allowing for differential calculations.

Finally, a rule defines how to determine the overall value of the formulabased on the value of the A term and the value of the B term. For exampleusing the higher of the A term and the B term as the formula value.

Calculation Rules

The calculation rules define the time period over which the average value ofthe quotations in the formula is calculated and define the currencyconversion method.

The average period can be defined using fixed dates or using “variables”around a key date in the transaction, for example a three day average, whichconsists of one day before the delivery date, the delivery date and one dayafter the delivery date.

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For currency conversion, either the daily exchange rates or an averageexchange rate can be used. For average exchange rate calculation, theaverage period can be defined in the same way as the quotation averageperiod. For example, for the above three day average quotation period onecan specify to use the average exchange rate of the working days of themonth prior to delivery.

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This is an enhancement of the standard SAP condition exclusion techniquewhich allows the user to define rules that specify which condition recordsare and are not included. For example, should multiple discounts apply tocustomer/material, the system can be configured to use the highest discountand omit the other applicable discounts.

The IS-Oil enhancement allows selection of the highest price (worst price forthe customer), whereas the Core R/3 System only allows selection of thebest price for the customer.

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Several enhancements have been made to allow accurate invoicing of U.S.state and federal excise taxes:

New fields for origin and destination and new condition types have beencreated to facilitate proper tax calculation for taxes due at either the origin ordestination of the delivery.

Routines have been developed to identify when a customer has a federal orstate excise tax exemption certificate.

Prices as well as taxes can generally be entered with six decimal places.

For further information, refer to the chapter on TDP.

.H\�,6�2LO�)XQFWLRQV�6HUYHG�E\�WKH�&RUH�5��6\VWHPThe basic pricing functionality is provided by Core R/3. In summary, thisincludes the following:

q User-definable condition types

q Condition types can be set for gross prices, discounts and surcharges

q Order level and item level pricing

q Gross prices can be defined by a variety of parameters including:material, customer/material and currency/price list type/material

q Discounts can be set for a given time period or applied continuously

q Discounts and surcharges can be set at an item or order level

q Discounts and surcharges can be set manually, if required

q Any combination of fields in the sales document can be used as thesearch key for the appropriate pricing condition records


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q The access sequence by which the search for valid records is made canbe defined by the user

q Calculation types can be defined, for example whether a discount is anabsolute amount or a percentage

q Pricing conditions can be defined as statistical, i.e. they are used forstatistical analysis, not for setting prices

q Multiple valid pricing records can be used and rules are set to determinethe correct record(s) using the condition exclusion technique.

q Pricing based on Different Units of Measure (UOM)

Core R/3 supports the requirement that an order can be made indifferent UOMs than the condition record, and pricing can still occur.The system converts the quantity ordered into the UOM of the pricingcondition record and price accordingly. This price is displayed to theuser. The UOM on the order does not change. The condition type’s UOMcan be selected from a pre-defined list. The volumes in various UOMscan be printed on the invoice in an IS-Oil enhancement.

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This area of functionality includes the pricing of a sale according to the dateof a specified event in the sales order cycle. The life cycle of an order canencompass several days or pricing cycles. The sales order, delivery note,goods issue, and invoice are all likely to occur on different dates. Sincedifferent dates may be set up with different pricing condition records, thechoice of which pricing date to use at invoice creation directly affects thecalculated net price.

During user customization, each invoice type is defined with a specificdefault pricing date to be used during invoice creation. In the IS-OilDownstream System, the following alternative pricing dates are available:

q Order date/time

q Invoice date/time

q Actual goods issue date (from the delivery document)

q Loading date (from the delivery document)

q Delivery date (from the delivery document)

If a manual pricing date and time is entered at invoice creation, the logic fordefining alternative pricing dates is not processed, and the system acceptsthe manually-entered date for pricing without further validations, except ifthe date entered is in the past. In this particular case, a warning message isissued.

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In addition, the IS-Oil Downstream time pricing functionality offers thepossibility of creating pricing conditions whose scale is either date and timedependent or day of the week and time-dependent. The scale which can beapplied to standard price conditions is defined in the configuration of thecondition type.

An example of the pricing date procedure is shown in Figure 3.1. In theexample, an order for 10,000 liters was recorded on the first of July. Thedelivery note was processed on the third of July, the goods issue on the fifthof July, and the invoice processed on the seventh of July. All four documentdates have different prices in the associated pricing table. The selection ofwhich date to use for pricing directly affects the final price for the sales orderto the customer.

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Core R/3 pricing uses the pricing procedure defined in the sold-to partnerand the sold-to customer specific prices if defined. IS-Oil delivers the tools touse the head office prices and/or pricing when selling to the branch.

A head office/branch indicator can be set on the branch customer master toshow whether the head office or branch pricing procedure should beapplied.

The indicator can only receive input if a head office is defined in the accountmanagement data for the branch. In addition, two new requirementsprograms (403 and 404) have been developed for use within accesses for anycondition type. When allocated to an access sequence, 404 accesses pricingcondition records defined for the customer, while 403 accesses pricingrecords defined for the head office of the customer (if head office is defined).

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With the Core functionalities, the access sequence and the exclusiontechnique, it is then possible to define the circumstances in which each priceis used, e.g. always use branch price if one is defined, or use the lowestprice.

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For pricing purposes, the location-specific pricing functionality (using theDifferential Reference Code - DRC) represents a geographical region that canbe used for setting prices, discounts, surcharges and taxes. A standard ordercan have multiple customers (business partners) associated with it: theactual purchasing customer (sold-to party), the consignee (ship-to party), thebilling-party and the payer, although they may all be the same customer.The ship-to is the customer who takes actual receipt of the ordered material.The DRC is defaulted from the customer master of the ship-to party to theorder header and the item

and can be overwritten. If a DRC is changed in the order, the order isrepriced to account for this change. If the ship-to party is changed in theorder header/item, the DRC is redetermined and the order is repriced.

The DRC has six different attributes which all can be used individually forpricing. The DRC itself can also be used for pricing. They are:

q Country

q Region/State

q Metropolitan Indicator

q Wide area pricing zone

q State license fee zone

q Pricing DRC

The country and region fields have the same possible values as the Core R/3country and region. The MI, WAP and SLF fields are DRC-specific fields andmust be defined in the configuration tables before they can be defined asattributes.

The Pricing DRC allows a number of DRCs to point to the same DRC forgeneric pricing purposes for example, while freight surcharge conditionsmay be set at a DRC-specific level, discounts for certain types of customersmay be at a group of DRC levels. So while neighbouring DRCs 1,2,3, and 4may all have specific freight surcharges, the discount for a certain type ofcustomer may be based on DRC 1 and DRC 2,3 and 4 point to 1.

An example of the Differential Reference Code table is shown in the figurebelow. An order was created where the ship-to partner is located in Boston,Massachusetts. For this region of the United States, certain price conditionsexist. The region code for Massachusetts has a specific tax rate which alsoincludes the Boston metropolitan area, and the wide area pricing region ofthe Eastern half of the state. Through the DRC, all three pricing indicatorsare combined under one indicator, which is linked to the customer master.

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When the order item is displayed, the DRC of 12345 is defaulted. If thedefault DRC is not valid (for example, the goods are not delivered to Boston,but to another final destination, a different Metropolitan code is needed), theoperator can manually change the DRC to the correct value.

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The Core R/3 System allows the user to manually enter a contract price atcontract creation. However, the result of such a manual price is thatwhenever the function “new pricing” is carried out during call-off or invoicecreation, the manual price will be lost and would thus have to be re-entered.

The IS-Oil enhancement offers the basis for contract-specific pricing, bycopying the contract number into all subsequent documents, i.e. call-off,delivery and invoice. This field is included in the SD Pricing Field Catalog. Acondition record can then be created which includes the contract/itemnumber as one of its key fields in the access sequence.

There is an enhanced matchcode on contract call-off, enabling the selectionof contract numbers by sold-to party. This is available on contract pricingcondition record maintenance screens.



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The above graphic shows a representation of the document flow with regardto contract-specific pricing. Contract-specific pricing occurs at the contract(order entry) and invoice level of the document flow.

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Pricing based on a pre-defined list of products is a feature of the IS-OilDownstream component. The functionality allows lists of products (andassociated quantities) to be defined for each customer. The list may containmaterials of different material types.

This functionality is used for customers who regularly order the sameproducts and same quantities. In such cases, the ordered products mayalways be the same but the prices may change frequently. Every time thepricing list is accessed, the prices are recalculated using pricing conditionrecords valid for the specified pricing date and time.

The IS-Oil MAP enhancement allows the list of products to call the pricingfunctions and the list to be priced. This pricing operation is not part of anorder transaction. The pricing of the list can be carried out for differing datesor differing condition records depending on the needs of the customer. Thisfunctionality simplifies and quickens the process for informing customers ofthe current prices for regularly ordered products and quantities.

Each customer can have more than one price list. Each customer may haveseveral, but different, lists of regularly ordered products and quantities, andeach list can be priced separately as required.

The IS-Oil MAP enhancement includes a table which can be used to definethe list of products and quantities. A transaction has been created whichuses this table. This transaction calls the standard R/3 pricing procedures.The pricing procedure selected for the pricing depends on the order type

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(entered when selecting a list for pricing). The standard R/3 pricingprocedure has not been altered. The price list functionality operatesindependently of the order process.

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In Core R/3 the system uses the volume measured in the condition recordunit of measure to calculate the condition value. Conversion factors aredefined by the user. The ASTM functionality is used, where applicable.

The IS-Oil enhancement in this area provides the ability to maintain a singlecondition record and use either gross or net volume for pricing, based onuser defined criteria. This functionality only applies to the SD Module.

These criteria can be defined in two places:

q Gross/net pricing indicator - condition type

q Gross/net pricing rule - document line item

The gross/net pricing indicator, has been added to the condition type. Thisindicator defines whether the value of the condition type should always becalculated using the gross or net volume, or whether the gross/net rule onthe line item should be examined. If the value is blank, then normal CoreR/3 processing will occur.

The gross/net rule for the line item provides the user with a user-exitcapability to define a means by which to determine whether to price basedon gross or net volume.

The line item rule is determined using a table. Keys in the table are thecountry and the region in which the title of ownership passes. This locationis determined by using the Incoterms.

Where special rules apply to a customer, the customer number can beentered in this table.

Formula & Average Value-Based Price Calculations

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Formula & average value-based pricing functionality allows the calculationof prices based on the value of externally-quoted materials over an averageperiod. This functionality is fully integrated with Core R/3 pricing using theCore condition technique. The key configuration feature of formula-basedprice condition types is that the calculation type is Q (formula and averagecondition). This allows you to define a formula rather than a rate whencreating the condition record. In the formula, the reference to the externalquotation(s) is defined together with the average period.

Every time pricing is called, the formula is evaluated and the pricingcondition rate is calculated and then displayed on the pricing screen. Thestart and end dates of the average period are determined from thecalculation rules (final and provisional) in the formula definition. Some or allof the required quoted prices for the average value calculation may be in thefuture with respect to the system date on the day that the condition is

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evaluated. In this case the system calculates the “best price” using the periodup to the system date.

The formula evaluation status indicator which is held on the formula valuedisplay screen shows the status of the formula, for example the formula wasevaluated using the provisional rules.

External quotations are held in a table. The key of this table is the source (forexample Platts, Reuters), type (for example high, low) the quotationreference (for example Platts quote NWE/PREUNL/C/FOB) and the date.The possible values of the keys and quotation check data are defined in theconfiguration tables. A user exit routine exists which interfaces the formulawith the external quotation source using either the IS-Oil Quotation table,another user-defined table or an interface directly to an external datarepository.

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Formula Definition & Maintenance

The formula definition screens are common to condition maintenance and tothe pricing screens within sales and purchasing documents. Authorizationobjects are provided to control maintenance in the documents.

There are two main data entry screens:

q Formula term entry screen

q Calculation rules screen

The Formula Term Screen

You define the quotations, surcharges and the two weighting factors whichcreate the price on the Formula Term Entry screen. The formula consists oftwo “terms“, the A term and the B term. Both contain an unlimited numberof component lines. The total price for each term is determined by addingthe value of the component lines together. The value of the component linemay be positive or negative, thus allowing for differential calculations.


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An external quotation may be referenced within each component line. Thequotation is identified by the source of the data (for example Platts), thequotation type (for example Low, Mid or High) and the quotation number.The quotation description is displayed for reference.

A surcharge may be added within each component line, possibly with acurrency and UoM different from that of the quotation. It is possible to entera surcharge on a component line which does not reference a quotation (forexample the quotation fields are blank for the component line).

A currency exchange rate type is assigned to each line item of the formulaterm. This is a Core field, customizable in the global settings of the IMG. Acurrency exchange rate type represents a source of information on currencyexchange rates. The exchange rate type is used to convert both the quotationand surcharges into the formula rate display currency (also defined on thisscreen). If this field is blank, then all values are converted to the documentcurrency by the formula pricing engine within pricing transactions (forexample by default rate currency = document currency).

A rule is assigned to each item on the screen, which decides how the valueof the line is calculated. For example, multiply the sum of the quotation andthe surcharge field by the product of the two factors.

Finally, a rule defines how to determine the overall value of the formulabased on the value of the A term and the value of the B term. For example,take the higher of the A term and the B term as the formula value.

There are two buttons at the bottom of each term which lead to the screenswhere the calculation rules are defined.

The Calculation Rules Screen

The calculation rules define the time period over which the average value ofthe quotations in the formula are calculated. There are two main areas todefine:

q the means by which the price quotations are averaged

q the way that the currency exchange rate is determined

Defining the Averaging of the Price Quotations

There are two possible means of defining the start and end dates of theaverage period. The first method is to define a fixed “date from“ and “dateto“ for the quotation average period. The second method is more involvedand works as follows:

1. The starting point is to identify a key date in the transaction concerned,for example the pricing date or the delivery date. This key date is the“reference date“. Some examples are delivered with the IS-OilDownstream component, and you can add further possibilities bycustomizing the “reference date“ user exit

2. An “offset“ is then applied to this reference date in order to arrive at the“event date“ (also referred to as the “offset reference date“). Forexample, offset the reference date to the Monday of the previous week.Again, some examples are delivered with the IS-Oil system, and the


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user can add further possibilities by customizing the “reference dateoffset“ user exit.

3. The next step is to define the period before the event date and the periodafter the event date over which the average value is calculated. Thefields “period before“ and “period after“ are used for this definitiontogether with the “Time Unit of Measure“ routine, which is specified.The “Time Unit of Measure” routine determines the start date and theend date of the average period based on the values entered in the“period before“, “period after“ and “exclude event date“ fields.

m If the quotation factory calendar defines that day as a non-workingday, then the system uses the weekend rule to decide which priceto use for that day. An example is delivered with the system: forSaturday, use Friday’s price, for Sunday use Monday’s price. Youcan add further possibilities by customizing the “weekend rule“user exit.

m If the quotation factory calendar defines that day as a holiday, thenthe system uses the non-posted day rule to decide which price touse for that day. Again, you may customize non-posted day rules,as the field is defined as a user-exit.

m Finally, you have to define the way that the system responds whena quotation is simply missing, i.e. when, according to the quotationfactory calendar it should exist. In this case, the system uses thecustomizable “No-quotation exists“ routine.

Defining the Currency Conversion for the Average Value Calculation

In principle, there are two methods of converting currencies within theaverage value calculation: using daily exchange rates or using averagevalues of exchange rates. There are two fields in the calculation rules screenwhich allow you to define which of these techniques is to be employed. Thepossible values of these fields are defined by creating user exit routines forthe “daily currency rule“ and the “average currency rule“.

q In daily currency conversion routines, the price for a quoted material ona certain date in the required currency is determined by multiplying thequotation price for that day by a currency exchange rate for the sameday. This exchange rate converts the price from the quotation currencyto the required currency. The IS-Oil System delivers one example of thisroutine, where the quotation is multiplied by the valid currencyexchange rate for the same day.

q In average currency exchange rate routines, the pricing calculationengine determines an average value of the currency exchange rate over aperiod of time defined by the currency exchange calculation rules (suchas currency time UoM, currency period before, currency period after,etc.) which are defined on the same screen of the formula. This averageexchange rate is then used for all currency conversions for that term ofthe formula.


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External Price Integrity Check Program

A factory calendar is used to define on which days quotes are expected ornot expected. The external price integrity check program checks for incorrectexternal price quotations using the factory calendar as defined in thequotation check table. The integrity check program can be used to search forprice quotations that are not necessary or for quotations which are incorrect.The program searches for the following quotes:

q Quotes that diverge from the previous value by a specific percentage oramount

q Missing quotes

q Quotes that were not quoted (entries with a No Quote indicator)

q Quotes that are not necessary

The external price integrity check program generates reports using thefollowing selection criteria:

q Source

q Type

q Quote

q Date

q Percentage

Second Level Price Analysis

You can use the second-level analysis to display the quotations andexchange rates which were used to calculate the value of a formula, of aformula term, or of a formula item.

Second level price analysis is accessed from the existing first level analysis.Second level price analysis generates a report which displays a detailedanalysis of the data used in the formula evaluation calculations. The analysiscan be performed for the entire formula, for either term, or for one termitem. IS-Oil provides default routines and the default report ROICANAL.

To use second level price analysis instead of the default routines, thefollowing activities are required:

q Maintain a report to define output and the analysis report data

q Define the format for the item section output

q Define report names and other routines (header and item format, errorhandling, data capture) in the condition configuration


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Master Repository

It is possible to define a formula master in which formulas are stored. You cancreate, change and display formulas using the formula repository. Everyformula has a unique numeric or alphanumeric identifier. When maintainingcondition records, you can copy formulas in the formula repository or inpurchase documents or sales documents�

The formula master record contains the following predefined search fields:

q Customer

q Material

q Plant

q Material group

q Vendor

The predefined search fields in the formula master can be redefined. Duringformula maintenance, it is possible to retrieve a predefined formula from theformula master. In addition, you can determine your own selection criteria,which help identify a formula.

Authorization on Formula Maintenance

Access is restricted to formula maintenance in SD and MM documents and theformula master, using the core R/3 authorization technique. Additionalauthorization is provided to apply restrictions to sales documents, billingdocuments, purchase documents, and information records. The authorizationconcept also applies to formula and average based fees.

Repricing at MM Invoice Verification

The proposed value for an invoice item can be recalculated based on theformula. Invoice verification is performed according to the recalculation.

MM Purchasing Documents

It is possible to use formula-based price conditions with contract, order,invoice receipt, and goods receipt purchasing documents.

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The differential invoice function creates an invoice in SD which debits orcredits the difference between the preliminary and final prices, when thefinal price is known. Customizing settings make it possible to individuallydefine the circumstances in which a differential invoice is to be created. Forexample, when the final price is not yet known. The differential invoice isindependent of invoice cycles and invoices any outstanding cycles.


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A differential invoice itemizes the differential amounts at the condition typelevel, that is, the differential amount for each condition record in the pricingprocedure of the differential invoice is calculated. If the system is unable tocalculate the differential amount at the condition type level, error handlingcan be specified or customized by the user at the invoice type level. IS-Oilprovides an error-handling exit to cancel the existing billing documents andrebill at the new price.

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A customer price list allows net prices to be calculated for a predefined listof products. The price list contains the quantity usually ordered by acustomer along with the unit of measure.

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The Differential Reference Code (DRC) represents a physical geographicspecification used for calculating location specific prices, discounts andsurcharges. The DRC allows prices paid by customers to reflect supplier’scosts and permits areas with the same taxes or prices to be grouped together.Crucially, the DRC is used to set prices based on the destination of adelivery, for example on the location of the ship-to-party, however this canbe manually overridden in the sales document. The geographical elementsof the DRC are:

q Region/State

q Metropolitan Indicator (MI)

q Wide Area Pricing Zone (WAP)

q Pricing DRC (combines several DRCs for pricing)

q Country Code

q State License Fee Zone (SLF)

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One of the geographic elements within the Differential Reference Code(DRC). It may be used to assign pricing conditions according to the citycode.

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One of the geographic elements within the DRC (Differential ReferenceCode). As a company may have hundreds of DRCs defined in their system,it sometimes makes practical sense to group together some of these DRCswhich have the same pricing rules.


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One of the geographical elements within the geographical reference zone. Itis used to establish tax or pricing conditions for a group of customers whichhave been entered in the system as coming from the same gegraphical area.

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Allows pricing based on the time of the day in conjunction with the pricingdate or with the day of the week.

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The wide area pricing zone is one of the geographic elements within thedifferential reference code (DRC). It may be used to create pricingconditions.

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+LJK�/HYHO�6XPPDU\The objective of MCOE is to enhance the Marketing Contracts and OrderEntry functionality in the Core R/3 System. The enhancements providespecific functionality required by the downstream oil industry.

Part of the required MCOE functionality is already supported in the CoreR/3 System; the remainder is implemented in the IS-Oil Downstream MCOEenhancement.

q A streamlined, fast order-entry process, with various defaults such aspreferred supply plant for each order item, sales area from the customer,sold-to party for ordering ship-to

q Ability to indicate final delivery against a call-off and reflect the actualdelivered quantity in the contract in the contract UoM

q Ability to specify restrictions in the contract which apply to call-offdetails, e.g. product, quantity, ship-to party

q Ability to specify multiple ship-to parties in a contract and selection ofone at call-off entry time

q Ability to check the sold-to/ship-to relationship defined in the customermaster

.H\�)XQFWLRQ�%HQHILWVThe key function benefits are as follows:

The order-entry process is enhanced to speed up the process of order taking.Due to the high transaction volumes, large number of customers, largenumber of products and variety of delivery locations and methods, theprocess can be sped up by the automatic determination of data. Thisimproves the speed and accuracy of the order-entry process.

The key benefit within a tele-sales environment is that the customer need onlyspecify his customer number, material and quantity in order to place an order.The system automatically determines the supply plant, storage location andsales area without any required input from the user. The IS-Oil order alsoaccepts a ship-to customer and links it automatically to the sold-to customer.

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These benefits result in a higher degree of customer satisfaction by requiringless customer time necessary for placing an order. It also reduces costs byallowing a higher order throughput.

The system can be adapted to interface to an automated telephone orderingsystem. By keeping the information required to a minimum, the customercan enter an order via telephone without needing an operator to accept it.

The quantity correction when calling off orders ensures that the system has amore accurate record of what has been delivered to the customers. Thisensures that the contract data is more accurate.

The modifications to pricing improve customer service by allowing changesto the ordered UoM to be made while taking the order. This also allows thecustomer to be advised of what his order will be in various UoMs withoutactually changing the order UoM. Enhanced customer service is a keycompetitive advantage in a commodity market and this enhancement helpsmake the company more competitive.

Checking the call-off order for adherence to contract terms ensures thatagreed terms will be observed.

.H\�,6�2LO�)XQFWLRQV�6XSSRUWHG�E\�WKH,6�2LO�'RZQVWUHDP�0&2(�&RPSRQHQWThe following MCOE enhancements are provided in the IS-Oil Downstreamsystem:


Within a downstream oil company, considerable business benefit is realizedby the ability to take orders quickly - for example, in response to telephoneorders. In this process, the manual determination of data is minimized as faras possible in favor of having the system automatically determine fields forthe order. For instance, the selection of supply plant and storage locationcan be automatically determined and the sales area can be defaulted fromthe customer. The order-taker is no longer required to enter the salesorganization, distribution channel and division on the initial order entryscreen. The ship-to party can be entered as the ordering party and thesystem finds the appropriate sold-to party automatically.

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The functionality concerning calling off orders from a contract is enhancedwith respect to differing units of measure (UoM). The functionality is alsoenhanced to support those cases when the delivered quantities differ from theordered quantities: the delivered quantity is subtracted from the availablecontract volume.

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The basic system of pricing agreements based on contracts is enhanced in IS-Oil Downstream so that sales documents created with reference to thecontract include the contract number. Contract specific pricing allowsspecific pricing conditions to be set up for a customer and then to be applied


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to all call-offs from that contract. This ensures that when pricing is carriedout (during order or invoice creation), the correct contract-specific pricing isused. For more details, see chapter on MAP.

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Functionality to add validation to certain fields in the call-off to ensure thatthe values entered do not exceed/differ from the terms agreed in thecorresponding contract.

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Functionality to enter multiple ship-to partners in the contract header toindicate that all contract items are applicable to those ship-to parties. Whencalling off an order against a contract with multiple ship-to partners defined,a selection screen appears so that the user can choose the ship-to for this call-off.

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New fields in the delivery document to allow entry of more detailed externalinformation (for example bill of lading number) and possibility to indicatethat no further deliveries will take place for a call-off. The latter will bereflected in the call-off and contract.

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Functionality to prevent assignment of the same ship-to party to multiplesold-to parties and report the sold-to/ship-to relationship.

.H\�,6�2LO�)XQFWLRQV�6HUYHG�E\�WKH�&RUH�5��6\VWHPThe Core R/3 System covers only some functions required by thedownstream oil industry. IS-Oil Downstream meets this requirement withfunctionality which adds to the Core functionality.

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The existing R/3 order entry process supports some of the requirements of theIS-Oil fast order entry enhancements, e.g. some customer data is alreadyprovided within the order entry transaction. Another example is availabilitychecking: this is already in R/3 but is enhanced further in IS-Oil Downstream,including proposal of alternate sources of supply at the order item level.


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The R/3 System currently supports orders where the called-off order UoMdiffers from the contract UoM.

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The order-entry department at a downstream oil company is faced with thefollowing challenges:

q High transaction volumes

q Large number of customers

q Large number of products

q Large number of possible delivery locations

q Wide range of possible delivery methods

Therefore, the order entry process needs to be as quick as possible withautomatic determination of data, where possible.

The Core order entry process within R/3 allows a significant amount of datarelating to the order to be available and automatically determined when theorder is taken. This data is available via the various pull-down menus withinsales order-entry processing.

In IS-Oil Downstream, no separate “fast order” entry path can be created.Rather, the existing order entry process is enhanced to meet the requirementsof the oil industry.

The following details show the functional enhancements to the current orderentry process.

Automatic Allocation of Order Type, Supply Plant and Storage Location

The Core R/3 System automatically defaults the last order type used. Theuser can override the order type defaulted if desired. The exception to this isthe first time the transaction is used in a session, the user must select theorder type (i.e. there is no initial automatic default).

The Core R/3 System selects a default supply plant. This selection isdetermined from the customer master record of the ship-to party or thematerial master record. The selection is automatic, but can be manuallyoverridden. In IS-Oil Downstream, the supply plant selection is enhanced toinclude full availability checking across all the preferred and alternativeplants.

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Sales Area Defaulting

In Core R/3, the sales area needs to be entered on the order entry screen.

On the IS-Oil entry screen, after a customer has been entered, the systemsearches for the corresponding sales areas to which it is assigned. If only onesales area is found, then it is automatically defaulted in the Sales Area fields.If several sales areas are found for the customer, then a popup appears,prompting you to choose one of the sales areas. The entry selected is thencopied into the sales area fields.

There is also a pushbutton that can be used to trigger the sales areadefaulting functionality on request. The popup shows all the valid salesareas for a particular customer, if it is assigned to several sales areas. Thisoption is only possible if there are no line items on the order.

Fast Order Entry Fields

The following fields are mandatory in the fast order-entry transaction:

q Order type (one-time)

q Sold-to or Ship-to party

q Material

q Order quantity

q Customer purchase order number (depending on configuration)

The following fields can be defaulted:

q Sold-to party (if ship-to is entered as ordering party)

q Sales organization

q Distribution channel

q Division

q Handling type

q Item category

q Plant

q Contact details

Speed and accuracy are optimized by limiting the number of mandatoryinput fields and maximizing the number of defaulted fields.

Core R/3 allows the order-taker to select and copy the last order from thesold-to party. IS-Oil enhances this function to allow the order-taker to selectand copy the last orders from a combination of sold-to and ship-to customers.

Line Item FunctionalityWithin Core R/3, some data is displayed in the header during this process.Further information on the customer is quickly available via the specificfunction buttons or pull-down menus (within the order entry transaction).

The Core System carries out validation checks on the data entered in the lineitem fields. In addition, enhanced availability checking is carried out in theIS-Oil Downstream System.

The system is enhanced to allow the handling type to be displayed at the lineitem level. This code establishes how a material that is subject to excise duty

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will be used by the customer. In the IS-Oil Downstream System, the handlingtype is used to determine the excise duty status of the material/customercombination (see TDP).

The system defaults a handling type. This comes from either the customermaster record or the customer/material information. Both these areas areenhanced to include handling type fields. The default handling type can bemanually overridden with a value entered by the user. The user selects froma pre-defined list of handling types. The system is enhanced to provide a listof handling types.

Availability Checking

The IS-Oil Downstream enhancements in the MCOE area are based on theavailability check functionality in the Core R/3 System.

Within Core R/3, availability checking is carried out by using the defaultsupply plant in the line item. The default supply plant comes from thecustomer master record or the material master record. When creating orchanging an order, this default plant can be manually overridden (selectedfrom a list of possible supply plants) by the user. The availability check isthen carried out against the selected plant. Within the Core R/3 System, thischeck runs only against that one plant.

The IS-Oil Downstream MCOE enhancement allows for the creation of a listof alternative plants for availability checking. If the default plant does nothave sufficient availability, then the first alternative plant is checked. Thesystem then searches down the pre-defined list of alternative plants until aplant with availability is found. A total of 4 alternative plants can bespecified. These are manually set by the user prior to order-entry.

The availability checking functions which are carried out on each alternativeplant are the Core R/3 functions, for example static checks (based on thetotal available quantity at a plant) or dynamic checks (taking into account allplanned receipts and deliveries) can be configured; replenishment lead time(RLT) can be included or excluded from the calculations.

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In IS-Oil Downstream , if no plant has the required availability, the systemdefaults back to the initial plant and warns the user of the shortage. This“warning” is the Core R/3 window: “Standard Order: Availability Control”.This allows the user the normal options of choosing partial delivery,rescheduling the delivery date, or accepting a lower, confirmed orderquantity. This applies to the initial default plant.

Line Item Category

The Core R/3 System supports the allocation of item categories to the lineitems on an order or any other sales document. This is used to determine therequirements on the line item (for example a text line would have the itemcategory of “text” and would not be part of any pricing calculation). Theitem category controls pricing, billing, delivery processing, stock postingsand the transfer of requirements. For each document type, certain itemcategories are permitted. The way each line item category is processed iscontrolled by control elements. The system automatically allocates the lineitem category to each item on the order based on the sales document typeand material. The user has the option of manually overriding the itemcategory, if required.

The Core R/3 System’s automatic allocation of item category is enhanced toallocate each line item with an item category determined by the customer/material combination. The customer is identified by a customer classifi-cation. The Core R/3 System currently supports this customer classificationcode. The material is identified by the material group which the R/3 Systemcurrently supports. The customer classification/material group thus definesthe item category. In IS-Oil Downstream, this is defined in a new table. Theitem category found by this search overrides that set by the document type.

Thus, for example, if a customer group has a material normally deliveredfrom consignment stock, then the relevant table entries might be:


The business situation addressed by this functionality concerns call-offsfrom contracts. Typically, a contract is set up for a customer and thenvarious sales orders are created, which call-off from the contract. Core R/3functionality supports this process.

The contract specifies various materials and associated quantities and unitsof measure (UoM). The total price of these materials is then determined.

The order call-off need not be in the same UoM as the contract. The CoreR/3 System supports this and converts the called-off UoM to the contractUoM in order to update the contract accordingly. The UoM on the orderremains unchanged.

The enhancements to this process are as follows:

Correction for Final Delivery Quantity

The situation this addresses is one in which the actual final delivery quantityagainst the call-off does not equal the original quantity in the call-off. TheCore System did not update the contract with the actual final delivery

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quantity. It only updated the contract with the original quantities in the salesorder. The enhancement indicates when the final delivery has been madefrom the call-off and then updates the contract accordingly with the actualdelivered quantity. In addition, the UoM of the delivered quantity need notbe the same as on the contract, as the system converts it to the contract UoMand updates the contract accordingly. Depending on the UoMs used, thisconversion may require the use of ASTM (American Society for Testing &Materials) conversion functionality.

The user indicates when a final delivery has been made by using the finaldelivery indicator in the delivery document. When the final delivery ismade, the system does the following:

q Calculates the total quantity called off in the order UoM

q Calculates the total call-off quantity in contract units of measure (thismay utilize ASTM functionality)

q Updates the contract called-off quantity (released quantity)

q Sets call-off status to “completed”

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It is sometimes necessary to have price agreements that are related to aspecific contract. It is therefore necessary to price call-offs based on theoriginal contract. The IS-Oil enhancements offer the basis for this functionalityby copying the contract number into the call-off and any subsequentdocuments.

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When call-off orders are entered against a contract, the system proposesthose contract items which have not been fully delivered and which have notbeen set to “completed”.

Call-off quantity and other item data, like unit of measure, ship-to party andpayment terms are defaulted from the contract. The Core R/3 System allowsthose details to be changed during the call-off, as well as entry of additionalitems which were not specified in the contract.

The IS-Oil enhancement provides the possibility of setting restrictions at thecontract level which apply to the orders called off against the contract. Theserestrictions can apply to products, quantities, units of measure, validityperiods, payment terms and allowable ship-to parties. The new functionalitychecks the details of the call-off against the restriction and prompts the userwith a message, if the details are different. The type of message (error,warning or information) is specified when the restriction is set in thecontract.

A call-off may be referenced to multiple contracts, all of which may haverestrictions set. In this case, the type of message for each respective restrictionis applied.


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In the Core R/3 System, only one ship-to party can be entered in the contractheader/item level. In the oil industry, one contract often covers delivery tomultiple locations (ship-to parties). In the Core R/3 System, this businessrequirement would result in a manual adjustment of the ship-to party duringentry of each call-off. The IS-Oil enhancement allows the specification ofmultiple ship-to parties in the contract header to indicate that the entirecontract is applicable to those ship-to parties. In contract create mode, all theship-to parties in the sold-to party customer master are proposed for selectionas alternative ship-to partners. This selection screen is reached by a newpushbutton in the header partner screen.

When calling off an order from a contract with multiple ship-to partnersdefined, a selection window is displayed so that the user can choose theship-to partner for the call-off.

This functionality is integrated with the call-off restriction functionalitydescribed above, so that the assignment of ship-to parties can be restricted tothose specified in the contract.

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The delivery document has been enhanced with new fields to allow the userto specify more detailed external information and to indicate that no furtherdeliveries will take place for a call-off, which is reflected in the contract.

The delivery document contains a new external details button in the headerand in the details screens. This button causes a popup screen to be displayed,showing the external bill of lading number, miscellaneous delivery number,origin/destination information and other miscellaneous information. Theexternal bill of lading number and miscellaneous delivery number can beaccessed with a new matchcode. The external details popup is also available inthe contract and call-off.

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In the Core R/3 System there is no check on the ship-to/sold-to partyrelationship which is defined in the customer master. It is possible to assignthe same ship-to party to several sold-to parties. The IS-Oil enhancementperforms a check on this relationship during customer master maintenance.The check, which is optional, and the outcome (error, warning, informationmessage) are defined at sales organization level. Reporting functions areavailable to show sold-to/ship-to party assignment and vice versa.

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+LJK�/HYHO�6XPPDU\The objective of the IS-Oil Downstream MRN application is to optimize thebusiness location handling support capabilities of the R/3 System.

The first step towards achieving that objective is to define the businesslocation in a way that is neutral and does not contain information specific toa single business view.

The second step is to provide the capability to define links from the businesslocation to other, business function specific views of the location.

The next step towards optimization is achieved by building a mechanism tolink the business location to business partners of the system owner. Thelinks are recorded in terms of the type of activity or role that the partner haswith respect to the location.

The final step is concerned with the generation of performance reports aboutthe business location. The statistical information used to report on thebusiness location is collected from processes that take place with respect tostandard system objects to which the location has been linked.

The application is intended to meet two distinct user requirements:

q Dialog support for a head office view of the business location and itsassociated data

q Reporting of performance of physical locations or sites in terms of themultiple business events that occur at these sites

6\VWHP�2YHUYLHZ�DQG�2EMHFWLYHVCommercial organizations exist to sell company products or services in somekind of marketplace. It is common to bring the product or service to a placewhere it is convenient for the purchaser to obtain or make use of the productor service. In the retail business, particularly, commercial organizations orcompanies depend on convenient customer access to their products.

To reach the retail customer, they may use business locations (for examplestores, service stations) which try to provide the best possible environmentfor the customer to obtain company products or services.

In the search for improved profitability it is important to attract themaximum number of consumers to every business location. This is oftenachieved through the provision of a variety of support services, which maybe provided by other organizations or individuals operating at the business

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location. For example, a large service station may, in addition to its mainbusiness of fuel sales, sub-let forecourt area to smaller businesses providingspecialist services such as a fast-food restaurant, service bay, newspaper andmagazine sales and even overnight accomodation.

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A commercial business location may be the basis for a wide range ofbusiness activities, including:

q Sales to the consumer of company-owned stock by company employees

q Sales to the consumer of company-owned stock by a commissioncharging business partner or dealer

q Sales to the consumer of dealer-owned stock by company employees

q Sales to the consumer of dealer-owned stock by the dealer

q Sales to the dealer of company stock

q Sales to the dealer of company services such as maintenance orequipment leasing

q Leasing of sales floor space by a dealer in connection with sellingcompany owned or dealer owned stock or both (sometimes referred toas a concession)

q Leasing of company branding and/or franchise agreements

Any combination of the above is also possible, not just simultaneously butalso over time.

It follows that a company’s view of business can be strongly centered on thelocations where that business takes place, particularly if that company isconcerned with retailing or property management. It follows that reports,analyses and comparisons which take place with reference to the locationmust recognize the business location as a discrete and permanent object, a

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separate entity from the business partners active at that location. This separationmust also be recognized by the systems which provide this information.

This document discusses a component application of the IS-Oil Solutionwhich supports the independent definition of a business location in the R/3System. The primary objective of this application is to provide support forthe management of service stations and other oil-industry specific businesslocations.

A guiding principle of the design team has been to keep the design open, sothat the application can also be used for commercial locations which are notoil-industry specific.

The name of this IS-Oil application is “Marketing: Retail Network” or“MRN”, so called because “retail network” is the term used to describe theretail network interests of the downstream oil business.

The introduction of an independent business location to the R/3 Systemarises from two distinct user requirements:

q Support for the head office view of the business location and itsdefinition according to one or more R/3 applications

q Performance tracking of physical locations or sites in terms of themultiple business events that occur at those sites

The business events or transactions which occur at a business location actuallytake place with reference to business partners an/or accounting and logisticalobjects. For example, sales or purchasing processes occur with reference tocustomer or vendor business partners, operational overheads can be settledagainst a generic cost collector and an internal goods movement to or from alocation can be recorded in the material ledger.

The figure below gives an overall view of the positioning of the IS-Oilbusiness location with respect to other objects within the system.

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This document describes functionality which is provided in the IS-Oilproduct. The functionality is largely stand alone, using independentprogram, function and dictionary objects with read-only access to otherobjects within the R/3 System. The independent development of IS-OilMRN was a deliberate development strategy, intended to minimize thesoftware maintenance overhead during successive upgrades of the standardR/3 product, on which IS-Oil is based.

.H\�)XQFWLRQ�%HQHILWVThe key function benefits provided by the IS-Oil MRN application are asfollows:

The facility to define the business location in a way that is neutral and doesnot contain information specific to a single business view, as well as thecapability to define links from the business location to other, businessfunction specific views of the location and navigate to those views.

The provision of a mechanism to link the business location to businesspartners of the system owner. The links are recorded in terms of the type ofactivity or role that the partner has with respect to the location

The generation of performance reports about the business location usingstatistical information collected from standard processes related to thatlocation.

.H\�,6�2LO�)XQFWLRQV�6XSSRUWHG�E\�WKH,6�2LO�'RZQVWUHDP�051�&RPSRQHQWThe following is a summary of the IS-Oil functions provided by the IS-OilDownstream MRN application.

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The central building block of the IS-Oil MRN application is the businesslocation. The business location master data object is used to register aphysical location in which the system owner has some kind of economicinterest.

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The business location object persists in the system throughout the life of theactual physical location which it is depicting. The business location is linkedto other economic objects within the system which are used in turn to depictthe physical location according to the various application modules of the

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R/3 System. These links are supported by the object link facility provided inthe business location maintenance transactions.

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A mechanism is provided to link the business location to business partnersdefined in the system, where those business partners are transacting somekind of business with respect to that location. The link between the businesslocation and the business partner is made in terms of both a location partnerrole type and validity period. Thus the duration of a business partner’sresponsibilities or activities can be recorded, as well as the activitiesthemselves.

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An extra screen is provided in the standard SD sales contract to support theentry of retail network-specific data. In addition, a new contract index ispopulated to enable fast access of contracts by business location rather thanbusiness partner.

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When links have been established between the business location and otherobjects or business partners in the system, it is possible to populate statisticalinformation structures with performance data which is specific to individuallocations.

A new information structure is provided within the Sales InformationSystem (SIS) to record sales activity at the location level.

The business location is made available as a fixed characteristic in theControlling-Profitability Analysis reporting tool (CO-PA) and can beincorporated in an operating concern reporting structure accordingly.

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IS-Oil Downstream MRN is a virtual application, because it contains nocomplex master or transaction data objects (although there are some simplemaster data objects). Instead, it references master and transaction dataobjects which are provided by existing R/3 applications.

It follows that the full range of business processes which are necessary forthe management of business locations are available within the R/3 Systemitself. All these key IS-Oil Downstream functions are accessible from theMRN business location transaction. This approach is explained in moredetail in the section discussing object links and navigation.


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Virtual applications must be built in an open and flexible way so thatenhancements made to R/3 applications referenced by the virtual applicationsdo not fundamentally change the operation of the virtual application.

An important consideration with regard to a virtual application is the extentto which it requires configuration of reference applications before it becomesviable. In the case of MRN reporting, especially in the area of profitabilityanalysis, the accuracy of the information being recorded about the businesslocation is dependent on the complete definition of business locationactivities in the standard system.

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The central building block of the IS-Oil MRN application is the businesslocation. A complete set of maintenance dialogs are provided to enable theuser to register the business location in the R/3 System.

The registration of the business location in the system is supported by a range ofstandard R/3 System services, such as classification, text element processing(using SAPscript or WINWORD), change document processing, central addressmanagement and archiving. In addition, the MRN functionality interfaces withthe ABAP Extension (enhancement) tool to support the definition of customerinstallation data elements in the business location master table.

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A new transparent table is provided which is used as an “anchor” point forinformation entered in the system about a specific business location. Thetable contains no application data itself, other than data defined by fieldsadded via APPEND structures by user installations, rather it is the checktable for a number of dependent tables used by MRN sub-applications. Thefollowing groups of technical data are recorded in the business locationmaster:

q Business location type

q Address number for the central address maintenance system

q Blocking and deletion indicators

q Create and change dates, times and responsible users

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All business location master records must be assigned a location type duringthe creation phase. This may be changed later using a dedicated type changedialog.

Location typing is used to define the business purpose of the location.Examples of location typing would therefore be “depot”, “departmentstore”, “service station” or “development plot”. The typing of a businesslocation is not expected to change frequently during the lifetime of a site.

Possible reasons for change might be the conversion of a development plotor investment site into an operational location. It is probable, however, thatthe eventual purpose of the site would be known at the time it is enteredinto the system as a master record, even if it remains a vacant business plotfor some time.

From a technical perspective, business location typing is used to support:

q Identification of location master data via search facilities such asmatchcodes

q Control of number range allocation, i.e. internal or external andapplicable ranges

q Control of access to master data according to type via authorizationprofiles

q Field selection, some fields may be not be valid for some types

q Control of links to other application objects used to depict the businesslocation

q Control of partner role types available to define links to businesspartners involved with the business location.

Because there are a number of application dependencies on the typeassignment of a business location, a special dialog is provided which validatestechnical dependencies before permitting a type change to be posted.

The type change dialog will only support changes to the location type, if thefollowing is true:

q The location ID of the business location falls within the number rangedefined for the new location type or the location ID of the businesslocation does not fall within the number range defined for the newlocation type but the “Mismatched number range OK” flag is set “on” inthe “MRN System Control - General and Top Level” step within theMRN IMG.

q All populated object link field groups in the business location arepermissible for the new location type - if an object link field group whichis supported for the original location type but is not supported for thenew location type contains no values, the location type change issupported.

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q No partner role assignments exist for the business location which are notpermissible for the new location type - if a partner role assignment isdetected which was permissible for the original location type but is notpermissible for the new location type, the change will be rejected untilthat partner role assignment is deleted.

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The central address maintenance system is used to record all address-basedinformation which is relevant to the business location.

The link to the central address maintenance system is made at the directaddress no. level. “Address valid from” and “International version no.”,which form part of the key of the central address file are supported at thedatabase level, but not at the dialog level. As of the current release it istherefore only possible to specify one address per location.

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A link is provided from the business location to the R/3 long text handlingutility. The link supports the centralized storage of text-based informationfor each business location. The long texts can be stored in the followingformats:

q SAPScript

q WINWORD

Other text formats compatible with OLE enabled PC editors may beavailable in future. The text formats for each text type can be set by yourtechnical support group.

Texts for the business location can be entered in “Create” or “Change”modes of the business location maintenance transaction.

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A link is provided from the business location maintenance transaction tostandard dialogs of the classification system. For technical reasons, theclassification maintenance screen is only available via a specific dialog calland not as part of the standard business location maintenance transactionscreen sequence. Within the business location allocation screen andcharacteristic value assignment screen, exactly the same functions aresupported as in the allocation functions from the classification menu.

A class type has been created in the classification system for the MRNbusiness location. This is class type “800”.

When a specific business location has been allocated to one or more classeswithin the classification system, it can be accessed using the powerful searchtools available within this powerful application. The classification systemcan also be used to apply additional characteristics to business location

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master data. In this way it can be used as an alternative to the MRNAPPEND Maintenance Concept discussed below.

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Using the change document listing feature of MRN, it is possible to displayall changes which have been made in a business location master record andall dependent structures such as location partner roles. The changes arerecorded by the central R/3 change document processing facility.

There are five selection fields through which the parameters can be set forthe list of change documents that the system generates:

q Business location ID

q Document number

q From date

q From time

q Last changed by

Generic specification is possible for all of them except the date and timefields, using the “*” as a wild card symbol.

User-defined fields in the business location table are also recorded by thechange document processor, from the moment that the table is regeneratedafter the addition of the new fields.

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MRN data archiving removes business location data which is no longerrequired in the system, but which must be retained off-line in a way that isreadily accessible.

Data in the R/3 database can only be archived via archiving objects, whichdescribe the data structure. For the MRN business location all master anddependent data is archived via the archiving object IS_OIFSPBL. Thisconsists of the location master, assignment records, partner role assignmentrecords, change documents, SAPscript texts and information system records.In addition, any business location entries which have been written tobusiness partner master records are deleted and the business partner masterrecords correspondingly updated. The business partner master records arenot archived at this time. The application archiving objects are pre-definedin the system.

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The archiving procedure comprises two main steps:

q Creating archive files: the data to be archived is first written sequentiallyinto a newly-created file. These archive files can, for example be passedto an archive system via ArchiveLink.

q Executing delete program: the data in the archive files is removed fromthe database by the delete program.

The archiving programs are scheduled as background jobs, but can also runduring online processing. The system need not be shut down during archiveprocessing.

Routines are also provided to reload business location data from archivefiles.

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The application of user-defined fields to the business location object ismanaged through the MRN APPEND Maintenance Concept (MRN AMC).The MRN AMC uses the ABAP Workbench Enhancement Manager. Thisenables the user to control the implementation of the MRN AMCfunctionality. User customization is supported in terms of both the additionof custom defined data fields and maintenance of those data fields by meansof screen dialogs.

The MRN AMC approach is necessary because research has shown thatthere is little commonality between the business location managementrequirements of the users with respect to data fields. MRN AMC enableseach user installation to define only those data fields that they wish tomaintain as part of the MRN Business Location table.

The components of the MRN AMC are:

q APPEND structure maintenance provided by the ABAP Dictionary

q An enhancement containing two CUSTOMER-FUNCTION calls for datatransfer

q The SUBSCREEN concept from the ABAP Screen Painter

q The table customizing facility provided by the R/3 IMG

All user development of customized data element extensions to the MRNbusiness location table can be achieved using these four building blocks.

The approach of the MRN AMC to the incorporation of maintenance dialogswhich are developed by the user is to use the concept of the “subscreen”provided by the ABAP Workbench Screen Painter. In this, a dialog mainscreen uses the “CALL SUBSCREEN” command to call a dialog subscreen tofill a pre-defined area of the main screen.

The installation defined subscreen is defined as a dynpro belonging to acustomer work area (also known as “module pool” or “program”), not theMRN business location work area, SAPMOIFA. This means that the businesslocation master data structure (including the installation’s own fields,defined via the APPEND structure) must be passed to the customer work

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area before it can be processed and returned to the MRN work area afterprocessing. This is achieved by the use of a pair of user exits which can beenabled by the installation.

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This section deals with the component of the MRN application whichsupports the creation of links from the business location to other objects inthe R/3 System which can be used to depict the business location.

As a virtual application, MRN works by providing a primary object in thesystem to represent the business location, which holds only minimal dataabout the business location. Other objects in the system are used for thispurpose. These objects are referred to as secondary depictions of the businesslocation. When these objects are created using application modules in thestandard R/3 System, the MRN object link and navigation component canprovide a link to existing transactions which are used to display or maintaindata within those application areas.

Links are possible to eight different link objects. These are shown in thefigure below.

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The permissible link definitions which can be made for a specific businesslocation are determined by the location type for that location. For eachlocation type defined in the MRN IMG, it is necessary to identify which ofthe object links are supported for that type.

The entry of the object link data is made using a fullscreen dialog within thebusiness location master data maintenance transaction.

In cases where all or nearly all object links are definable for the businesslocation (as determined by the type of that location) the screen will contain alarge number of input fields requiring the user to use the scroll function. Toavoid this it is possible to invoke a second object link definition screen. Thisis done by allocating some assignment boxes to the second screen whendefining the permissible object links by location type.

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A configurable navigation tool is provided in connection with the link objectdefinitions which can be defined within the business location maintenancetransaction. The tool enables user installations to specify the dialog trans-actions to which the system provides links when the navigation function isused.

The range of dialog transactions to which links are supported arecustomizable via a step in the MRN IMG. Using this customizing facility, itis possible to define the permissible range of dialog transactions to whichlinks can be supported for each object link type.

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Additionally, for each “object link type/dialog transaction” combination itwill be possible to:

q Optionally specify a short text to describe the link (if no entry is made,the target dialog transaction text is defaulted from the TSTCT)

q Indicate which SET/GET parameters will be activated for eachtransaction link

q Indicate if the transaction is to be called with/without a “skip firstscreen”

Users will need to take care when defining these entries. However, MRNprocessing is designed to ignore incorrect SET/GET parameters. Inappropriate“skip first screen” entries are handled by the dialog transaction itself, i.e. if thefirst screen cannot be skipped due to a missing entry the system displays thefirst screen with an error message.

If no entry is made in the IMG for the dialog control of a particular linkobject, the system calls a default dialog. Normally, this is the display masterdata dialog transaction for that object link.

If one control entry is made for a particular link object, the system calls thespecified dialog transaction. If multiple entries are made for a link object, thesystem calls a modal dialog box or “popup window”. The purpose of thispopup is to allow the user to choose which link dialog he or she wants toaccess whenever more than one possible link is defined for the link object.

Radio buttons are used to indicate to the user that a single access path is tobe chosen. A “Double-click” selection is also supported.

The diagram below shows how the configurable popup window might lookfor the asset master link object with three possible choices:

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The number of selection choices is dependent on the number of entries madein the IMG. Three choices are shown in the illustration above.


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A link is provided from the business location to the CO cost center masterdata object. The link enables the cost and overhead processing for thebusiness location to be determined. As of the current release, the link isspecified on three levels:

q Controlling area

q Cost center ID

q Valid-to date

The diagram below shows how the link between the business location andthe cost center is modelled in terms of entity relationships, using an SAPEntity Relationship Model.

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Capabilities exist in the underlying architecture of the business locationmaintenance dialog for the handling of non-time-dependent cost centerassignments to the location. This facility is not enabled at this time, butwould allow automatic roll-over of the link to the cost center record valid forthe actual time slot. Currently, a reassignment is required, after cost centerperiod-end has occurred.

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With the incorporation of the controlling area as a profit center differentiatorinR/3 3.0D and later, the definition of the link from the business location tothe EC-PCA profit center master data object is similar to the link to the COcost center described above. The profit center is used to depict the businesslocation typically as a strategic business unit within the organization. As ofthe current release, the link is specified on three levels:

q Controlling area

q Profit center ID

q Valid-to date

The diagram below shows how the link between the business location andthe cost center is modelled.

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As with cost centers, the capability exists in the underlying architecture ofthe business location maintenance dialog for the handling of non-time-dependent profit center assignments to the location. This function is notenabled at this time, but would allow automatic roll-over of the link to theprofit center record valid for the actual time slot. Currently, a reassignmentis required, after profit center period-end rollover has taken place.

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A link is provided from the business location to either the FI-AA assetmaster data object or the FI-AA group asset object. The link supports theidentification of one or more assets which together define the asset value ofthe business location. As of the current release, the link is specified on threelevels:

q Asset main number

q Asset sub-number

q Company code

The diagram below shows how the link between the business location andthe asset master is modelled.

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The capability exists in the underlying architecture of the business locationmaintenance dialog for the handling of multiple asset assignments to thelocation, should this be necessary. This function is not enabled at this time,because by using a group asset for the location to asset assignment, a flexiblesolution is provided to the requirement for multiple asset allocation to aparticular business location. Again, it should be understood that MRN is avirtual application and therefore asset management functionality is providedonly by the FI-AA application, not by MRN.

The MRN dialog is able to determine if the asset number entered is a main-/sub-asset number or a group asset. If a group asset is assigned to thebusiness location, this is indicated by a checkbox in the Asset Assignmentscreen box.

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A link is provided from the business location to the PM Functional Locationmaster data object. In this way the maintenance status of the businesslocation can be determined. As of the current release, the link is specified ontop level functional location ID only.

The diagram below shows how the link between the business location andthe functional location is modelled.

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The capability exists in the underlying architecture of the business locationmaintenance dialog for the handling of multiple functional locationassignments to the location, should this be necessary. This facility is notenabled at this time, because by optimal structuring of the functionallocation code using the structure indicator, it is possible to model thebreakdown of a business location functional location within the PM system.This provides a flexible solution to the requirement for multiple functionallocation allocation to a specific business location. It is important that plantmaintenance functionality is provided only by the PM application, not bythe MRN virtual application.

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A link is provided from the business location to the plant object for referencepurposes in connection with inventory management processes.

The diagram below shows how the link between the business location andthe plant is modelled.

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As of the current design release, multiple plant assignments for a specificbusiness location are not supported.

Note that it is also possible to define a link between the business locationand a storage location for inventory managment purposes. This is because itmay be appropriate to evaluate business location inventory at storagelocation level rather than plant level. It is not envisioned that both object linkassignments will be definable at the same time for a business location of agiven location type.

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A link is provided from the business location to the storage location objectfor reference in connection with inventory management processes.

The diagram below shows how the link between the business location andthe storage location is modelled.

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As of the current design release, multiple storage location assignments for aspecific business location are not supported.

Note that it is also possible to define a link between the business locationand a plant for inventory managment purposes. This is because it may beappropriate to evaluate business location inventory at plant level rather thanat storage location level. It is not envisioned that both object linkassignments will be definable at the same time for a business location of agiven location type.

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A link is provided from the business location to one or more PS projectdefinition records and/or project Work Breakdown Structures (WBSs). Inthis way, the status of any number of projects active at the business location,e.g. sales floor refurbishment, can be determined. As of the current release,for project definitions the link is specified on project definition ID; for aspecific project WBS, the link is specified on a combination of projectdefinition ID and WBS ID. In the second case, the user need enter only the

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WBS ID, the system determines the appropriate project definition ID andpopulates the project definition ID field accordingly.

The diagram below shows how the link between the business location andthe project definition/WBS combination is modelled.

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The user may wish to use one standard project definition to handle similaractivities which take place at all business locations. In this case, each locationwill have its own WBS defined within that standard project definition. Forexample, an organization maintains an open project for roof refurbishment.For each explicit roof refurbishment activity at a business location, it candefine one WBS.

Alternatively, the user may wish to define a project definition for eachbusiness location under which each discrete business activity is managed viaWBSs.

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Where a CO order has been created to capture overhead postings for aspecific business location, a link can be made between the MRN businesslocation and that order.

A link can be defined from the business location to one or more CO orders,and only the CO order number is entered.

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The diagram below shows how the link between the business location andthe CO order is modelled.

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The user may wish to use one CO order to handle action-oriented planning,as well as monitoring and allocation of costs. Alternatively, differentoperational areas within the business location could be handled usingdifferent CO orders.

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The MRN location partner role module records data about the type andstatus of relationships that exist between business partners of the systemowning organization (system client) and the business locations (or businessentities) in which that organization has an interest. This information isprovided to support administrative procedures, direct links to transactionsaccessing data about business partners and the provision of a mechanism tofacilitate recognition of the business location by reporting tools which existin the standard R/3 System.

The design of the location partner role module is intended to recognize thevaried relationships which exist in location networks. In particular, it takesinto account the multiple involvement of business partners, which can occurat a single business location.

The MRN Location Partner Role data model graphic below shows the way inwhich the multiple relationships between business partners and businesslocations are depicted and characterized. The model also illustrates the

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overall arrangement of technical objects required to support this MRNfunctionality in the R/3 System.

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In the figure, the business location (or business entity) can be seen in thelower left-hand corner, while the object depicting the “partner role”assignment between business location and business partner can be seen inthe lower right-hand corner.

The partner role assignment has an aggregated dependency on the businesslocation and partner role. This means that the business location record andthe partner role entry must exist before the partner role assignment can becreated.

The partner role assignment has a referential dependency on the businesspartner record. The partner role assignment is shown as a time-dependentobject, because it describes a specific period of time; this means, in effect,that a partner role assignment is only “valid” for a specific period of time.

The top half of the diagram shows the business partner object and thedifferent kinds of subtyping for that object. The first major subtypedistinction is between the business partner as debitor object and businesspartner as creditor object. Each of these subtypes is broken down intosecond level subtypes. The debitor/customer types of fuels agent, C-storeagent and service customer, and the creditor/vendor types of leasor andmaintenance supplier are illustrated in the diagram.


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A reference is shown between the debitor/creditor subtypes and thelocation partner role technical category object. This is because the partnerrole technical category specifies the object type used within the MRNscheme (and generally) to distinguish between debitor and creditor objects.

The way to resolve these multiple relationships is through the use of a set oftables in which the relation between the business location and the businesspartner who is active at the business location is recorded.

The tables record the characteristics that make up the relation between abusiness location and a business partner in some unique way. The locationpartner role design classifies these characteristics in the following way:

q Technical characteristics - used to classify the role according to technicalrequirements of the system; for example, the database table used torecord information about a particular type of business partner (necessarybecause different database tables are used in the R/3 System to depictbusiness partners)

q Functional characteristics - used to classify the role according to thefunctional requirements of the system; for example, the role of thebusiness partner

q Time characteristics - used to define the validity of the role according todate and time (timestamp)

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The MRN location partner role type is used to classify the activity of abusiness partner of the company with respect to the business location.

The location partner role type is a four-character code which is freelyconfigurable by the user installation by means of the MRN IMG. Before it isavailable for uses, the location partner role must be assigned to at least onepartner role technical category (see below). The technical category identifieswhat kind of business partners can be assigned to a particular role.

One business partner may perform a number of different MRN partner roles ata specific business location or the same role at a number of different locations ora combination of these. This arrangement is shown schematically in the diagrambelow.

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Business events concerned with the business partner are recorded in the R/3System in the normal way using established processes in the logistics andfinancial modules. The location partner role may support the generation of alink to the business partner identified by each role assignment. In this casethe partner specific business events may also be used to report on thelocation.

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The partner role technical category is the medium used to establish the rulesby which a business partner object can be validated by the system.

It is possible to define the technical categories to be used to identify a specifictype of business partner within the R/3 System by means of a configurationstep in the MRN IMG. Each technical category provides the possibility ofdefining up to three process determining technical characteristics.

The primary technical characteristic of the business partner is the name ofthe database table containing the business partner. A basic distinction istherefore made between business partners defined in the KNA1 table, whichare customers, and those defined in the LFA1 table, which are vendors.

The secondary technical characteristic of the business partner is the accountgroup. The customer and vendor account groups are used to determine theprocessing associated with customer and vendor objects, respectively,within the system. The customer account group in particular may define theprocessing associated with a customer object in a way which is of centralimportance to the business location reporting model.

The third technical characteristic of the business partner is only relevant tocustomer business partners. This is the SD partner function. In cases wherethe customer account group alone is not sufficient to identify the functionsof a business partner, it is necessary to define the self-referencing partnerfunction that a partner must carry in order to meet the requirements of thepartner role technical category.

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The Location Partner Role maintenance screen sequence provides the userwith an effective tool to create, change, display and list location partner roleassignments for any given location.

The “entry” screen to location partner role functionality is a dialog withinthe MRN business location maintenance transaction. Within that dialog, theLocation Partner Role listing screen is always the first screen to be presentedto the user.

The user can create a new location partner role assignment from the listingscreen by calling the “Create business partner role” function. This function isavailable in create and change modes of the business location maintenancedialog.

The user can change any existing location partner role assignment from thelisting screen by calling the “Change business partner role” function. This

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function is also available in create and change modes of the business locationmaintenance dialog. The partner role assignment detail screen will bepresented in local change mode.

The user can display an existing business partner role entry from the listingscreen by calling the “Display business partner role” function. This functionis available in all modes of the maintenance dialog.

The partner role assignment listing screen is the access point to allmaintenance processing for partner role assignments for a specific businesslocation.

The standard location detail header sub-screen is displayed in all businesslocation maintenance dialog screens as a standard screen header, giving theID, name and type of the business location being maintained.

The partner role assignment listing is presented in one of three list modes:

q Active - showing only roles active for the current or specified time

q All - showing all role assignments for the location

q Selection - showing roles active within a specified period

Each list mode uses a different selection control subscreen, which are shownbelow. The list mode can be changed by direct overtyping, selection using<F4> or by using a pushbutton on the toolbar.

The location partner role assignment detail screen contains a subscreenwhich is set according to the primary technical characteristic specified by thepartner role technical category entered.

For example, if the business partner is identified as a customer partner (i.e.primary technical characteristic = “KNA1”) the sub-screen will containcustomer name, account group, the general address and other details. Thefollowing BPR detail sub-screens are provided in the current release:

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A configurable navigation tool is provided in connection with the businesspartner role assignments, which can be defined within the business locationmaintenance transaction. The tool enables user installations to specify thedialog transactions to which the system will provide links when the navigatefunction is used.

The range of dialog transactions to which links are supported are customizableusing a step in the MRN IMG. It is possible to define the permissible range ofdialog transactions to which links can be supported for partner role technicalcategory, using this customizing function.

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Additionally, for each “partner role technical category/dialog transaction”combination it will be possible to:

q Optionally specify a short text to describe the link (if no entry is madethe target dialog transaction text will be defaulted from TSTCT)

q Indicate which SET/GET parameters will be activated for each transactionlink

q Indicate if the transaction is to be called with/without “skip first screen”

The processing works in a similar way to that provided for the configurableobject link navigation. As with that processing, if no entry is made in theIMG for the dialog control of a particular link object, the system calls adefault dialog. Normally, this will be the display master data dialogtransaction for the type of partner identified by the partner role technicalcategory.

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In order to support business location reporting via business partner activity,it is necessary to write the business location ID to the business partnermaster record of the business partner which has been linked to the location.The generation of the location ID in the business partner master data recordis achieved through the use of a function which is initiated from within thebusiness location maintenance transaction. This function is triggeredwhenever the system detects a partner role assignment with a „technicalcategory“ which has been specified as a location category in Customizing.


When links have been established between the business location and otherobjects or business partners in the system, it is possible to populate statisticalinformation structures with performance data which is specific to individuallocations.

A new information structure is provided within the Sales InformationSystem (SIS) to record sales activity at the location level.

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A link to the Sales Information System is provided to support sales reportingby location as opposed to the standard reporting via ordering party. The linkis dependent on the generation of the business location ID in a validbusiness partner with reference to which a sales document is created.

The ID of the business location associated with the “Ship-to” party specifiedin the sales document is carried in the “Ship-to” partner function segment atheader or line item level.

This information is made available to the LIS entry point in the form of bothchanged and original data. The MRN business location ID is thus availableat line item level as both the original assignment for the line item and the

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new assignment. To enable the user to confirm the allocation of the MRNbusiness location, a subscreen is provided in the sales document businessdata screen. A subscreen is used to minimize the impact of the modification.If an installation does not use MRN, no business location information willappear on this screen.

Various additional move lines are added to sales document processing tocopy the business location ID to the correct transfer structures.

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Reporting of business location profitability is enabled by the availability ofthe business location and location partner role as fixed characteristics in theControlling-Profitability Analysis reporting tool (CO-PA).

With these new fixed characteristics, it is possible to define both location andlocation partner role fields in an operating concern reporting structure. Fromstructures in which both location and location partner role data is summa-rized, it is possible to generate reports about location or partner roleprofitability segments or combinations of these.

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A master data object in the IS-Oil System. The business location is a physicallocation which cannot change in space or time, about which the processowning organization would like to record information. The business locationroughly equates to a physical address. The location is not transferrable withrespect to physical address in normal circumstances.

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Normally, the basic business purpose of a business location. The businesslocation type allows the process-owning organisation to categorize thebusiness location for operational and technical purposes.

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The only example of a connection between the business location and anotherbusiness object in the R/3 System which is used to depict the location interms of a specific or set of specific business processes.

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The role or function in an IS-Oil system which a business partner performswith respect to a specific business location. This is in contrast to an SD or FI“partner function”, which defines the function of the business partner withrespect to the process-owning organization. One business partner mayperform a number of business partner roles with respect to the samelocation.

The business partner role must be assigned to one or more partner roletechnical categories in order to be usable.

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The single instance of a specific partner role at a particular business locationfor a specified period of time.

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The underlying technical specification of the partner role in an IS-Oil system.

In effect, the partner role technical category allows the process-owningorganization to define types of business partner in terms of business partneraccount group and, where applicable, SD partner function.

The types of business partner thus defined can then act as the basis for rulesgoverning the validation of business partner links when creating a partnerrole assignment.

The business partner role technical category may support integration withR/3 processes such as sales order processing and LIS, or it may be purelyinformational.

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An application which has no functionality of its own, but which provides anoptimized business view of existing functionality within a system.

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+LJK�/HYHO�6XPPDU\The Transport and Distribution (TD) application area supports requirementsspecific to distribution in the downstream oil business with enhancementsmade to Core SAP R/3 functions. The TD functional enhancements supportthe following business processes associated with downstream oil distribution:

q Definition of the means of transport (vehicle) to be used in distribution

q Processes to control the delivery of oil products (scheduling, loadconfirmation and delivery confirmation)

q Processes to control the transfer of product between two company-owned locations

q Transport of purchased product from vendor

q Change of stock ownership in line with oil industry practice

q Shipment cost calculation

q Integration with other IS-Oil Downstream application areas (HPM, TDP,Exchanges) during the TD process

)XQFWLRQ�2YHUYLHZ�DQG�2EMHFWLYHVThe TD application area provides functions to support three separate shipmentprocesses - scheduling, loading confirmation, and delivery confirmation. Thefollowing oil distribution requirements are carried out across these processes:

q Scheduling of shipments on specified vehicles based on underlyingdocuments

q Confirmation of the actual quantity loaded on the vehicle

q Confirmation of the actual delivered quantity

q Tracking of product during transport to customers

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Underlying documents (shipping notifications, reservations, or deliveries)form the basis of any TD shipment across the TD shipment processes.Schematically, the function flow looks as shown in the figure 6-1.

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.H\�)XQFWLRQ�%HQHILWVThe integration of TD with the Core SAP R/3 System enables an oilcompany to manage shipments in a timely and accurate manner. TDprovides for the accurate processing and tracking of high volumes of ordersand bulk shipments.

The scheduling, loading confirmation, and delivery confirmation transactionsprovide a consistent framework for processing and tracking high volumes ofbulk material shipments. These three transactions are suited for the frequentchanges that occur in the bulk oil distribution business.

The scheduling, loading confirmation, and delivery confirmation transactionswere designed to interface with automated systems such as, “DispatchOptimizers“ and “Automated Loading Systems“.

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Through the use of an “intransit storage location or intransit plant“ it ispossible to closely track stock quantities in the distribution process. In-transit quantities are counted once by the system, without the necessity ofmanual reconciliation.

The TD application area uses compartment planning to provide bettersupport for the administration of oil products that are being transported.

Through the use of shift and trip functions the TD application area providesa more detailed scheduling of shipments.

Through integration with the equipment master record from the PlantMaintenance component, it is possible to link many of the master dataentities such as, vehicles and transport units to equipment master records.The equipment master record can be used both for maintenance planningand execution.

.H\�,6�2LO�)XQFWLRQV�6XSSRUWHG�E\�WKH,6�2LO�'RZQVWUHDP�7'�&RPSRQHQWThe following TD functions are provided within the R/3 IS-Oil Downstreamcomponent:

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The TD application area provides functions to define a means of transport(vehicle) as master data. These master data definitions enable the following:

q Matching the product with vehicle characteristics

q Matching the customer with vehicle characteristics

q Checking the availability of the vehicle

q Checking for overloading of the vehicle

TD provides functions to define the following as master data:

q Vehicles

q Transport units and compartments

q Drivers

q Vehicle meters

q Rack meters

q Compatibilities

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The bulk shipment type contains settings used by TD to determine how ashipment is processed. A bulk shipment type must be selected whenscheduling a shipment, and cannot be changed once a shipment has beensaved. The following functions are enabled by the bulk shipment type:

q Vehicle mode of transport: When assigning a vehicle to a shipment, thevehicle mode within the bulk shipment type is checked against thevehicle mode of transport defined in the vehicle type. If the two aredifferent, for example the shipment type requires a truck and thescheduler attempts to schedule a train, the system rejects the assignment.

q Compartment load indicator: During scheduling it is possible tocombine deliveries and materials for the same compartment. Thecompartment load indicator in the bulk shipment type determineswhether the compartment is to accept only one material of onedocument, or combinations of documents with the same material ormultiple materials.

q Intransit Posting Group: The intransit posting group determines howexcise duty is processed for a product during shipment. It is also used todetermine which intransit storage location is used to hold the intransitstock. The intransit posting group determines the valuation types andhandling types used in material movements triggered by TD.

q Confirm balance load indicator: The Confirm balance load indicatordetermines how balance loading is carried out. Balance loading is theprocess of assigning discharge documents to loaded quantities. It isparticularly relevant when the actual loaded quantity is different fromthe scheduled quantity. The balance load indicator determines if andhow discharge quantities are processed.

q Partial Delivery Confirmation: This function is used during the deliveryconfirmation transaction. When selected, the system posts a goods issueagainst deliveries for which discharge quantities have been recorded.This allows inventory to be updated after the first delivery is dischargedwithout requiring all discharge quantities to be recorded.

q Shipment Cost Relevance: It is possible to specify the scope of theshipment cost calculation through a series of parameters defined in thebulk shipment type.

q Exchange assignment: Exchange asssignment data entered in the bulkshipment type determines how exchange-relevant deliveries are processed.

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A transaction is provided to schedule underlying documents (shippingnotifications, reservations, or deliveries) into shipments of bulk products.The scheduling process supports the assignment of specific vehicles toshipments.


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During the scheduling process the following information is necessary:

q Date of the shipment

q Vehicle used for the shipment

q Compartment into which product is scheduled

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A transaction is provided to support the loading activity. The oil industryrequires the flexibility to determine the actual quantity loaded, and the plantand store location from which the product is loaded. It is common for theactual quantity loaded to change from the quantity originally scheduled. Thesystem allows loading from different plants in one shipment.

The loading transaction provides the capability to control and manage thefollowing:

q Loading date and time

q Actual quantity of product loaded

q Store location and batch from which the product is loaded

q Compartment into which product is loaded(if compartment planning is used)

q Unplanned rebranding of the product, that is, shipping a replacementproduct

q Assignment of quantities left on the vehicle from a previous shipment.

q Loading of the components of a sales material (Bill of Material) and theposting of sales material


It is possible that the quantity of product delivered deviates from what wasloaded. It may also occur that planned shipments do not take place (forexample when there is insufficient tank capacity at the receiving station). Insuch a case, the product is either returned on the truck or is delivered toanother customer. The delivery confirmation transaction enables the user toreflect these unplanned changes in the delivery, as well as, confirm theactual quantity of product that is delivered to the customer.

The following activities are supported by the delivery confirmationtransaction:

q Specifying delivery date and time

q Establishing actual quantity shipped

q Handling non-delivered product - either to be returned to the plant orleft on the vehicle

q Handling of gains and losses during transport

q Changing the shipment in order to handle unplanned deliveries

q Flexible status handling to allow changes between processes


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2UJDQL]DWLRQ�6WUXFWXUH�RI�WKH�7'�&RPSRQHQWThe organization structure for the transportation function is shown below:

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3ODQWIn the case of deliveries, the delivering plant must be entered in the salesorder. This is used to define the shipping point which is required before thedelivery can be created. In the case of a shipping notification, the receivingplant must be entered in the purchase order. For a reservation a supplyingand receiving plant is entered.

7UDQVSRUW�3ODQQLQJ�3RLQWThis is the organizational entity used to plan transportation functions. Thetransport planning point represents a group of employees responsible forplanning transportation. A transport planning point can cover one or manyshipping points. In fact, transportation planning points are independentunits and are not related to the other organisational units in Logistics.

,QWUDQVLW�6WRUDJH�/RFDWLRQA major function of TD is to keep track of bulk products in respect to bothquantity and value. For the oil industry a special storage location is requiredto track product as it is transported.

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In the standard document flow for sale of product in the Sales andDistribution (SD) module, the products change ownership from thedelivering company to the customer when they are goods issued at the endof the delivery process. Goods issue is the point when the goods leave thecompany’s site. In such a case, the customer takes ownership of the stock assoon as it leaves the delivering plant on execution of the goods issue.


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In order to track the stock at the point it leaves the delivering plant, andprior to arrival at the customer, TD introduces the concept of the intransitstorage location. The product(s) remain on the delivering company’s booksuntil delivery is confirmed at the customer. This is achieved in TD by thedelivery confirmation process triggering the core goods issue process. In thiscase, a transfer is used to move the stock from the delivering plant to thevehicle during load confirmation. The stock loaded on the vehicle then existsin the intransit storage location. This can be viewed in the Stock Overviewreport.

When the products are loaded on the vehicle they are moved from a normalstock location to an in-transit store location, with a store-to-store movement.Similarly, when the products are delivered to the customer a goods issue isposted from the in-transit store location to the customer. To achieve this theoriginal delivery document is updated with the intransit storage location inthe delivery confirmation process before the goods issue is posted. Everytransaction in the TD area which includes a goods movement associatedwith the vehicle (or change of responsibility in case of returns to anotherplant, for example) causes a quantity update to the intransit storage location.

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In the standard Purchasing process for the Material Management (MM)module, a purchase order is created, after which a shipping notification canbe created to control the shipment of the goods. When the goods arereceived, a goods receipt is posted in the receiving plant.

With TD, the goods receipt is posted in the intransit storage location whichrepresents the stock of the vehicle that is loaded. The stock remains in theintransit storage location until a transfer to the actual receiving plant isinitiated during the delivery confirmation process.

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When shipping large quantities of product of long distances, such aspipeline and marine shipments, it can be necessary to maintain a segregatedoverview of the intransit stock. In the TD application area this can beaccomplished by representing the vehicle as a separate plant, known as anintransit plant. It is possible to allocate all vehicles (for example, barges) to asingle intransit plant, or alternatively, to set up a separate intransit plant foreach vehicle (for example, pipeline).

The intransit plant can consist of multiple storage locations for producttracking purposes as the product moves along the route. The allocation ofthe intransit plant is specified in the underlying documents that are assignedto the shipment.


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9HKLFOHV�DQG�5HODWHG�0DVWHU�'DWDA vehicle is a key entity in the transportation of goods. Within TD a vehicleis defined as master data. This is done for the following reasons:

q Each vehicle is unique and is made up of a fixed number of transportunits

q Each transport unit is unique and is made up of a fixed number ofcompartments

q Each compartment is unique and can be used as an intransit storagelocation during shipment

Although the following figure shows a truck as a means of transport, TDsupports all of the following means of transport:

q Trucks (Road transport)

q Trains (Rail transport)

q Ships (Sea transport)

q Barges (Inland water transport)

q Pipelines

The figure below shows the possible composition of a vehicle, in this case atruck with two trailers.

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The vehicle master data is created through a three layer hierarchy. Thelayers of master data are:

q VehicleThe highest level for a means of transport is a vehicle. The completevehicle is defined in vehicle master data. A transaction is provided tosupport the creation, change, and display of vehicle master data.


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q Transport unitA vehicle is made up of at least one transport unit. In the example shownin the figure, the transport units would be the mover and the twotrailers. As with the vehicle master data, a transaction is provided tosupport the creation, change, and display of transport unit master data.There is a one to many relationship between the vehicle and thetransport units . For example a train can be defined with one tractor andmany rail wagons. There is also a one to many relationship betweentransport unit and vehicles, where a transport unit can be assigned toseveral vehicles.

Validation checks ensure that a transport unit is not concurrentlyscheduled to more than one vehicle in the same shipment.

q CompartmentA transport unit consists of one or many compartments. A compartmentis a fixed part of the transport unit. The same transaction used to create atransport unit is also used to create the compartments for the transportunit.

Since vehicle and transport unit are considered generic terms and thereis no limitation on the number of transport units in one vehicle, themaster data can be used to define many forms of transportation (forexample rail, marine, pipeline). The following paragraphs providefurther details on the fucntions supported at the master data level.

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A vehicle is a collection of one or more transport units. Vehicle master datahas a header with information stored on the vehicle level and the transportunits assigned to the vehicle. Transport units are assigned to the vehicle asvehicle items. The vehicle header has the following data:

q Vehicle identification: The vehicle code is used throughout the systemto refer to the vehicle. The numbering of vehicles can either be externallyor internally based. The vehicle master data is additionally supported bymatchcode search strategies.

q Vehicle type: A vehicle type is used to define the basic characteristics ofthe vehicle. The type can be used to define whether the vehicle is usedfor road, rail, marine (sea or inland), or pipeline transportation. Thevehicle type also defines what the units of measure are for volume andweight.

q Vehicle compatibility: A vehicle can be allocated to a compatibilitygroup, which has been created previously with certain characteristics.The compatibility definition is checked during Scheduling to determinewhether the selected vehicle meets the customer requirements specifiedin the customer master data.


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q License type and number: The license requirements for a vehicle aredefined through the assignment of license types. Possible license typesare defined in a separate table. When creating a vehicle, a license type isselected to determine the requirements for the vehicle. A license numberis entered for a vehicle in the vehicle master data.

q Transport unit number: identifies the transport units assigned to avehicle.

q Carrier: Represents an external vendor responsible for the vehicle. Acarrier is created as a vendor in Purchasing (MM) and can be used forshipment costing.

q Route: The route can be used to define various points along which theshipment is transported. If the route is created in the vehicle master datarecord, then it is defaulted into the shipment using that vehicle.

q Status: The status controls whether the vehicle can be selected duringscheduling.

The vehicle master data is represented in the figure below:

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As stated previously, a vehicle consists of at least one transport unit. Thetransport unit id’s must be individually assigned to the vehicle in the vehiclemaster data. The master data for each transport unit must therefore existbefore being assigned to a vehicle.

A transport unit is an independent entity forming part of a vehicle. It can beindividually described as a means of transport. Examples of a transport unitare:

q Truck trailer

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q Barge

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The figure below shows how the master data for a transport unit is structured.

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The transport unit master data includes the following:

q Transport unit number: The transport unit number is the uniqueidentifier for a transport unit. The number is freely definable by the user.The user can also use internal number ranges generated by the system.

q Transport unit type: A transport unit type is used to define the basiccharacteristics of the transport unit. The type can be used to definewhether the transport unit is used for road, rail, marine (sea or inland) orpipeline transportation. The transport unit type also determines whetherthe transport unit is a mover such as a train locomotive, or a trailer.

q Dimensions of the unit and unladen and maximum weight.

q Availability checking of the unit. The status of the transport unit can beeither available, not available, or marked for deletion. For example, thetransport unit status can be set to unavailable when the transport unit isbeing serviced or temporarily out of service. A status of marked fordeletion means the transport unit should no longer be used for futureshipments and will be deleted from the system when the nextreorganization program is run (provided there are no active shipmentsusing that transport unit).

q Meters per transport unit: Metered transport units (for example trailers)use meter readings to determine the unloaded quantity. In order to usethe meter readings of a transport unit, the meters are defined in thesystem as master data. The predefined meters are assigned to onetransport unit.


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q Compartments: A transport unit can consist of as many compartmentsas necessary. It is mandatory to define at least one compartment for atransport unit. A compartment is the lowest level in the definition of ameans of transport. Information about the quantities of material carriedon the vehicle is stored at the compartment level. The following data islinked to compartments:

m Minimum/Maximum volume: The system allows the definition ofthe minimum and maximum volume that a compartment can store.The unit of measure used is defined at a transport unit level. Themaximum weight and volume are checked during the schedulingtransaction. Whenever the dispatcher overloads a compartment witha particular product, the system issues an error message.

m Product compatibility: A compatibility group can be defined foreach compartment. Various characteristics are selected for eachcompatibility group from a list defined in customizing. Duringscheduling, the system checks that the product to be loaded into thecompartment is compatible with that compartment by checking thatthe characteristics correspond.

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TD supports two types of meters: rack meters and vehicle meters. Rackmeters are defined as master data and are tied to a plant and store location.The store location assignment can be changed. Vehicle meters are defined aspart of the vehicle master data. The meters can be used during loadingconfirmation and delivery confirmation. By entering the meter readings, theloaded and unloaded quantity is recorded. If TD is interfaced to a TerminalAutomation System or in-cab computer system, the meter readings can becaptured automatically.

If such systems are not in use, the meter readings can be manually entered.To provide an audit trail of meter readings, a meter reading reconciliationfunction is provided. The reconciliation report lists all material movements


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that have passed through the meters during the specified time period.Movements include the loading of vehicles, in addition to other incidentals,such as flushings and meter recalibration. Each meter is listed with thecorresponding shipment number, and the start and end readings for eachmovement. Meter adjustment factors can also be entered.

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A driver is master data and is maintained through a separate transaction.The driver table contains the following data:

q Driver number: Used to uniquely identify the driver in the system. Thedriver code can use either externally or internally defined numberranges. The driver master data is supported by matchcode searchstrategies.

q Driver name

q Personnel number: An external personnel number can be entered, this isnot linked into the Core Human Resources Module of SAP R/3 System.

q License type: Can specify the types, identification and period the licenseis valid for.

q Carrier: A driver can be assigned to an external carrier.

q Availability: The status of a driver specifies whether a driver is availablefor assignment to a vehicle during scheduling.

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The Transportation view is available in the product master. In this view,a product compatibility group can be defined. An error or warningmessage is issued whenever a product is scheduled into a compartmentwhere the characteristics do not match. Whether an error or warningmessage appears, is configured in Customizing.

q Customer MasterThe transportation view is available for TD functions in the customermaster. In this view a vehicle compatibility group can be defined.During scheduling an error or warning message is issued whenever avehicle does not match the required characteristics to carry out adelivery to the customer. Whether an error or warning message appears,is configured in Customizing.


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The TD process flow is based on the assignment of documents to shipmentsduring scheduling. The TD process flow supports inbound purchases,outbound sales, and product transfers by integrating with the relevant R/3process flows. The underlying documents that can be assigned to andprocessed as bulk shipments are reservations, shipping notifications, anddeliveries.

The following figure shows the relationship of these documents to the bulkshipment process and the relevant R/3 processes.

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A shipment moves from the scheduling process where the underlyingdocuments and vehicles are assigned to shipments, to the loading anddelivery confirmation processes. The shipment status determines if andwhen a shipment can move from one TD process step to the next. Duringloading, product is loaded onto vehicles from the schedules. During thedelivery confirmation process, the delivery of the shipment is recorded.

Within TD it is possible to change quantities during the scheduling, loadingand delivery confirmation processes. The scheduled quantity is proposedduring the loading step, but can be changed. Also, product left on thevehicle from a previous shipment can be added to the current shipmentduring loading. If at the delivery confirmation, the actual quantity shippeddiffers from the underlying document, the underlying document is updated.


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Oil product inventories are normally held at a standard temperature (forexample 15° Celcius or 60° Fahrenheit). In order to calculate these inventoriesand movements at a standard temperature, it is necessary to know thetemperature and density, as well as the measured volume of the product. As asingle shipment is transported, the measured temperature and density maychange. The American Petroleum Institute (API) has published formulae andprograms to calculate volumes at standard or any temperature, based onmeasured temperature and density. These programs are generically referredto as the American Society for Testing Materials (ASTM) calculations. Thecalculation of other units of measure is also supported. For instance, fordifferent purposes, a material might be measured in tons, pounds, 60° gallonsand 60° barrels. The material can be defined so that the system simultaneouslytracks a material’s movements and inventories in all these units of measure.

The HPM application area of R/3 IS-Oil Downstream supports the entry oftemperature in TD, and supports calculation of standard volumes usinginput or default temperatures and densities. TD and HPM are integrated sothat TD seamlessly offers support for multiple units of measure within thesame transaction. Temperature and density are important to the loading anddelivery confirmation processes.

Scheduling

During the scheduling step, underlying documents are grouped together toform shipments. Because only planned quantities are used at this stage, noASTM calculations are carried out in scheduling. If any changes to theunderlying document quantities are made during scheduling, then theunderlying documents are updated.

Loading Confirmation

During the loading confirmation step, the quantities actually loaded on thevehicle can differ from the quantities in the underlying document and thescheduled quantity. The loaded quantity per product is captured at loadingconfirmation and assigned to the underlying documents. The updatedquantities are posted to the original document item. Entry of ASTMparameters is supported during loading. These parameters are maintained atthe item level in the underlying document.

Delivery Confirmation

During the delivery confirmation step, the quantities actually delivered maydiffer from the loaded quantities. The actual delivered quantity per productis captured through the delivery confirmation transaction and posted to theoriginal document item. Entry of ASTM parameters is supported duringdelivery confirmation as the temperature may have changed since thevehicle was loaded.


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In the IS-Oil Downstream component, a valuation record and/or batch is usedto represent the tax status of a material. This is structured so that tax-relevantmaterials are always batch controlled. Either, the batch management functionis used or ”dummy“ batches are used based on two types of valuationrecords, “taxed“ or “untaxed“.

When goods are physically moved from one storage location to anotherstorage location or to a customer, the excise duty status can change. In TD avehicle is associated with an intransit storage location and thus can have adifferent tax status than both the customer and the delivering stock location.When a goods movement in TD results in a change of tax status, thefinancial postings accompanying the goods movement take account of anyduty or tariff implications.

Store Location/Batch

It is a requirement for TD to be able to change the storage location and batchup to the point of loading. The rescheduling function for storage location andbatch is supported in the loading confirmation transaction. When executingthe rescheduling function the new store location and batch number areupdated in the underlying document. For this to be possible, no batch numbershould have been entered in the underying document when it was created.

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Using TD application area, it is possible to schedule deliveries in caseswhere the product is supplied from or to an Exchange partner.

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6FKHGXOLQJThe main objectives of the scheduling function are as follows:

q Group underlying documents (deliveries, shipping notifications, orreservations) into shipments

q Assign shipments to appropriate vehicles

q Allocate products and quantities to the vehicle compartments

q Optionally assign a drivers to the vehicles

q Change the quantity of product to be shipped

q Plan transport-related activities using the event handling function

The result of the scheduling process is one or more shipment documents.Each shipment document is assigned a number and forms the basis for theloading and delivery confirmation processes. After a shipment is confirmed,the loading document can be printed.

The schedule that has been created is only a proposal for the loading processand can be changed, for example, if it is discovered that there is not enoughproduct. An important result of the scheduling process is that the underlyingdocuments which have been assigned to a shipment are blocked so that theycannot be simultaneously assigned to other shipments. The figure belowshows the place of scheduling in the TD process flow.

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The TD component of IS-Oil supports two options for scheduling. The firstapproach involves an interface to a third party software product or “pointsolution“, known as a dispatch optimizer. The second approach uses an IS-Oil TD transaction to perform the scheduling tasks.

The process of scheduling a shipment requires that a vehicle and andunderlying document (delivery , shipping notification, or reservation) beassigned to the shipment. Checks exist to ensure that deliveries, shippingnotifications, and reservations can be used for a shipment. These checksensure, for example, that they are not already in use by another shipment orother system process.


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The vehicle overview is used during the scheduling process to assign one ormore vehicles to a shipment. When scheduling a vehicle, the system checksthe mode of transport against the vehicle mode defined for the bulkshipment type. When assigning a vehicle the system prevents the sametransport unit from being assigned simultaneously to several vehicles.

After a vehicle has been assigned to a shipment, it is still possible to makechanges to the vehicle details. Within the shipment there is a view of thevehicle master data where changes can be made to the vehicle informationsuch as, equipment, identifier, unladen and maximum weight for thetransport unit, and the compartment volumes. Changes made to vehicle datafrom the shipment view are only valid for the shipment, and are notreflected in the actual vehicle master data.

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The document overview transaction is used during scheduling to assign theunderlying documents to a shipment. Each underlying document isassigned exclusively to a shipment, meaning that the document is blockedfrom use by other shipments and updates from other transactions. If knownthe document numbers can be entered in the document overview.Alternatively, a document selection report can be used to find documents toassign. The document selection report generates a list of documents thatmeet the specified selection criteria.

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After the underlying document and vehicles have been assigned to ashipment, it is necessary to schedule how the product is to be loaded on thevehicle. Product is assigned to the compartments of the vehicles assigned tothe shipment. If a vehicle, such as a pipeline, is defined with only onecompartment, the compartment planning is done automatically.

A number of checks are performed during compartment planning, includingthe following:

q Product compatibility

q Customer compatibility

q Overloading of the compartment

These checks ensure that the compartment is appropriate to transport theproduct, and that the vehicle has the correct characteristics to deliver to thecustomer. The overloading check ensures that the product quantity does notexceed the weight and volume capacity of the transport unit andcompartment.


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6KLSPHQW�2YHUYLHZ�5HSRUWThe shipment overview report provides an up-to-date view of all movements(both planned and actual) for a shipment. When a shipment is scheduled butnot yet loaded, all quantities in the shipment overview report are plannedquantities. No actual quantities are displayed at this stage. When a shipmentitem is loaded, the actual quantity is updated to reflect the loaded quantity.

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During scheduling events handling is available to maintain information on awide range of transport-related services such as, an inspection at loading orcleaning services for a ship. Event default groups can be set up for the bulkshipment type. Event default groups automatically propose event types andevent text that have been defined for the bulk shipment type. This could beused to ensure, for example, that compartment cleaning is always proposedfor marine shipments.

It is possible to enter the document number of a document related to theevent such as, a service order. A link is then established to the document sothat it can be viewed directly from events handling.

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6KLSPHQW�&UHDWLRQDuring the creation of a shipment, the following information is specified inthe shipment document:

q Transportation Planning Point

q Bulk Shipment Type


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q Date of the shipment

q Vehicles

q Documents assigned to the shipment

Transportation Planning Point

The transportation planning point is a group of employees responsible forthe planning of transportation. It is an independent unit and is not related inany way to any other organisational units in Logistics (i.e. plants, shipmentpoints etc ).

Bulk shipment Type

This is used to group the different types of shipments that can be createdand to define the basic parameters for processing them. Some of theparameters that can be set via the bulk shipment type are:

q Allocation of shipment numbers

q Definition of mode of transport (vehicle, train, etc.)

q Whether balanced loading is required

q Units of measure of the shipment

q Compartment loading gives an indication of how products can be loadedinto compartments. As with product compatibility, the compartment loadIDs assist the dispatch department in planning the products for a vehicle,that is assignment to compartments. Possible compartment load IDindicators are:

1. One document item in a compartment

2. Multiple document items of one material in a compartment

3. Multiple materials per compartment (normally used for the casewhere the whole vehicle is defined with one compartment and noprocessing is done at a compartment level)

q What sort of compatibility checking should take place (this can occurbetween products and compartments and customers and vehicles)

q Intransit posting group (which is used in the calculation of any duty ortax implications when the product is moved through the TD processingcycle)

q Exchange settings


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Shipment Dates

Several dates are included in the shipment, planned date for the load startand end, actual date for the load start and end, planned date for the deliveryconfirmation start and end, actual date for the delivery confirmation startand end.

Vehicles

One or more vehicles can be assigned to a shipment. For every vehicle it isalso possible to add a shift and trip. If a trip number is entered then a checkis carried out that the vehicle/shift/trip combination is unique. It is alsopossible to assign a carrier and route to the vehicle.

Selection routines exist to help in the selection of vehicles. Whole vehiclesmust be selected - it is not possible to select individual transport units orcompartments for a shipment.

Drivers

One or more drivers can be entered against a shipment - although the entryof a driver is not mandatory in the shipment. The matchcode facility can beused to select the driver.

Underlying Documents

One or more documents can be allocated to a shipment. Once a document isallocated to a shipment, it cannot be changed outside the shipment.

The TD component supports the following methods of assigning documents:

q Entry of an explicit document number

q Selection of deliveries using the Document Selection Report. The reportcan be used to select documents based upon the following criteria:

m Delivery details

m Shipping notification details

m Reservation details

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After selection of both documents and vehicles used for the shipment, a planmust be made showing how the vehicle will be loaded. At this time theimportant level of assignment is the compartment level. Compartmentplanning is used to assign document items to each compartment of theselected vehicles (transport units and compartments).

The assignment of products to compartments is processed as follows. First,the dispatcher selects a vehicle allocated to the shipment. The shipmentcontains a list of items to be transported along with a series of check boxesfor the compartments. The dispatcher selects which material goes into whichcompartment by setting the check box. The system then automaticallyassigns volumes to the compartment. The assignment can be entered ormodified on another screen. A number of checks are performed at this pointincluding the following:


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q Product CompatibilityThat the compartment is compatible with the product that is due to beloaded into it.

q Customer CompatibilityThat the vehicle has the correct characteristics to deliver to thatcustomer.

After successful assignment of all document items, the shipment can beposted.

If the quantities of a document do not fit in a compartment, the system willonly automatically assign the quantity that fits in the compartment. Theoutstanding quantity can then be allocated to another compartment ( but notnecessarily on the same vehicle in the shipment ). The shipment cannot beposted if compartment allocation has not been carried out. It is possible tochange the document item quantities from the Document Quantity screen inthe scheduling transaction. When appropriate, the system displays andupdates the following data:

q Actual weight and volume per vehicle

q Actual volume or weight per compartment

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Through the shipment it is possible to change the quantity of product to betransported. This allows the scheduler a certain degree of flexibility todetermine the quantity of product actually shipped. The scheduler may wishto make adjustments, in order to optimize the use of the vehicle. Thescheduler can make a judgment on balancing customer service (deliver asordered) and cost control (efficient transportation). The system allows thefollowing functions with respect to changing quantities:

q Changing quantities of allocated products

q Automatic calculation of unallocated quantities by subtracting theallocated quantities from the document item quantities

q Automatic document update at shipment posting

When the scheduler chooses to change the quantity of a shipment item (i.e.product) both the availability and credit limit checking functions areperformed as set up for a specific product or customer. This occurs when thequantity of product is increased. The delivery process with respect tooverdelivery and underdelivery tolerances continues to be supported in thescheduling function.


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Posting the scheduling transaction causes a shipment document to becreated recording all the information described above. The document statusis updated to “scheduled“ at this point.

Following the creation of a shipment, changes are made to the underlyingdocument if the quantity to be shipped has changed during scheduling. Thisis an automated process.

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The scheduling transaction, along with loading and delivery confirmation,will support the use of bills of material. The scheduling process will takeplace at the level of the header material in the BOM.

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The scheduling transaction supports the printing of the loading document ata printer determined by using the core output determination process.

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The system provides both Change and Display transactions. The capabilityto change the shipment will depend on the status of the document. Forexample, after scheduling almost any field can be changed. However, afterloading confirmation it is not possible to change the vehicle.

Matchcodes

Matchcode(s) are defined to support the search strategies for the selection ofshipments. Selection criteria for this matchcode are shipment type, status,user etc.

/RDGLQJ�&RQILUPDWLRQThe loading transaction starts when a shipment is loaded on to a vehicle.The prerequisite for loading is scheduling. A shipment can not be loaded if itis not scheduled. A status handling function controls the sequence betweenTD processes. Status handling is flexible, so that changes can be made to ashipment even after the shipment has moved to the loading or deliveryprocesses. However, changes cannot be made to the vehicles or documents,when these have been load or delivery confirmed. The main functions ofloading are to record the actual loaded quantities and to update all of thedependent data (shipment, delivery, order, stocks, tax liability, etc.). Theplace of the loading process within TD is shown below:


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The loading process is the same regardless of whether a TerminalAutomation System (TAS) is in use or not for a particular terminal. Whensuch a system is used, the data is transferred from the TAS system to SAPR/3 System using the same transactions as when no automatic system is inplace.

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The process of load confirmation is completed for each vehicle/plantcombination. Each vehicle and plant maintains a separate status. Afterposting the loading confirmation for one vehicle/plant the shipment is giventhe status “partially loaded“. If the loading confirmation has been posted forall vehicles/plants in the shipment, the shipment is given the status “fullyloaded“. For every loading confirmation of a shipment it is possible toidentify the loading date and time.

Bulk Product Quantities

Several important processes occur within the loading confirmation step, themost important being the entry of actual loaded quantities. Quantities inscheduling are planned quantities which are proposed at the loadingconfirmation stage.For bulk products the loaded quantity can be entered in two ways:

q Activate proposal (accept the products and quantities proposed fromscheduling)

q Enter loaded quantities directly, if different from scheduling proposal

q Meters (single or multiple meters can be used to enter the quantities foreach line item)

q Prior-to-load quantities can be entered, if product was left on the vehiclefrom a previous shipment

The entry of product quantities has to be accompanied by the store locationnumber and the batch number (or valuation record) indicating the origin ofthe product. The temperature and density of the product must be entered atthis stage, via a popup window, so that the ASTM calculation can be doneand quantities in other units of measure calculated.


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TD offers the capability to define meters for store locations (tanks) fromwhich the quantities are read. The meters are maintained as master data andare identified uniquely by a meter code. Based on the meter readings, theloaded quantities are determined. If a differing unit of measure is used forloading than that employed by the meter, the system performs anappropriate conversion either based on ASTM routines or “simple“conversion factors. For example, if the meter is defined in kiloliters (ambientliters) and loading is done in liters (ambient) one click of the meter isconverted into 1,000 liters. It is a requirement (mandatory) to assign a meterto a specific plant. On entering a meter code, a check is made to ensure themeter is defined within the loading plant.

Manufactures/Planned Rebrands

Manufactures or rebrands are a common practice in the oil business. It canhappen that two products are mixed to produce a new product duringloading onto the vehicle. This is common in the case where additives areadded at the loading racks of depots to a base product to produce anenhanced sales product to be delivered to the customer. In the SAP R/3System, a sales Bill of Material (BoM) is used to support this activity. Thebills of materials that is, sales products are used during scheduling withoutbeing exploded. However, during loading the sales product is exploded intoits constituent components, and the quantities for these components can beentered. Although the bill of material proposes the quantities of thecomponents to be loaded to make the sales product, it is possible to enter theactual loaded quantities of all components such as, the base product and theadditive.

This is illustrated in the following example:

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The quantity of the sales product is calculated by adding the loadedquantities of the components and using a weighted average calculation forthe temperature and density. The same process also applies to “PlannedRebrands“. In the oil business this is used when different product names areused for stock keeping and sales purposes. The sales product number isentered in the order, delivery and the schedule. For accurate stock keeping itis possible to enter the loaded quantities of the actual stock keeping product.


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When delivering products to a customer it can occur that the complete loadedquantity is not actually delivered. A certain quantity of a product may remainon the vehicle and come back to the depot. This is referred to as the “left-on-vehicle” quantity. The driver reports the left-on-vehicle quantities when hereturns to the depot. The system functions surrounding processing of left-on-vehicle quantity are discussed in the section “Delivery Confirmation“.

If the vehicle contains a quantity of bulk product from a previous shipmentthis is indicated at loading confirmation as the “prior-to-load“ quantity. Thequantity left on the vehicle in a previous shipment can be entered or pulledinto the current shipment by activating the prior-to-load quantity. Thisamount together with the newly loaded quantity is then combined into thecurrent shipment.

A report can be used to reconcile left-on-vehicle and prior-to-load quantitiesfor a specified period of time. The report displays quantities which havebeen left on the vehicle and not assigned to any subsequent shipmentsduring loading confirmation.

&RPSDUWPHQW�$OORFDWLRQThe loaded quantity of a bulk product is allocated at compartment level onthe vehicle during the scheduling step. At loading confirmation the userassigns the actual quantity of product loaded onto the individualcompartments in the transport units.

%DODQFH�/RDGLQJDuring loading, a balance load function is available to ensure that theunderlying document quantity is equal to the loaded quantity. If the balanceload indicator is set in Customizing, the material quantities which have beenloaded must be assigned to the underlying documents. During balanceloading, the loaded quantity is proposed as the discharge quantity in thedelivery confirmation process. Balance loading is also a prerequisite forother processes, such as Rapid Delivery Confirmation.

Two types of balance loading exist, and the method used depends on howthe compartments have been loaded, which in turn is determined by thecompartment load indicator. However, when balance loading is required,only the relevant method is used.


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When the compartment load indicator is set to allow only one delivery percompartment, the process of balancing documents must be carried out. Theprocess of balancing documents assigns delivery documents to the loadedquantities. The materials and quantities are allocated to delivery documentsat the compartment level.

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When multiple deliveries or multiple materials are allowed for theshipment, the process of balancing quantities must be carried out beforeloading can be confirmed. Unlike the balance documents process, withinbalance quantities the quantities allocated to a particular delivery or deliveryitem may be changed or split between several compartments.

At the balance loading stage, it is also possible to allocate or deallocatedocuments.

8QSODQQHG�5HEUDQGLQJ�DW�/RDGLQJAn example of unplanned rebranding is a case where the ordered product is“Unleaded Regular“. At loading the driver finds that the product is notavailable. It is then decided to provide the customer with “Unleaded Super“for the price of “Unleaded Regular“. It is possible to indicate that this type ofunplanned rebranding has taken place. The pricing and all the printeddocuments for the customer refer to the originally ordered product. Thegoods movements which are generated in the background are based on theactual shipped product.

0XOWLSOH�0HWHUVIn some oil companies it is common practice to load product using morethan one meter. The multiple meter function allows more than one meter tobe used in loading the vehicle compartment.

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Within the loading confirmation process it is possible to capture anunlimited number of measurement readings for the same productmovement. All of the readings are stored in the shipment document forfuture reference, but are not posted against inventory and are not used toupdate underlying documents. Measurements that are to be used as thebasis for inventory purposes must be selected for that purpose.

When loading confirmation is completed, the postings must reflect thecorrect intransit stock position for the shipment. If there are no differencesbetween the measurements, or the sender and receiver agree on ameasurement, only one material movement is necessary to move stock to theintransit plant.


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If there is a difference between the measurements, and the first measurementhas already been used for the intransit posting, a correction of the loadedquantity is required. How the correction is handled depends on a decisionbetween the sender and the receiver as to where the difference in quantityshould be posted. If the receiver accepts the difference, the intransit stock iscorrected by posting a gain or a loss. If the sender accepts the difference, thenecessary postings depend on the underlying documents used for theshipment.

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During the loading confirmation process it is possible to correct quantitiesfor shipments which have been completely loaded. Changing the quantitiesfor a completely loaded shipment results in correction postings. What typeof posting is made depends on the underlying document used for theshipment.

For example, when loading against a shipping notification, a goods receipt isnormally posted. If the quantity is increased as the result of shipment stockadministration, then an additional goods receipt is posted for the additionalquantity. A decrease in quantity results in a reversal of the goods receiptposting.

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When a shipment is partially delivery confirmed and the underlying documentis a shipping notification or reservation, it is possible to:

q Change onboard stock movements

m Between intransit storage locations

q Between vehicles

q Post gains/losses during transport

q Rebrand intransit stock

q Change tax status of intransit stock

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It is possible to change information about loaded stock for shipments thathave a status up to “partially confirmed“. The changes are made from thedelivery confirmation process. Using the movement on board function, it ispossible to change the following information about a loaded shipment:

q Vehicle

q Compartment

q Intransit plant

q Intransit storage location

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q Material

q Quantity

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TD provides the capability to automatically print documents after loadingthe shipment. The printed documents are flexible in layout and content. Anexample of a bill of lading is supplied with the system. TD also uses the coreoutput condition technique to allow flexible output definition for thedocument (print, fax, email, etc.).

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Status of Shipment Document

Posting the loading confirmation results in an update of the shipmentdocument. The status after loading confirmation can be one of the following:

q Partial loading - loading is finished for one or more vehicle/plantcombinations, but still has to be done for other vehicle/plant combinationsbefore the shipment has been completely loaded.

q Completely loaded - loading has been done for all vehicle/plantcombinations in the shipment.

Material Movements

At the loading confirmation posting the product moves from normal stock toa vehicle. The vehicle is represented as an “intransit storage location“.

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When products are loaded at the depot of an exchange partner, the loadingconfirmation is processed differently. This process is shown in the figure 6-13.

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When a product is loaded from an exchange partner, the system performsthe posting of a goods receipt to a purchase order (call-off). The goodsreceipt is the process of recording the actual quantity received in stock andgenerating the required inventory accounting entries. The product isreceived in the “normal“ storage location and is then moved to the intransitstorage location.

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The handling of account postings for tax purposes is described in the chapteron Tariffs, Duties, and Permits (TDP). In short, when products are physicallymoved they have a “from“ and a “to“ tax status. Both can be “ED-free“ or“ED-paid“. This terminology is extensively discussed in the TDP concept. ForTD purposes it is important to note that there are physical movements ofproducts and thus the tax status definition has to be supported.

The “From“ status is derived from the batch where the product is loaded. The“To“ status is defined by the intransit storage location, using customizingtables related to the bulk shipment type.

'HOLYHU\�&RQILUPDWLRQThe final step in the distribution cycle is the confirmation of the delivery.This the final processing stage of the products which were loaded on thevehicle. The place of delivery confirmation within the TD process flow isshown in the figure below:

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At delivery confirmation, four alternatives can take place with a givenproduct quantity:

q Product was delivered to a customer (or to another plant in the case of atransfer)

q Product is left on the vehicle for the next shipment

q Product is returned to a plant

q Product is lost or gained

Delivery confirmation must be completed for each vehicle in a shipment. Ashipment is completed when all assigned shipments are confirmed. Theprocessing of left-on-vehicle quantities, return quantities or gains and losses


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can only be executed when all shipments are confirmed. A status handlingfunction controls the sequence between TD processes. Status handling isflexible, so that changes can be made to a shipment even after the shipmenthas moved to the loading or delivery processes. However, changes cannot bemade to the vehicles or documents, when these have been load or deliveryconfirmed.

Within the delivery confirmation process, there are several methods ofconfirming the delivery, depending on the accuracy required for theinformation, and the amount of time available for processing the shipment.Rapid delivery confirmation does not require that the quanities delivered bereviewed, and can be performed for one specific delivery or all deliverieswith the shipment. Fast delivery confirmation makes it possible to changethe quantities delivered from those which are proposed.

The delivery confirmation process includes functions for handling unplanneddeliveries, and several options for dealing with undelivered product. It ispossible to enter delivered quantities manually or by using vehicle metersduring delivery confirmation.


The delivery confirmation transaction supports three main business scenarios:

q Complete shipment is delivered to the customers as loaded. In this caseno gains or losses, no left-on-vehicle quantities and no return to storelocation postings occur (rapid confirmation).

q Some deliveries from the shipment are delivered to the customers andare confirmed (partial delivery confirmation). If one chooses not tochange quantities for the selected discharge-relevant documents, thesame postings apply as in the first scenario.

q Some or all discharge-relevant documents are selected and the userchanges the quantities actually delivered to the customers. In this case,the user determines how the difference between the loaded quantity anddelivered quantity of a product is managed (lost, gained, left-on-vehicle,or returned to stock).

In the figure below, the subsequent steps and functions are schematicallypresented. The remainder of this section describes the Delivery Confirmationfunctions.


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Rapid delivery confirmation can be used to confirm one or all of thedeliveries within the shipment. This is an especially useful process whengains and losses do not exist. Rapid delivery confirmation can also be usefulwhen it is intended to deliver as loaded and there are no gains and losses tobe taken into account.

The quantities confirmed for delivery using rapid confirmation are the samequantities that were confirmed during the loading confirmation process. Touse rapid confirmation, balance loading must have already been carried outfor the shipment.

It is possible to select individual deliveries to be confirmed (partial delivery).For individually selected documents it is also possible to perform a rapidconfirmation. This means that for the selected documents the shippedquantities equal the loaded quantities.


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The fast delivery confirmation transaction displays all the data necessary toamend and confirm quantities that were delivered. This informationincludes the meter data entries, receiving plants (for stock transfers), reasoncodes. This method of delivery confirmation has the advantage that alldeliveries for a given vehicle are displayed on one screen.

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Unplanned Deliveries

If a delivery cannot be made to the expected customer and, rather thanbringing the load back to the depot, it is decided that the product on thevehicle will be delivered to another customer, then the original document inthe shipment is modified to show that no delivery, or if appropriate, a partialdelivery occurred and a new document is added to the shipment for the newcustomer. This is possible because of the flexible status handling in TD.

New delivery documents can be added to the shipment. However, adelivery can only be added to the shipment if the delivery exists and is notcurrently „scheduled“ to another shipment.

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It is possible to specify the delivered quantity for each delivered item. Bymanual entry of the quantities, or by entering meter readings, it is possibleto specify exactly the quantity of each product delivered to the customer.

ASTM Parameters

The ASTM parameters are entered and stored at loading confirmation. Theseparameters can be updated during delivery confirmation (for example dueto a temperature change at delivery). A pop-up window for ASTMconversion can be called to specify the new delivery parameters. The ASTMcorrected quantities are calculated based on these values and updated in theunderlying document, and will subsequently be used for postings.

Left-On-Vehicle

An important aspect of the delivery confirmation is the accounting for anyleft-on-vehicle quantity, which will be left in the intransit storage locationwith the ASTM parameters taken during the delivery confirmation. Extraprocessing will be required when the truck is next loaded to take account ofthis stock in the new shipment.

Return to Plant

If not all the product was delivered, some of it can be unloaded at a companyplant - either the original plant or another one. The return quantity can also berebranded as a new product. For example, if the product is returned because itis contaminated, it could be returned under a different product name. Anyvalue differences would be posted as a gain or loss financially.


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Gains and Losses

If the user posts a different quantity during delivery confirmation, thesystem considers the difference to be a gain or a loss. If a return plant is notspecified the system will prompt the user to specify one. This plant is thenmade responsible for the gains or loss. The system can also be customized touse specific tolerance values for gains and losses. If the gains or loss exceedsthe tolerance value the user is required to specify a reason code for the gainor loss. The reason codes are freely definable codes. The codes and theirexplanation are defined in a customizing table. A user specific report canthen be built to analyze the gains and losses.

Meters

Meter readings can be used to capture the delivery quantity. Meter data isstored each time a transaction passes through the delivery confirmation. Ameter history file captures the information for use in the meter reconciliationfunction.

Two-Step Transfers

TD also supports the transportation function for stock movements from oneplant to another. In the Core SAP R/3 System, this function is supported byusing different purchase order types. A transfer order type is used tomanage the movement of stock from one plant to another plant within thesame company. When using these order types in TD, the additionalfunctions are reflected in the loading and delivery confirmation transactions.The system generates both a goods issue (from the delivering plant) atloading and a goods receipt (for the receiving plant) at deliveryconfirmation. To enable these documents to be produced the user is requiredto specify both the storage location and the batch number of the product.

Excise Duty Handling

As discussed during the loading step the products receive a tax status in theintransit stock. When the products are delivered to the customer they receivea new tax status. The new tax status is based on the customer master. Fortax posting purposes, a “from“ tax status exists (as discussed in loadingconfirmation) and a “to“ status exists as retrieved from the customer masterduring delivery confirmation. When a return, gains or loss or goods receiptis posted, the “to“ tax status is retrieved from the receiving batch. The effectof these changes to the tax status are reflected in the financial postingsaccompanying all the goods movements.

3RVWLQJWhen posting the loading or delivery confirmation, the system updates thestatus of the shipment document. The following table shows the differentposting possibilities dependent on the underlying documents and their loador discharge relevance.


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Document LoadRel.

Disch.Rel.

Action Movements Comments

Delivery X X L 311 Delivering Plant/StLc toIntransit StLc

D 601 Intransit StLc to Customer

X D 601 Intransit StLc to Customer

X Not allowed atscheduling

ShippingNotification

X L 101 Goods Receipt to IntransitPlant/StLc

X X L 101 Goods Receipt to IntransitPlant/StLc

D 301 Transfer ReceivingPlant/StLc

Not plannedduring scheduling

X Not allowed atscheduling

Reservation X L 301 Delivering Plant toIntransit Plant

X D 301 Intransit Plant toDelivering Plant

X X L 301 Delivering Plant toIntransit Plant

D 301 Intransit Plant toReceiving Plant

Not plannedduring scheduling

Two-stepTransfer

X X L 311 Delivering Plant + 641Goods Issue

D 101 Goods Receipt

X D 641 GI to Intransit ofReceiving Plant

No Goods Receiptosting for receivingplant

X Not allowed

6KLSPHQW�&RVW�3URFHVVLQJShipment cost processing is used to carry out the calculation and settlement

of shipment costs with a service agent. The shipment cost processinvolves several activities within TD:

q Prepare shipments for shipment cost processing

m Maintain routes in shipment

m Maintain partners (service providers) in shipment


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m Assign loading and discharge points

m Assign loaded and discharged quantities

q Create shipment cost documents

and other shipment costs

q Settle shipment costs with service provider

The following functions are provided in shipment cost processing:

q Entry and management of master data for shipment agreements, rates,and other shipment costs

q Calculation of shipment costs for each stage of a shipment

q Settlement of costs for each service agent

q Transfer of shipment costs to Financial Accounting and Controlling

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Shipment stages (legs, load transfer points, and border crossing points) areused to record the geographical aspects of a shipment. The assignment of theunderlying documents of a shipment to the stages within a route is requiredfor the document item quantity assignment, and therefore, also necessary forthe creation of a shipment cost document and the settlement of costs with aservice agent.

A shipment can consist of several points of departure and several destinations.The shipment can require various modes of transport and involve variousservice agents. The connections between the locations, modes of transport,and service agents are all recorded in TD through the use of stages. To settlecosts with a service agent the shipment cost process requires the asignment ofunderlying documents to the stages of a route. The shipment cost is based onthe quantity of product transported over the specified stages.

Using the optional auto stage assignment function, stage reference information(from associated tranportation connection points) can be used to make anautomatic stage assignment. For example a plant, storage location, customer, orvendor information can be used.

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Partner data is used to represent service agents in TD. Multiple partners canbe assigned to a shipment. The shipment cost process uses the partnerassignments to settle all costs of the shipment, such as costs based on thequantity of product transported over specified stages.

Partner data can be maintained on the shipment header level (insurancepartner), on the vehicle level (carrier), or on the stage level.


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Document item quantity assignment is the assignment of load-relevantdocument items to discharge-relevant document items for the selectedvehicle based on the material information. This is necessary for shipmentcost processing, because of the flexibility required to support pipeline andmarine shipments. This flexibility is reflected in the following TD functions:

q Separate documents for loading and discharge of a certain quantitywithin a shipment

q Splitting of quantities from load-relevant documents to multipledischarg-relevant documents or vice versa

Quantity assigment is carried out for each vehicle along the vehicle route,based on the First In First Out (FIFO) principle. The process is triggered bythe creation of a shipment cost document for a shipment, or can be carriedout in a separate step where the document and quantity assignments can bemodified.

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The shipment cost document contains data that is important for processing ashipment. This data represents the physical flow of a shipment. It can, however,be important to redefine a shipment from the view of shipment cost calculation.This can be important for example, when it is necessary to determine shipmentcosts according to the method “most expensive main leg“.

This method is not yet implemented for IS-Oil Downstream release 1.0D, but itis an example of why a separate document is required for the shipment costs.

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In the example above, the actual shipment flow plays a subordinate role inshipment cost calculation. The main legs are the most important information


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for shipment cost settlement. It is still necessary to calculate several shipmentstogether. This is particularly the case when the insurance for a transportationchain is based on a percentage rate of the total transportation costs.

The shipment cost document in the above example requires an appropriatereference to the shipment components for which you have to have separateshipment cost calculation (stages, shipment header).

The above example shows a function of shipment cost processing which willbe available after Release 1.0D. The shipment cost document which isavailable in Release 1.0D contains the following information:

q Cost view

m Overview of items with display of calculated costs

m Representation of costs for each document item

q Document view

m Overview of underlying documents that are a part of the shipmentcosts

q Stages

m Overview of stages that are part of these shipment costs

q Document flow

m The shipment cost document is integrated into the SD documentflow

m It is possible to call up the document flow from the document

q Status management

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Shipment costs are calculated using the condition technique in standard R/3pricing. The standard pricing function is based on:

q Pricing procedure

q Condition types

q Access sequence

q Conditions

The pricing procedure is determined by the following:

q Transportation planning point

q Shipment cost group

q Carrier group

q Shipping type group

The actual shipment cost calculation is carried out either on the basis of theshipment stages, vehicle, or shipment header. The data can be taken from


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different sources such as, the shipment header, the vehicle, the shipmentstages, or the underlying documents. The basis calculation can be one of thefollowing:

q Underlying documents

q Items from the underlying documents

q Assigned quantities

q Vehicle

q Shipment cost document item

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How shipment costs are allocated, and how the GL accounts and CO objectsare determined is based on the shipment and the underlying (discharge-relevant) documents, as well as parameters set in Customizing for theshipment cost item category. Parameters for account determination include:

q Information from the shipment

m Company code

q Information from Customizing

m Plant

m Valuation class

m Account assignment category

q Document type of the underying document (optional)

Account determination based on the document type of the underlyingdocument is only possible if costs are allocated per document or documentitem. This allows the costs for inbound and outbound movements within thesame shipment or shipment stage to be separated into different GL accounts.

The CO objects can be determined based on the GL account or from theunderlying documents (sales order, delivery, purchase order, or shippingnotification). CO objects include:

q Cost center

q Profit center

q CO order

q CO/PA object

The GL accounts as well as the CO objects determined by the system areonly proposals and can be modified.


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A function to settle shipment costs with a service agent (partner) is provided,and supports manual invoicing and automatic invoicing.

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Shipment cost settlement includes the following functions:

q Manual and automatic release of shipment cost documents forsettlement

q Creation of external service orders and entry of services provided

q Automatic settlement (ERS procedure)

q Transmission of shipment costs to accounting system

q Self billing (information for the service agent with respective informationfrom shipments and shipment cost documents)

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+LJK�/HYHO�6XPPDU\The objective of TDP within R/3 IS-Oil Downstream is to incorporatefunctions specific to the oil industry for the handling, calculation, andposting of excise duty values in the R/3 System.

The IS-Oil System provides:

q Excise duty (ED) handling from order entry through to invoicegeneration. Calculation of excise duty liabilities and receivables aremade on each movement of dutiable product. Duties can be calculatedbased on multiple units of measure, including temperature-correctedquantities.

q Maintenance of the dutiable status of materials. Changes in the quantityof taxable inventory are calculated on each movement of dutiableproduct. The ED-paid inventory values of dutiable products are heldseparately from the book value of the inventory.

q Functionality for maintaining and using different tax rates for the sameproduct, depending on the intended use of that product. It is possible tohandle duty calculations for material moved between different plantswith different tax rates.

q Licenses, exemptions, and allowances are taken into account in dutycalculations.

.H\�)XQFWLRQ�%HQHILWVBy integrating excise duty handling in Purchasing, Materials Management,and Sales the R/3 IS-Oil Downstream component helps oil companies tocalculate their excise duty liabilities correctly, and avoid fines or penaltiesthat might result from incorrect calculations for the payment of taxes.

The key function benefits are as follows:

Specifically, the TDP application area ensures that both the functional and legalrequirements governing excise duty are met. TDP covers the identification andcalculation of excise duty liabilities and claims, which occur whenever there aremovements of dutiable materials between ED-paid and ED-unpaid locations orvice versa. ED-paid represents undbonded/tax product where the excise dutytax is paid. Ed-unpaid represents bonded/untax product where the excise dutytax is not yet paid.

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The TDP application area integrates excise duty handling techniques inMaterials Management, Sales and Distribution, and Financial applicationsthereby leading to consistency in the handling of excise duties.

This functionality automatically proposes certain excise duty parametersand transfers these parameters among applications, thereby reducing thedata input effort required by users and reducing the risk of datatranscription errors.

TDP enables each unit of oil material to be identified as either ED-paid orED-unpaid stock. This enables a business to track changes in ED-paid stockseparately from ED-unpaid stock, and to select stock for issue based on itsduty status. This gives companies flexibility in managing their exposure toexcise duty tax and hence the flexibility to manage their cash flowsaccordingly. This is critical in countries where the value of the excise duty ininventory is greater than the value of the material itself.

.H\�,6�2LO�)XQFWLRQV�6XSSRUWHG�E\�WKH,6�2LO�'RZQVWUHDP�7'3�&RPSRQHQWThe following TDP oil industry-specific functionality is provided within theR/3 IS-Oil Downstream System:

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Within the downstream oil industry there is a requirement to be able tocalculate and report on excise duty values whenever a movement of dutiablematerial occurs from a ED-unpaid to an ED-paid location or vice versa. Inaddition, it is necessary to capture the financial implications of materialmovements between ED-paid locations. Material movements between ED-unpaid locations have no financial implications with regard to excise dutyidentification.

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The TDP application area builds on Core R/3 by defining the rules necessaryfor excise duty calculations, and by providing the mechanism to calculate andpost these excise duty values in real time.

Examples of some of the posting rules that are provided by TDP include:

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q Tax liability postings for movements of dutiable material from an ED-unpaid to an ED-paid location

q Tax claim postings for movements of dutiable material from an ED-paidto an ED-unpaid location

q Excise duty value of stock to be calculated separately from the materialvalue and to be posted to a separate balance sheet account

q On consumption of dutiable materials, the excise duty value of a stock tobe calculated separately from the material value and to be posted to aseparate consumption account. Relief against inventory is posted againstthe excise duty value in the stock account

q Excise duty value differences to be calculated and posted whenevermovements of dutiable materials occur, where two excise duty rates mayapply

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The Core R/3 System provides the function for holding stock in one unit ofmeasure (the “base” unit of measure). The R/3 IS Oil DownstreamHydrocarbon Product Management (HPM) application area enables users tohold stock in additional units of measure based on ASTM/API conversionsfrom the base unit of measure. There are multiple standard unit of measureviews for a given material to cover different requirements for purchasing,pricing, stockkeeping, etc. In addition, quantities are also provided in theexcise duty unit of measure. These units of measure are user-definable (forfurther information, see the chapter on HPM).

The TDP application area utilizes these extra quantity units of measure toprovide users with the ability to specify which of the various units ofmeasure are used to calculate excise duty values on relevant materialmovements.

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TDP integrates excise duty handling techniques with the specialized invoiceprocessing functions developed for oil product exchanges in the R/3 IS-OilDownstream Exchanges (EXG) application area. This enables the invoicingof excise duty values, even where material and/or fee amounts are notinvoiced.

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It is possible to capture the difference in excise duty values resulting fromchanges in duty rates between accruing the liability and invoicing thecustomer, and then to record the financial implications of such differences inan appropriate manner.

TDP enables users to specify how differences in excise duty values betweenthe accrual of the liability and the invoicing of cost to the customer are


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handled. Differences can be handled as a windfall gain or loss which isposted to the income statement, or handled as an additional excise dutyliability or claim and posted to the balance sheet.

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The Core R/3 System provides the framework to automate data transferwithin and between the different functional modules such as MaterialsManagement, Sales and Distribution and Financials. The TDP applicationarea extends this functionality by providing for the automatic proposal(default) and transfer of excise duty parameters within purchase, sales, andproduction orders. A separate process then uses those parameters tocalculate the excise duty values, and posts the relevant financial documentson a real-time basis.

A basic framework upon which functionality for the handling, calculationand posting of excise duty values can be built, is provided by the R/3 CoreSystem, for example, the ability to split valuated materials. Enhancementsprovided by IS-Oil TDP include the identification of the excise duty status ofa material.

Within the downstream oil industry there is a requirement to be able to trackdutiable material as either ED-unpaid stock or ED-paid stock. This isnecessary to enable ED-unpaid and ED-paid stock to be separatelycontrolled and valuated, and also to provide the ability to select stock forissue based on its excise duty status.

6SHFLILF�)XQFWLRQDOLW\�IRU�1RUWK�$PHULFDCertain functions have been identified which are relevant to the NorthAmerican market. A customer can be exempt from certain taxes dependingupon a variety of factors such as material, material group, customer,customer group, mode of transportation, origin, destination, and type of tax.The customer has to present his exemption license and the number must beentered into the system. When the exemption license expires, the customermust pay the excise tax until a new license is provided.

Condition types have been created for federal, state, county, and city excisetax rates. An interstate excise tax table defines tax rates for movementsbetween states. Taxes can be charged either by the state of origin ordestination.


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'HWDLOHG�'HVFULSWLRQ�RI�%XVLQHVV�)XQFWLRQV�6XSSRUWHGE\�WKH�,6�2LO�'RZQVWUHDP�7'3�&RPSRQHQWThis section describes in further detail how TDP handles excise duties. Theexcise duty values calculated and posted within R/3 IS-Oil Downstream canbe summarized as:

q Liabilities to pay excise duty to the tax authority of a specific country

q Tax Claims for returns from the tax authority

q Excise duty value associated with the quantity of ED-paid inventoryheld in ED-paid locations

q The costs of excise duty associated with the consumption of duty-paidinventory

q Excise duty accounting differences generated by specific circumstances

q Excise duty postings associated with gains and losses of product duringa two-step transfer

The business parameters which control how excise duty values are postedinclude the following:

q The excise duty status of the material being moved; whether the materialis held or moved to an ED-unpaid or an ED-paid location

q To which excise duty tax group the material belongs

q The mineral oil content of a particular material, that is, the percentage ofthe product deemed liable for duty

q For what the material will be used, such as for a process of manufactureor for use as a fuel

q The locations involved in a movement; certain locations within a countrymay apply excise duty at reduced rates

q The defined purpose of the movement itself, such as a goods issue toscrap the material

q The date on which the movement takes place

In the following subsections, the business functions within the downstreamoil industry which determine how excise duty values are calculated aredescribed together with the TDP functionality which are provided tocalculate these values. Examples of the postings which may result from theTDP functionality are also given as appropriate.


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Excise Duty Status

The excise duty status of a dutiable material (ED-unpaid or ED-paid stock)and the nature of the tax movement determine the nature of the accounts towhich postings are made. For example:

q Whenever oil-based material is moved internally from a ED-unpaidlocation to an ED-paid location, it is necessary to pay excise duties to theauthorities and an excise liability is incurred.

q When oil-based material is supplied from an ED-paid location by avendor and becomes part of the company inventory at an ED-paidlocation, the company must record an increase in the excise dutyinventory value associated with its ED-paid stocks.

A license number can be stored for each storage location, where ED-unpaidstock is held. This license can be printed on delivery documents involvingED-unpaid stock.

It is important that oil material can be identified as either ED-unpaid or ED-paid stock. This enables a business to track changes in ED-paid stockseparately from ED-unpaid stock and to select stock for issue on the basis ofits dutiable status. It is also critical that the excise duty value of inventory beheld separately from the underlying value of inventory. To make thispossible each material is associated with at least two “valuation types”(valuation records). A valuation type is a sub-record for the material whichholds the total inventory value and quantity for the material of that type.

Either a batch number or a valuation type must be given for every materialmovement to allow the system to update the physical and financial balancesfor ED-unpaid and ED-paid materials. The update of the physical stockbalance, the financial balances for the material cost of inventory, and for theED value of inventory occur online and real time.

The material master record requires the following information for an exciseduty material:

q The excise duty tax group to which the material belongs. This is a user-definable value and allows materials to be treated in the same way forexcise duty purposes. The excise duty group to which a material belongspartially determines the excise duty rate which applies to a movement ofthe material.

q The mineral oil content of the material. This determines whatpercentage of the quantity of the moved material is deemed liable toexcise duty.

The excise duty status of a particular quantity of inventory is defined in thevaluation record.

Total stock on hand at each “plant“ (which could represent a tank farm,refinery, etc. in R/3 IS-Oil Downstream) is held in multiple units of measurein the material master record. In the valuation record, the total quantity ofED-paid inventory is stored in the excise duty rate unit of measure.

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The unit of measure used for the excise duty rate is defined for the exciseduty rate in the Excise Duty Rates table.

Excise Duty Postings

Tax Liabilities

Tax liability postings can be specified according to:

q The nature of the material: Materials with different tax groups may betreated differently.

q The business function of the movement: The R/3 System represents thebusiness function of a movement by using an internal transaction/eventtype (goods receipt, issue, transfer, etc.) and a movement type specifiedby the user for each movement of material in the system. A movementtype can distinguish an issue for scrapping material from an issue ofmaterials for use in production, for example.

The following general accounting rules are followed by the TDPfunctionality when determining the type of financial posting that is to bemade:

q An excise duty liability is generally posted for material movements fromTax Status “ED-unpaid“ to Tax Status “ED-paid“ ,that is, from an ED-unpaid to an ED-paid location.

q An excise duty claim is generally posted for material movements fromthe Tax Status “ED-paid“ to the Tax Status “ED-unpaid“, that is, from anED-paid location to an ED-unpaid location.

It is possible to specify that excise duty claims be posted to a separateaccount from that used for excise duty liabilities.

Tax Inventory

When dutiable material is received into valuated inventory, a debit postingis made to an account representing the “excise duty of inventory“. Whendutiable material is issued from valuated inventory, a credit posting is madeto an account representing the “excise duty of inventory“.

All postings to inventory accounts representing the value of stock are madewithout excise duty, online, at the time the material movement occurs.

Although the “excise duty liabilities“ account may have postings made to itwith a reduced rate of excise duty, the “excise duty of inventory“ accountalways has postings made to it with the full rate of excise duty for thematerial. This ensures that a meaningful revaluation of the excise duty valueof inventory can be conducted whenever there is a change in the applicableexcise duty rate.

Excise Duty Value at Consumption

For all material received as ED-paid product directly to consumption, theexcise duty value is posted to a separate cost account in the system. Thesame is true where ED-paid inventory is issued to a department of thecompany for consumption.

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Excise Duty “Accounting Differences“

There are several circumstances where, due to the nature of the downstreamoil business, excise duty accounting differences may require the excise dutycalculation and posting process to calculate and post balancing financialentries. The following are some examples:

q Movements where a relief/reduction in excise duty applies. Such as,when oil is sold to a customer from ED-paid stock with a reduced exciseduty rate.

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In the example, 10,000 liters of oil product are sold to a customer with areduced excise duty rate. A reduction in rate is specified using a special code- the handling type - during the transaction. The system determines that ahandling type of “03” implies a reduced excise duty rate of 500.00 DM per1,000 liters at 15 degrees Celsius (ASTM calculations are ignored). Thisoccurs during the processing of the material document for this transaction.

The excise liability which is posted as “excise duty cost of goods sold”reflects the reduced rate. However, the reduction in excise duty inventory isposted with the full rate of excise duty for the material. The full rate of exciseduty is found by reading the excise duty rates table with a masked handlingtype - i.e. “XX“.

The difference between the “excise duty cost of goods sold“ and the exciseduty value of inventory posting is posted to a “relief/reduction“ account.This difference may be treated as a liability in some countries, or as aloss/gain in others. The financial account which is used to post thisdifference is controlled via a company-level parameter, which can beconfigured by users as appropriate.


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q Internal “plant-to-plant“ transfers of material. For example, oil productis sent from a refinery to a depot for storage prior to sale.

In this case, several differences may arise:

m Excise duty rates at each plant may be different (possible incountries, such as Italy, where preferential rates of duty are appliedin certain districts). Also in certain countries, a movement of duty-paid stock from one location to another location with a higher exciseduty rate is treated as a liability.

m During a two-step transfer (where material is issued from one plantand held as “intransit“ until received at the second plant), exciseduty rates at the receiving plant may change during the course of thetransfer. In some countries, such differences may be regarded asliabilities.

m Differences between excise duty liabilities booked and excise dutybilled may occur both on the procurement side and on the sales side.

For example, a company may book liabilities based on the quantityof oil product loaded on a truck measured in liters at 15 degreesCelsius. However, it is acceptable to bill customers for excise dutymeasured in ambient liters. In such a situation, a difference willarise between the excise duty liability recorded and the excise dutybilled to the customer.

m Similar differences could arise on the purchasing side if a duty-inclusive price is quoted to a buyer based on a different rate thanthat used by the company to value its duty-paid inventory.

Excise Duty Associated with Product Loss or Gain

During transfer of oil product between locations, the quantity of oil productissued may differ from the quantity of product received. There may be aphysical loss or gain. A physical loss may be due to measurement, spillage,leakage, etc.

Excise duty postings which are made for transfers where quantities aremonitored at issue and receipt (the two-step transfers) cater to both thescenarios described above. An “excise duty loss or gain“ is posted for thedutiable quantity lost or gained.

Excise Duty Rate Determination

Within R/3 IS-Oil Downstream, it is possible to control the excise duty rateapplied to a movement of material based on a set of parameters, such as:

q According to the physical location (refinery, depot, tank farm, tank, ship,truck etc.) from which dutiable material is issued, or according to thelocation at which material is received.

q By the nature of the material

Different material groups may be given different rate structures withinR/3 IS-Oil Downstream.

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q With respect to the end use of the product

A handling type associated with a movement of material can be used todenote the intended use of the material. In such cases, excise duty ratesvary according to the handling type used for a particular movement.

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q The date from which the excise duty rate is valid.

The calculation process selects historic excise duty rates - from entrieswithin the excise duty rates table - based on the posting date of thegoods movement document within the system.

q According to the end use of the product. It is possible for users to define,whether a specific movement of material is to be made with a handlingtype (a code which defines the end-use of an oil material). Handlingtypes are, in turn, used to specify the excise duty status from which amaterial is bought, or the status to which it is sold. License numbers (todocument relief or exemption from duty) may also be required forcertain handling types.

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Posting of Excise Duty

It is possible to control whether an excise duty liability or excise duty claimis posted for a particular materials movement.

Defaults of Excise Duty Parameters

One of the aims of TDP is to reduce unnecessary data entry by proposingkey excise duty parameters for purchase orders and sales orders. Other keyfunctions within the R/3 System, for example, the control of productionprocesses using “production orders“ also use the default excise dutyparameters.

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Standard Purchase Orders

TDP functionality allows the control of excise duty liability postings bycompany/purchase order type. Different purchase order types within theR/3 System have different identification codes. These codes can be used tohelp modify the tax movements allowable within the R/3 System. Thus agoods receipt to a standard purchase order (type NB) within the R/3 Systemfor a ED-unpaid to ED-paid movement may be configured to provide exciseliability postings, whereas a goods receipt to a specialized purchase ordermay result in no liability posting being recorded.

The key data required for excise duty within the purchase order is defaultedinto the order from master records and tables.

The handling type from the company/purchase order type is superseded bydefaults held in the purchasing information record (the purchasinginformation record holds data concerning the purchase of a specific materialfrom a supplier). The Handling type is mandatory for purchase order itemsfor dutiable material.

The excise duty status from which the material is bought, or to which it issold (from an ED-unpaid location or from an ED-paid location), is defaultedfrom the handling type.

The excise duty status of the stock when it is received is determined by thevaluation type which it is given when it is moved into stock. The valuationtype is a label which determines the dutiable status of material and is carriedwith the material through every material movement.

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Purchase Prices Inclusive of Excise Duty

Where purchases of taxable material include excise duty, it is possible todefine purchase order prices so that the system calculates a valid price forthe material net of excise duty liabilities. This net price is used to valuate thematerial on entry to stock or on consumption. It is important to hold the netprice in these circumstances so that the material purchase price history canbe maintained. Incoming invoices can be split to separate excise taxes frommaterials to reflect different terms of payment.

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An additional condition in the purchase order item defines the excise dutyrate to be used to calculate the excise duty portion of the gross price. Twomain types of conditions are allowed:

q External excise duty rates: These select an excise duty rate automaticallyby reading the Excise Duty Rates table in the system using excise dutyparameters within the purchase order item.

q Internal excise duty rates: These allow the user to specify the rate ofexcise duty applicable within the gross price using price conditionrecords. The user can then accept the price proposed by the system orenter a price manually.

The system deducts the excise duty portion from the gross (duty-inclusive)price to give a valid net price for the material. At the time the goods receiptis posted, the system posts the net material cost to inventory (or expense).

The excise duty portion is calculated and posted to an excise duty value ofinventory (or excise duty expense) account.

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The offset financial entry to the above financial entries is the accrual for thepayable (net material cost or excise duty) and is posted to the “goodsreceipt/invoice verification“ clearing account. This account is cleared in theinvoice verification process, when the invoice for the total cost (material plusexcise duty) is recorded. It is possible to clear excise duty values separatelyfrom the material values.

When the invoice is received for the purchased material, the systemproposes the total value of the accrued material and excise duty cost formatching. The quantity of material for which the value is matched is alsodisplayed. However, quantities are only displayed in the purchase orderunit of measure, which may not be the excise duty tax rate unit of measure.The excise duty rate used for the accrual calculation is not displayed.

Receipts of Dutiable Material Free of Charge

In certain circumstances, oil product may be delivered free of charge whileexcise duty is still payable on the delivery. Note that pure exchanges ofmaterial are not covered by this scenario: the process of accounting formaterials and fees in exchanges is covered in depth in the chapter onExchanges.

For example, a supplier may deliver gasoline from an ED-unpaid location toan ED-unpaid tank. On receipt, the product is found to be contaminated andis returned. The supplier offers a replacement product, but has to providethe material from a ED-paid stock. The product is purchased “free ofcharge“ but excise duty is still payable. If a purchase order is raised for thereplacement supply, it is possible to define a net price of zero and a grossprice which reflects the excise duty cost per unit of material. Conditions,used to define the excise duty rate, are used as in the example in the section“Purchase Prices Inclusive of Excise Duty”. This provides a workablesolution for free-of-charge deliveries which incur excise duty. The postingswould be as follows:

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Subcontracted Purchase Orders

Within the R/3 System it is possible to specify that material be provided to athird-party (contractor) who will use the material to create a separate, finalproduct. This business process is handled within SAP R/3 System throughthe use of “subcontracted orders“. In the standard system, these provide theability to track material components at the supplier’s premises during theproduction process. Subcontracted orders are also used to automaticallycalculate the inventory (or consumption) value of the final material based onthe net values of the component materials provided and the cost of“manufacture“ of the final product. When material is issued to thesubcontractor, it is treated as company-owned stock at a new location (i.e.materials supplied to vendors). In R/3, this stock is managed at a plant level,because the stock is not stored on the company’s premises but rather at thevendor’s site. Component materials are deemed consumed at the point thatthe finished material is received as part of company-owned stock.

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Such orders might, for example, be used in the oil industry to monitor andaccount for issues of material to a third-party refinery with the aim that afinal blended product be returned.

TDP provides a mechanism for calculating and controlling excise dutypostings during the process of third party “manufacture“ at a subcontractor.

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The excise duty postings made at the time of issue of material to a subcontractedorder, and at the time of receipt of the finished product, are entirely user-definable. The figure below gives one example of how the system can beconfigured for subcontracted orders.

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Materials provided to a subcontractor are issued to him. For goods issues,the valuation type from which the materials are issued provides the exciseduty “from“ status of the materials. No financial postings of excise dutyliability or excise duty inventory occur for this transaction. In the figureabove, the following material movements would take place:

q Material “A” is issued: ED-unpaid ½ ED-paid

No excise duty liability posted. Material is moved from unrestrictedstock in the issuing plant, and the stock of material provided to vendorat the plant level is increased.

q Material “B” is issued: ED-paid ½ ED-paid

No excise duty liability posted. Material is moved from unrestrictedstock in the issuing plant, and the stock of material provided to vendorat the plant level is increased. The net effect on excise duty inventory iszero.

When the finished material is received into stock, all excise duty entries areposted for this material transaction. Materials consumed in the productionprocess are considered as follows:

The excise duty status “from“ of the component material comes from thevaluation type associated with the material at goods issue to the subcontractedorder.


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The excise duty status “to“ for the consumption posting is derived from theTax Status “from” defined in the purchase order (i.e. the Tax Status of thevendor). In the above figure, postings for consumption of materialsprovided are as follows:

q Material “A” is consumed: ED-unpaid ½ ED-paid

From row 3 of the sample table set up in the figure “Example ofConfiguration for Subcontracted Orders”, it can be seen that no exciseduty claim is posted for the consumption of ED-unpaid material. Noreduction of excise duty inventory occurs.

q Material “B” is consumed: ED-paid ½ ED-paid

From row 4 of the sample table set up in the figure “Example ofConfiguration for Subcontracted Orders”, it can be seen that an exciseduty claim is posted for the quantity of material consumed. A reductionin excise duty inventory is posted.

A separate excise duty calculation is made for the receipt of the finishedproduct:

q Material “C” is received into stock: ED-unpaid ½ ED-paid

From row 5 of the sample table set up in Figure 13, it can be seen that anexcise duty liability is posted for the quantity of finished materialreceived into stock. An increase in excise duty inventory is recorded.

The difference between the excise duty liability posted for the receipt ofmaterial into ED-paid stock and the excise duty claims posted forconsumption of duty-paid material represents the net liability to the exciseduty authorities.

Third Party Orders

It may be necessary to buy oil products for delivery:

q To a third party manufacturer

q To a customer

Special order types or item categories are used for such purchases. In thestandard system, no goods receipt is recorded, as materials do not passthrough the company’s inventory. In order to post excise duty liabilities forpurchased material, it is necessary to record a valuated goods receipt for thematerial. This results in the accrual of excise duty liabilities for the goodsreceipt, but will not result in an update to inventory accounts. The figurebelow depicts a typical third party order scenario.

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Supplier´s Consignment Stock Held at Company Premises

The R/3 IS-Oil Downstream Exchanges application area deals with complexscenarios where agreements exist to lift product from other companies’stock. For details of this functionality, see the chapter on Exchanges.

However, it is also possible that our company may wish to make a straightpurchase from a supplier on a consignment basis. Supplier’s consignmentstock is defined as stock which remains the supplier’s property while on ourpremises, but which will become our company’s stock at the moment we liftthe product. We are assumed to have an unlimited right to draw off as muchoil product from the consignment stock as is available in the tank.

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TDP provides the following solution for processing excise duties.

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Material can be received at the company’s premises (as supplier’s stock)with the same excise duty status with which the material was issued. Thesystem only allows receipts to ED-unpaid consignment stock from an ED-unpaid location at the supplier’s premises, or receipts to ED-paidconsignment stock from an ED-paid location at the supplier’s premises.

Receipts from Purchase Orders

In line with all material movements, permissible movements for receipts ofoil product (and the resulting financial postings) can be controlled using theentries in the excise duty/Tax Status table. The financial postings shownbelow are examples.

Materials can be received directly to a storage tank (ED-unpaid or ED-paid)and regarded as available product, or can be received to special “blocked“stocks where quality inspection may take place. Blocked stocks are treated as“non-available“ and may not be reserved or issued. Alternatively, oilproducts may be purchased for immediate consumption at receipt.

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Receipts to inventory: excise duty postings covering a variety of scenarios forreceipts from purchase orders to available inventory might look as follows:

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Receipt to blocked stock: Dutiable material can be held as blocked stockwith an excise duty status. Excise duty postings take place for the situationin which the material is received to blocked stock. Blocked stock can bevaluated, which means that movements to and from blocked stock cancreate the required excise duty postings.

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Receipts to consumption: If a non-stock oil material is purchased with theintention that the costs associated with procurement be charged to expenseon receipt, the excise duty portion of the cost is separately expensed. Costaccounting postings for excise duty values can go to a separate cost center,and can be distributed among user departments. Postings are as follows:

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Multiple Excise Duty Rates (Tax Elements) for a Purchase

It is possible that a number of excise taxes are applied to a single goodsmovement of taxable material. For example, in some countries, additionalenvironmental taxes may be levied on movements of oil product. R/3 IS-OilDownstream offers the capability to:

q Specify up to six “tax elements“ relating to a single movement of taxablematerial. All tax element excise rates must be based on the same taxablerate unit of measure and must be based on the same dutiable quantityfor the movement. Likewise, all tax elements must share the samevalidity period. Tax elements are defined in the excise duty Rates table.The cumulative value of excise duties are displayed on the main screen.

q Charge each tax element to a different account.

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Standard Production Processes

Oil companies may wish to handle a scenario where materials are combinedin a productive process to produce a new, finished material. A typical oilscenario might be the blending of oil product at a refinery to produce a newmaterial.

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Materials issued to a production process may be oil materials or non-oilmaterials, or a mixture of the two. For oil materials, it is possible to controlwhether it is permitted to issue ED-unpaid product to the productionprocess by the type of the material. When a material with an excise dutystatus is used, the user can obtain information about the tax.

The TDP functionality assumes that during production, the process takesplace as either an “ED-unpaid process“ or an “ED-paid process“. In otherwords, the production order carries an excise duty status. This is the statusto which raw materials are issued. It is also the excise duty status fromwhich the final product is received.

The final material created in production may be either an oil product or anon-oil product. If the material is an oil-product, excise duty liabilities andexcise duty inventory are posted for the receipt of the final material to stock.

To summarize, excise duty postings (excise duty liabilities and adjustmentsto excise duty inventory) are made on the basis of the tax movements whichoccur:

q For the issue of component materials to the production process

q For the receipt of the final product to inventory

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In the figure above, it is permitted to issue a gas oil from an ED-paid stock inthe production process. The issue is treated as a “ED-paid to ED-unpaid“movement and an excise duty claim can be posted. It is also permitted toissue heavy fuel oil from ED-unpaid stocks for use in production. The issueis treated as an “ED-unpaid to ED-unpaid“ movement and no excise dutyliabilities are posted. Again, it should be stressed that allowable movementsand excise duty liability postings are completely controlled by the userthrough the configuration of key tables.

Once the final product (a light fuel oil) is produced, the receipt to stockoccurs from ED-unpaid production to an ED-paid inventory, excise dutyliabilities are calculated for the final material.


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Overview: Inventory Movements

Dutiable material can be received to inventory, managed within inventory,and issued from inventory using a series of movement types defined in theR/3 System. Some of these possible movements have been described above.As already discussed, it is possible to control allowable excise dutymovements (from ED-unpaid to ED-paid location, etc.) in terms of thebusiness purpose of the movement. Within the R/3 System, the businesspurpose of the movement is defined by a combination of event type (issue,receipt, transfer etc.) and movement type (receipt to blocked stock, issue toscrapping etc.).

All control of excise duty status with material movements is set in the ExciseDuty/Tax Status table. Users can freely define the excise duty postings(liabilities and changes to excise duty inventory) associated with amovement of material.

In addition to standard movement types, it is possible for users to definetheir own movement types within the R/3 Core System.

Standard inventory movements to which excise duty postings can applyinclude:

Receipts to inventory:

q From purchase orders

q Without purchase order

q To blocked stock

q From blocked stock to available stock

q Returned material from customers

Examples of postings for receipts from purchase orders are given in thesection “Receipts from Purchase Orders”. The R/3 System also offersmovement types to receive stock without a purchase order. Excise duty isposted in the same way as for receipts from orders. Postings to blocked stockare discussed in the section “Receipts from Purchase Orders” and in thesection “Returns of Material by Customers”.

Movements within a single depot or other location, for example:

q Material to material movements (used for re-branding the product)

q Movements of material from unvaluated stocks (e.g. vendor-ownedstock) to valuated stocks

If at any point stock which does not belong to the company (e.g. customerstock held at the company depot) is transferred to the company‘s ownership,excise duty postings take place based on the Tax Status the material ismoved from and to (material movements between physical sites).

See section “Movements of Material” for an explanation of alternatives andexcise duty implications.

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Issues of material from inventory:

q Issues to consumption

q Issues for scrapping

q Issues to production

q Issues to subcontracted orders

If ED-paid material is issued, the excise portion of the material value isexpensed separately from the net material cost and at a separate time. Thecost accounting posting for excise duty is made to a separate cost centerfrom which a distribution of the cost may be made.

Issues of ED-paid stock to scrap result in an offset posting to a “scrappedmaterial“ cost account. For this purpose, the excise duty value is to beposted to a separate “excise duty scrapped material” account.

Revaluation of Excise Duty Value of Inventory whenExcise Duty Rates Change

Excise Duty Rate Changes

A requirement exists in certain countries to revaluate ED-paid inventorywhen the excise duty rate for the material changes. If excise duty ratesincrease, the company may face an additional liability for the increase inexcise duty value of stock. Conversely, if excise duty rates decrease, thecompany may be able to request an excise duty claim for the decrease inexcise duty value of stock. Companies can decide whether or not they wishto conduct a revaluation process for ED-paid inventory.

A change in excise duty rates is initiated when a new entry is added to theexcise duty rates table. Changes to excise duty rates may involve changes toone of the following:

If ED-paid inventory revaluation is switched “on“ in the control table, andan additional entry for a plant and material tax group is added to the exciseduty rates table, it is necessary to conduct a tax inventory revaluation. Itmust be remembered that ED-paid inventory is always valuated at the fullexcise duty rate for the plant and material, whenever the ED-paid material ismoved to or out of stock.

Mechanism for Revaluation

The principal aims in designing a revaluation mechanism are:

q To guarantee the integrity of a tax rate revaluation. A single set ofASTM parameters is required so that the stock quantity on hand can beconverted to the excise duty rate unit of measure prior to excise dutyrevaluation. In order to obtain this set of parameters, and also to providean agreed quantity for the revaluation, a stock-taking must take place inthe system. This need not be a physical count, however. Functionality isprovided to allow “logical“ stock counts to be performed, where thebook quantities are proposed as the counted quantities.

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q To maximize the ability to post material movements duringrevaluation. In order to guarantee the integrity of the quantities to berevaluated, all material movements for the particular material and stocksegment level combination that is the subject of a count are disallowed inthe time period between the posting of the stock count and the postingof the stock count difference. For example, if the stock count is related toa normal material item at a storage location, then material movementsfor that particular combination of material and storage location are notallowed. If on the other hand, the count is related to a special stock, thenmaterial movements involving at the individual material stock segmentlevel are disallowed.

Assume a “future“ rate is added to the excise duty Rates table for Depot 01and excise duty Group C4. A movement is posted with a posting date withinthe validity period of the new rate. The system updates a future quantityand a future value field in the valuation record.

Where an historic rate of excise duty applies for the posting date (and a taxrevaluation has taken place), the system posts any liability with the exciseduty rate applicable for the historic rate. However, because inventoryrevaluation has taken place, any posting to excise duty value of inventory ismade at the current rate. An excise duty difference is posted.

q To provide a flexible approach: The approach supports the flexibility oftax rate definition. A more simplistic approach would have limited theways in which excise duty rates could be defined. Revaluation of ED-paid inventory is an optional feature and can be switched on and off atthe plant level, according to legal requirements.

Separate field groups track quantities posted in a period where a “current“tax rate is in force and of quantities relating to a “future“ rate of taxation.The process of revaluation rolls all “future“ quantities into the “current“quantity field. The way in which the process operates may be illustrated inthe following figure:


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Each time a material movement of dutiable material takes place, the postingdate of the material movement is compared to a “check date“ held in thematerial valuation record. This determines whether “current“ or “future“quantities are updated in the valuation record.

Stock-taking transactions have been changed to allow the option of postingstock-taking with or without the posting of a tax rate change.

If ED-paid inventory is to be revaluated, stock-taking must first take place.The postings that will arise are as follows:

q Excise duty inventory account (differences from stock-taking only)

q Excise duty losses/gains from stock-taking

q Excise duty differences from the tax rate change

q ED-paid inventory account (differences from tax rate change)

Stock-Taking

ED-paid Product

It is possible within the R/3 System to adjust the duty-paid inventoryaccount to reflect any addition to, or reduction from the quantity of duty-paid inventory recorded as a result of stock-taking. When a revisedinventory count is entered into the SAP R/3 System, the following postingsoccur:

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ED-unpaid Product

As a general rule, changes in the recorded quantity of ED-unpaid product asa result of stock-taking do not result in excise duty postings.

However, some countries (notably Belgium and France) operate a system ofallowances for stock losses. Losses of ED-unpaid product above a certainallowance result in excise duty liability for the portion above the allowance.Gains of ED-unpaid product within an allowance may be sold withoutliability to excise duty.

TDP deals with the use of allowances for gains/losses of ED-unpaidproduct, prior to excise duty claims or liabilities being recorded. Theseallowances are defined in a table, which calculates the excise duty valuesand creates the postings.

Customer Stock

Where an oil company acts as the facilities manager for a depot, it may bethe case that other oil companies choose to store product at the same depot.

The facility manager needs to control the quantity of a product which“customer“ oil companies can lift.

The facility manager is responsible for the payment of excise duty for liftedquantities of ED-unpaid stock which is to be moved to an ED-paid location,whether these quantities are the facility manager’s own stock or another oilcompany’s stock. The facility manager may be able to bill the excise dutycharge to the company that owns the stock in certain circumstances.

Customer stocks are unvaluated in that stock values are not recorded in thecompany’s books, whereas the company‘s own stocks are valuated. When athird party stock is moved, the customer stock number must be included inthe movement. Excise duty liability postings are still made when a customerquantity is moved from a ED-unpaid location to an ED-paid location.

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Internal Transfers of Material

Dutiable material may be moved between company-owned locations withimplications for excise duty postings.

The full R/3 IS-Oil Downstream solution for inter- and intra-companytransfer of material is covered by the Transport and Distribution (TD)application area. TD enables scheduling, loading, delivery confirmation andload balancing to be handled for all methods of transport. For a fulldescription of functionality in this area, please refer to the chapter on TD.Excise duty values are calculated and posted for each relevant materialmovement.

However, some companies may not wish to use the TD functionality, or maywish to interface specialized distribution systems to the R/3 System. For thisreason, TDP functionality ensures that excise duty handling takes intoaccount standard R/3 System functionality to handle transfers of materialbetween locations. The technique used by a company to track material intransit between two locations varies based on the company’s requirementsand the nature of the method of transport, e.g. pipeline versus truck. Threebroad scenarios can be identified:

q One-step transfers: In this scenario, the material movement is recordedin the system as an “instantaneous“ transfer from one location toanother. There is no provision for intransit stock tracking and nopossibility to record gains or losses. These transfer types are suitable for“local“ transfers, such as tank to tank, tank to truck, or truck to tank.

q Two-step transfers: In this scenario, material is first moved from onelocation to “intransit” storage and thus in a separate movement fromintransit storage to the receiving location. Intransit stock quantities canbe monitored by “tracking number” (equivalent to a shipment) andgains and losses can be calculated per shipment. This functionality is notin the standard R/3 System and is developed as part of the HPMapplication area as detailed in the chapter on HPM.

q One and two-step transfers against a “transport“ order. This providesthe same basic functionality as described above, but adds the use of atransport order to record the “sale“ of material from one plant toanother. A delivery note is created for the order and contains projectedloading and delivery dates.

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Excise Duty Values for Two-Step Transfers without TD Integration

General Posting Rules for Excise Duty Values

q Excise duty liabilities (arising when taxable material is moved out of orto an ED-unpaid area): If the receiving location is ED-unpaid, liabilitiesare posted for the goods receipt only. If the receiving location is ED-paid,liabilities are posted for the goods issue only.

q Excise duty relief/reduction (arising when taxable material is movedwith a reduction in duty): If the receiving location is ED-unpaid,relief/reduction is posted for the goods receipt only. If the receivinglocation is ED-paid, relief/reduction is posted for the goods issue only.

q Excise duty rate differences (arising when the tax rate applicable at thesending plant is different from the tax rate at the receiving plant): Taxdifferences are only posted for the goods issue only. Differences areonly posted where a transfer takes place between two ED-paid locations.

q Excise duty rate changes (arising when a change in tax rate takes placefor the receiving plant between the time the material is issued from thesending plant and received): Tax changes are only posted for the finalreceipt once the gain or loss for the total transfer is known.

q Excise duty gain/loss (associated with a physical gain or loss of duty-paid product) is posted for the final receipt of all product associated witha shipment (transport number).

Posting Rules for Material Quantities

Quantities in transit are updated at the plant level. Unrestricted use stockand total stock quantities are updated at a lower level.

To facilitate the handling of gains and losses, the quantity in-transit may benegative. The balance of the quantity in transit against a single transportnumber must be reduced to zero when the gain and loss postings arecompleted.

Examples of Excise Duty Postings

In the examples shown below, the following assumptions have been made:

q Excise duty rates at both plant 01 and plant 02 are the same

q Excise duty rates do not change during the cycle of the plant-to-planttransfer

q A single issue and a single receipt are made

q The price of material at plant 01 and plant 02 is identical

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q Issue unit of measure, stock unit of measure and tax rate unit of measureare identical

q Issue and receipt take place on the same day: 01.01.97

Changes in quantities are shown below the line in each “T“ account.

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In the example below, the following assumptions have been made:

q Excise duty rates between plants can vary

q Excise duty rates are assumed to change during the cycle of the transfer

q Reduced rates of excise duty are applicable

q The price of material at plant 01 and plant 02 is identical

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Handling of Gains and Losses

Excise duty gains or losses are posted for the associated inventory gains andlosses. Gains and losses are attributed to the receiving plant. A periodiccalculation of gains and losses by analysis of transport number is possible.The transfer cycle would be closed manually after user criteria have beenmet (for example that no further movement has taken place against atransport number in the last ten days). At this point a final goods receipt isposted with a zero quantity, and the final delivery indicator is set.

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Movements of dutiable materials within the Sales and Distribution need tobe considered for their potential excise duty impact. Examples of the factorsthat need to be taken into account include:

q The Tax Status of the product to be sold: This is determined in thesystem by the selection of a valuation type or batch, from which materialis deemed to be taken (see section “Excise Duty Status”). This is enteredin the scheduling or load confirmation function of R/3 IS-OilDownstream.

q Whether the customer has authorization to buy the product at areduced rate of excise duty: Licenses are maintained in master datatables. During order entry, a license (if required) is defaulted from thismaster data, if it satisfies the matching criteria for the order line. Tomake sure that the right license type is determined, there must be aconnection between the license type and the condition type in thepricing procedure.

q The end use that the customer puts the product to and whether thisuse requires autorization from the excise authorities: A “handlingtype” code signifying the end use of the product sold may be stored inthe customer record, or the sales information record. This informationmay also be entered directly in the order.

q The Tax Status of the location where the customer puts the product,ED-unpaid or ED-paid: The excise duty status at receipt by the customeris defined by the handling type.

q The date of the material movement: Valid from dates are defined forexcise duty rates.

q The total product cost, if excise duty is included in the total price:excise duty rates are set out in an excise duty rates table. If the userwants to specify an excise duty rate which is different from the one usedto record the liabilities, they can do so by using the price conditionrecords. The standard pricing procedure proposes an excise duty valuefor the ordered quantity in all sales quotations and orders. See thesection entitled “Excise Duty Handling in Sales Orders”.


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Excise Duty Handling in Sales Orders

The R/3 System offers many forms of “sales order“. It is possible to raisequotations, orders, contracts, scheduling agreements and deliveries in thesystem.

Defaults for excise duty handling are passed to the sales order fromcustomer records or from sales information records. Data can be taken fromthe customer, payee or consignee in the order.

In all sales orders, the excise duty value associated with an order for ED-paid stock can be calculated and displayed. A standard R/3 System pricingprocedure is used to calculate excise duty within a specific order. Similar tothe functionality provided for purchasing, two types of price condition areallowed:

q External Excise Duty: These select an excise duty rate automatically byreading the excise duty rates table in the system using excise dutyparameters within the sales order item.

q Internal Excise Duty: These allow the user to specify the rate of exciseduty applicable within the gross price via price condition records. Theuser can then accept the price proposed by the system or enter a pricemanually.

The system adds the excise duty portion to the material price to give a validgross price for the material. For goods issues, the system posts the netmaterial cost to inventory (or expense).

This concept means that if users want to use the same excise duty rates inthe billing as was used in the liability posting, one set of reference data forthe duty rates needs to be maintained, namely the excise duty Rates table.Conversely, if users want to specify alternative rates, they can do so bycreating price condition records. The figure below portrays this scenario.

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For the manual price conditions a series of “price condition“ records may bedefined for excise duty rates. Such records indicate an excise duty rate for aquantity of material. Each price condition record has a user-defined “key“.Two key structures are provided with the R/3 IS-Oil Downstream System.The keys in each case are:

Other fields in the condition record are:

q Validity period

q ASTM/API unit of measure (base for excise duty calculation)

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q Duty rate (per duty quantity)

q Duty quantity

The condition record mirrors the set-up of the Excise Duty Rates table that isused for excise duty handling in the R/3 Materials Management function.

During order creation, the system searches for excise duty condition recordswith a key structure which matches the data in the order. If found, the exciseduty rate is applied to the material quantity and the calculated value isadded to the total order cost.

Tax Elements

It is possible to have several excise duty tax rates associated with a sale of amaterial. Additional excise and environmental taxes may be levied on a sale.This scenario mirrors the one described for the purchasing function. Taxelements for excise duty calculations in the Sales and Distribution functionare the same as those defined for the Purchasing function, i.e. they are heldin the excise duty rates table. In addition, users can define tax elements inprice condition records, if they do not want to use the same rates as thoseused for the liability posting.

Up to six excise duty tax elements can be defined. The set-up of excise dutytax element price conditions in the Sales and Distribution function shouldmirror the set-up of tax elements within the excise duty Rates table.

The standard functionality for condition records ensures that calculated taxelements for an SD document can be stored as separate condition types. Inaddition, it is possible to post each excise duty element separately to thegeneral ledger.

Excise Duty Handling in Sales Invoices

When creating a sales invoice, it is possible to pull over the prices (andexcise duties) defined in the order without further revision. However, it isalso possible to “reprice“ in the invoice, a process which reevaluates some orall of the condition records associated with an order and redefines the priceof the product if conditions have changed. The mechanism for recalculatingexcise duty in the invoice is identical to that used in sales orders. However,certain key criteria in the calculation of excise duty are different:

q The quantity used for the excise duty calculation in the invoice may bethe ordered quantity, the loaded quantity or the confirmed (delivered)quantity

q The date used for pricing in the invoice (and hence selection of exciseduty rate) may be: the date invoice is entered in the system, the date ofloading, the date of delivery, etc.

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Licenses: Relief and Exemption Handling

Overview

Authorities responsible for the collection of excise duties will often issuelicenses or permits to traders and require that the license reference numbersbe quoted whenever dutiable material is moved.

In R/3 IS-Oil Downstream, excise licenses can be created, maintained anddisplayed. The presence of a license affects the processing during movementof dutiable product, where license type “rules” are used in the determinationand possible exemption/reduction of the amount of excise duty calculated.

A number of different license types are available in the system (describedbelow) and it is possible for a user to create new license types with referenceto an existing license type.

The license types indicate a different processing method and the use of adifferent selection of the license master data. The major differences inprocessing are that:

q Excise duty (Europe) and pre-paid permits (Singapore) deal with bothmovement tax and customer invoicing implications

q North American methods are concerned with the tax determination andlicencing issues, at the time of invoicing only

q Vendor licenses are held for record purposes

License Master Data

It is possible to create, change or display licenses.

Excise Duty License Types

Customers who buy dutiable oil products may have an exemption certificate(for a specific period), which frees them from paying excise duty.Alternatively, a customer may have an authorization number (again for aspecific period) which reduces the excise duty payable to the supplier.

An excise duty license is always dependent on a customer specification(customer number or customer group), a material specification (materialnumber or material group) and the handling type. The license applies for aspecific period.

The entry of a company code is optional, but if used, the license is valid onlyfor that company code. A maximum quantity may be entered.

In the business transactions like order entry, the system attempts to default alicense if there is one applicable for the transaction data (customer, material,etc.).

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North American License Types:

Federal Excise Tax/State Excise Tax / County Excise Tax / City Excise Tax /Other NA Tax

These taxes are North American duties which are dependent on a customerspecification (customer number or customer group), a material specification(material number or material group) and the country. The company code,the mode of transport and the sales document type are optional. The licensesapply for a particular location, which is:

q For the Federal Excise Tax, the country

q For the State Excise Tax, the state code or an entry in the alternatelocation field

q For the County Excise Tax, the state code and the county code or anentry in the alternate location field

q For the City Excise Tax, the state code and the city code (county codeoptional) or an entry in the alternate location field

q For the Other NA Tax, the state code and the city code or the state codeand the county code or the state code, the county code and the city codeor an entry in the alternate location field

The State Excise Tax in most cases applies only for the destination. Insome states the tax applies for the origin as well. These states areregistered in an interstate table.

The condition types, which identify the different “excise” taxes, are linked ina separate configuration table to the applicable license types. Multiplecondition types can be linked to one license type.

The customer tax group field in the customer master minimizes the numberof license and condition records required for exempt groups, such asgovernmental agencies and schools. An “alternate” material group field isalso available for minimizing the number of licenses.

The Interstate table only requires the entry of specific states or jurisdictionsthat require licenses at the origin plant. The Interstate table includes thecondition type, the state, county, or city that requires the appropriate license,and the valid “from” and “to” dates.

Rather than modifying the supplied “user exits,” users can use the standardpricing condition access sequences to achieve unique requirements, such asthe following:

q A match on customer specific value using core pricing techniques wouldstop the access sequence search, if a condition record was found. Thecustomer- specific conditions are applicable for FOB (customer pick-upat company “plant”) transactions, with FOB identified in the “Incoterms1” field.


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q A match on plant-specific situations not covered by the standard taxexemption determination user exits, applicable for FOB transactions,would allow the search to continue to the next sequence. Included in thiscondition would be the new North Carolina tax rules.

q The final FOB access sequence would check for standard condition typetax records, followed by the tax exemption determination user exit forlicense validation.

A “sales order type” field is included in the license data to satisfy aCanadian legal requirement to enable specific customers to be tax-exempt onexchange related transactions, while being non-exempt for normal salestransactions.

Vendor License

For reporting purposes, it is possible to store vendor licenses in the system.These licenses have no functionality of their own. The vendor number ismandatory, the company code is optional.

Pre-Paid Permit

This license type deals with those licenses which are issued for a definedquantity of dutiable material. The company pays a specified amount for thelicense and is entitled to sell an agreed quantity of material from an ED-unpaid area. The cost of the license is in effect prepaying the tax liability.The license may apply to a group of materials which have a common rate oftax. Each time there is a delivery of the defined material, the quantitybalance for the license is reduced until it is exhausted. A follow-on licensemay be specified for additional delivery quantities.

Mandatory inputs are a customer specification (customer number orcustomer group) and a material specification (material number or materialgroup). A company code and a country are optional. The license applies fora specific period.

Duty-Free Permit

The duty-free permit is a license which allows transfers of product betweentwo ED-unpaid areas or allows the customer to buy duty-free (this wouldtypically apply to an export customer or to a special-use customer such asthe armed forces).

The permit is dependent on a customer specification (customer number orcustomer group) and material specification (material number or materialgroup). A company code and a country are optional. The license applies fora specific period.

Control of Reduced Excise Duty Rates

A reduction in excise duty is indicated by a specific handling type in theExcise Duty Rates table. For each material tax group, it is possible to specifyreduced rates of excise duty associated with specific user-defined handlingtypes. The relationship between a handling type and the requirement forexcise duty license details is specified in a reference table. The predefinedexcise price conditions can also be used to handle reduced rates.


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Validation of Exemption Licenses and Authorizations

Licenses are validated in the sales order and invoice.

Returns of Material by Customers

It is possible that dutiable oil products may be returned by customers,perhaps because an unacceptable degree of contamination has occurred andthe customer wishes to obtain replacement product. In such cases, it isnecessary to make a special “returns“ order in the R/3 System. This orderhas no formal link to the original sales order.

It is also possible to create a credit memo for the customer for the value ofthe material returned. Prices and excise duty values are calculated usingprice condition records. If the value of the credit memo is based on the dateof return of material to stock, it is theoretically possible that the excise dutyvalue credited to the customer is different from the original excise dutycharged, if the excise duty rate has changed between goods issue and goodsreturn. However, the excise duty value can be “overwritten“ in the creditmemo with a manual entry.

At the time of material return, care should be taken that the excise dutyparameters (Tax Status “from“ and “to“ and handling type) reflect thoseused in the original sales order.

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Key areas that are covered by TDP include:

q It is possible to make excise duty postings based on material movementswith respect to product loading or to unloading at the customer site.

q The process that calculates and posts excise duty can handle cases wheremodes of transport (truck, ship, etc.) are deemed to be ED-unpaid or ED-paid locations in their own right, or with cases where the Tax Statusassociated with the customer is used for the product in the truck.

q Excise duty gains and losses are calculated and posted for the material.

Duty Liability versus Duty Billed Discrepancies

The broad rule is that excise duty liabilities to the customs authoritiesbooked for the selling company should match the excise duty billed to thecustomer. This can be achieved by ensuring that the excise duty rates to beused in the R/3 MM Module (defined in the Excise Duty Rates table) matchthe excise duty rates to be used in the R/3 SD Module (defined in pricecondition records).

However, users are able to configure the system so that differences betweenbooked liabilities and billed duty may arise.

For example, in some countries, it is allowable to base excise duty liabilitieson quantities of product measured at a standard temperature, while exciseduty billed to the customer may be based on the quantity of oil productdelivered in ambient liters. Differences between excise duty liabilities

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booked and excise duty billed will occur in this case. The TDP process whichcalculates the duty postings, includes parameters to enable users to specifywhether excise duty should be balanced, that is, whether additional exciseduty liability/claim postings for the difference will be made.

If excise duty is not to be balanced, the process tracks the excise dutyliability booked against the excise duty billed and accounts for anydifferences. Differences are treated as a “windfall profit or loss“ with anappropriate adjustment to revenue.

Excise duty liabilities may be posted for the material movement representingthe loading (scheduled quantity) or the movement representing the deliveryat the customer location (confirmed quantity). Differences between theposted liability and the excise duty billed to the customer can be tracked inthe delivery note. The system posts differences for the final goods receipt (ifinvoicing is completed before the delivery is recorded) or for the invoicecreation (if delivery is completed before invoicing). Any difference is postedas a “windfall profit/loss“ against a revenue account.

Excise duty postings associated with a difference between posted exciseliabilities and billed excise duty would look as follows. It should be notedthat values only (and not quantities) are balanced in the difference posting.

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It is possible to specify whether excise duty balancing is required. Inaddition, a further indicator must be set to identify whether vehicles usedfor transportation are regarded as ED-unpaid or ED-paid locations in their


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own right; or whether the Tax Status of loaded product within a vehicle istaken from the customer’s intended use of the product.

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Requirements for excise duty handling with respect to processing of oilproduct exchanges primarily focus on the integration of standard exciseduty techniques with specialized invoice processing functions required foroil-product exchanges.

Invoices for exchanges may involve the billing of product costs only, feesonly, excise duties only, or any combination of these. A more detaileddescription can be found in the chapter on Exchanges.

Excise duty values continue to be calculated for purchase and sales ordersusing standard excise duty techniques:

q Excise duty values in “purchase“ agreements can be specified in thecontract using the price condition technique, if the material priceincludes excise duty. For goods receipts, excise duty liabilities arecalculated using the rates in the Excise Duty Rates table.

q Excise duty values in “sales“ agreements can be specified using eitherthe price condition technique or the Excise Duty Rates table. For goodsissues, excise duty liabilities are calculated using the rates in the ExciseDuty rates table.

Excise Duty for Exchange Invoices

Invoices for exchanges may include any combination of fees, duties andmaterial costs. It is also possible that all invoiced charges may be “netted“under the agreement with a periodic settling of accounts.

For product received from exchange partners:

q Pure material exchange - no product costs are invoiced. For goodsreceipts, excise duty is charged to the goods received/awaiting invoiceaccrual account. For invoice receipts, the excise duty portion is matchedto the entry on the goods received/awaiting invoice accrual account.Fees are matched separately.

q Exchange with material costs billed. In this case, for goods receipts,excise duty is added to the material cost and a single posting is made tothe goods received/awaiting invoice accrual account at goods receipt. Ifan invoice is received, the material and excise duty portion of the cost iscleared as a single item. Fees are matched separately.

In the case of invoice netting, all charges under the exchange agreement arecleared and a net payable or receivable is booked against the vendor orcustomer account for the exchange partner, as appropriate. For full details ofthe netting process, please see the chapter on Exchanges.

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5HSRUWLQJThe TDP application area provides the FI-Special Ledger (FI-SL) structurefor reporting. A line item table and a summary table structure is provided.The ledger structures enable users to report excise duty postings based on avariety of key fields, for example:

q Company code

q Plant

q G/L account

q Valuation type

q Tax Status moved from

q Tax Status moved to

q Handling type

The process which calculates and posts the excise duty values also“populates” the excise duty Special Ledgers. The figure below shows therelationship of data held in a source document used for excise duty postingand the data that can be held within the excise duty special ledgers.

The excise duty Special Ledger collects details from all transactionsinvolving dutiable materials, including those that do not involve an exciseduty posting, such as ED-unpaid to ED-unpaid transactions and transactionsmade at an excise duty rate of zero.

With the excise duty Special Ledgers installed, the standard R/3 ReportWriter or Report Painter can be used to build custom reports.

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+LJK�OHYHO�VXPPDU\One of the building blocks of effective supply chain management in the Oil& Gas industry is the accurate modelling of controls and constraints whichaffect the handling of bulk materials.

The SAP IS-Oil Downstream Bulk Distribution Requirements Planningapplication area will provide a range of tools and process optimizationswhich are intended to support bulk material supply chain modelling acrossthe extended enterprise.

The first steps towards this objective is the development of a range of masterdata extensions which facilitate the control and definition of objects used bybulk supply chain management processes.

.H\�IXQFWLRQ�EHQHILWVA range of key function benefits are provided at the current release of theSAP IS-Oil Downstream (Bulk Distribution Requirements Planning) BulkReplenishment application:

q The site control parameters function benefit allows you to set sitecontrols in your system.

q The replenishment control parameters function benefit supports thesetting of replenishment control parameters in your system.

q The storage objects function benefit allows you to define objects thatstore materials in your system.

q The sales meters function benefit supports the definition of sales metersin your system.

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.H\�,6�2LO�IXQFWLRQV�VXSSRUWHG�E\�WKH�5��,6�2LO'RZQVWUHDP�&RPSRQHQWThe following master data objects exist at the current release of the SAP IS-OilDownstream (Bulk Distribution Requirements Planning) Bulk Replenishmentapplication:

q Site control parameters

q Replenishment control parameters

q Storage objects

q Sales meters

In addition some demonstration Internet transactions are provided to allowusers of IS-Oil BDRP to experiment with some of the processes which will befully realised in future releases of the product.

.H\�,6�2LO�IXQFWLRQV�VXSSRUWHG�E\�WKH�FRUH�5��V\VWHPIS-Oil BDRP master data objects always appear in the system as sub-objectsof other master data objects. This means that access to BDRP master dataobjects is always via a higher level object. For example, the BDRP masterdata object ’storage object’ is stored in the system in one central place, but isreferenced for maintenance purposes by its owning object. Owning objectsin the case of storage objects can be customer ship-to parties or IS-Oil MRNbusiness locations.

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There is a requirement to record information at the site level which is used tocontrol or influence bulk logistical processes such as delivery planning,shipment scheduling and unloading operations. For example, the forecastingof a replenishment event in terms of quantity and time is dependent on anumber of factors. One of these factors is the link between consumption ofbulk product at a retail site and the opening hours of that site. If a retail site isnot open for business over the weekend period, no product will be sold at thesite and so no consumption will occur.

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IS-Oil BDRP Site Control Parameters component can be used to record suchsite level information which is specific to bulk material handling processes.The mechanism provides an additional screen for standard site managementdialogs, in which both a standard set of site control parameters and userinstallation defined site characteristics can be maintained.

Initially, the Site Control Parameter maintenance screen will be availablefrom the SD customer ship-to party maintenance dialog and the IS-Oil MRNbusiness location maintenance dialog.

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Fig. 8-1: The effect of sales hours on replenishment calculations.

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You can enter parameters to control replenishment at a delivery site usingthe IS-Oil BDRP Replenishment Control Parameters screen. An additionalscreen is provided within delivery site (e.g. customer ship-to) master data.In this screen you can define replenishment control parameters for eachreplenishable material at the customer site.

An additional function benefit of IS-Oil BDRP Replenishment ControlParameter component is a structure for recording the stock figures enteredfrom external system for the delivery site.

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Fig. 8-2: Stock report for a delivery site based on external data.


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The IS-Oil BDRP Replenishment Control Parameter component is suppliedin prototype form only at the current release. Processes which use the datacontained in this screen are currently being developed. The structure of thisscreen and the field definitions on this screen are subject to change, beforethese processes are implemented.

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In connection with bulk material handling processes such as deliveryplanning, scheduling and unloading operations there is a requirement torecord information about the tanks, containers or silos which are used toreceive the bulk material.

For example, the available capacity of customer storage for a particularmaterial should be known before a delivery is scheduled to that customer, inorder to avoid unnecessary returns or even hazardous overflows. In anothercase it may be mandatory to confirm the compatibility of the target stockreceiving object with the material to be unloaded, to prevent damage orcontamination.

The IS-Oil BDRP Storage Object Characteristic component provides astandard technique within the system to define and maintain one or manystorage objects for any given stock holding object within the R/3 system. Atthe current release storage objects can be defined for the following stockholding objects:

q Customer Ship-to

q Business Location.

The Storage Object Characteristic component is used to record informationabout storage objects which is specific to bulk material handling processes. Foreach storage object, the component provides screens for basic specifications,maintenance data, assignments and linear/volumetric conversion data.Individual storage objects are created with reference to storage object typeswhich are maintained in customizing. Storage object types serve both to typestorage objects and as reference storage objects for specification andlinear/volumetric conversion data.


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Fig. 8-3: The allocation of storage objects to a site object within IS-Oil

A facility is provided within the storage object master data to manage theconversion of linear dip values to physical volumes. Such conversions arecommonly referred to in the industry as tank strapping conversions.

During a delivery or stock taking cycle the contents of a particular tank/silocan be evaluated through the use of a dip reading. The dip reading isnormally taken with a calibrated rule inserted into a perforated guide tube.The guide tube ensures verticality of the rule. The dip reading is used tomeasure both depth of product and water in any particular tank or tankgroup.

The tank/silo or tank/silo group consist of storage vessels of irregular shape- typically these shapes will spherical or cylindrical. This means that theconversion between a linear dip and the volume of product held in the tankis non-linear. The industry response to this is to define conversion tableswhich contain a number of conversion constants. Each conversion constantconsists of two fixed values, one of which represents a linear measure andthe other the volumetric capacity which is contained in the storage object fora dip of the specified linear value. For a given dip of a specific storageobject, it is possible to ascertain the volume of product contained within thestorage object.

Because the linear and volumetric values of a sequence of conversionconstants do not have to be co-incremental, it is possible to model irregularlyshaped storage objects.


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Fig. 8-4: Calculating the volume contained in a tank based on a dip measurement

The IS-Oil BDRP Storage Object Characteristic component supports thedefinition of sets of linear/volumetric conversion constants (LVCC sets) for:

q Storage object types, where the conversions apply to all storage objectsof a particular type

q Individual storage objects, where the conversions apply only to a singlestorage object

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In connection with bulk material handling processes such as deliveryplanning, scheduling and unloading operations there is a requirement toproduct flow meter data and convert it to product quantities. For example,the material consumption data of a delivery site is required in order tocalculate replenishment quantities. The data is available in the form ofmeter readings. A log is therefore required of each meter installed at the sitealong with the assignments of meters to materials at the site. Materialconsumption quantities can then be calculated by subtracting the currentreading from the previous reading for each meter, making adjustmentswhere necessary and aggregating the converted quantities by material.

The IS-Oil BDRP General Meter Management component provides a standardtechnique within the system to define and maintain one or many meters forany given stock holding object within the R/3 system. At the current releasemeters can be defined for the following stock holding objects:

q Customer Ship-to


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The General Meter Management component is used to record information aboutmeters which is specific to bulk material handling processes. For each meter,the component provides screens for basic specifications and maintenance data.Individual meters are created with reference to meter types.

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Fig. 8-5: How the sales meter function benefit will be used to calculate salesquantities

The IS-Oil BDRP General Meter Management component is supplied inprototype form only at the current release. Processes which use the datacontained in this screen are currently being developed. The structure of thisscreen and the field definitions on this screen are subject to change, beforethese processes are implemented.


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The BDRP component provides some demonstration Internet transactions toallow users of IS-Oil BDRP to experiment with some of the processes whichwill be fully realised in future releases of the product.

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Fig. 8-6: Process flow of internet scenario which includes determination ofmaterial assignment and use of tank strapping tables.

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A pair of values which describe a permanent correlation between a linearquantity and a volumetric quantity. Linear/volumetric conversion constantsform the basis of calculations made to determine the quantity of material in astorage object for any given measurement of the depth of material in thatstorage object.

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Any object in the system for which storage process relevant data need to becaptured. For example, a delivery scheduler needs to know the maximumcapacity of oil tanks at both a plant and a customer business partner.


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Any variable or descriptive text which describes an object which can be usedto store materials. Some storage object characteristics are entered andmaintained in application specific objects such as plants and storage locations.Other storage object characteristics can be maintained using the storage objectcharacteristic maintenance tool.

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The number of a subordinate storage object in terms of the owning object.For example a ‘ship-to’ customer may have three storage objects with thenumbers 001, 066 and X74.

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The technique used to support the definition of common reference data forstorage object characteristic segment instances.

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The process whereby the quantity of a material in a storage object can bedetermined from the depth of material in that storage object. Accurate tankstrapping requires the maintenance of a large number of linear/volumetricconversion constants. The system uses these constants to calculate avolumetric quantity from an input linear measure or tank dip.

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