SAP Oil Chapter 1

&KDSWHU �

��

([FKDQJHV��(;*��DV�SDUW�RI,6�2LO�'RZQVWUHDP

+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.

� ([FKDQJHV��(;*��DV�SDUW�RI�,6�2LO�'RZQVWUHDP

��

.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.

,PSURYHG�,QYHQWRU\0DQDJHPHQW

%HWWHU�3URILWDELOLW\0DQDJHPHQW

$FFXUDWH�&UHGLW�([SRVXrH$QDO\VLV

,PSURYHG�0DUNHW5HVSRQVLYHQHVV

5HGXFHG�)LQDQFLDO$GPLQLVWUDWLRQ�(IIRUW

([FKDQJHV��(;*��DV�SDUW�RI�,6�2LO�'RZQVWUHDP �

��

.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.

)LJ��([FKDQJH

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:

&UHDWLRQ�0DLQWHQDQFH�RI�([FKDQJH�$JUHHPHQWV

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.


��

)LJ��'HILQLWLRQ�RI�DQ�([FKDQJH�$JUHHPHQW

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.

+DQGOLQJ�DQG�'HILQLWLRQ�RI�)HHV�DQG�'LIIHUHQWLDOV

)LJ��$VVLJQPHQW�RI�)HHV�DQG�'LIIHUHQWLDOV�WR�([FKDQJH�$JUHHPHQWV

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.


��

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.

/LIWLQJ�&RQWUROV�DQG�&KHFNV

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.

4XDQWLWDWLYH�7UDFNLQJ�RI�([FKDQJH�%DODQFH

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.

)LJ��4XDQWLWDWLYH�7UDFNLQJ�DW�WKH�([FKDQJH�$JUHHPHQW�/HYHO


��

)LQDQFLDO�0DQDJHPHQW�RI�([FKDQJH�$JUHHPHQW

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.

/RDG�%DODQFLQJ

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).

)LJ��$VVLJQPHQW�RI�3XUFKDVH�&RQWUDFW�WR�&XVWRPHU�'HOLYHU\


��

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.

)LJ��)XQFWLRQ�RI�WKH�/RDG�%DODQFLQJ

([FKDQJH�$JUHHPHQW�1HWWLQJ

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.

)LJ��1HWWLQJ�3URFHVV


��

9DOXDWLRQ�RI�/RJLFDO�,QYHQWRU\

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.

5HYDOXDWLRQ�RI�/RJLFDO�,QYHQWRU\

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.

/RJLFDO�,QYHQWRU\�$GMXVWPHQWV

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.


��

)LJ��)XQFWLRQV�RI�WKH�/,$�7UDQVDFWLRQ

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.

5HSRUWLQJ�DJDLQVW�([FKDQJHV

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


��

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.


��

'HWDLOHG�'HVFULSWLRQ�RI�%XVLQHVV�)XQFWLRQV�6XSSRUWHGE\�WKH�5��,6�2LO�'RZQVWUHDP�(;*�&RPSRQHQW

2YHUYLHZ�RI�([FKDQJH�+DQGOLQJ

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.

%LOO��GXH�OLVW

/RDG�%DODQFLQJ

4W\��VFKHG�

)HHV

4W\��VFKHG�

)HHV

4W\��VFKHG�

3XUFKDVH�FRQWUDFW 6DOHV�FRQWUDFW3XUFKDVH�FRQWUDFW 6DOHV�FRQWUDFW

*RRGV�UHFHLSW

3D\PHQWSURFHVVLQJ

&ROOHFWLRQSURFHVVLQJ

([FKDQJH�VWDWHPHQW

1HWWLQJ

([FKDQJH�EDODQFH

/,$

/RJLFDO�LQYHQWRU\

([FKDQJH�DJUHHPHQW00 6'

), ),

4W\��VFKHG�6DOHV�FDOO�RII3XUFKDVH�FDOO�RII

5HSRUWLQJ

'HOLYHU\�*RRGV�LVVXH

6XE�%DVH

(56,QYRLFH�YHULILFDWLRQ5HSULFLQJ

6SOLW�LQYRLFLQJ%LOOLQJ

6SOLW�LQYRLFH�YHULILF�

)LJ��%XVLQHVV�3URFHVV��([FKDQJHV

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”.

2YHUYLHZ�RI�([FKDQJH+DQGOLQJ


��

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.


��

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.


��

&UHDWH�([FKDQJH�$JUHHPHQW�+HDGHU

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

&UHDWH�([FKDQJH�$JUHHPHQW+HDGHU


��

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.

)LJ��5HVXOW�RI�&UHDWLQJ�DQ�([FKDQJH�$JUHHPHQW

+DQGOLQJ�DQG�'HILQLWLRQ�RI�)HHV�DQG�'LIIHUHQWLDOV

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

+DQGOLQJ�DQG�'HILQLWLRQ�RI)HHV�DQG�'LIIHUHQWLDOV


��

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:

)LJ��$VVLJQPHQW�RI�)HH�5DWH

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.


��

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.).

)LJ��$VVLJQPHQW�RI�)HHV�DQG�'LIIHUHQWLDOV�WR�([FKDQJH�$JUHHPHQWV

/LIWLQJ�&RQWUROV�DQG�&KHFNV

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

/LIWLQJ�&RQWUROV�E\�&RQWUDFW


��

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.


��

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.

)LJ��/LIWLQJ�&RQWUROV�LQ�D�6DOHV�&DOO�RII

4XDQWLWDWLYH�7UDFNLQJ�RI�([FKDQJH�%DODQFH

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.

4XDQWLWDWLYH�7UDFNLQJ�RI([FKDQJH�%DODQFH


��

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.

)LJ��8SGDWH�RI�4XDQWLWDWLYH�%DODQFH�)ROORZLQJ�*RRGV�,VVXH

)LQDQFLDO�0DQDJHPHQW�RI�([FKDQJH�$JUHHPHQW

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.

)LQDQFLDO�0DQDJHPHQW�RI([FKDQJH�$JUHHPHQW


��

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

)LJ��3XUH�([FKDQJH�3RVWLQJV


��

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


��


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


��

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.


��


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


��

/RDG��%DODQFLQJ

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:

)LJ��([FKDQJH�/RDGLQJ�%XVLQHVV�6FHQDULR�DQG�6\VWHP�5HSUHVHQWDWLRQ

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.

/RDG�%DODQFLQJ


��

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).


��

6SOLW�,QYRLFLQJ

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.

6SOLW�,QYRLFLQJ��6'�

6SOLW�,QYRLFH�9HULILFDWLRQ��00�


��

1HWWLQJ

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.

1HWWLQJ


��

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.

)LJ��1HWWLQJ�3URFHVV

0RYHPHQWV�%DVHG�1HWWLQJ

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.

0RYHPHQWV�%DVHG�1HWWLQJ


��

'HWDLO5HSRUW

1HWWLQJ�3ULQW5HTXHVW

*5*, /,$ERRN

1HWWLQJ�VHOHFWLRQ

0RYHPHQWV'DWDEDVH

%LOOLQJ

)LQDQFLDO�'DWDEDVH

1HWWLQJ�3URSRVDO

��'HOLYHULHV��5HFHLSWV��3XUH�)LQDQFLDOV��%RRN�5HFHLSWV��%RRN�'HOLYHULHV

1HWWLQJ%7&,

6XPPDU\5HSRUW

,QYRLFH5HFHLSW

1HJ1HJ��3D\PHQW3D\PHQW

)LJ��0RYHPHQWV�EDVHG�1HWWLQJ

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.

9DOXDWLRQ�RI�/RJLFDO�,QYHQWRU\


��

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.

)LJ��0RYLQJ�DYHUDJH�SULFH�RI�ORJLFDO�LQYHQWRU\

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.

5HYDOXDWLRQ�RI�/RJLFDO,QYHQWRU\


��

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.

/RJLFDO�,QYHQWRU\�$GMXVWPHQWV


��

)LJ��(IIHFW�RQ�/RJLFDO�,QYHQWRU\�%DODQFH�RI�3RVWLQJ�D�/RJLFDO�,QYHQWRU\$GMXVWPHQW

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.


��

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.

)LJ��4XDQWLW\�3RVWLQJV�*HQHUDWHG�E\�WKH�/,$�7UDQVDFWLRQV


��

)LJ��)LQFDQFLDO�3RVWLQJV�*HQHUDWHG�E\�WKH�/,$�7UDQVDFWLRQV

([FKDQJH�6WDWHPHQW

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.

5HSRUWLQJ�$JDLQVW�([FKDQJHV

Display Exchange Balance

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

([FKDQJH�6WDWHPHQW

5HSRUWLQJ�$JDLQVW�([FKDQJHV


��

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”)

Intended Quantity = The quantity reserved due to assignment of the call-offto a customer order

(see section “Load Balancing”)


��

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

)LJ��([FKDQJH�(QWLWOHPHQW

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”).

)LJ��'LVSOD\�([FKDQJH�(QWLWOHPHQW�7UDQVDFWLRQ


��

*ORVVDU\�RI�([FKDQJH�6SHFLILF�7HUPV

3XUH�([FKDQJH

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.

1RQ�3XUH�([FKDQJH

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.

1HWWHG�([FKDQJH

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.

%RUURZ�/RDQ�([FKDQJH

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.

)HH�&DWHJRU\

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.


��

)HH�7\SH

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

/RJLFDO�,QYHQWRU\

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).

SAP Oil Chapter 1

Documents

Transcript of SAP Oil Chapter 1