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([FKDQJHV(;*DVSDUWRI ,62LO'RZQVWUHDP +LJK/HYHO6XPPDU\ The objecti objective ve of the Exchanges Exchanges function category w ithin R/ 3 IS-Oil IS-Oil Downstream is to build on th e fun fun ctionality ctionality within the Core SAP SAP R/ 3 prod uct to enable the processing and management of exchange agreements between oil companies involved in dow nstream activities. activities. The IS-Oil IS-Oil System System pr ovides: q

Sup port for a compan y using SAP-S SAP-System R/ 3 to exchange exchange prod ucts with another comp any to their mutu al benefit. benefit.

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Capability for maintenance of exchange inventory positions. It is possible to monitor the exchange position for a product, agreement or exchange partner. It is possible to view the balance to-date for each agreement and to view the m ovement d etails etails that have affected affected that ba lance. lance.

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Pricing is enhanced to handle exchange fees and to allow fees to be maintained or revalued at all stages in the sales or purchasing process flows.

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Capability Capability to have invoicing invoicing at specifi specified ed intervals and to net those A/ R and A/ P invoice invoicess for: for: m

Exchan Exchan ge fees

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Product value

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Excise Excise taxes and VAT

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Management of global quantities quantities and prices on an ann ual contract while allowing monitoring of exchange position and volumes on a periodic (e.g. (e.g. mon thly) basis.

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Exchanges Exchanges and sw aps for like like and un like like prod ucts and location. location.

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Integration into the Transportation and Distribution functionality as of release 1.0D.

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Checks Checks and controls controls over prod uct lifting lifting entitlements.

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

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Capability Capability to assign assign a base p rodu ct to ind ind ividual items (subprod ucts) in in an exchange to allow the exchange to be monitored at the base product level.

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.H\)XQFWLRQ%HQHILWV The integration of Exchanges functionality within the Core SAP System allows the oil company to manage exchange balances on a timely and accurate basis by ensuring data integrity, through one time data entry, between Exchanges and Inventory Management, Financial Accounting, Ord er and Delivery Delivery Tracking Tracking an d Invoicing. Invoicing. The sp ecific ecific benefits of the Exchanges fu nctionality ar e:

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Online tracking of Logical Inventory Balances for pure exchanges - by autom aticall atically y up dating th e logical logical inventory balance wh enever a movem ent is posted against an exchange and providing online transactional display, the system allows the user to view and manage exchange positions from a quantity viewpoint.

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Online automation and integration of exchange accounting provides the foundation for allowing the oil company to monitor and manage the pr ofitability ofitability of its exchange exchange bu siness on a timely ba sis.

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Lifti Lifting ng controls at the sales and p urchase outline agreement level within an exchange exchange contract contract allow the credit exposur exposur e to a p articular articular exchange partn er to be accurately managed. These controls are in addition to the financial credit limit checks w hich could also be enforced.

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By providing flexibility in terms of the range of types of fees and differentials through the use of price condition techniques and by providing current exchange balances, the system allows the oil company to be responsive to market forces in in term s of the deals it it can negotiate and m anage w ith exchange exchange partners.

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Valuation and revaluation of logical inventory enables the system to automatically manage the financial accounting aspects of “pure” exchanges. The system is therefore able to account account for “Logical Inven tory Ad justm ents”, logical inventory clearances and to capture the financial implication, loss or gain, associated with these transactions.

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

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It has entitlement to lift lift prod uct at the oil comp any 2 location location Y

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

&UHDWLRQ0DLQWHQDQFHRI([FKDQJH$JUHHPHQWV Within the oil ind ind ustry an exchange exchange is an agreem ent between oil companies to allow allow lifting lifting of pr odu ct at one time and location location in exchang exchang e for entitlement entitlement to lift lift prod uct at anoth er time and location. location.

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R/ 3 IS IS-Oil -Oil Downstream supp orts the linking of entitle entitlements ments to lift produ ct from an exchange partner (purchase agreement) and entitlements of the exchange partner to lift product from the oil company (sales agreements) un der an exchange exchange agreement. It is possible to define lifting and receipt entitlements at multiple locations within the same exchange agreement. It is also possible to define multiple agreem ents at the same p hysical location. location. For For this reason, R/ 3 IS IS-Oil Dow nstream offers offers the p ossibility ossibility to explicitly explicitly state, or to select select via a pop up window, w hich hich p urchase urchase agreement agreement should be used to supply prod uct to an external external customer.

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Definition of fee types and rates - Within Exchanges, many different types of fees fees are encountered. The R/ R/ 3 IS IS-Oil Down stream compon ent incorp orates price condition techniques into the definition of fee types. This allows the user, or system configurer, to define the combination of circumstances (e.g. method of delivery, location, exchange type etc.) upon which the fee rate will depend for a particular fee fee type.

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The system also allows the user to d efine the fee fee rate for each each combina tion of circumstances encountered and provides the option to propose new values for fees, based on up-to-date condition record values. The effective date rang e for each fee is is user d efinable. Assignment of fees to exchange agreements - The fees are assigned to the individual entitlements to lift product, i.e. within the line items of the individu al sales sales and pu rchase agreements agreements assigned to th e exchange exchange contract. This level level of granu larity allows ma ximum flexi flexibili bility ty in term s of fee assignm assignm ent within an exchan exchan ge contract. contract.

/LIWLQJ&RQWUROVDQG&KHFNV articular exchange agreement, it is common Controls by contract - Within a p articular to schedule the volumetric entitlement to lift product, especially on the exchange exchange partn er side, into p eriodic quantities. quantities. For this reason, a Quantity Schedule is created at the level of the line items within th e sales sales and pu rchase agreements. This This enables the user to schedu le the entitlement qu antity into freely freely d efinable efinable periods (usu ally ally m onthly) over the length of the agreement. This control is invoked when attempting to create call-offs (nominations) against the pu rchase or sales sales agreement.

4XDQWLWDWLYH7UDFNLQJRI([FKDQJH%DODQFH R/ 3 IS-Oi IS-Oill Down stream tracks exchange exchange balances by p rodu ct, exc exchange hange receipts minus exchange deliveries, at the individual exchange agreement level. The exchange balance is updated real-time and is available on-line. This fun fun ctionality ctionality is is integrated with the stand ard SAP R/ 3 System System m aterial movem ent transactions and is therefore therefore seamless seamless to the u ser.

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)LQDQFLDO0DQDJHPHQWRI([FKDQJH$JUHHPHQW Accounting for Fees - The user can specify by exchange type whether fees should be invoiced, invoiced, or netted, independ ently of how th e material price shou shou ld be treated. In the oil industry, it is common to invoice for fees and not to invoice for material cost, i.e. a “pure” exchange where fees are invoiced. When invoice matching for pu rchase agreements, the system system allows allows th e user to match fees both at the summary level and at the individual fee line item level and automatically posts any matching differences back to the app ropriate account account as gains or losses. losses. Accounting for Materials - As with fee accounting, the user can specify by exchange type whether the material cost should be invoiced, netted, or neither (a pure exchange). In the case of non-invoiced exchanges, the exchange balance is treated as “logical” inventory. Accounting for Taxes - It is common practice in the oil industry to invoice and be invoiced for excise taxes receivable and payable due to movements against exchange exchange agr eements even in th e case case of pu re exchanges exchanges w here the material cost cost is not invoiced. invoiced. R/ 3 IS-Oi IS-Oill Down stream th erefore erefore allows the user to define for pure exchanges whether the excise duty payable or receivable will be invoiced.

/RDG%DODQFLQJ As of release release 1.0 1.0D D the R/ 3 IS-Oi IS-Oill Downstream component allows allows th e user to assign a purchase contract or call-off for the supply of product against a customer order. The purchase contract or call-off can be explicitly assigned wh en the d elivery elivery note is schedu schedu led (as described described above).

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If the contract is not explicitly assigned, then the system displays a list of available available contracts when th e delivery note is loaded (issued to th e customer). This transaction automatically ensures that the quantity called-off and received against the selected purchase contract is equal to the quantity issued issued against the customer d elivery. elivery.

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([FKDQJH$JUHHPHQW1HWWLQJ It is common for oil companies not to invoice an exchange partner after each individual movement against a particular exchange. Such exchange types may be netted, i.e settled settled p eriodically. eriodically. R/ 3 IS-Oi IS-Oill Down stream allows the user to define for an exchange type whether or not the exchange should be netted. Periodicall Periodically y the p ayables and receivables receivables can can th en be n etted and only the n et balance posted to the exchange partner account. This can then be invoiced or paid as required.

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9DOXDWLRQRI/RJLFDO,QYHQWRU\ When exchange balances balances are bu ilt ilt u p against “pu re” exchanges, exchanges, it is usual to value the assets and liabilities associated with the goods movements as if they w ere actual inventory for financial financial accounting accounting pu rposes. The reasoning behind this is that the payable or receivable in the case of pure exchanges is a quantity of produ ct and not a financial financial amou nt. Und er R/ R/ 3 IS IS-Oil -Oil Downstream th e system system r ecords ecords an d tracks the value of logical logical inventory inventory at the p revailing revailing inventor y carrying pr ice ice wh en the m aterial movement was created. The system ensures that the integrity between the quan tity balance balance owed or owing, i.e. i.e. the quan tity of logic logical al inventory, and th e financial financial value of the logical logical inventory inventory is always m aintained. If no own inventory is carried at a location, the receivable and payable volumes can be valued at the current value at a “reference plant”, which is norm ally ally a nearby plant at which you hold inventory. The system supports both standard priced and moving average priced inventory valuation strategies.

5HYDOXDWLRQRI/RJLFDO,QYHQWRU\ Oil companies often value physical inventory using a standard cost that represents the calculated calculated prod uction cost. cost. How ever, this produ ction ction cost is recalculated on some periodic basis. It is therefore a requirement that the oil company can change the inventory carrying price of their physical inventory. If logical inventory is to be valued as if it were physical inventory, then the carrying cost of the logical inventory may also need to be changed. IS-Oil functionality allows the user to change the inventory carrying value of the logical logical inventory inventory an d au tomatically tomatically records the loss/ loss/ or gain from revaluation to P&L.

/RJLFDO,QYHQWRU\$GMXVWPHQWV Oil companies manage their logical inventory balances by periodically posting exchanges of a quantity of product owed for a quantity of product owing. A negotiated payment or receivable may or may not be included in the tran saction. It is is also also possible to balance an exchan exchan ge in which different products have been exchanged against different volumes, e.g. 100,000 barrels of regular regular u nleaded for 80, 80,00 000 0 barrels of of premiu m un leaded. The system system sup ports this type of transaction transaction both at the exchange exchange agreement level and across exchange agreements for an exchange partner. The system automatically updates the logical inventory balance and captures the resulting loss/ loss/ or gain on the transaction. transaction.

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6XE3URGXFW%DVH3URGXFW)XQFWLRQV A base product can be assigned to each delivered product (sub product) within an exchange exchange agreem ent. In this case case the exchange exchange balance is up dated for the base product, and the base product price is used for the logical inventory p osting osting as w ell. ell.

5HSRUWLQJDJDLQVW([FKDQJHV The following reporting capabilities are included within the exchanges functionality functionality und er R/ 3 IS IS-Oil -Oil Downstream: Exchange Statement - The exchange statement is a document that can be generated and sent to the oil comp comp any’s exchange exchange p artner. It summ arizes the exchange activity for a period, listing movements, financial transactions and exchange adjustments. It is a tool to aid in the reconciliation of an exchange with the partner. Exchange Balance - The user is able to report total liftings, receipts and balances against exchange agreements and to summarize this data by material, exchange type, exchange partner, exchange number and location. This functionality is mainly used across pure exchange types where it enables the user to track the logical inven tory balan ce real-time and on-line. Exchange Movements - The system allows the user to display all physical movements of product against exchange agreements for a particular material. The list of movements displayed may be selected by several param eters including including location, location, exc exchange hange typ e, exchange exchange partn er and method of delivery. Exchange Entitlement - Entitlement to lift product is defined as the open qu antity against an exchange exchange nom ination, i.e. the open pu rchase call-off call-off

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quantity for purchase agreements assigned to exchange contracts. The system allows the user to narrow the search of exchange entitlements for a particular product by location, exchange partner, method of delivery and exchange exchange type. Matchcodes - Several matchcodes have been provided that can be used to select select based on exchang e related criteria, for instance: q

Purchasing/ Sales contracts contracts

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Pu rchasing/ Sales call-off call-offss

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Netting Netting documents

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Delivery Delivery and good s movements

.H\,62LO)XQFWLRQV6HUYHGE\WKH&RUH56\VWHP This section summarizes the relevant functionality supported by the Core R/ 3 Syste System. m. q

Creatio Creatio n o f Exchange Partners Partners An exchange partner is represented by the linking of a customer and vendor account.

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Creation Creation o f Contract Contract Outline Agreemen ts The creation creation of sales and pu rchase outline agreements is a capability capability of the standard system. This functionality is enhanced to allow the inclusion of fees, d ifferent ifferent ials and lifting contr ols. In addition to the basic outline agreement and order handling functionality, the Core R/ 3 System System h as the following following capabilities capabilities within the exchanges area:

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Incorporation of Price Condition Techniques within Purchasing The inclusion inclusion of price cond cond ition ition techniques w ithin both p urchasing and sales sales allows allows R/ 3 IS-Oi IS-Oill Downstream to use th ese techniques techniques to d efine efine fees, and differentials, within exchange agreements. This base capability is enhanced to allow the user to specify the fee types to use within the line line items of the p urchase or sales outline agreement. Repricing Repricing functionality functionality has been enh anced, particularly on the p urchasing side, to allow fee values to be recalculated at each stage in the delivery/ receipt process.

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'HWDLOHG'HVFULSWLRQRI%XVLQHVV)XQFWLRQV6XSSRUWHG E\WKH5,62LO'RZQVWU E\WKH5,62LO'RZQVWUHDP(;*&RPSRQ HDP(;*&RPSRQHQW HQW 2YHUYLHZRI([FKDQJH+DQGOLQJ This section describes the overall conceptual framework for the proposed R/ 3 IS-Oi IS-Oill Down Down stream component for hand ling ling exchange exchange agreements. The section builds on the simple exchange business scenario introduced in the previous section and intends to set the functionality identified in this section in the wider context of the system functions as used in exchange handling. The section then describes the specific exchange functionality introduced in the p revious section section in greater d etail. etail.

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

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

Create Create Exchange Exchange A greement H eader In system terms, an exchange agreement header is a document linking one or more purchase contracts with one or more sales contracts. The process of exchange header creation is detailed in the section “Create Exchange Exchange Agreement H eader”.

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Create Create Con tract tractss (Outline Agreemen ts) Create Sales Contacts - Agreements to supply specified amount(s) of product(s) within a specified delivery schedule. When an exchange related sales contract is created, the following can a lso be specified: specified: m

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

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Lifting controls that apply to the exchange deliveries at the contract level (see also also “Lifting “Lifting Con trols and Checks”).

Create Purchase Contracts - Agreements to receive specified amount(s) of prod uct(s) uct(s) within a specif specified ied schedu schedu le.

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

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Define lifting lifting controls that app ly to the exchang e receipts (see section section “Lifting “Lifting Contr ols and Ch ecks”). ecks”).

Create Call-offs Create Sales Call-off - This is the process of creating an actual sales order against the sales outline agreement (sales contract). The fees and differentials app lying to the call-off call-off are copied from the contr act. In order to schedule the deliveries into periodic quantities, it is possible at this stage to create further lifting controls for the deliveries against th is call-off. call-off. creating an actual pu rchase Create Create Purchase Call -off -off - This is the process of creating order against the purchase outline agreement (purchase contract). The fees and differentials differentials app lying to the call-of call-offf are defaulted from the contract. In order to schedule the deliveries into periodic quantities, it is possible at this stage to create further lifting controls for the deliveries against th is call-off. call-off.

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Sales Flow Create delivery notes. The delivery note indicates to the system:

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Order item/ item/ produ ct to to be delivere delivered d

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Date to be delivered

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Location from which the delivery is made, i.e. the SAP delivering plant/ store location

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Quan tity to be delivered - at this point qu antities antities are checked checked to see that they d o not violate contract contract or scheduled quan tities. tities.

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Post confirmed confirmed d elivered elivered quan tity/ create create goods issue. issue. m

Change the delivery note quantity to the confirmed delivered quantity.

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Create goods issue for the delivery note. This generates the required inventory accoun accoun ting entr ies autom aticall atically. y.

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Create invoice (for invoiced partners). This process posts the invoice to the customer account account and generates an entry in a file file ready for printing. When using a billing due list, additional exchange-specific selection criteria are available to specify the range of documents relevant for invoicing. q

Purchase Flow Receive Goods - The following two scenarios are relevant to exchanges in this area: 1.

Po st st Go Go od od s Re Re ce ce i pt pt - In the simple case where oil comp comp any 1 takes ownership of the goods at th e exchange exchange p artner location. location.

call-offf is used to fill fill a 2. Perfor erform m load load balan balanci cing ng - Where the p ur chase call-of sales delivery (to one of oil company 1’s customers) from the exchan exchan ge p artn er location (as of Release 1.0D). 1.0D). Post Invoice Receipt (for invoicing partners) - This process posts the payable to the partners’ vendor accounts ready for standard system payments processing. At this time, the accrual generated at the time of postin g a goods receipt is cleared. cleared. For automatic creation of invoice verification documents, the Evaluated Receipt Receipt Settlement (ERS) (ERS) pr ocess has been en han ced to han d le exchangeexchangerelated tr ansactions. ERS ERS with Exchan Exchan ges includ includ es:

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Han dling fees and repricing repricing th ose fees fees

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Selecting goods receipt documents by exchange number or a range of exchange exchange num bers

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Collecting Collecting invoice items items by exchange nu mber

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Split invoice verification

Netting Where an exchange is flagged for netting, all the sales and purchasing invoices will be flagged as blocked for payment. The netting p rocess rocess allows allows those pay ables and r eceivabl eceivables es to be reviewed , selec selected ted or deselected deselected an d th en cleared. cleared. The d ifferenc ifferencee between the sum of values of the payables and the sum of the values of the receivables is posted as a single entry to either payables or receivables receivables as appr opriate. In movements-based netting, the system uses goods movements which reference the exchange agreement as the selection method for collecting receivables and payables.

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The exchange agreement header provides a framework to link one or more sales contracts with one or more purchase contracts (see figure above). When creating the exchange header the user must specify the type of exchange agreement th at is being created. created. The system system holds d efault parameters for the exchange type but these may be overridden by the user when the exchange header is created. created. The param eters identified identified at th is stage are: q

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

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The posting rules for the fees - see section “Financial Management of Exchange Exchange Agr eement”

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The posting rules for the taxes

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Whether or not n etting etting is p erformed an d the N etting cycle cycle - see see section section “Netting”

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The breakdown p roposal for for the quantity schedu schedu le

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Sub p rodu ct to base prod uct edit rules

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VAT on internally posted m ovements ind icator icator

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Partner reference reference

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General purp ose text text

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Base location (for example specifying a point on a pipeline from which exchan exchan ge differentials are calculated) calculated)

The posting rules for fees and materials determine how to accrue for payables on goods receipt and how to account for receivables on goods issue. The reason for th is flexibi flexibility lity is that it is anticipated that an inst allation would use different accounting entries depending on whether the exchange movem ent is expected expected to be invoiced invoiced or m erely carried carried forward as in a pu re exchange. exchange. The separate p osting osting rules for fees fees and materials allow allow them to be treated differently for accounting purposes where for example fees are expected expected to be invoiced invoiced an d materials carried carried forward . In order to allow exchange header creation, a new transaction has been created. Dur ing creation of the exchan exchan ge, the above entries are specified. specified. The exchange agreement number may be numbered by the system (internally nu mbered ), or num bered by the user (externall (externally y num bered). It is possible to assign sales and purchase contracts to an exchange header in two ways: q

Branch directly to the create sales and purchase contract transactions from the create/ create/ maintain exchange exchange head er transaction. transaction.

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Assign existing contracts to the exchange header from the maintain sales and pu rchase contracts contracts transactions. transactions.

In either case, the system cross references the sales and purchase agreements to 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 any add itional itional data required by an exchange. exchange. Moreover, it is possible to create an exchange agr eemen t w ith reference to an already existing one. Sales and purchase contracts assigned to the referenced exchan exchan ge agreem ent can also be selected selected for copyin g.

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+DQGOLQJDQG'HILQLWLRQRI)HHVDQG'LIIHUHQWLDOV IS-Oil IS-Oil sup por ts the paym ent or collection collection of fees and d ifferentials ifferentials in add ition to the value or qu antity of produ ct identifi identified ed in th e exchange. exchange.

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De finition o f Fee Categor Categories ies 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 defined wh en configuring configuring the system. The existing Core System capabilities surrounding pricing condition records are retained. These These are not detailed detailed here bu t may be sum marized as: q

Condition tables - Key structures for access of the fee condition records may be defined du ring configuration. configuration. For example, it is possible to configure by specifying a price condition structure with th ese param eters in in the key, a fee fee type that dep ends u pon: m

Delivering location

m

Exchange Exchange typ e

m

Method of d elivery elivery

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q

Access sequences - If required, the oil company may define that a fee category has more than one key structure. In this case, it is necessary to define which should be u sed in pr eference. eference. For examp examp le, an ind ividu ividu al fee fee may be d efined efined w ithin a key structure of: Location/Method of delivery/Exchange type However, if the rate for this key is not found, then the company may wish to define that a generic rate for for location/method location/method of delive ry should be used.

De finition of Fee Rates Rates Within a fee type, the user is able to create condition records that specify the fee rate for the determining p arameters and data r ange. This This is illustrated illustrated by the figure below:

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Accounting for Fees Fees Accounting for fees is explained in greater detail in the section “Financial Management of Exchange Exchange Agreements”. Sales Side On th e sales side it is necessary necessary to specify the fee reven ue account t o be used when invoicing or netting for the fees following exchange pickups by our exchange exchange p artner. It is possible to specify the fee revenue account to be used at the fee type level. Purchasing side On the purchasing side, it is necessary to define whether a particular fee type is expensed or includ includ ed in inventory on goods receipt. receipt. This is explained explained in more detail in the accounting section. It is possible to specify the accounting policy whether to expense or include the fee amount in inventory and the account to be used, if the fee is to be expensed , at the fee typ e level.

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Assigning Fees and Differentials to Exchange Agreements The fees fees and differentials differentials to be used are specified specified w ithin the line items of the sales and purchase contracts that are assigned to a particular exchange agreement. This is ill illustrated ustrated by the figure figure below. When creating or assigning assigning a sales or purchase outline agreement under an exchange agreement, the user is taken into a fee definition screen. The fees and differentials to be invoked wh en posting movem ents against the outline agreement mu st be specified. specified. The system displays the currently applicable rates. Depending on configuration options the rates will be copied into subsequent documents with or without repricing. Again, depending on configuration options, the user may have the option to override these rates manually. IS-Oil IS-Oil sup por ts the paym ent or collection collection of fees and d ifferentials ifferentials in add ition to the value or quantity of product identified in the exchange. A series of indicators, called invoicing cycles, makes it possible to allocate different pay men t term s to the variou s pricing cond itions (taxes, (taxes, fees, fees, etc.). etc.).

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/LIWLQJ&RQWUROVDQG&KHFNV Lifting Controls by Contract The stand stand ard pu rchase rchase and sales sales contract contract creati creation on and amend ment tran sactions sactions were enhanced to allow the user to enter a “Quantity Schedule” whenever a contract is assigned assigned to an exchang exchang e. The result of a typ ical ical sales contract contract creation transaction is show n in the figure above.

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The Quantity Schedule allows the user to schedule the sales or purchase outline agreement into periodic (usually monthly) parts. The breakdown is proposed from the exchange type but this default may be overridden by the user. In addition, the user may modify the scheduling periods manually as required. System System calculated calculated breakdow n ind icators icators are: q

Daily

q

Weekly

q

Monthly

If any of these param eters are chosen, chosen, then the system p ro-rates the contract contract item 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 the contract. The system performs various checks when a quantity schedule is created: q

Check that the total scheduled quantity is not greater than the contract quantity

q

If the scheduled quan tity is less less than the contract quan tity, then th e user is warned

q

The scheduling periods must fall within the validity period of the contract

The scheduled quantity in any period is the maximum permissible call-off quan tity for the contract contract in the period. If the user attem pts to callcall-off off more than th e permitted qu antity in any schedu schedu ling ling period, then the system issues issues a war ning m essage. How ever, the call-of call-offf may still be created created . In addition to the quantity schedule checks, it is possible to specify whether it is per mitted to over call-off call-off against the contra ct item item total qu antity. Update of the Contract Contract Quantity Schedu le The contract contract qu antity schedules are u pd ated w henever a callcall-off off is is created. created. The callcall-off off quantity schedu le is is up dated autom aticall atically y w hen a delivery note or a good s receipt receipt is posted. Lifting Controls Controls in the Call-off In similar fashion to th at created in the contr act, it it is also possible to create create a quantity schedule to schedule a call-off quantity into periodic quantities. The creation and validation are the same as for the creation of a quantity schedule within the contract. However, the call-off quantity schedule is validated 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 one contract contract scheduling control period. Clearly then, the d elivery schedu le for for the call-off call-off has to use a sm aller period than the corresponding contract schedule. It is possible in the contract schedule to specify a proposed breakdown indicator for the call-off(s) (i.e. daily, weekly, monthly). If this has been specified, then the system autom aticall atically y p roposes a call-of call-offf schedu schedu le broken d own into periods of this length and falling within the validity period of the relevant contract line. This can can be overridd en by the u ser if required. Update of the Call-off The sales call-off quantity schedule is updated when a delivery note is created against the call-off. If the delivery note quantity is subsequently changed, the system d oes not up date th e call call off quan tity schedu schedu le. The pu rchase call call-of -offf quantity schedule is upd ated w hen the good s receipt receipt is created. In addition, for purchase call-offs, the intended (from delivery note) field is updated when the call-off is assigned to the supply of a delivery note (see “Load Balancing/ Balancing/ Resc Reschedu hedu ling”). ling”). The quan tity is transferred to the received received field field w hen a good s receipt receipt is created created against the p ur chase call-of call-offs. fs.

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Schedule Checking The entitlement checking and schedule updating process relevant to delivery note creation is shown in the figure below. Clearly schedule checking only app lies lies to call-off call-offss w here a quan tity schedule is created. The system locates the call-off scheduling period corresponding to the requested delivery date and verifies that the requested delivery quantity is less than or equal to the available quantity for the period. If the requested quan tity is is greater than tha t available available for for the p eriod then: The system system w ill ill react react in the w ay the u ser customized customized the qu antity schedu schedu le message. There can be either no reaction, a warning or an error. The possibility to customize the System’s reaction applies to all respective messages of the qu antity schedule for sales sales and pu rchase. Please see the update of the QS in the following figure. That is as well when the System checks the quan tity of the QS. QS.

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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 received quantity

q

Goods issue against an exchange agreement - for the confirmed delivered delivered qu antity

q

Posting of a Logical Inve ntory ntory A djustment transact transaction ion

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The system system th erefore erefore only up dates the exchange balance when th e ph ysical ysical movement of goods has occurred and the confirmed movement quantity is know n, or wh en the logical logical inventory balance is is up dated within th e Logical Logical Inventory Ad justm ent transaction. transaction.

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The key to this database segment, which defines the lowest level at which the exchang e balance is tracked, is: Clie Client/ nt/ Perio Period/ d/ Materi Material al Group/ Materi Material al// Plant/ Plant/ Exchange xchange Partner/ Partner/ Exc Exchange Type/ Exc Exchange Agreement Agreement Num ber/ Base Product This allows the user to view the exchange balance at any higher level by summarizing the information held at this level (see “Reporting against Exchanges”). The up da te of S03 S036 6 following following good s issue is illustr illustr ated by the figure below .

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For each each exchan exchan ge agreemen t created in R/ R/ 3 IS-OIL IS-OIL Dow nstream , financial accounting is governed by the posting rules defined for the fees, materials and taxes. These rules determine how to accrue for payables on goods receipt receipt an d how to account account for receivabl receivables es on good s issue. issue. There are four four key factors factors that can affect affect the type of postings that are m ade for an exchange: 1.

Materi Material al posti posting ng rules - Interna Internal/ l/ Externa xternall

2.

Fee Fee posti posting ng rules rules - Internal nternal// Externa xternall

3.

Fee acc accounting ounting polic policy y

4.

Excis xcisee duty posti posting ng rule ruless

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

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q

The posting rules for the fees and material indicate whether to use the standard accounts for posting the receipts and deliveries of product (and therefore invoicing the exchange partner and being invoiced), or whether to use internal p ayables/ internal receivables receivables accounts. accounts. In this case it it is a Borrow / Loan exchange exchange agreement, so invoices invoices are not created. created.

q

The separate posting ru les for for fees and m aterials aterials allow allow them to be treated differently for accounting purposes. For example, in the oil industry it is common for fees to be invoiced (posted externally) and materials carried forward (posted internally) as in the case of a pu re exchange. exchange.

q

If material is posted internally the excise duty posting rules can be either specified as posted externally (Invoice for Excise Duty is created) or interna lly (no invoice is created created for Excise Excise Duty).

q

The accounting policy for fees defined against purchase agreements within an exchange allows the user to define whether the fee should be expensed or included in inventory at the time of posting the good s receipt. receipt.

In the figure below a bu siness scenario scenario is show show n for the following posting ru les: q

Material internal

q

Fees extern extern al

q

Excise Excise Duty extern al

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Accounting for Material Material The user can sp ecif ecify y in an exchange exchange agr eement w hether m aterial cost cost should be invoiced, or posted internally (not invoiced). In the case of non invoiced materials the exchange balance (quantity which is moved between the exchange partners) is treated as logical inventory and posted on internal accounts receivables and internal accounts payables. Sales Agreement (Goods Issue) The goods issue automatically creates financial accounting entries to record the d iminution of stock. 1. The product is expec expected ted to be invoice invoiced d - Standard Standard acco accounting unting entries entries are posted. 2. The product is expec expected ted not to be invoiced invoiced - the internal recei receivabl vables es accounts is used as offset to the inventory account. 3.

The product product is is expe expeccted ted to be nette netted. d.

Create Financial Accounting Entries The financial postings that occur in the goods issue stage for each of the above scenarios is indicated below. The key points to note are: q

The postings to the internal receivables account are not cleared by invoice issue or netting. The balance on the internal receivables account may be cleared down by, for example, a Logical Inventory Adjustment posting.

q

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

Financial Posting s q

q

Product Product to be inv oiced m

Cred it - Stock (inven (inven tory account )

m

Debit - Cost of Good s Sold Sold

Product not to be invoiced m

Cred it - Stock (inven (inven tory account )

m

Debit - Intern al Receivables Receivables accoun accoun t

Purchasing Purchasing A greement (Goods receipt) The accounting accounting entries on good s receipt: receipt: 1. To refle reflect ct the incre increase ase in inventory inventory 2. To ac accrue for for the liab liabil ilit ity y to the supp supp lier lier

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Create Financial Accounting Entries The receipt of goods automatically triggers the required general ledger postings, however it is imp imp ortant to n ote the following: following: q

The inventory account for a particular material is automatically inferred from the m aterial master details. details.

q

Material to be invoiced (externally posted)

q

m

Debit - Inventor y accoun accoun t

m

Credit - GR/ GR/ NI (Goods (Goods received/ received/ not invoiced) invoiced) material cleari clearing ng accoun accoun t (to be cleared cleared by invo ice receipt pr ocessing) ocessing)

(internally p osted) Material not to be invoiced (internally m


m

Credit - Material Internal Paya bles account account

Accounting f or Fees Fees Within an exchange agreement, the user specifies whether fees should be invoiced or posted internally. These fee posting rules are independent of accounting for materials. The user can specify by fee type whether fees should be expensed or included in inventory for the purchase side and which revenue account is app licable licable in the sales side. Sales Agreement (Goods Issue) The purpose of posting the goods issue is to record the actual quantity of product delivered to the customer. This process automatically triggers the requ ired gen eral ledger po stings to reflect reflect the issue issue of stock. stock. Create Create Financial Accounting entries entries The key points to note about posting fees during a good s issue issue are: q

There are no fee postings on goods issue unless the fees are internally posted, i.e. are not invoiced. If the fees are internally posted, then the system gen erates a fee postin g to the fee intern intern al receivables receivables accoun accoun t and an offset offset to the ap prop riate fee fee revenue accoun accoun ts.

q

The postings to the fee internal receivables account are not cleared by invoice issuing or netting.

q

The fee reven ue account m ay be specified specified for each fee type.

Financial postings Und er R/ 3 IS-Oi IS-Oill Down stream, there are th ree scenarios scenarios to reflect reflect the posting of fees fees du ring a good s issue: issue: q

Fees to be invoiced (externally posted) m

q

Nothing done at time of goods issue, fee revenue account is posted by invoice processing

Fees no t to to be invoiced (internally (internally p osted) m

Cred it - Fee Revenu Revenu e accoun accoun ts

m

Debit - Fee Internal Receivable Receivable accoun t

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Purchasing Purchasing A greement (Goods receipt) The purpose of posting the goods receipt is to record the actual value of product received from the supplier. This process automatically triggers the required general ledger postings to reflect the receipt of stock. The fee accounting policy is determined for each type and determines wh ether the fee is is to be expensed or includ includ ed in stock at time of posting the goods receipt. Note that the system therefore allows, within the same purchase order line item, that some fees should be expensed and some includ includ ed in the inventory carrying cost. Create Create Financial Accountin g entries entries Und er R/ 3 IS IS-Oil -Oil Downstream, these are the p ostings ostings of fees fees dur ing a goods receipt: q

q

Fee to be invoiced (externally posted) m

Debit - Stock or Fee expense account (depends on whether fee is to be expensed or included in stock at time of posting the goods receipt)

m

Credit - Fee clearing account (fees to be cleared by invoice receipt processing)

(internally p osted) Fee not to be invoiced (internally m

Debit - Stock or fee expense (depends on whether fee is to be expensed or included in stock stock at time of p osting osting th e goods receipt). receipt).

m

Cred it - Fee Intern al Payables accou accou nt.

Invoice Verification During invoice verification the system allows the user to edit fees both at the summary level and at the individual fee line item level and automatically posts any matching differences back to the appropriate account as gains or losses. When an invoice is received (detailing fees) and the fees don’t match the posted fees receivable (fees clearing account) then the user is able to specify the clearing clearing am ount against each each fee in the line item. item. Accounting for Taxes (In a Pure Exchange) It is common practice in the oil industry, in the case of pure exchanges where the material cost will not be invoiced for the excise duty taxes due to movements against exchange agreements to be invoiced since they have to be given to the government. R/ 3 IS IS-Oil -Oil Downstream allows the user to define, for pure exchanges, whether excise duty is invoiced or (like the material costs) posted internally. See the chapter on TDP for more detail on excise excise duty h and ling.

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Create Financial Accounting Entries The receipt and issue of goods automatically triggers the required general ledger p ostings to accoun accoun t for the above scenar scenar ios as follows: follows: q

q

q

q

Internally posted duty on goods receipt (on pure exchange where material is also posted internally) m


m

Debit - Exci Excise se Duty Invent ory

m

Credit - Material Internal Payables (material amount + excise duty amount)

Externally posted duty on goods receipt m


m

Debit - Excise Excise Du ty

m

Credit - GR/ GR/ NI (exci (excise se du ty value)

m

Credit - Material Internal Payables account (material amount)

Inter Internally nally posted duty on goods issue m

Credit - Inventory

m

Cred it - Excise Excise Duty Inven tory

m

Debit - Material Internal Receivables (material amount + excise duty amount)

Exter xternally nally po sted duty on goods issue m

Credit - Stock

m

Cred it - Excise Excise Duty Inven tory

m

Debit - Exci Excise se Duty Cost o f Goods Sold (excise (excise du ty am oun t)

m

Debit - Material Interna l Recei Receivables vables (material am oun t)

Invoice/Invoice verification for excise duty Where excise duty is externally posted the following accounting entries are made: Invoice issue: q

Cred it - Exci Excise se Duty Revenue

q

Debit - Exchange partner account

Invoice receipt: receipt: q

Debit Debit - GR/ GR/ NI

q

Credit - Exchange Exchange partn er account account

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The pu rpose of load balancing is to cope cope w ith the bu siness siness scenario scenario wh ere it is desired to use an existing pu rchase contract/ call-off call-off to fulfill fulfill a custom er order. The business scenario is illustrated below:

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Two variations of the illustrated illustrated scenario scenario are en visaged: visaged: q

IS-Oil Transportation and Distribution functionality is used. Typically this is where the delivery is carried by a truck that is under our control e.g. e.g. one of our ow n or an indep endent carrier employed by us. Exchange Exchange loading integrates the exchange functionality into the delivery creation, the shipment scheduling and the load confirmation processes, so that what is loaded onto the vehicle is the quantity receipted under the exchange.

q

Without IS-Oil Transportation and Distribution functionality (i.e. using standar d Core Delivery Delivery p rocessing). rocessing). Typically Typically this is where th e d elivery elivery is carried out by a vehicle that is not under our control, for example the customer p icks icks up the pr odu ct. Exchang Exchang e loading integrates the exchange exchange functionality into the delivery creation and the goods issue processes, so that what is issued to the customer is the quantity receipted under the exchange.

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

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Assi gnme nt of Exchange Exchange Con tract tract The exchange exchange can be assigned to th e customer d elivery elivery n ote in tw o p laces: laces: q

When creating or changing the delivery note an assignment of one or more exchange contracts/ contracts/ callcall-off offss can be m ade to the delivery item. This This assignmen assignmen t causes the qu antity schedule of the contract/ callcall-off off to to be updated with the intended delivery quantity. This ensures that the required quantity of product is reserved against the total available for call-off call-off against the p ur chase contr contr act/ call-off call-off..

q

When scheduling a d elivery elivery to a shipm ent (TD (TD only) an assignment can be made or modified. This updates the quantity schedule in the same man ner as p er creating creating or changing the d elivery elivery note d irectly. irectly.

There are two m ethods of assigning assigning th e exchange: exchange: q

A user exit will allow user written code to automatically choose the exchange depending on criteria from the delivery note item. If the IS-Oil user h as specific specific strategies for determ ining w hich exchan exchan ge is relevant in certain circumsta nces (for examp le Exchan Exchan ge call-off call-off 1234 12345 5 is only t o be used for product issued from plant ABCD during June 1997) than this can be programm ed.

q

The exchange exchange contract/ callcall-off off can can be explicitl explicitly y sp ecifi ecified ed via a pop up wind ow. If no user exit exists exists or no app licable licable strategy can be d etermined then th e exchange exchange can be m anu ally specif specified ied or changed .

The system will check that there is sufficient availability against the exchange quan tity schedule schedule wh ich ich ever method is used. Loading or Goods Issue At load confirmat ion (TD (TD relevant) or goods issue (non-TD) the quan tity that is loaded onto the vehicle or issued out to the customer is confirmed. However before this happens that quantity needs to be received from the exchange exchange p artner. To do this the system p erforms the following following fun ctions: ctions: q

Checks the exchange assignment. If the date of the delivery has changed or the qua ntity has increased increased the exchange exchange assignment m ay no longer be valid.

q

Amend s the delivery note quan tity to the entered entered loading/ goods issue issue quantity.

q

If a pu rchasing contr act has been assigned then a call-off call-off is is created.

q

Updates the quantity schedule of both the purchase call-off and the contract contract as app ropriate.

q

Posts the good s receipt receipt ag ainst the p ur chase call-of call-off. f.

q

Posts the loaded quantity into in-transit (TD relevant) or against the delivery n ote for invoicing invoicing (non -TD). -TD).

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IS-Oil functionality allows multiple invoices to be generated from a single delivery for different pricing components. For example fees can be invoiced separately from taxes, and importantly the fee invoices can have different paym ent terms tha n the tax invoices. invoices. This functionality is not restricted to exchanges but is available for all sales transactions. An invoicing cycle can be assigned to pricing conditions and a billing type can be assigned to process one or more invoicing cycles. So for example all exchange fee condition types can be assigned invoice cycle 1 and all tax condition typ es assigned to invoice cycle cycle 2. 2. At the customer m aterial level level or on the sales documents the p ayment term can be set for each invoicing cycle. In addition user exits allow user written code to set the p aym ent ter m if specific specific criteria criteria exist, such as th e ru les for for US taxes, and also allow the netting cycle indicator to be set, so for example fee invoices could could be netted bu t tax invoices billed billed . The flow of pr ocessing ocessing for sp lit invoicing invoicing is:

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q

(Customisation of condition types and billing types to set invoicing cycles.)

q

Order taking: Payment terms for each invoicing cycle may default in from Cu stomer Material Info Info records or may be m anu ally ally set. Invoici Invoicing ng cycle cycle on price conditions conditions may be man ually overridd en.

q

Delivery processing (no change).

q

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

q

Profitability (COPA) updated with full invoice item quantity but only valu e for first cycles.

q

Delivery status and do cum ent flow refelct refelct the cycles cycles pr ocessed. ocessed.

q

For subsequent invoicing runs, the processing is the same except profitabili profitability ty is only upd ated for value (and n ot quan tity). tity).

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 Release 1.0D. With split invoice verification, you can calculate the freight costs and excise duties separate from the material value and the fees for a goods receipt, receipt, and you can provide d iffe ifferent rent term s of payment each time.

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1HWWLQJ Netting functionality allows payables and receivables for an exchange partner to be summed up and subtracted from each other. So instead of invoicing the exchange partner for each outward movement and receiving an invoice from them for each inward movement and then processing all those paym ents, only only one either payable or receivable receivable open p osting osting n eed to be processed.

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The user specifies specifies when creating creating an exchange exchange agreement w hether sales and purchases with the exchange partner are to be netted or invoiced. The netting fu nctionality consists of four ar eas of functionality: q

Financial Nett ing Process - Period ic clearing clearing of the paya bles/ receivables (netting) to generate a single open item for the balance

q

Specification pecification of netting criteria

q

Blocking the invoices for automatic payment

q

Selecti electing ng the p ayable/ receivable receivable items items for n etting

Specification of Netting Criteria The payment blocking indicator is used to block invoices for payment and enhanced by IS-Oil to indicate that these invoices are to be netted. Different values can be used as blocking indicators to specifiy different netting criteria. This is flexible and can be specified by exchange partner. For example blocking blocking indicator “A” may be used to specifi specifiy y that all B/ B/ L exchange type transactions dated between the 16 th of the previous month and the 15 th of the current mon th are netted together for exchange exchange partner ABCD. Blocking the Invoices for Automatic Payments The netting indicator (or payment blocking indicator) is set in the exchange header and defaults into the sales and in the exchange header and defaults into the sales sales and p urchasing docum ents. Depend Depend ing on customising, customising, it may be changed or removed in these documents, if required. Within the split invoicing functionality there is a user exit that also allows the indicator to be set depending on criteria relevant to the invoicing cycle. For example, this allows allows fees to be netted bu t taxes to to be invoiced/ invoiced/ paid. Selecting the Payable/Receivable Items for Netting Before the payab le and receivable items are netted it is possible to review th e documents and deselect anything that is not to be netted in this run. This allows allows items that are in d ispute (i.e. (i.e. not agreed w ith your exchange partn er) to be netted later or man ually processed. processed. Ne tting tting of Payables and Receivables The result of the financial netting process is shown in the figure below. The purpose of this functionality is to periodically, e.g. monthly, net off the payables and receivables for an exchange partner and post a single document to rep resent the difference. difference.

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The key aspects of the finan finan cial netting fu nctionality are: q

The netting p rocess rocess reads th e netting relevant p ayables and receivable receivabless for the exchange exchange p artner.

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This balancing document can be processed as a normal payable or receivable, i.e. i.e. by paym ent/ collection collection processing, or left left on the accoun accoun t to be carried carried forward and netted off against against future tran sactions. sactions.

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As of Release Release 1.0D, 1.0D, the collection collection of receivables and pay ables in an exchan exchan ge for netting can be carried carried ou t based on the actual exchange-relate exchange-related d goods movem ents which took place. Instead of financial docum ents being selected, the finan finan cial valu es that are to be offset offset against against each other are d erived from goods m ovements w hich have been selecte selected d by the exchange partn ers to be includ includ ed in netting.

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9DOXDWLRQRI/RJLFDO,QYHQWRU\ Logical Logical inventory inventory balances are upd ated w henever on e of the following following system events occurs: q

Goods receipt against a pure exchange agreement - for the actual received received qu antity

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Goods issue against a pure exchange agreement - for the confirmed delivered delivered qu antity

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Posting of a Logical Inventory Adjustment transaction

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The finan finan cial value of the logical inven tory balan ce is is held in a new da tabase (OIA7) (OIA7) wh ich ich is keyed by Comp Comp any Code/ Plant/ Material and contains the quan tity, value and moving av erage price of the the logical logical inventory. q

Material Material internal receiv receiv ables - For physical goods issues, the quantity of logical inventory owed to us by our exchange partner is valued at the prevailing physical inventory carrying price, regardless of any pricing deta ils in in th e exchan exchan ge sales contr contr act.

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Material internal payables - For physical goods receipts, again the quantity of logical inventory owed by us to our exchange partner is valued at the pr evailing evailing ph ysical ysical inventory carrying price or at the price of the m aterial at a specified specified reference plant (a reference plant is comm only used w hen no inventor y is norm ally held held at the receiving receiving plant).

This valuation strategy recognizes that logical logical inventory inventory represents a quan tity of product, and not a financial amount, owed or owing and therefore should be valued as if it it w ere ph ysical ysical inventory.

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Moving Average Price The system tracks the moving average price of the logical inventory balances at the comp any, plant, p rodu ct level. level. This This strategy is illustrated illustrated by the figure below and ensures that the integrity between the system held logical inventory quantity balance and the logical inventory financial balance is always maintained, i.e. if all of the quantity balance were cleared, then the system held financial value would be zero. The strategy ensures that IS-Oil can handle both standard priced and moving average priced physical inventory valuation strategies.

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Revaluation of Logical Inventory

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IS-Oil functionality incorporates an enhanced price change transaction that can be invoked as r equired to post a new inventory carrying price for for logical logical inventory within a particular plant. The effect effect of posting a revalu ation of logical logical inventor y is illustrat illustrat ed by figu re 20. In the above example, the logical inventory carrying price is changed to 1.00 1.00 USD/ lt. The difference between the logical invent ory valu e at the old carrying price and that at th e new carrying carrying p rice rice is calc calculated ulated by the system and posted to a P&L account. account. In th is case case the d ifference ifference is: (Old p rice x qu antity) - (New pr ice x quan tity) = 3,0 3,062 62 - 2,8 2,800 00 = 262 262 This is recorded as a loss on revaluation. Sub/Base Product Product Handli ng IS-Oil functionality offers the flexibility of creating an exchange agreement containing containing m ultiple prod ucts referenci referencing ng a single single base p rodu ct. This This is used for example with exchanges of gasolines with different octane levels but for ease of monitoring, reconciliation and valuation all transactions are based up on a mid grad e gasoli gasoline. ne.

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When sub/ base produ ct fun fun ctionality ctionality is is used the logical logical inventory is updated in terms of the base product. For example if an exchange contract contains contains the following following p rodu cts: cts: -

U N 87 87H 0

87 o ct a n e g a so lin e

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U N 90 90H 0


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U N 93 93H 0


all referencing UN90H0 as a base, an issue or receipt for either UN87H0 or UN93H0 will upd ate the logical logical inventory for UN 90H0. 90H0. The value posted to logical inventory will be based upon the inventory carrying price for UN90H0 and the difference between that and the material’s normal inventory carrying p rice is posted as a loss/ loss/ gain. All All reporting is centered up on the base product with the sub product generally only being reported as additional information.

/RJLFDO,QYHQWRU\$GMXVWPHQWV The Logical Inventory Adjustment transaction allows the oil company to adjust the logical inventory they have recorded against an exchange partner. Typically Typically this is is to record th e swap of the ownership of a specifi specified ed qu antity of one prod uct for the own ership of a specifi specified ed qu antity of another p rod uct or to correct a movement that was incorrectly posted against an exchange, or to transfer the balance from an expired exchange agreement to a new exchange agreement. The adjustment may or may not include a monetary payment. No physical product movement is involved in the settlement only a logical inventory inventory movement.

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The product(s) to be balanced result from unequal or incorrect call-offs on sales and purchase contracts, assigned to pure exchanges only, at one or more locations. This means the internal payables and receivables logical inventory accoun accoun ts are u sed for th e exchange exchange contracts contracts to control valuation of prod uct logical logical inventory. The three compon ents of a Logical Logical Inventory Ad justmen t are: q

A specifi specified ed qu antity of an over-received over-received prod uct(s) uct(s) to be swapp ed in

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A specifi specified ed qu antity of an over-delivered over-delivered p rodu ct(s) ct(s) to be swap swap ped out

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A mon etary paym ent (issue (issue or receipt) receipt)

Usually, at least two of the thr ee components w ould be d efined efined for a Logical Logical Inventory Adjustment, although the system allows any combination of the above. The logical inventory effect of posting a Logical Inventory Adjustment is illustrated illustrated by the figure below.

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Specifications to be Made in the Logical Inventory Adjustment Transact Transaction ion The user specifies the exchange partner with whom the Logical Inventory Adjustment is being made on entry to the Logical Inventory Adjustment transaction. For each over-received product to be swapped out and each over-delivered over-delivered p rodu ct to be swapp ed in, the user mu st specif specify: y: q

The locati location on at w hich the posting should be m ade

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The exchange type against which the Logical Inventory Adjustment should be posted

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The produ ct to be swapp ed

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The quantity to be swapp ed

In addition, the user has the option of specifying the exchange agreement number against which the Logical Inventory Adjustment clearance should be posted. If this is not specified, then the Logical Inventory Adjustment clearance clearance is is posted at the sum mary level for the exchange exchange p artner.

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Quantity Posting Made By the Logi cal Inventory Adjustment Transact Transaction ion When entry is complete the exchange product quantity balances are updated. This is is illustrated illustrated by the figure below. The entry for an over-delivered p rod uct has the effect of reducing the delivered quantity rather than increasing the received quantity. Conversely the entry for an over-received product has the effect of reducing the received quantity rather than increasing the delivered quantity. If the user attempts to swap in more product than has been received or swap out more than has been delivered, the system issues a warning. The user may choose to ignore this warning and post the Logical Inventory Adjustment in any case. Financial Postings Postings Mad e By By the Logical Invent ory Ad justm ent Transa ction The financial financial postings mad e by the Logical Inventory Inventory Adjustment transaction transaction are illustrated by the figure below. The logical stock valuation is updated on each product’s valuation record (see section “Valuation of Logical Inventory”). For over-delivered products the internal receivable account is credited. For over-received products the internal payable account is debited. The offset is to a P&L P&L accou accou nt called called “Exchange Balance” Balance” represent ing the gain/ loss on the Logical Logical Inventory Adjustment. The negotiated payment details, if entered, causes an invoice posting either to payables or receivables receivables,, in order to request a p ayment by ou rselves rselves or the exchange exchange p artner. For For an invoiced invoiced p ayment r equest to the exchange exchange p artner the customer account is debited. For an invoiced payment request from the exchange partner the vendor account is credited. In either case the offset accoun accoun t is again t he P&L “Exchan “Exchan ge Balance” Balance” accoun accoun t. If the negotiated payment is a receivable an invoice document can be generated that contains contains details of the adjustments adjustments mad e and the value that is owed by the exchan exchan ge partn er. This This docum ent can then be sent to the exc exchang hang e partn er.

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The exchange exchange statement is a docum ent or series of docum ents used to report the activities of an exchange over a certain period. Typically the exchange statement is sent sent to the exchange partn er and forms the basis for for the p eriodic reconciliation reconciliation of the exchange. It will contain inform ation su ch as: q

the details of the movements (issues and receipts): material, plant, quan tity, data, document n o., etc. etc.

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the financial information relevant to the exchange partner for these mo vem ents: fees, fees, differentials, etc.

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adjustments: LIAs

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opening and closi closing ng balances

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net amoun t owed or owing for the period

It is highly customisable so that the amount of information sent to the exchange exchange p artner can be controlled controlled and formatted as requ ired. For For the same data different formats and levels of information can be output. So it is possible to send a summarised version of the exchange statement to the exchange exchange p artner bu t generated a d etailed etailed version for internal use.

5HSRUWLQJ$JDLQVW([FKDQJHV D ispl ay Exchange Exchange Balance Balance

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

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exchange balance display transaction enables the user to display the S036 segments held at the exchange agreement level and th erefore erefore to sum marize up to higher levels levels of detail. detail. The key to this database segment, which defines the lowest level at which the exchange ba lance is tracked, is: is: Client/Period/Material Group/Material/Plant/Exchange Partner/ Exchange Type/ Exchange Exchange A greement N umbe r/Base Product Product This allows the user to view the exchange balance at any higher level by summ arizing the information held at this level. level. The Logistics Information System (LIS) is used for reporting purposes. This is a flexible, customisable reporting system that allows the exchange balance details (i.e. lifts, receipts and balances) to be reported and summarised by any combin ation of the key fields. fields. Di splay Excha Exchange nge Movemen ts The display exchange movements transaction allows the user to display all exchange exchange related m ovements. In SAP SAP terms, the d eal related related m ovements are: q

Goods Issue

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Goods Receipt

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Logical Logical Inventory Ad justm ent

The user is able to narrow the range of selected movements by specification of one or m ore of the following selection selection criteria: q

Material Nu mber (or matchcode)

q

Plant

q

Exchange type

q

Movement Movement typ e

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Range of posting dates

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Exchange Partner

Display Exchange Entitlement The exchange entitlement transaction supports the IS-Oil user in finding open entitlements. An entitlement to lift product from an exchange partner is represented by the open quantity against a purchase call-off. For each calloff, off, the open entitlem ent is defined by: Exchange Exchange entitlement entitlement = Schedu Schedu led qu antity - Intend ed quan tity - Rece Received ived Quantity where, Scheduled Quantity = Maximum quantity available in any scheduling control period (see section section “Lifting Contr ols and Checks”) Intended Quan tity = The The qu antity reserved d ue to assignment of the call-of call-off f to a customer order (see section section “ Load Balancing”)

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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 or mor e of the follow follow ing selection selection criteria: q

Product

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Plant

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Exchange Partner

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Exchange Exchange typ e

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Method of d elivery elivery

The system displays the open entitlement on all exchange related purchase call-offs that meet the entered selection criteria. It is also possible to drill down on a particular call-off to display the underlying scheduling quantity schedu les (see (see section section “Lifting Controls an d Ch ecks”). ecks”).

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*ORVVDU\RI([FKDQJH6SHFLILF7HUPV 3XUH([FKDQJH A pure exchange is one where the liability incurred due to a receipt of prod uct from an exchange exchange p artner, or the asset acquired acquired d ue to the d elivery elivery of product to an exchange partner, is a quantity of product owed or owing and not a financial financial amoun t. The The assump tion is that over time the quan tities tities owed and owing balance although periodic or ad hoc settlements against this type of exchange are possible. The implication is that “pure” exchanges are managed with respect to the quantity of product owed or owing due to physical or logical logical movements against the exchange agreement.

1RQ3XUH([FKDQJH A non pu re exchange exchange is one wh ere the financi financial al amoun t owed or ow ing du e to an exchange receipt receipt or delivery is to be paid or netted. For this reason, the quan tity balance balance against this typ e of exchange exchange is not be cleared down over time. The implication is that non “pure” exchanges are managed with respect to the financial value owed or owing due to physical movements against the exchange agreement. This type of exchange may be netted or invoiced.

1HWWHG([FKDQJH A netted exchange is a non pure exchange within which an oil company periodically invoices only the net balance owed or owing due to the movements against against the exchange exchange as opp osed to invoicing for each each ind ividual m ovement.

%RUURZ/RDQ([FKDQJH In a borrow/ loan exchange, exchange, materials materials are only posted internally, they are not invoiced to the partn er. A logical logical inven inven tory is set up . Excise Excise d uty an d fees incurring with the material movements will generally be invoiced. A borrow/ loan exchange exchange is is also also known as a “pu re” exchange. exchange.

)HH&DWHJRU\ This is is a br oad group ing of similar types of fees. The The fee category correspon correspon ds to an SAP price condition record type and therefore allows the user to define the key parameters on which the fee rate should depend, e.g. individual fees dep ends u pon m ethod of delivery, exc exchange hange typ e, and delivery location. location.

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)HH7\SH This identifies the type of fee within a fee category, e.g. types of individual fees fees are wh arfage, truck filli filling ng an d dem urrage.

/RJLFDO,QYHQWRU\ This is represented as exchange balances owed or owing against pure exchanges. The inventory is valued, and revalued, as if it were physical inventory but is tracked against a separate balance sheet account for balances owed (due to exchange deliveries) and balances owing (due to exchan exchan ge receipts).

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+\GURFDUERQ3URGXFW0DQDJHPHQW+30 DVSDUWRI,62LO'RZQVWUHDP +LJK/HYHO6XPPDU\ The SAP SAP R/ 3 Logistics Logistics mod ules, Materials Managemen t (MM) and Sales Sales and Distribution (SD), provide a comprehensive information system for the effective and efficient management of all standard activities within the supply chain. The objective of the Inventory and Hydrocarbon Product Management (HPM) functionali functionality ty w ithin the R/ 3 IS-Oi IS-Oill Downstream component is to enable these Core modules to address certain specific oil industry requirements. With regard to general hydrocarbon inventory management, IS-Oil amends existing existing Core SAP functionality in ord er to: q

Incorporate Incorporate ASTM/ ASTM/ API petroleum m easurement standard s. These standard s are used to convert convert volume quantities and p rodu ct densities at ambient temperatures to volume quantities and densities at well defined standard temperatu res for material movem ents and measurements.

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Provide ad ditional quantity fields fields enabling stock balances balances to be stored in mu ltiple ltiple units of measure (for (for example volume at am bient temperatu re, corrected corrected volume based on stand stand ard temp erature and app arent mass). mass).

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Allow stock balances to become negative as the result of a movement, and hand ling ling the financial financial imp imp act of such a movemen t.

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Provide a tracking function to link material movements from one plant to another in order to calculate and post gains and losses (two-step transfer).

.H\)XQFWLRQ%HQHILWV The key function benefits are outlined below: HPM’s functionality can be viewed as a tool for creating business benefits in other design categories within IS-Oil. Principally, it allows oil companies to effec effectivel tively y m anage their sup ply chain of continuou continuou s and discrete discrete prod uct to minimize costs and maximize the reliabilit reliability y an d quality of service service pr ovided to the customers.

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The ASTM/ ASTM/ API calculati calculation on fun ction ction enables highly accurate accurate autom atic conversions conversions between alternative units of measure, based on internationally internationally accepted petroleum measurement standards (ISO 91-1), which are performed within the SAP R/ R/ 3 System. System. Thus, Thus, the compan y gains savings in in terms of time and effort effort by n ot having to perform th ese calc calculations ulations outside the system. As there is no limit to the nu mber of u nits of measure that can be calculated calculated for a material, the system provides complete flexibility for tracking and reporting m aterial quan tities. tities.

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The ability ability to calculate calculate material quantities using th e ASTM/ ASTM/ API conversions conversions in HPM provides a high level of integration with the other modules. This enables 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 material simultaneously provides the company with accurate quantity levels of material in real time.

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The weight ( i.e. apparent mass) and volume of a product required for shipment is calculate calculated d and saved to aid in th e delivery and shipp ing process. process.

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Issues Issues and receipts receipts for plant-to-plant plant-to-plant transfers are linked linked by R/ 3 IS-Oi IS-Oill Downstream functionality. functionality. The enhancement to the intra-company movement (plant-to-plant transfer) functionality functionality enables enables an issue quantity from one plant an d a receipt receipt q uantity at a second second plant to be reconcil reconciled, ed, and the resulting gain/ loss assoc associated iated with the m ovement to be autom aticall atically y calculate calculated d an d p osted.

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+\GURFDUERQ3URGXFW0DQDJHPHQW+3 +\GURFDUERQ3URGXFW0DQDJHPHQW+30DVSDUWRI 0DVSDUWRI,62LO'RZQVWUHD ,62LO'RZQVWUHDP P

.H\,62LO)XQFWLRQV6XSSRUWHGE\WKH ,62LO'RZQVWUHDP+30&RPSRQHQW The foll following owing H PM enhancements are provided within the R/ 3 IS IS-Oil -Oil Downstream component:

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,QYHQWRU\$GGLWLRQDO8R0 Storing of mu ltiple ltiple units of measure is made available available through add itional itional app endix tables to the material master for each material, thereby provid ing add itional itional information for ABAP ABAP r eporting capability. capability.

3ODQWWRSODQW7UDQVIHUVDQG+DQGOLQJRI*DLQV/RVVHV Issues Issues and receipts receipts for plant-to-plant tran sfers sfers are linked by R/ 3 IS-Oi IS-Oill Downstream functionality. The enhancement to the intra-company movement (plant-to-plant (plant-to-plant tr ansfer) fun fun ctionality ctionality enables an issue quan tity from one plant and a receipt receipt qua ntity at a second second plant to be reconcil reconciled ed and the resulting gain/ loss loss associated associated with the m ovement to be autom atically atically calc calculated ulated and posted. Material movements can occur between plants belonging to the same company, or between storage locations within a single plant. These movements can be monitored in th e R/ 3 IS-Oi IS-Oill Downstream system.

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A transaction transaction exists in in R/ 3 IS-Oi IS-Oill Downstream in w hich the issue issue from the first plant is linked by a transfer tracking number to the receipt of the second second . Thu Thu s, the tracking tracking nu mber allows for the calc calculation ulation of gains gains and losses associated with a company movement, as well as tracking the status of the material movement. The correspond correspond ing excise excise duty gain/ loss is is also calculated.

1HJDWLYH,QYHQWRU\ Negative inventory allows for stock balances to become negative as a result of a goods movement. This allows an issue of a material to be made even though there is insufficient stock available in the system to complete the issue. For example, if a hydrocarbon movement occurs over several days, certain transactions will be booked several days after the initial part of the m ovement. This could result in a shortage of inventory, from a system perspective, if a goods issue is made.

.H\,62LO)XQFWLRQV6HUYHGE\WKH&RUH56\VWHP The following following features in the Core R/ 3 System System are p articulary articulary ap plicable plicable to the oil and gas indu stry.

%OHQGLQJDQG5HEUDQGLQJ The ability to change the material code of a product when two different products are mixed together, creating a new product, or to change the description description of one prod uct to another.

3K\VLFDO,QYHQWRU\ Post to ph ysical ysical inventory balancing is simp simp lifi lified ed in R/ 3 by the d etail stored stored in the inventory. All movements and physical counts are retained by the system, which provides for numerous ABAP reports to be developed for invent ory reconciliation. reconciliation. R/ 3 also also prov ides the flexibili flexibility ty of a comp comp any defined grouping of products that enable the company to create custom ABAP reports.

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6SHFLDO6WRFNV Consignment and subcontract stocks stocks are easily easily accoun accoun ted for and tracked in the stand ard R/ 3 System, System, regardless of their their actual p hysical hysical location location (for (for example, stocks at customer or vendor sites). Functionality available for special stocks is similar to that of normal inventory stocks, which includes physical counts, stock reservations, and pricing.

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/,)2),)2,QYHQWRU\9DOXDWLRQ0HWKRGVIRU$FFRXQWLQJDQG5HSRUWLQJ LIFO/ LIFO/ FIFO FIFO valuation is provided by R/ 3 IS IS-Oil -Oil as part of the Core System. System.

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Within the SAP SAP R/ 3 System, System, much of the m aster data information is structured within a comm on h ierarchy. ierarchy. This hierarchy hierarchy consists consists of four levels: client, company, plant and storage location. All information in the hierarchy applies equally to all lower levels. Thus, the hierarchical structure ensures that data redun dancy is is kept to a minimum.

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The common hierarchy is app lied lied to several different different m aster file file structures, one of which is the location structure. Clients and Companies

For any given organ ization, ization, there m ay be a v ariety of ways that th e location location structure could be repr esented w ithin the SAP SAP R/ 3 System. System. This This is done by mirroring current or desired organizational structures of the business. The decision is driven primarily by how corporate information is gathered, aggregated aggregated and reported.

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An oil company (the SAP client) may have divided its organization into business functions. Thus, the SAP companies would be the independent business units of the oil company, as illustrated in th e figure figure below.

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

A plant is a strategic business unit. The plant is the highest level in the hierarchy where inventory balances are stored, so the assignment of plants will determine how an organization’s inventory position can be reflected. The plant field field is a four d igit igit alphan um eric fiel field. d. For an oil comp comp any, typical uses of the plant entity in SAP might be to d efine: efine: q

Crud e storage terminals

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Finished Finished pr odu ct marketing terminals

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Refi Refineries neries and man ufacturing comp lexes lexes

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Pipelines, or pipeline segments

In addition to these “physical” sites, where an organization’s inventory is maintained and reported, it is possible to define so called “logical” plants. An oil comp comp any m ight use logical logical plants: q

To store and report inventory in a sum marized m anner

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To represent third party inventory sites, for example exchange partner locations

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To store in-transit in-transit inventory, possibly possibly by mod e of transport

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Storage Storage Location

A storage location location is a subd ivision ivision within a p lant, enabling enabling inventory to be managed at a more detailed level. Each plant must contain at least one storage location. The storage location field is a four digit alphanumeric field. Storage locations locations enable the m anagement of inventory in sm aller aller u nits. Within a “p hysical” hysical” plant, an oil comp comp any m ight use storage locations: locations: q

To track track and report volum es of individu al prod uct, for for example establish establish individu al or group s of tanks at a term inal (plant) (plant) as storage locations. locations.

Within a “logical” “logical” plant, an oil comp comp any might use storage locations: locations: q

To define individual third party sites (within a summary third party plant)

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 plants or storage locations is comp comp letely flexi flexible ble within th e SAP SAP R/ 3 System. System. An oil company would assign entities as plants or storage locations dependent on factors such as:

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The num ber of inventory sites sites to be d efined efined in the SAP R/ R/ 3 System System

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The level of inventory tracking and reporting required at the inventory site

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3URGXFW+LHUDUFK\ This is another area to which the common hierarchy is applied in the material master record.

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Client

The Client level is the highest level at which material information can be maintained. Information m aintained at this level level includ includ es: q

Material nu mber and description description

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Stockkeeping tockkeeping u nit of measure

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Material type

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Indu stry sector sector

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Quan tity calculati calculation on method

The stockkeeping unit of measure is the base unit of measure, or the unit in which the stock is managed. The standard system converts all quantities entered in oth er un its to this unit. In In R/ 3 IS-Oi IS-Oill Down stream, for “oil materials”, these conversions conversions can be performed using ASTM/ ASTM/ API conversion conversion routines (see the section section “Quan tity Conversions Incorporating Incorporating ASTM/ API Procedures”). All implicit financial transactions (material valuations, accounts payable updates, etc.) associated with a goods movement are performed based on the qu antity in the stockkeeping stockkeeping UoM. The material type provides one method for grouping materials together in the SAP R/ R/ 3 System. System. Examp Examp les of material material types are raw materials, trading goods and finished products. The material type defines certain features of

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the material and has imp ortant control functions. functions. For For example, the material type determines which department-specific data the user can enter for the material. Company

In the oil industry, a requirement exists to hold material information at the company level, level, since since some information, for example, that pertaining to tax and excise excise du ty, is is coun coun try-specific. try-specific. R/ 3 IS-Oil IS-Oil Dow nstream pr ovid es the following information at that level: q

Additional units of measure for maintaining inventory quantities in master files files and r eports

q

Conversion Conversion grou p

The units of measure that are calculated automatically for a material (in addition to the stockkeeping unit) when a material movement occurs, are defined a t this level. level. It is possible possible to group individu al units of measure, by a key, simplifying simplifying the assignm assignm ent of the un its of measure to a country code. The The un its of measure that are reported in the standard stock reports (see the section entitled “Inventory Information an d Reporting”) Reporting”) are also d efined efined at this level. level. The R/ R/ 3 IS IS-Oil -Oil Downstream System System p rovides a nu mber of method s for for converting between th e different different u nits of measure d efined efined for a m aterial (see (see the section section “Qu antity Conversions Incorporating Incorporating ASTM/ ASTM/ API Procedu Procedu res”). res”). The conversion group defines which set of formulas will be used in the conversion calculations. Plant

The plan t level is is the high est level in the SAP hierarchy w here stock balances are stored in th e SAP SAP R/ 3 System. System. Material Material information information held at this level level includes: q

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

q

Stock balances balances in in ad ditional unit of m easure for total stock stock and valuated stock stock w ith un restricted restricted u se

At plant level, level, stock stock balances in the stockkeeping u nit of measu re are h eld for a num ber of d ifferent ifferent typ es of stock. These includ includ e total stock, un restricted use stock, stock stock in transfer, consignment consignment stock stock an d reserved stock. In add ition ition to these quan tities tities held in the stockkeeping stockkeeping u nit of measure, the total stock and valuated stock with unrestricted use are held in the add itional itional UoM and are available available for reporting. The batch man aged indicator is maintained at plant level. level. If If this indicator indicator is set, then a material is managed in batches.

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Storage Location

Information Information maintained for a material at this level in in th e R/ 3 IS-Oi IS-Oill Downstream system system includes: q

Stock balances in stockkeeping UoM for different types of material quantity

q

Stock balances in additional UoM for total stock and valuated stock with unr estricte estricted d use.

Batches

Storage location stock can be subdivided into batches in order to facilitate the man agement and valuation of inventory inventory at a m ore detailed detailed level. Special Stocks

SAP R/ 3 provides functionality functionality to manage stock stock own ed by third parties, or stocks stored at third party locations. Special stocks are typically stored in the system as “logical” plants and storage locations, as described in the section entitled “Location Hierarchy”. Some examples of special stocks include: q

Vendor Consignment Stock - Stock owned by a vendor, but stored at your site

q

Sub contract contract Stock - Stock owned by your company, but stored at a site belonging belonging to a supp lier lier

q

Customer Consignment Stock - Stock owned by your company, but stored at a site belonging belonging to a customer

q

Supplier’s and Customer’s packaging to be returned

q

Stocks allocated allocated to p rojects rojects defined in the SAP R/ R/ 3 Project Stock - Stocks pr oject oject system

One examp le of the the w ay special special stocks stocks could be u sed by an oil company is as follows: customer consignment stock could be used to keep track of inventory quantities at certain dealer-operated retail stations. After delivery of the product, it is still owned by the delivering company until it is finally sold. sold. Inventory at retail stations stations can can be tracked in the system u sing customer consignment stock.

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In the oil industry, it is a requirement to be able to hold material quantities in mu ltiple ltiple un its of measure (UoM). The volume qu antities and densities of of oil materials materials are temp erature-depend ent; Raisi Raising ng th e temp erature of a liquid or gaseous material increases the material’s volume and thus decreases its density. In order to comp comp are one volum volum e quantity of material to another volume quantity of the same material, the comparison must be made at a comm comm on temp erature.

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Thus, it is usual (and a legal requirement for excise duty calculations) to maintain inventory balances in a UoM at a fixed fixed temperatu re (for (for example liters at 15° Celsius, L15). However, most goods movements occur at ambient temperature, with the temperature at which the movement occurred being measured along with the density of material moved. The quantity correction functionality functionality prov ided by R/ 3 IS IS-Oil -Oil Downstream system enables conversion conversion between volumes measured at different temperatures into UoM at a standard temperature, for inventory management and reporting. It is also possible to calculate the weight of a material. All UoMs relevant to a material can be defined and calculated automatically when a movement of the material takes place. Functions Utilizi ng D ifferent Units of Measure

A par ticular ticular UoM m ay be requ ired in ord er to calculate calculate the exci excise se du ty. The The TDP functionality uses the conversion routines to calculate and report inventory balances in in th e required UoM. A company’s marketing department might require various UoMs, due to pricing pricing p rocedu rocedu res for different different customers in international m arkets. The pricing functionality in MAP can use any of the UoMs as the basis for pricing.

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Since all UoMs defined for a material are calculated for every movement type, the Exchanges functionality is able to track exchange balances in mu ltiple ltiple UoMs. Quantity Calculation Calculation M ethod

The following following d escription escription of the quan tity conversion conversion routines ap plies to “oil materials”. These are defined by assigning a conversion group to the mat erial ma ster record of the m aterial. If this group is set to ind ind icate an oil material, then the quantity conversion routines will be performed for the material. Quantity D etermination etermination

There are two p ossibilities ossibilities for entering qu antities in the R/ R/ 3 ISIS-Oil Oil Downstream system: The first is to enter the movement quantity along with the density and temperature of the material when the movement occurred. Automatic internal conversion routines then convert this quantity into all the UoM maintained for that m aterial. aterial. The alternative is to enter all quantities required, with associated temperatu re and density information, directly directly in the system. system. This procedu procedu re is used if the qu antities antities are calculated calculated outside of the SAP R/ 3 System. System. The system system checks checks all mand atory fields fields for a man ual entry of that kind. Quantity Conversion

The automatic conversion conversion of one UoM to another UoM can be performed in one of two two w ays: The R/ R/ 3 IS-Oi IS-Oill Downstream system system contains contains ASTM/ ASTM/ API conversion conversion routines. This functionality performs conversions based on the rules and formulas defined by the American Petroleum Institute (API), based on the descriptions 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 for relative densities and ASTM Tables 5 and 6 for gravities. The conversion calculati calculations ons u se form form ulas based on these standard tables. tables. The alternative is to perform the calculations by an external customer function function mod ule. An external interface interface to the SAP R/ R/ 3 System System allows conversions conversions that are not supp orted by the ASTM/ ASTM/ API routines, as described described above. The two m ethods are illustrated illustrated in the following following d iagram.

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Units of M easure easure Available

The standard UoM for a material is the stockkeeping unit defined at client level in the material master record. This is the base UoM for storing and reporting inven tory balances. R/ 3 IS IS-Oil -Oil Downstream enables an un restricted restricted additional number of UoMs to be defined for each material. The system automatically converts transaction quantities to these UoM for each goods movement of the material. Quantity balances are maintained for the material in all of these add itional itional UoMs, as described described below. The total stock and available stock balances are held in the additional UoM at the following levels: q

Plant

q

Storage location

q

Batch level

q

Special stock

The transaction transaction qu antity in th e following following transaction types are converted converted to the add itional itional UoM:

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Material movem ents: good s receipts, receipts, goods issues, issues, . . .

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Deliveries

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Physical Physical inventory docum ents

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Material-Specifi Material-Specifi c Information Information Us ed in the Q uantity Conversion Calculation Calculation s

The quantity conversion conversion routines require the m aterial aterial density and temperature to perform their calculations. This information may be obtained from the conversion routines in one of the following w ays: q

The values for density and standard temperature can be stored at, and defaulted from, plant, storage location and batch-level. This information can be up dated at those hierarchical hierarchical levels, levels, based on the d ate.

q

For each each ind ividual goods m ovement, it is possible possible to to ma nu ally ally enter the temperatu re and material density associ associated ated w ith the transaction. transaction.

Carrying out the Quantity Conversion Calculations

For some transactions, transactions, it is is a requirem ent to be able to enter temp erature an d density measur ements mad e at the time of the goods movem ent. The R/ R/ 3 IS ISOil Downstream system provides this capability. Dependent on transaction type, it is possible possible to configure configure the R/ 3 IS IS-Oil -Oil Downstream system to perform the qu antity conversion calc calculations ulations by one of four d ifferent ifferent method s:

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Automatic Conversion Calculation

The system uses default values for density and temperature. The quantity conversions are performed in background calculations, based on the transaction transaction qu antity and associated associated UoM. Semi-Automatic Conversion Calculation Calculation

The system uses default values for density and temperature. The quantity conversions are performed in background calculations, based on the tran saction qu antity and associated UoM. The results of the calculations calculations are displayed to the user and can be changed changed man ually before before being being p osted.

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Manual Conv ersion ersion Calculat Calculation ion

The system uses default values for density and temperature. The system displays these values to the user, and may be changed by m anua l inpu inpu t. It It is also possible possible to manu ally ally inpu t values for the transaction quantity in an y of the alternative UoMs. The system then performs conversion calculations to the UoM that have not been man ually inpu t. The The results of the calculati calculations ons are redisplayed and can be changed changed by the user. Semi-Manual Conversion Conversion Calculat Calculation ion

The system system uses default values for for density and temperatu re and allows only these values to be changed. The system system performs the volum e conversions conversions in the background , based based on the transaction transaction qu antity and associated associated UoM. Calculat Calculation ion of Gross/N Gross/N et Weights and Volumes

The R/ R/ 3 IS IS-Oil -Oil Downstream system performs au tomatic ASTM/ ASTM/ API calculati calculations ons of weights and volume in the shipm ent p rocess. rocess. Base Sediment and Water Calculation

Base Sedim Sedim ent an d Wa ter (BS& (BS&W) W) is a per centage of the total qu antity th at is non -oil ma terial. This value is is to be subtracted from th e ASTM-c ASTM-corrected orrected quantity and is applied to volumes when activated. Activation takes place by product type specified in a table. The BS&W is an integral part of all ma terial mov emen ts. The meter calibration calibration factor factor is app lied to all target volum es, when BS&W S&W is activated activated . Gain/Loss Handling with Plant-to-Plant Transfers

The two-step plant-to-plant transfer functionality has been enhanced to enable the reconciliation of individual goods issues and goods receipts associated associated w ith a p hysical hysical shipm ent. Performing Performing Quantity Conversion Calculations Calculations When No Goods Movement Has Occurred

The R/ R/ 3 IS IS-Oil -Oil Downstream system provid es the functions functions for performing quantity conversions when no goods movement has occurred. A “desk top calculator” is provided to perform stand-alone calculations, using either ASTM/ ASTM/ API or customer customer conversion fun fun ction ction mod ules.

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Checking the Results of Q uantity Conversion Conversion Calculations Calculations

Functionality is provided to be used for checking the results of system calculati calculations, ons, performed either using th e ASTM/ ASTM/ API or the customer function function m odu les. les. The result is a report that comp ares the system calculati calculation on with values in the stand stand ard ASTM/ ASTM/ API tables. tables. The following following ta ble illustrates illustrates the use of the R/ R/ 3 ISIS-Oil Oil Downstr eam quantity conversion functionality. In this example, a material has a stockkeeping UoM of barrels at 60 degrees Fahrenheit (B60), while goods movements of the material are recorded in barrels at ambient temperature (BBL). The material has an API gravity of 40 and the initial stock of the pr od uct is 500 500 B60. 60. The The table show s the chang es in quan tity for the following scenario: A supplier delivers 950 BBL of the material. The temperature measured at the time of delivery is 50 degrees Fahrenheit. Subsequently, 500 BBL of the material is is issued issued to a retail station. station. The The temp erature m easured at th e time of issue is 70 70 degrees Fahren heit.

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The R/ R/ 3 IS-Oil IS-Oil Down stream comp onent p rovides extensive fun fun ctionality ctionality for storing and reporting inventory information. The inventory information stored at the different levels of the common hierarchy were discussed in the section entitled “Product Hierarchy”. Other inventory management functions and the repor ting capabilities capabilities of the system w ill now be considered considered .

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Physical Inventory

The real-time real-time n ature of SAP SAP inventory functionality functionality assum es that tr ansactions ansactions are entered into th e SAP SAP R/ 3 System System as they occur. occur. When a goods movem ent occurs, occurs, the correspond correspond ing posting should be mad e immed iately, iately, to ensure that the system reflects reflects an accurate accurate v iew of the tru e inventory position. Thus, all transactions for a given location must be entered into the system before a physical inventory count is performed at that location. The phy sical sical inventor y count consists of the following following step s:

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q

Selec Selectt the ma terials and locations to be includ includ ed in the coun t

q

Perform the physical inventory count and record the results in the ph ysical ysical inventory document

q

Enter the physical inventory measurements in the system. These can be entered either manually, from the physical inventory document, or using an interface to the SAP SAP R/ 3 System. System. The quantity conversion rou tines, discussed in the section section “Quan tity Conversions Conversions Incorporating ASTM/ ASTM/ API Procedures” are used to calculate measured quantities into the UoM defined for the material

q

Create a „post to physical inventory difference list“

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If possible, correct the physical inventory measurements, for example if difference differencess can be traced to inpu t errors

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Post the d ifferences. ifferences. This This involves adjusting t he book inv entor y to reflect reflect the physical inventory measured and the generation of the associated financial adjustments.

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

Each Each m aterial movem ent is posted in the SAP SAP R/ 3 System System as a docum ent, and stored in a m ovements h istory istory file. file. Material Material movements ar e categorized categorized by movem ent type. The The movem ent type d efines efines the nature of the movement, for examp examp le goods issue issue to p rodu ction ction or plant-to-plant plant-to-plant tran sfer. sfer. Inventory balances are up dated in real-time, real-time, as each tr ansaction ansaction is recorded in the system. This ensures that the risk of reconciliation errors is small. It is assumed that any errors will ultimately be identified during physical inventory counting. The user can reconcile transactions and physical balances using the movem ents history file file and the p hysical hysical inventory h istory istory file. file. Customized ABAP reports could be produced to display information from these files if required, for example, for estimating production and consumption, storage losses losses and gains or trend analysis. analysis. Inventory Reporting

The inventory balances that are held at each level of the location hierarchy were discussed in the section “Product Hierarchy”. These balances can be displayed through the location structure using the stock overview transaction. This transaction provides an inventory on-line report, for a single material nu mb er, at all, all, or selec selected, ted, levels of the hierarchy. The user can “drill-down” in the hierarchy to see all of the product inventory for the company, plants and storage locations within a plant. Individual batches at a storage location location ar e also displayed by this transaction. In R/ 3 IS-Oil IS-Oil Downstream, this tran saction saction enables the add itional, itional, oiloilspecifi specificc information recorded in the system to be displayed. The tran saction saction

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enables inventory balances in additional UoM, as well as the stockkeeping UoM, to be reported reported . The SAP SAP R/ 3 System System p rovides several capabilities capabilities for for assigning a m aterial to a user-defined pr odu ct grouping, for example material group . This This functionality functionality allows allows the u ser to create create his or her own prod uct hierarchy. Customized ABAP ABAP reports can then be produced to report material balances within the userdefined hierarchy.

%OHQGLQJDQG5HEUDQGLQJ Blending is a common transaction in the oil industry. Product blending includes: q

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The mixing mixing of tw o different different m aterials aterials to obtain a n ew m aterial

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The mixing of similar mater ials

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Rebrand Rebrand ing is available available as a function function of the Standard SAP R/ 3 System. System. The blending (mixing) of products is supported by a bill of materials with sub-items sub-items for a given d elivery elivery of a pr odu ct. The density for the new material is recalculated based on the sub-item densities. The rebranding is provided by a material-to-material transfer posting. In order to p erform a material-to-material material-to-material transfer posting in R/ 3, it is necessary necessary that both m aterials aterials be managed in the same stockkeeping stockkeeping u nit. ASTM/ ASTM/ API quantity conversions conversions are provided for both functions.

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0DUNHWLQJ$FFRXQWLQJDQG 0DUNHWLQJ$FFRXQWLQJDQG3ULFLQJ0$3 3ULFLQJ0$3 DVSDUWRI,62LO'RZQVWUHDP +LJK/HYHO6XPPDU\ The objectives of MAP within IS-Oil Downstream are to enhance the basic Marketing, Accounting and Pricing (MAP) functionality within the Core SAP R/ 3 System. System. The Core R/ R/ 3 pricing pricing fun ctionality ctionality is flex flexibl iblee enough to support many business scenarios. However, the MAP enhancements support functionality functionality specif specific icall ally y requ ired by the d own stream oil indu stry. q

The ability to define the pricing date as any one of a range of dates with in th e sales cycle, cycle, i.e. i.e. it it is po ssible to price sales deliveries based on order, invoice, goods issue, delivery note posting, loading, delivery note confirmation or invoice creation dates.

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Ability Ability to set and obtain p rices rices by date in combination combination w ith time as w ell as day of the week in combination with time.

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The abillity to determine whether a customer’s price is to be based on local pr icing icing or th e customer ’s head office office pr icing icing r ules.

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Ability Ability to base p ricing ricing on geographical elements elements linked to the delivery location. location. These elemen elemen ts are p art of a location location cod e wh ich is stored in the customer master.

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Ability to h ave contr act-specifi act-specificc pricing.

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

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The abili ability ty to d etermine whether a pr ice ice condition is to apply to gross or to net volumes.

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Ability to print temperature, density and volume in all the units of measure w hich are used for pricing.

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Capability to utilize average value calculations or user-defined formula & average pricing for products which can be based on external price quotations (e.g. Platts, Reuters, ...). Possibility to recalculate formula prices at month-end for invoicing invoicing pu rposes.

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Exclusion techniques enhanced to choose highest price.

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Capab ility to pr oper ly bill or exempt U.S. U.S. Feder Feder al and State Excise Excise Taxes. Taxes.

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.H\)XQFWLRQ%HQHILWV Enhancements to the degree of pricing pricing sop histicati histication on allow th e oil comp comp any, sup por ted b y IS-Oil, IS-Oil, to tailor its pricing strategy , policy, and tactics tactics to su it its cost base and its individual customers’ circumstances very precisely. This feature feature of the system enables the sales organization organization to maximize the qu antity and quality of revenue generated. The specific benefits are detailed below:

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By allowing a variety of pricing dates at invoice creation and the ability to set prices related to a time as well as a date, the system allows a more flexible approach to price setting. The nature of the oil products market is such that the price of products can vary by relatively significant amounts over the period between order placement and delivery. This flexibility allows the supplier to guard against making a loss on the trade or the customer being charged an uncompetitive price (and thus prejudicing further sales). The head office/ office/ bran ch level pr icing icing fun ctionality imp imp roves the flexibil flexibility ity of the pricing process and allows pricing to be based on head office level rather than defaulting to specific specific prices prices and procedu res set for the branch level.

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The inclusion of the location-specific Differential Reference Code (DRC) allows allows p rices, rices, discounts, discounts, surcharges an d taxes to be calculated calculated based on an accurate accurate description description of the location location of wh ere the good s are d elivered. elivered.

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The use of customer-specific price lists eases the process of informing customers of the applicable prices for a list of regularly ordered products. The provision of this facility speeds up the time taken to answer customer inquiries, thereby imp roving customer service service and redu cing cing bu siness siness costs. costs.

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The provision of formula & average value-based pricing allows greater flexibility in price setting. When discussing pricing with a customer, the ability to set prices based on market averages is an added benefit which assists in the selling p rocess.

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The contract-specific pricing allows the oil company to identify, target and tailor the service it provides to specific high priority customers according to the sales sales strategy it is is pu rsuing. Negotiating mediu m to long term contracts contracts with key target customers can ensure mutually beneficial continuity of business. By attaching a pricing element to the contract this business requirement can be fulfilled.

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0DUNHWLQJ$FFRXQWLQJDQG3ULFLQJ0$3 0DUNHWLQJ$FFRXQWLQJDQG3ULFLQJ0$3DVSDUWRI,6 DVSDUWRI,62LO'RZQVWUHDP 2LO'RZQVWUHDP

.H\,62LO)XQFWLRQV6XSSRUWHGE\WKH ,62LO'RZQVWUHDP0$3&RPSRQHQW $OWHUQDWLYH3ULFLQJ'DWHV7LPH3ULFLQJ The following MAP enhancements are provided within the IS-Oil Downstream System: The Core Core R/ 3 System System currently prop oses order p ricing ricing with the d efault efault invoice invoice pricing pricing d ate. If If required, this date can be m anu ally ally overw ritten with a value entered by the user. If the user chooses to change the pricing date, the system recalculates recalculates p ricing ricing for th e invoice. In the oil business, the order cycle from posting the order through to order delivery could take several days during which the price could change substantially. Hence, functionality is required to allow a variety of dates to be chosen for calculating calculating th e price wh en th e invoice is is created. These default dates include the order date, the goods issue date, the date of loading, delivery date and invoice invoice date. In add ition, ition, the user can set prices prices du ring the sales sales cycle cycle based based on the date an d time, or based based on the d ay of the week an d time.

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+HDG2IILFH%UDQFK/HYHO3ULFLQJ$JUHHPHQWV Some organizations choose to make pricing arrangements at their head office and at the branch office level. Therefore, when making a sale to a customer w ho h as a head offic office, e, it it is necessary necessary to d efine efine wh ether to u se the pricing arrangements negotiated with the head office, or those negotiated with the branch.

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The pricing pricing arrangemen ts can can be broken dow n into two comp onents: q

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The head offic officee and the branch custom er m ay be assigned d iffere ifferent nt p ricing ricing procedu res and the customer-specifi customer-specific c prices may also be different. different. IS-Oi IS-Oill delivers the tools for for u sing the h ead offic officee pr ices ices and / or p ricing ricing procedur e when selling selling to the branch.

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/RFDWLRQ6SHFLILF3ULFLQJXVLQJWKH'LIIHUHQWLDO5HIHUHQFH&RGH'5& The location-specific pricing functionality (technically implemented using the Differenctial Reference Reference Code - DRC) allows allows a mor e accur accur ate d efinition efinition of the location of each sale. sale. This enables enables pricing to take into account account oth er geographical factors factors than th ose that are standard in the customer m aster. This fun fun ctionality ctionality allows allows p ricing ricing conditions to be based u pon the DRC code itself, or upon one of the location grouping attributes of the DRC. For example, a wide area pricing zone could be used to determ ine surcharges or discounts applicable to deliveries in that area. The DRC has six different attributes. They are:

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Country

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State license fee zone: groups DRCs together, for example for pricing of taxes

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Pricing DRC: for referring on e DRC to anoth er DRC

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&RQWUDFW6SHFLILF3ULFLQJ Contract specific pricing allows pricing conditions to be set for a customer and then to be applied to all call-offs from that contract. This ensures that when pricing is done (at order or invoice creation), the correct contractspecific specific price is used .

3UH'HILQHG&XVWRPHU6SHFLILF3ULFH/LVWV The customer price list allows net prices to be calculated for a pre-defined list of products. The price list contains the quantity usually ordered by a customer, along along w ith the un it of measure. The price list is not part of an order transaction; it is created for customer information purposes only. The list does, however, use the pricing functionality functionality in the sam e w ay as the order or invoice creation creation transaction. transaction. The materials and quantities are defined as master data, and cannot be changed at the time that the customer p rice rice list list transaction transaction is run . When the price list transaction is executed, the user has to specify pricing relevant relevant d ata like customer, sales sales area, order typ e and pricing pricing d ate and time.

3ULFLQJ%DVHGRQ*URVVRU1HW9ROXPHV The ability to invoice customers based on either gross or net volume delivered is required by oil companies in some countries for either marketing or legal reasons. reasons. Gross volum volum e is for example ambient liters and net volu me is for examp le liters liters corrected to 15C.

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The key factor is generally the country and region where the ownership of the prod uct changes. How ever, some some customers have a special arrangem arrangem ent wh ich ich m ay override the general rule. The IS-Oil Downstream enhancement allows the maintenance of a single condition record in either a gross or net unit of measure. The system then uses criteria, criteria, defined defined by configuration, configuration, to determ ine wh ether the gross or net volume is used d uring p ricing ricing wh en calculati calculating ng the condition value. The print program for invoices has been enhanced to enable you to display HPM data. This allows the temperature and density information from the delivery to be displayed on the invoice. invoice.

)RUPXOD$YHUDJH9DOXH%DVHG3ULFH&DOFXODWLRQV IS-Oil Downstream functionality includes pricing based on the (average) value of externally externally quoted materials over a defined p eriod of time. External price quotations from organizations such as Platts, Reuters, etc. can be interfaced to th e SAP SAP system . This is achieved by m eans of a configurable routine delivered by IS-Oil. The quotations are then referenced in the creation of pricing formulas.

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The formula pricing functionality is integrated into the creation of price condition records using the core condition technique. Formula and average pricing functionality is available within the Sales & Distribution (SD) Module, and is integrated with Core pricing in the Material Management (MM) Mod ule and exchan exchan ge fees. fees. A condition type can be configured as “formula based”, which then allows definition of a formula rather than a rate when creating a condition record for this condition type. Once a formula based price condition record exists in the system, it is possible to retrieve the formula using the condition technique technique du ring tran sactions sactions in the Core System. System.

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The formula and average condition type can be included in pricing procedur es in in the same w ay as standard condition types. At the time that the pricing pricing takes place, place, the “formula pricing pricing engine“ evaluates the formu formu la defined for each each formu la based condition type to give the rate wh ich ich is then displayed on the pr icing icing screen. screen. As in the d aily aily business practices practices of a comp comp any, the average period may n ot be over at the time of order/ invoice invoice creation creation so that the pr ice ice calculated calculated can be a provisional price rather than the final price. The status of the formula evaluation, i.e. final price or provisional price is indicated by a status indicator, wh ich ich is held on the formu formu la value value display screen screen in the document. There is additional functionality to define provisional calculation rules, which allows the user to specify a different average period for calculating the provisional price if this is required. It is possible to create a differential invoice invoice in SD, wh ich ich d ebits/ ebits/ credits the difference difference between the p rovisional rovisional and final prices. A pricing formula is made up of two parts: the formula definition, which defines a reference reference to the quotations an d the calculation calculation ru les, les, wh ich ich define the average period. Formula ormula D efini tion

The formu formu la consists consists of two “term s“: the A term an d the B term. Both Both contain an un limited limited nu mber of comp comp onent lines.

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An external external quotation may be referenced referenced within each comp comp onent line. line. A surcharge may be added within each or as an individual component line, possibly possibly with a different different currency and UoM from the quotation. A currency exchange rate type is assigned to each line item of the formula term. This is a core field and is customizable in the IMG global settings. A currency exchange exchange r ate type represents a source of information on currency exchange exchange r ates. The The exchange rate type is used to convert both the quotation and th e surcharges. surcharges. The total price for each term is determined by adding the value of the component lines together. The The value of the comp onent line may be positive or negative, thus allowing for differential calculations. Finally, a rule defines how to determine the overall value of the formula based on the value of the A term and the value of the B term. For example using the higher of the A term and the B term as the formu la value. Calculation Rules

The calc calculation ulation ru les define define the time period over w hich the average value of the quotations in the formula is calculated and define the currency conversion conversion method .

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The average period can be defined using fixed dates or using “variables” around a key date in the tran saction, saction, for for example a three d ay average, which consists of one day before the delivery date, the delivery date and one day after after the d elivery elivery d ate.

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

&RQGLWLRQ([FOXVLRQ7HFKQLTXH+LJKHVW3ULFH This is an enhancement of the standard SAP condition exclusion technique which allows the user to define rules that specify which condition records are and are not included. For example, should multiple discounts apply to customer/ material, the system can can be configured configured to use the highest discount discount and omit the other ap plicable plicable discounts. discounts. The IS-Oil IS-Oil enhancem ent allow s selection selection of the h ighest p rice (wor (wor st pr ice for the customer), whereas the Core R/ 3 System System only allows selection selection of the best price for the customer.

1RUWK$PHULFDQ([FLVH7D[+DQGOLQJ Several enhancements have been made to allow accurate invoicing of U.S. state and federal excise excise taxes: New fields for origin and destination and new condition types have been created to facilitate facilitate prop er tax calculation calculation for taxes du e at either the origin or destination of the d elivery. elivery. Routines have been been d eveloped eveloped to identify when a customer h as a federal or state excise excise tax exem ption certificate. certificate. Prices as well as taxes can gener ally be entered with six decima decima l places. For further information, refer refer to the chapter on TDP.

.H\,62LO)XQFWLRQV6HUYHGE\WKH&RUH56\VWHP The basic basic pricing pricing functionality functionality is provided by Core R/ 3. In sum mary, this includes the following:

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User-definable condition types

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Condition typ es can be set for gross prices, prices, discounts discounts and surcharges

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Ord er level and and item level pricing pricing

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

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Discoun Discoun ts can be set for for a given time p eriod or ap plied continuously

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Discounts Discounts an d su rcharges can can be set at an item or ord er level

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Discoun Discoun ts and surcharges can be set man ually, if if required

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Any combination of fields in the sales document can be used as the search search key for the ap prop riate pricing pricing cond ition ition records

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The access sequence by which the search for valid records is made can be defined by the u ser

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Calculation types can be defined, for example whether a discount is an absolute absolute amou nt or a percentage

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Pricing conditions can be defined as statistical, i.e. they are used for statistical statistical analysis, not for setting pr ices

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

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Pricing based on D ifferent ifferent Un its of Measur e (UOM) Core R/ R/ 3 supports the requirement requirement that an order can be mad e in different UOMs than the condition record, and pricing can still occur. The system converts the quantity ordered into the UOM of the pricing condition record and price accordingly. This price is displayed to the user. The The UOM on the ord er d oes not change. The The condition typ e’s e’s UOM can be selected selected from a pre-defined list. The volumes in various UOMs can be printed on the invoice in an IS-Oil IS-Oil enha ncement .

'HWDLOHG'HVFULSWLRQRI%XVLQHVV)XQFWLRQV6XSSRUWHG E\WKH,62LO'RZQVWUHDP0$3&RPSRQHQW $OWHUQDWLYH3ULFLQJ'DWHVDW,QYRLFH&UHDWLRQ This area of functionality includes the pricing of a sale according to the date of a specified event in the sales order cycle. The life cycle of an order can encompass several days or pricing cycles. The sales order, delivery note, goods issue, and invoice are all likely to occur on different dates. Since different dates may be set up with different pricing condition records, the choice of which pricing date to use at invoice creation directly affects the calculated net price.

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

Order date/ date/ time time

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Invoic Invoicee date/ time

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Actual goods issue issue date (from the d elivery elivery docum ent)

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Loading Loading d ate (from (from th e delivery document)

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Delivery Delivery d ate (from (from the d elivery elivery d ocument)

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

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In addition, the IS-Oil Downstream time pricing functionality offers the possibility of creating pricing conditions whose scale is either date and time dependent or day of the week and time-dependent. The scale which can be applied to standard price conditions is defined in the configuration of the condition condition typ e. An example of the pricing date procedure is shown in Figure 3.1. In the example, an order for 10,000 liters was recorded on the first of July. The delivery note was p rocessed rocessed on the third of July, July, the goods issue issue on the fifth fifth of July, and the invoice processed on the seventh of July. All four document dates have different prices in the associated pricing table. The selection of wh ich date to u se for pricing directly affects affects the final final pr ice for the sales order to the customer.

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Core R/ R/ 3 pricing pricing uses the pricing pricing p rocedu rocedu re defined in the sold-to partn er and the sold -to customer specific specific prices if defined . IS-Oil IS-Oil delivers the tools to use the head office office prices and / or pricing when selling selling to the branch. A head office office// branch indicator can can be set on the branch customer master to show whether the head office or branch pricing procedure should be applied. The ind icator icator can on ly receive receive inp ut if a head office office is is defined in the accoun t management data for the branch. In addition, two new requirements programs (403 and 404) have been developed for use within accesses for any condition type. When allocated to an access sequence, 404 accesses pricing condition records defined for the customer, while 403 accesses pricing record s defined for th e head office office of the custom er (if head office office is is defined ).

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

/RFDWLRQ6SHFLILF3ULFLQJ8VLQJWKH'5& For pricing purposes, the location-specific pricing functionality (using the Differential Differential Reference Reference Code - DRC) rep resents a geogr ap hical region that can be used for setting setting p rices, rices, discoun discoun ts, surcharges and taxes. A standard order can have multiple customers (business partners) associated with it: the actual pu rchasing rchasing customer (sold-to party), the consignee consignee (ship-to party), the billing-party and the payer, although they may all be the same customer. The ship-to is the customer customer wh o takes actual receipt receipt of the ord ered m aterial. aterial. The DRC is defaulted from the customer master of the ship-to party to the order head er and the item

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and can be overwritten. If a DRC is changed in the order, the order is repriced to account for this change. If the ship-to party is changed in the order head er/ item, the DRC DRC is is redetermined and th e order is repriced. The DRC has six different attributes which all can be used individually for pr icing. icing. The DRC itself itself can can also be u sed for p ricing. They They ar e: q

Country

q

Region/ Region/ State

q

Metropolitan Metropolitan Indicator Indicator

q

Wide area pr icing icing zone

q

State license fee zone

q

Pricing DRC

The countr countr y and region fields fields have the same p ossible ossible values as the Core Core R/ 3 countr y an d region. The MI, WAP and SLF SLF fields fields are DRC-specific DRC-specific fields fields and must be defined in the configuration tables before they can be defined as attributes. The Pricing DRC allows a number of DRCs to point to the same DRC for generic pricing purposes for example, while freight surcharge conditions may be set at a DRC-specific level, discounts for certain types of customers may be at a group of DRC levels. So while neighbouring DRCs 1,2,3, and 4 may all have specific freight surcharges, the discount for a certain type of custom er may be based on DRC 1 and DRC 2,3 2,3 and 4 poin t to 1. 1. An example of the Differential Reference Code table is shown in the figure below. below. An ord er was created w here the ship-to partn er is locate located d in Boston, Boston, Massachusetts. For this region of the United States, certain price conditions exist. The region code for Massachusetts has a specific tax rate which also includes the Boston metropolitan area, and the wide area pricing region of the Eastern half of the state. Through the DRC, all three pricing indicators are combined un der on e indicator, wh ich ich is linked linked to the customer m aster.

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When the order item is displayed, the DRC of 12345 is defaulted. If the default DRC is not valid (for example, the goods are not delivered to Boston, but to anoth er final destination, destination, a d iffe ifferent rent Metrop olitan olitan code is n eeded), the operator can m anu ally ally change the DRC to the correct correct value.

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The Core R/ R/ 3 System System allows the user to m anu ally ally enter a contract price at contract creation. However, the result of such a manual price is that wh enever the fun ction ction “n ew pricing” pricing” is carried carried ou t d uring callcall-off off or or invoice creation, creation, the manu al price price will be lost lost and w ould th us have to be re-entered. re-entered. The IS-Oil enhancement offers the basis for contract-specific pricing, by copying the contract number into all subsequent documents, i.e. call-off, d elivery and invoice. This field field is includ includ ed in the SD Pricing Pricing Field Field Catalog. A condition condition record can then be created which includ includ es the contract/ contract/ item item nu mber as one of its key fields fields in th e access access sequence. There is an enhanced matchcode on contract call-off, enabling the selection of contract numbers by sold-to party. This is available on contract pricing condition record maintenance screens.

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The above graphic show show s a representation of the document flow w ith regard to contract-specific pricing. Contract-specific pricing occurs at the contract (order entry) and invoice invoice level level of the docum ent flow.

3UH'HILQHG&XVWRPHU3ULFH/LVWV Pricing based on a pre-defined list of products is a feature of the IS-Oil Downstream component. The functionality allows lists of products (and associated quantities) to be defined for each customer. The list may contain materials of different material types.

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This functionality is used for customers who regularly order the same products and same quantities. In such cases, the ordered products may always be the same but the prices may change frequently. Every time the pricing list is accessed, the prices are recalculated using pricing condition records records v alid alid for the specifi specified ed p ricing ricing date an d time. The IS-Oil MAP enhancement allows the list of products to call the pricing functions functions and the list list to be priced. priced. This pricing operation is not part of an ord er tran saction. The The p ricing of the list can can be carried ou t for differing differing d ates or differing differing condition records records d epend ing on th e needs of the customer. This functionality functionality simplifies simplifies and quickens the p rocess rocess for informing customers of the current pr ices ices for for regularly ordered p rodu cts and quan tities. tities. Each customer can have more than one price list. Each customer may have several, several, but d iffe ifferent, rent, lists lists of regularly ordered prod ucts and quan tities, tities, and each list can be priced separately as required. The IS-Oil MAP enhancement includes a table which can be used to define the list of products and quantities. A transaction has been created which uses this table. table. This This transaction transaction calls calls the stand ard R/ 3 pricing pricing p rocedures. The pricing procedure selected for the pricing depends on the order type

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(entered (entered wh en selecti selecting ng a list list for pricing). pricing). The The stand ard R/ 3 pricing pricing procedure has not been altered. The price list functionality operates indep endently of the order process.

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In Core R/ R/ 3 the system system uses the volume m easured in the condition record unit of measure to calculate the condition value. Conversion factors are defined by the user. The ASTM ASTM fun fun ctionality is is used , where ap plicable. The IS-Oil enhancement in this area provides the ability to maintain a single condition record and use either gross or net volume for pricing, based on user d efined efined criteria. This fun fun ctionality only app lies to the SD Mod ule. These criteria criteria can be defined in tw o places: q

Gross/ net pricing pricing indicator - condition type

q

Gross/ net pricing pricing ru le - docum docum ent line line item item

The gross/ gross/ net pricing pricing indicator, has been add ed to the condition type. This This indicator defines whether the value of the condition type should always be calculate calculated d u sing the gross or net volume, or whether the gross/ net rule on the line item should be examined. If the value is blank, then normal Core R/ 3 processing processing will occur. occur. The gross/ gross/ net rule for the line line item item p rovides the user w ith a user-exit user-exit capability to define a means by which to determine whether to price based on gross or net volume. The line item rule is determined using a table. Keys in the table are the country an d the region in wh ich ich th e title of ownership p asses. asses. This This location location is determined by using the Incoterms. Where special rules apply to a customer, the customer number can be entered in this table. Formu la & Average Value-Based Value-Based P rice Calculations Calculations

)RUPXOD$YHUDJH9DOXH%DVHG3ULFH&DOFXODWLRQV Formula & average value-based pricing functionality allows the calculation of prices prices based on the value of externallyexternally-quoted quoted materials over an av erage period. This fun fun ctionality ctionality is fully fully integrated w ith Core R/ 3 pricing pricing u sing the Core condition technique. The key configuration feature of formula-based price condition condition typ es is that the calculation calculation type is Q (formu (formu la and average condition). This allows you to define a formula rather than a rate when creating the condition record. In the formula, the reference to the external quotation(s) is defined defined together with the average period. Every time pricing is called, the formula is evaluated and the pricing condition rate is calculated and then displayed on the pricing screen. The start and end dates of the average period are determined from the calculation calculation r ules (final (final and pr ovisional) in in th e formu la definition. Some Some or a ll of the required qu oted p rices rices for for the average valu e calculati calculation on m ay be in the future with respect to the system date on the day that the condition is

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evalua ted. In this case the system calculates the “best price” using th e period up to the system system date. The formu formu la evaluation status indicator which is held on th e formula value display screen screen show s the status of the formu la, for for example the formu la was evaluated u sing the provisional rules. Externa Externa l quotat ions are held in a table. The key of this table is the sour ce (for (for examp le Platts, Reuters), typ e (for (for examp examp le high, low low ) the quotation reference reference (for (for examp examp le Platts quote NWE/ PREUNL/ PREUNL/ C/ FOB) FOB) and th e date. The possible possible values of the keys and qu otation check check d ata are d efined efined in the configuration tables. A user exit routine exists which interfaces the formula with the external quotation source using either the IS-Oil Quotation table, another user-defined table or an interface directly to an external data repository.

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Formula ormula D efini tion & M aintenance aintenance

The formu formu la definition definition screens screens are common to condition maintenance and to the pricing screens within sales and purchasing documents. Authorization objec objects ts are provid ed to control maintenance in in th e docum ents. There are two main d ata entry screens: screens: q

Formu Formu la term en try screen screen

q

Calculation ru les screen screen

The Formula Term Screen

You d efine efine the quotations, surcharges and the tw o w eighting eighting factors which create the price on the Formula Term Entry screen. The formula consists of two “terms“, the A term and the B term. Both Both contain an un limited limited nu mber of component lines. The total price for each term is determined by adding the value of the comp onent lines together. The The value of the componen t line may b e positive or negative, thu s allowing for differential calculations. calculations.

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An external quotation may be referenced within each component line. The quotation is identified by the source of the data (for example Platts), the quotation type (for example Low, Mid or High) and the quotation number. The quotation description description is displayed for reference. reference. A surcharge may be added within each component line, possibly with a currency and UoM different different from that of the qu otation. It It is possible possible to enter a surcharge on a component line which does not reference a quotation (for example the qu otation fields fields are blank for th e componen t line). line). A currency exchange rate type is assigned to each line item of the formula term. This is a Core field, customizable in the global settings of the IMG. A currency exchange exchange rate type represents a sour ce of information information on currency exchange exchange r ates. The The exchange exchange r ate type is used to convert both th e quotation and surcharges into the formula rate display currency (also defined on this screen). If this field is blank, then all values are converted to the document currency by the formula pricing engine within pricing transactions (for example by default rate currency = docum ent currency). A ru le is is assigned assigned to each item on th e screen, screen, which decides how the value of the line is calc calculated. ulated. For example, mu ltiply ltiply the sum of the quotation and the surcharge field field by the p rodu ct of the two factors. factors. Finally, a rule defines how to determine the overall value of the formula based on th e value of the A term an d the value of the B term. term. For example, take the higher of the A term an d th e B term as the formu la value. There are two buttons at the bottom of each term which lead to the screens wh ere the calculation calculation ru les are defined. The Calculation Rules Screen

The calculati calculation on ru les define define the time p eriod over w hich hich th e average value of the quotations in the formula are calculated. There are two main areas to define: q

the means by w hich the price quotations are averaged averaged

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the way that the currency exchange exchange rate is determined

De finin g the Averaging Averaging of the Price Price Quotations Quotations

There are two possible means of defining the start and end dates of the average period. The first first method is to define define a fixed fixed “date from“ and “date to“ for the quotation average period. The second method is more involved and works as follows: follows: 1. The starti starting ng point is to identif identify y a key date in the transacti transaction on concerned, concerned, for example the pricing date or the delivery date. This key date is the “reference date“. Some examples are delivered with the IS-Oil Downstream component, and you can add further possibilities by customizing the “reference date“ user exit 2. An “offs “offset“ et“ is is then applied applied to this referenc reference e date in order to arrive arrive at the “event date“ (also referred to as the “offset reference date“). For example, offset offset the reference reference date to the Mond ay 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 date offset“ offset“ u ser exit. 3. The next next step step is to define define the the period period before before the event event date and the p eriod eriod after the event date over which the average value is calculated. The fields “period before“ and “period after“ are used for this definition together with the “Time Unit of Measure“ routine, which is specified. The “Time Unit of Measure” routine determines the start date and the end date of the average period based on the values entered in the “period before“, “period after“ and “exclude “exclude event date“ fields. fields. m

If the qu otation factory factory calend calend ar d efines efines that d ay as a n on-working day, then the system uses the weekend rule to decide wh ich ich price price to use for that day . An examp examp le is is delivered delivered w ith the system: system: for for Satu rd ay, use Friday’s pr ice, ice, for for Sund ay use Mon da y’s y’s price. You You can add further p ossibil ossibiliti ities es by customizing customizing th e “weekend rule“ user exit.

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If the quotation factory factory calend calend ar d efines efines that day as a h oliday, oliday, then the system uses the non-posted d ay ru le to decide decide w hich price to to use for that day. Again, you may customize non-posted day r ules, as the field is defined as a u ser-exit. ser-exit.

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Finally, Finally, you h ave to define the way th at the system respond s when a quota tion is simp simp ly missing, i.e. wh en, accord accord ing to the qu otation factory factory calend ar it shou ld exist. In this case, the system u ses the customizable customizable “No-quotation exists“ exists“ rou tine.

De finin g the Curr Currency Conversion f or the the A verage verage V alue Calculation Calculation

In principle, there are two methods of converting currencies within the average value calculation: using daily exchange rates or using average values of exchange rates. There are two fields in the calculation rules screen wh ich ich allow you to d efine efine w hich of these techniques techniques is to be employed. The possible values of these fields are defined by creating user exit routines for the “daily currency rule“ and the “average currency rule“. q

In daily currency conversion conversion rou tines, the p rice rice for a quoted material on a certain certain date in the requ ired currency is determined by m ultiplying the quotation price for that day by a currency exchange rate for the same day. This exchange exchange rate converts the p rice rice from th e quotation currency to the required currency. The IS-Oil System delivers one example of this routine, where the quotation is multiplied by the valid currency exchange exchange r ate for the same d ay.

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In average currency exchange rate routines, the pricing calculation engine determines an av erage value of the currency exchange exchange r ate over a period of time defined by the currency exchange calculation rules (such as currency time UoM, currency period before, currency period after, etc.) which are defined on the same screen of the formula. This average exchange rate is then used for all currency conversions for that term of the formula.

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External Price Integrity Check Program

A factory calendar is used to define on which days quotes are expected or not expected . The The external p rice integr integr ity check check pr ogram checks for for incorrect external price quotations using the factory calendar as defined in the quotation check table. The integrity check program can be used to search for price quotations that are not necessary necessary or for qu otations which are incorrect. incorrect. The program searches searches for the following following quotes: q

Quotes that d iverge from from the pr evious value by a sp ecif ecific ic percentage or amount

q

Missing quotes

q

Quotes that were not qu oted (entries (entries with a No Qu ote indicator) indicator)

q

Quotes that are not necessary

The external price integrity check program generates reports using the follow follow ing selection criteria: q

Source

q

Type

q

Quote

q

Date

q

Percentage

Second Level Price Price Analysi s

You can use the second-level analysis to display the quotations and exchange rates which were used to calculate the value of a formula, of a formula 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 detailed analysis of the d ata u sed in th e formula evaluation calculati calculations. ons. The analysis analysis can be performed for the entire formula, for either term, or for one term item. IS-Oi IS-Oill provid es default routines and the d efault efault rep ort ROICANAL. ROICANAL. To use second level price analysis instead of the default routines, the following activities are required:

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Maintain a report report to define outpu t and th e analysis analysis report report d ata

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Define Define the format for the item section section ou tpu t

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Define Define report nam es and other rou tines (header (header and item format, format, error hand ling, data capture) in the condition configuration configuration

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Master Reposi tory tory

It is possible possible to define a formula m aster in w hich formulas are stored . You You can create, change and display formulas using the formula repository. Every formula has a unique numeric or alphanumeric identifier. When maintaining condition records, you can copy formulas in the formula repository or in purchase documents or sales documents  The formula m aster record contains the following p redefined search fields: fields: q

Customer

q

Material

q

Plant

q

Material group

q

Vendor

The predefined search fields fields in the formula m aster can can be red efined. efined. Du ring formula m aintenance, it is possible possible to to retrieve a pred efined efined formula from the formula m aster. In In ad dition, you can d etermine your own selec selection tion criteria, criteria, wh ich ich help id entify entify a formu la.

Authorization on Formula Maintenance

Access Access is is restricted restricted to form ula m aintenance in SD SD and MM docum ents and the formula master, using the core core R/ R/ 3 authorization techniqu techniqu e. Add itional authorization is provided to apply restrictions to sales documents, billing documents, purchase documents, and information records. The authorization concept concept also app lies lies to formula an d a verage based fees.

Repricing at MM Invoice Verification

The proposed value for an invoice item can be recalculated based on the formu la. Invoice verificati verification on is perform ed according to th e recalculation. recalculation.

MM Purchasing Purchasing Do cuments

It is possible to use formula-based price conditions with contract, order, invoice invoice receipt, receipt, and goods receipt receipt pu rchasing rchasing d ocuments.

'LIIHUHQWLDO,QYRLFH The differential invoice function creates an invoice in SD which debits or credits the difference between the preliminary and final prices, when the final final pr ice ice is know n. Custom izing izing settings settings m ake it p ossible ossible to individu ally ally define the circumstances in which a differential invoice is to be created. For example, when the final price is not yet known. The differential invoice is independent of invoice cycles and invoices any outstanding cycles.

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A differential invoice itemizes the differential amounts at the condition type level, that is, the differential amount for each condition record in the pricing procedure of the differential invoice is calculated. If the system is unable to calculate calculate the differential differential amount at the condition type level, level, error hand ling can be specified or customized by the user at the invoice type level. IS-Oil provid es an error-hand ling ling exit exit to cancel the existing existing billing billing d ocuments an d rebill at the new price.

*ORVVDU\RI0$36SHFLILF7HUPV &XVWRPHU3ULFH/LVW A customer price list allows net prices to be calculated for a predefined list of products. The price list contains the quantity usually ordered by a customer along with the un it of measure.

'LIIHUHQWLDO5HIHUHQFH&RGH The Differential Reference Code (DRC) represents a physical geographic specification used for calculating location specific prices, discounts and surcharges. The DRC allows prices paid by customers to reflect supplier’s costs costs and permits areas with the sam e taxes or or p rices rices to be group ed together. Crucially, the DRC is used to set prices based on the destination of a delivery, for example on the location of the ship-to-party, however this can be manually overridden in the sales document. The geographical elements of the DRC are: q

Region/ Region/ State

q

Metropolitan Indicator (MI)

q

Wide Area Pr icing icing Zon e (WAP)

q

Pricing DRC (combin (combin es several DRCs for pricing)

q

Country Code

q

State License Fee Zon e (SLF) (SLF)

0HWURSROLWDQ,QGLFDWRU One of the geographic elements within the Differential Reference Code (DRC). It may be used to assign pricing conditions according to the city code.

3ULFLQJ'LIIHUHQWLDO5HIHUHQFH&RGH One of the geographic elements within the DRC (Differential Reference Code). As a company m ay have h und reds of DRCs DRCs defined defined in th eir system, system, it sometimes makes practical sense to group together some of these DRCs wh ich ich h ave the same pr icing icing rules.

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6WDWH/LFHQVH)HH=RQH One of the geographical elements within the geographical reference zone. It is used to establish establish tax or p ricing ricing conditions for a grou p of customers wh ich ich have been entered in the system as coming coming from th e same gegraphical area.

7LPH3ULFLQJ Allows Allows p ricing ricing based on the time of the day in conjunction conjunction with th e pricing pricing date or w ith the day of the week.

:LGH$UHD3ULFLQJ=RQH The wide area pricing zone is one of the geographic elements within the differential reference code (DRC). It may be used to create pricing conditions.

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0DUNHWLQJ&RQWUDFWVDQG2UGHU(QWU\ 0&2(DVSDUWRI,62LO' 0&2(DVSDUWRI,62LO'RZQVWUHDP RZQVWUHDP +LJK/HYHO6XPPDU\ The objective of MCOE is to enhance the Marketing Contracts and Order Entry functionality functionality in the Core R/ 3 System. System. The The enha ncements provide specifi specificc functionality functionality required by the d ownstream oil ind ind ustry. Part of the required MCOE functionality is already supported in the Core R/ 3 System; System; the remaind er is imp imp lemented in the IS-Oi IS-Oill Downstream MCOE enhancement. q

A streamlined, fast order-entry process, with various defaults such as preferred sup ply plant for each order item, sales sales area from the customer, sold-to sold-to par ty for ordering ship-to

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Ability to indicate final delivery against a call-off and reflect the actual delivered delivered quan tity in the contract in in th e contract contract UoM

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Ability to specify restrictions in the contract which apply to call-off details, details, e.g. e.g. prod uct, quan tity, ship-to ship-to p arty

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

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Ability Ability to check check the sold-to/ ship-to relationship relationship d efined efined in th e customer master

.H\)XQFWLRQ%HQHILWV The key function ben efits are as follows: The order-entry process process is enhanced to speed u p th e process of order taking. Due to the high transaction volumes, large number of customers, large number of products and variety of delivery locations and methods, the process can be sped up by the automatic determination of data. This improves the speed and accuracy accuracy of the order-entry pr ocess. ocess.

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The key benefit benefit w ithin a tele-sale tele-saless environm ent is that th e customer n eed on ly specify specify his customer nu mber, material and qu antity in order to place an order. The system automatically determines the supply plant, storage location and sales sales area withou t any required inp inp ut from from the user. The IS-Oi IS-Oill ord er also accepts accepts a sh ip-to customer and links it automatically automatically to th e sold-to custom custom er.

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These benefits result in a higher degree of customer satisfaction by requiring less customer time necessary for placing an order. It also reduces costs by allowing allowing a h igher igher ord er throughpu t. The system system can be adapted to interface interface to an automated teleph teleph one ordering system. By keeping the information required to a minimum, the customer can enter an order via teleph teleph one without n eeding an operator to accept accept it.

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The quantity correction correction wh en calling calling off orders ensures that the system has a more accurate accurate record of what has been delivered delivered to the customers. This This ensures that th e contract contract d ata is more accurate. accurate.

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The modifications to pricing improve customer service by allowing changes to the ord ered UoM to be m ade w hile taking taking the ord er. This This also also allows allows th e customer to be advised of what his order will be in various UoMs without actually changing the order UoM. Enhanced customer service is a key competitive advantage in a commodity market and this enhancement helps make the compan y more competitive.

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Checking the call-off order for adherence to contract terms ensures that agreed terms w ill be observed.

.H\,62LO)XQFWLRQV6XSSRUWHGE\WKH ,62LO'RZQVWUHDP0&2(&RPSRQHQW The follow follow ing MCOE enha ncement s are provid ed in the IS IS-Oil Dow nstream system:

)DVW2UGHU(QWU\ Within a downstream oil company, considerable business benefit is realized by the ability ability to take ord ers quickly - for for examp le, in in response to telephon e orders. In this process, process, the manu al determination of data is minimized as far as possible in favor of having the system automatically determine fields for the ord er. For instance, the selection selection of sup ply plant and storage location location can be automatically determined and the sales area can be defaulted from the customer. The order-taker is no longer required to enter the sales organization, distribution channel and division on the initial order entry screen. The ship-to party can be entered as the ordering party and the system system finds th e app ropriate sold-to party au tomaticall tomatically. y.

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4XDQWLW\&RUUHFWLRQIRU&RQWUDFW&DOO2IIV The functionality concerning calling off orders from a contract is enhanced with respect to differing units of measure (UoM). The functionality is also enhanced to sup port th ose cases cases wh en the d elivered elivered qu antities differ differ from the ordered quantities: the delivered quantity is subtracted from the available contract contract volum e.

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3ULFLQJ The basic system of pricing agreem ents based o n contra cts is is enhan ced in ISISOil Down stream so that sales sales documents created created with reference reference to the contract include the contract number. Contract specific pricing allows specifi specificc pricing pricing cond itions itions to be set u p for a customer and then to be app lied lied

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to all call-offs from that contract. This ensures that when pricing is carried out (during order or invoice creation), the correct contract-specific pricing is used . For more d etails, see chap chap ter on MAP.

$GKHUHQFHWR&RQWUDFW7HUPV Functionality to add validation to certain fields in the call-off to ensure that the values entered entered d o not excee exceed/ d/ differ differ from from the terms agreed in the correspond correspond ing contract.

+DQGOLQJ6KLSWR3DUWLHVLQ&RQWUDFW Functionality to enter multiple ship-to partners in the contract header to indicate that all contract items are applicable to those ship-to parties. When calli calling ng off an ord er against a contract with mu ltiple ltiple ship-to partn ers defined, a selection selection screen app ears so that th e user can choose the sh ip-to for this callcalloff.

'HOLYHU\'RFXPHQW New fields fields in the delivery document to allow entry of more detailed detailed external external information (for example bill of lading number) and possibility to indicate that no further deliveries will take place for a call-off. The latter will be reflected reflected in th e call-off call-off and contract.

6ROGWR6KLSWR5HODWLRQVKLS Functionality to prevent assignment of the same ship-to party to multiple sold-to parties and report th e sold-to/ sold-to/ ship-to relationship. relationship.

.H\,62LO)XQFWLRQV6HUYHGE\WKH&RUH56\VWHP The Core R/ R/ 3 System System covers only some fun fun ctions ctions required by the downstream oil industry. IS-Oil Downstream meets this requirement with functionality functionality which ad ds to the Core functionality. functionality.

2UGHU(QWU\ The existi existing ng R/ 3 order entry p rocess rocess supp orts some of the the requ irements of the the IS-Oil fast order entry enhancements, e.g. some customer data is already provided within the order entry transaction. Another example is availability checking: checking: this is already already in R/ 3 but is enhanced fur ther in IS-Oil IS-Oil Downstream, includ includ ing pr oposal of alternate alternate sour ces of supp ly at the ord er item level. level.

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4XDQWLW\&RUUHFWLRQIRU&RQWUDFW&DOO2IIV The R/ R/ 3 System System currently supp orts orders wh ere the called-of called-offf order UoM differs from from t he contract UoM.

'HWDLOHG'HVFULSWLRQRI%XVLQHVV)XQFWLRQV6XSSRUWHG E\WKH,62LO'RZQVWUHDP0&2(&RPSRQHQW )DVW2UGHU(QWU\ The order-entry department at a downstream oil company is faced with the follow follow ing challenges: q

High tran saction saction volumes

q

Large number of customers

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Large nu mber of produ cts

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Large number of possible delivery locations

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Wide range of possible delivery delivery method s

Therefore, the order entry process needs to be as quick as possible with automa tic determination of data, w here possible. possible. The Core order order entry p rocess rocess within R/ 3 allows allows a signific significant ant am ount of data relating relating to the ord er to be available available and au tomatically tomatically determined w hen th e order is taken. This This data is available available via via the various p ull-dow ull-dow n m enus w ithin sales sales or der-entry processing. processing. In IS IS-Oil Down stream, no separate separate “fast order” entry p ath can be created. created. Rather, the existing order entry process is enhanced to meet the requirements of the oil ind ind ustry. The foll following owing d etails etails show the functional enhancements to the current ord er entry process. process. Automatic Allocation of Order Type, Supply Plant and Storage Location

The Core R/ R/ 3 System System autom aticall atically y d efaults efaults the last order typ e used. The user can override th e order type d efaulted efaulted if desired. desired. The exception exception to th is is the first time the transaction is used in a session, the user must select the ord er typ e (i.e. (i.e. there is no initial autom atic default).

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The Core R/ R/ 3 System System selects a defau lt supp ly plant. This selecti selection on is determined from the customer master record of the ship-to party or the material master record. The selection is automatic, but can be manually overridden . In In IS-Oi IS-Oill Downstream, the sup ply plant selection selection is enhan enhan ced ced to include full availability checking across all the preferred and alternative plants.

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Sales Area De faulting

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In Core R/ R/ 3, the sales sales area needs to be entered on the ord er entry screen. screen. On the IS-Oil entry screen, after a customer has been entered, the system searches for the corresponding sales areas to which it is assigned. If only one sales area is foun d, then it is automa tically tically defau lted in th e S Sales ales Area fields. 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 then copied into th e sales area fields. fields. There is also a pushbutton that can be used to trigger the sales area defaulting functionality on request. The popup shows all the valid sales areas for a particular customer, if it is assigned to several sales areas. This option is only p ossible ossible if there are n o line items on the order. Fast Fast O rder Entry Entry Fiel ds

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The following following fields fields are m and atory in th e fast order-entry transaction: q

Ord er type (one-time) (one-time)

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Sold-to or Ship-to par ty

q

Material

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Order qu antity antity

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Customer pu rchase order nu mber (depend ing on configuration) configuration)

The following following fields can be defau lted: q

Sold-to party (if (if ship-to is entered as ord ering par ty)

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Sales organ ization

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Distribution Distribution channel

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Division

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Hand ling ling type

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Item category

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Plant

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Contact details

Speed and accuracy are optimized by limiting the number of mandatory inpu t fields fields and maximizing maximizing the n um ber of defaulted defaulted fields. fields. Core R/ R/ 3 allows allows the order-taker to selec selectt and copy the last ord ord er from the sold-to party. IS-Oil IS-Oil enhan ces ces this fun fun ction ction to allow the order-taker to select select and copy the last orders from a combination of sold-to sold-to and ship-to custom custom ers. Line Item Functionality

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Within Core R/ 3, some data is displayed in the header d uring th is process. process. Further information on the customer is quickly available via the specific function function bu ttons or pu ll-down ll-down menu s (within (within the ord er entry transaction). transaction). The Core System System carries carries out validation validation checks on the d ata entered in the line item fields. In addition, enhanced availability checking is carried out in the IS-Oil Downstream System. The system is enhanced to allow the handling type to be displayed at the line item level. This code establishes how a material that is subject to excise duty

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will be used by th e customer. In In th e IS IS-Oi -Oill Downstream System, the hand ling type is used to determine the excise excise du ty status of the material/ material/ customer combinat ion (see TDP). TDP). The system defaults a handling type. This comes from either the customer master record record or the customer/ material information. information. Both Both these areas are enhanced to include handling type fields. The default handling type can be manu ally overridd overridd en w ith a value entered by the u ser. The The u ser selec selects ts from a p re-defined re-defined list of hand ling ling typ es. The The system is enhan ced ced to p rovide a list list of handling types. Availability Checking

The IS IS-Oil -Oil Downstream en hancements in the MCOE area are based on the availability check fun fun ctionality in in the Core R/ 3 System.

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Within Core R/ 3, availabili availability ty checking checking is carried ou t by u sing the d efault efault supply plant in the line item. The default supply plant comes from the customer master record or the material master record. When creating or changing an order, this default plant can be manually overridden (selected from a list of possible supply plants) by the user. The availability check is then carried ou t against the selected selected p lant. Within Within th e Core R/ 3 System, System, this check check ru ns only against that one p lant. The IS IS-Oil Dow nstrea m MCOE enhan cement allows for the creation creation of a list list of alternative plants for availability checking. If the default plant does not have sufficient availability, then the first alternative plant is checked. The system then searches down the pre-defined list of alternative plants until a plant with availability is found. A total of 4 alternative plants can be specifi specified. ed. These are manu ally ally set by the u ser prior to order-entry. The availability checking functions which are carried out on each alternative plant are the Core R/ 3 functions, functions, for for example static checks checks (based (based on the total available available quantity at a p lant) or d ynamic checks checks (taking into account account all planned receipts receipts and deliveries) deliveries) can can be configured; configured; replenishment lead time (RLT (RLT)) can can be includ ed or exclud exclud ed from the calculations.

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In IS-Oil Downstream , if no plant has the required availability, the system defaults back to the initial plant and warns the user of the shortage. This “warn ing” is the Core R/ R/ 3 window : “Stand “Stand ard Or der: Availabil Availability ity Control”. Control”. This allows the user the normal options of choosing partial delivery, rescheduling the delivery date, or accepting a lower, confirmed order quan tity. This This app lies lies to the initial default plant. Line Item Category

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The Core R/ R/ 3 System System su pp orts the allocation of item categories to the line line items on an ord er or any other sales sales documen t. This This is used to d etermine the requirements on the line item item (for (for example a text line line wou ld have the item category of “text” and would not be part of any pricing calculation). The item category controls pricing, billing, delivery processing, stock postings and the transfer of requirements. For each document type, certain item categories are permitted. The way each line item category is processed is controlled by control elements. The system automatically allocates the line item category to each item on the order based on the sales document type and material. The user has the option of manually overriding the item category, if required. The Core R/ R/ 3 System’s System’s automa tic allocation allocation of item category is enhanced to allocate each line item with an item category determined by the customer / mater ial combination. The custom er is iden tified tified by a custo custo mer classificlassification. The Core R/ R/ 3 System System curr ently sup por ts this custom custom er classif classificati ication on code. The The m aterial is is identified identified by the m aterial group w hich the R/ 3 System System currently supp orts. The The customer classif classific ication/ ation/ material group thus d efines efines the item category. In IS-Oil Downstream, this is defined in a new table. The item category category found by this search search overrides that set by the d ocument type. Thus, for example, if a customer group has a material normally delivered from consignment stock, then then the relevant table entries might be:

4XDQWLW\&RUUHFWLRQIRU&RQWUDFW&DOO2IIV The business situation addressed by this functionality concerns call-offs from contracts. Typically, a contract is set up for a customer and then various sales orders are created, w hich callcall-off off from from the contract. Core Core R/ 3 functionality functionality sup ports th is process. process. The contract specifies various materials and associated quantities and units of measure (UoM). The total price of these mater ials is is then d etermin ed. The order call-off need not be in the same UoM as the contract. The Core R/ 3 System System sup ports th is and converts the called-of called-offf UoM to the contract UoM in order to update the contract accordingly. The UoM on the order remains remains unchanged. The enhan cements to this pr ocess are as follows: follows: Corr Correction f or Final Final D eli very Quantity

The situation situation th is add resses resses is one in w hich the actual final final d elivery elivery qu antity against the call-off does not equal the original quantity in the call-off. The Core System did not update the contract with the actual final delivery

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quan tity. It only up dated the contract with the original quantities in in the sales order. The enhancement indicates when the final delivery has been made from the call-off and then updates the contract accordingly with the actual delivered quantity. In add ition, ition, the UoM of the the delivered quan tity need not be the same as on the contract, as the system converts it to the contract UoM and updates the contract accordingly. Depending on the UoMs used, this conversion may require the use of ASTM (American Society for Testing & Materials) conver conver sion functionality. The user indicates when a final delivery has been made by using the final delivery indicator in the delivery document. When the final delivery is mad e, the system system d oes the following: following: q

Calculates the total quan tity called called off in the ord er UoM

q

Calculates the total call-off quantity in contract units of measure (this may ut ilize ilize ASTM ASTM fun ctionality)

q

Updates the contract called-off quantity (released quantity)

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Sets call-off call-off status to “comp leted”

3ULFLQJEDVHGRQ&RQWUDFWV It is sometimes necessary to have price agreements that are related to a specific contract. It is therefore necessary to price call-offs based on the original contract. The IS-Oil enhancements offer the basis for this functionality by copying the contract number into the call-off and any subsequent documents.

$GKHUHQFHWR&RQWUDFW7HUPV When call-off orders are entered against a contract, the system proposes those contract contract items items w hich have not been fully delivered delivered and wh ich ich ha ve not been set to “completed”. Call-of Call-offf quantity and other item d ata, like like u nit of measure, ship-to party an d paym ent terms are d efaulted efaulted from th e contract. contract. The The Core R/ 3 System System allows allows those details to be changed during the call-off, as well as entry of additional items which w ere not sp ecif ecified ied in th e contract. contract. The IS-Oil enhancement provides the possibility of setting restrictions at the contract level which app ly to the ord ers called called off against the contr act. These These restrictions can apply to products, quantities, units of measure, validity periods, payment terms and allowable allowable ship-to parties. The The new functionality functionality checks the details of the call-off against the restriction and prompts the user with a message, if the details are different. The type of message (error, warning or information) is specified when the restriction is set in the contract. A call-off may be referenced to multiple contracts, all of which may have restrictions set. In this case, the type of message for each respective restriction is app lied. lied.

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+DQGOLQJ6KLSWR3DUWLHVLQWKH&RQWUDFW In the Core R/ 3 System, System, only one ship-to party can be entered in the contract head er/ item level. level. In In the oil industry, one contract often often covers delivery delivery to mu ltiple locati locations ons (ship-to parties). In In th e Core R/ 3 System, System, this business requirement requirement w ould result in a man ual adjustment of the the ship-to ship-to party d uring entry of each call-off. The IS-Oil enhancement allows the specification of multiple ship-to parties in the contract header to indicate that the entire contract is app licable licable to those ship -to parties. In contract create mod e, all the ship-to parties in the sold-to party customer m aster are prop osed for selecti selection on as alternative ship-to partners. This selection screen is reached by a new pu shbutton in the header p artner screen. screen. When calling off an order from a contract with multiple ship-to partners defined, a selection window is displayed so that the user can choose the ship-to p artn er for the call-off. call-off. This functionality is integrated with the call-off restriction functionality described above, so that the assignment of ship-to parties can be restricted to those specified specified in th e contract.

'HOLYHU\'RFXPHQW The delivery delivery docum ent has been enhan ced ced w ith new fields fields to allow allow th e user to specify specify more d etailed etailed external information and to indicate that no fur ther deliveries w ill take place for a call-off, call-off, wh ich ich is reflected in th e contract. The delivery document contains a new external details button in the header and 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 information and other miscellaneous miscellaneous information. information. The The external bill of lading number and miscellaneous delivery number can be accesse accessed d with a new matchcode. The external external d etails etails pop up is also also available in in the contr act and call-off. call-off.

6ROGWR6KLSWR5HODWLRQVKLS In the Core R/ R/ 3 System System there is no check check on the ship-to/ sold-to party relationship which is defined in the customer master. It is possible to assign the same ship-to party to several sold-to parties. The IS-Oil enhancement performs a check check on this this relationship relationship dur ing customer master maintenance. The check, check, wh ich ich is optional, and the ou tcome (error, (error, w arning, information message) are defined at sales organization level. Reporting functions are available available to show sold-to/ ship-to party assignmen assignmen t and v ice ice versa.

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0DUNHWLQJ5HWDLO1HWZRUN051 DVSDUWRI,62LO'RZQVWUHDP +LJK/HYHO6XPPDU\ The objective of the IS-Oil Downstream MRN application is to optimize the business location location han dling sup port capabiliti capabilities es of the R/ 3 System. System. The first step towards achieving that objective is to define the business location location in a w ay that is neu tral and does not contain contain information specific specific to a single business view. The second step is to provide the capability to define links from the business location to other, bu siness fun fun ction specific specific views views of the location. The next step step tow ards op timization timization is achieved achieved by building a m echanism echanism to link the business location to business partners of the system owner. The links links are recorded in term s of the type of activity activity or role that the p artner has with respect to the location. The final final step is concerned concerned with the generation of performan ce reports about the business location. The statistical information used to report on the business location is collected from processes that take place with respect to standard system system object objectss to w hich the location location h as been linked. The application application is intended to meet tw o d istinct istinct user requ irements: q

Dialog support for a head office view of the business location and its associated associated d ata

q

Reporting of performance of physical locations or sites in terms of the mu ltiple ltiple bu siness siness events that occur occur at these sites

6\VWHP2YHUYLHZDQG2EMHFWLYHV Commercial organizations exist exist to sell company prod ucts or services services in some kind of marketplace. It is common to bring the product or service to a place where it is convenient for the purchaser to obtain or make use of the product or service. In the retail business, particularly, commercial organizations or companies dep end on convenient customer access access to their their p rod ucts. To reach the retail customer, they may use business locations (for example stores, service stations) which try to provide the best possible environment for the customer to obtain compan y pr odu cts or servic services. es. In the search for improved profitability it is important to attract the maximum number of consumers to every business location. This is often achieved achieved thr ough the prov ision ision of a variety of supp ort services, services, wh ich ich m ay be 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 main business of fuel sales, sub-let forecourt area to smaller businesses providing specialist services such as a fast-food restaurant, service bay, newspaper and magazine sales and even overn ight accomod accomod ation.

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A commercial business location may be the basis for a wide range of bu siness activities, activities, includ ing: q

Sales to the consum consum er of comp comp any-owned stock stock by comp any em ployees

q

Sales to the consumer of company-owned stock by a commission charging business partner or d ealer ealer

q

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

q

Sales to the consumer of dealer-owned dealer-owned stock stock by the d ealer ealer

q

Sales to the d ealer of comp comp any sto ck

q

Sales to the dealer of company services such as maintenance or equipm ent leasing leasing

q

Leasing of sales floor space by a dealer in connection with selling company owned or dealer owned stock or both (sometimes referred to as a concession)

q

Leasi Leasing ng of company brand ing and/ or franchise franchise agreements

Any combination of the above is also possible, not just simultaneously but also over time. It follows that a company’s view of business can be strongly centered on the locations where that business takes place, particularly if that company is concerned with retailing or property management. It follows that reports, analyses and comparisons which take place with reference to the location must recognize the business location as a discrete and permanent object, a

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separate entity from the bu siness partners active at that location. This separat separat ion mu st also also be recognized recognized by the systems wh ich ich pr ovide this information. This document discusses a component application of the IS-Oil Solution wh ich ich sup ports the ind epend ent definition definition of a business business location location in the R/ R/ 3 System. The primary objective of this application is to provide support for the management of service stations and other oil-industry specific business locations. A guiding p rinciple rinciple of the design team has been to keep the d esign esign open , so that the application can also be used for commercial locations which are not oil-ind oil-ind ustr y sp ecific ecific.. The name of this IS-Oil application is “Marketing: Retail Network” or “MRN”, so called because “retail network” is the term used to describe the retail network interests of the dow nstream oil business. The introd introd uction of an independ ent business locati location on to the R/ 3 System System arises arises from tw o d istinct istinct user r equirements: q

Support for the head office view of the business location and its definition definition according according to on e or more R/ 3 applications applications

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Performance tracking of physical locations or sites in terms of the mu ltiple ltiple bu siness siness events that occur at those sites sites

The business events or transactions which occur at a bu siness locati location on actually actually take place with r eference eference to business partn ers an/ or accounting accounting a nd logistic logistical al objects. For example, sales or purchasing processes occur with reference to customer or vendor business partners, operational overheads can be settled against a generic cost collector and an internal goods movement to or from a location location can be recorded in the material ledger. The figure below gives an overall view of the positioning of the IS-Oil business location with respect to other objects within the system.

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2XWORRN This document describes functionality which is provided in the IS-Oil product. The functionality is largely stand alone, using independent program, function and dictionary objects with read-only access to other objec objects ts w ithin the R/ 3 System. System. The independ ent d evelopm evelopm ent of IS-Oi IS-Oill MRN was a deliberate development strategy, intended to minimize the software software m aintenance overhead overhead d uring su ccessi ccessive ve up grades of the standard R/ 3 produ ct, on w hich hich IS-Oi IS-Oill is based. based.

.H\)XQFWLRQ%HQHILWV The key function benefits provided by the IS-Oil MRN application are as follows:

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The facility to define the business location in a way that is neutral and does not contain information specific to a single business view, as well as the capability to define links from the business location to other, business function sp ecific ecific views of the location location and nav igate to those views.

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The provision of a mechanism to link the business location to business partn ers of the system system ow ner. The The links are recorded in term s of the type of activity activity or role that the p artner h as with respect to the location location

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The generation of performance reports about the business location using statistical information collected from standard processes related to that location.

.H\,62LO)XQFWLRQV6XSSRUWHGE\WKH ,62LO'RZQVWUHDP051&RPSRQHQW The following is a summary of the IS-Oil functions provided by the IS-Oil Downstream MRN app licati lication. on.

&HQWUDOL]HG0DLQWHQDQFHRI%XVLQHVV/RFDWLRQ The central building block of the IS-Oil MRN application is the business location. The business location master data object is used to register a physical location in which the system owner has some kind of economic interest.

2WKHU$SSOLFDWLRQ9LHZVRIWKH%XVLQHVV/RFDWLRQ The business location object persists in the system throughout the life of the actual p hysical location location w hich it is dep icting. icting. The busin ess location location is linked to other economic objec objects ts within the system w hich are used in turn to dep ict ict the physical location according to the various application modules of the

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R/ 3 System. System. These links links are sup por ted by th e object object link link facility facility provid ed in the business location maintenance transactions.

'HILQLWLRQRI/RFDWLRQ3DUWQHU5ROHV A mechanism is provided to link the business location to business partners defined in the system, where those business partners are transacting some kind of business with respect to that location. location. The The link between the bu siness siness location location and the business partner is made in term s of both a location location partn er role type and validity period . Thus the duration of a business partner’s responsibilities or activities can be recorded, as well as the activities themselves.

5HWDLO1HWZRUN&RQWUDFW+DQGOLQJ An extra screen screen is provided in the stand ard SD sales contract contract to supp ort the entry of retail network-specific data. In addition, a new contract index is populated to enable fast access of contracts by business location rather than business partn er.

3HUIRUPDQFH5HSRUWLQJDW/RFDWLRQ/HYHO When links have been established between the business location and other objects objects or business part ners in the system , it it is possible to pop ulate statistical information information stru ctures with p erformance data w hich is specif specific ic to ind ind ividual locations. A new information structure is provided within the Sales Information System (SIS (SIS)) to r ecord sales activity at the location level. The business location is made available as a fixed characteristic in the Controlling-Profitability Analysis reporting tool (CO-PA) and can be incorporated incorporated in an op erating concern concern rep orting structure accordingly. accordingly.

.H\,62LO)XQFWLRQV6HUYHGE\WKH&RUH56\VWHP *HQHUDO1RWH IS-Oil Downstream MRN is a virtual application, because it contains no complex master or tran saction saction da ta objec objects ts (although (although there are some simple master data objects). Instead, it references master and transaction data objec objects ts wh ich ich are p rovided by existing existing R/ 3 applications. applications. It follows that the full range of business processes which are necessary for the man agement of bu siness siness locations locations are available available within th e R/ 3 System System itself. All these key IS-Oil Downstream functions are accessible from the MRN business location transaction. This approach is explained in more detail in the section section d iscussing iscussing object object links and n avigation.

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051DV9LUWXDO$SSOLFDWLRQ Virtual applications must be built in an open and flexible way so that enhancements mad e to R/ R/ 3 applications applications referenced referenced by the virtual app licati lications ons do n ot fund amentally change the operation of the virtua virtua l application. application. An imp ortant consideration with regard to a virtual ap plication plication is the extent extent to wh ich it requ ires configur configur ation of reference applications before it becomes becomes viable. In the case of MRN reporting, especially in the area of profitability analysis, analysis, the accuracy accuracy of the information information being recorded about the bu siness siness location is dependent on the complete definition of business location activitie activitiess in the standard system. system.

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The central building block of the IS-Oil MRN application is the business location. location. A complete set of maintenance dialogs are provid ed to enable the user to register the business location location in the R/ 3 System. System. The registration registration of the bu siness locati location on in th e system is sup sup ported by a ran ge of stand ard R/ 3 System System services, such as classif classific ication, ation, text element p rocessing rocessing (using SAPscript SAPscript or WINWO RD), RD), chang chang e docum ent p rocessing, rocessing, central central ad dr ess management and archiving. In addition, the MRN functionality interfaces with the ABAP Extension (enhancement) tool to support the definition of customer installation installation d ata elements in the bu siness location location master table.

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A new tra nsparent table is provided w hich is is used as an “anchor” point for information entered in the system about a specific business location. The table contains no application data itself, other than data defined by fields added via APPEND structures by user installations, rather it is the check table for for a n um ber of depend ent tables used by MRN sub-app licati lications. ons. The The following groups of technical data are recorded in the business location master: q

Business location typ e

q

Add ress number for the central add ress maintenance system system

q

Blocking and deletion indicators

q

Create and change dates, times and resp onsible onsible users

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/RFDWLRQ7\SLQJ All business business location location master records m ust be assigned a location location typ e du ring the creation creation p hase. This This may be changed later using a ded icated icated typ e change dialog.

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Location typing is used to define the business purpose of the location. Examples of location typing would therefore be “depot”, “department store”, “service station” or “development plot”. The typing of a business location is not exp ected to change frequ ently d ur ing the lifetime lifetime of a site. Possibl Possiblee reasons for change might be the conversion of a d evelopm evelopm ent p lot or investment site into an operational location. It is probable, however, that the eventual purpose of the site would be known at the time it is entered into the system as a master record, even if it remains a vacant bu siness siness plot for some time. From a technical technical perspective, perspective, business locati location on typ ing is used to sup port: q

Identification of location master data via search facilities such as matchcodes

q

Control of number range allocation, i.e. internal or external and applicable ranges

q

Control of access to master data according to type via authorization profiles

q

Field Field selection, selection, some fields may be not be v alid for some ty pes

q

Control of links to other application objects used to depict the business location

q

Control of partner role types available to define links to business partners involved with th e business locati location. on.

Because there are a number of application dependencies on the type assignm assignm ent of a bu siness siness location, location, a special dialog dialog is p rovided wh ich ich v alidates alidates technical technical depend encies encies before before perm itting itting a typ e change to be posted. The type change d ialog ialog w ill ill only sup port changes to the location location typ e, if if the following is true: q

The location ID of the business location falls within the number range defined for the new location type or the location ID of the business location does not fall within the number range defined for the new location location type bu t the “Mismatched n um ber range OK” flag is set set “on” in the “MRN System Control - General and Top Level” step within the MRN IMG.

q

All populated object link field groups in the business location are perm issible issible for the new location typ e - if an object object link field field grou p w hich is supported for the original location type but is not supported for the new location type contains no values, the location type change is supported.

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q

No partn er role assignm assignm ents exist exist for the bu siness siness location location w hich are not permissible for the new location type - if a partner role assignment is detected detected wh ich ich w as perm issibl issible e for the original location location type but is not permissible for the new location type, the change will be rejected until that p artner role assignm assignm ent is deleted. deleted.

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The central central ad dress maintenan ce system system is used to record all add ress-based ress-based information which is relevant to the business location. The link to the central address maintenance system is made at the direct address no. level. “Address valid from” and “International version no.”, which form part of the key of the central address file are supported at the database level, but not at the dialog level. As of the current release it is therefore only p ossible to specify specify one ad dr ess per location. location.

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A link link is provided from the business locati location on to the R/ 3 long long text hand ling ling utility. The link supports the centralized storage of text-based information for each business location. The long texts can be stored in the following formats: q

SAPScript

q

WINWORD Other text formats compatible with OLE enabled PC editors may be available in future. The text formats for each text type can be set by your technical technical supp ort group .

Texts for the business location can be entered in “Create” or “Change” mod es of the bu siness siness location location m aintenance transaction. transaction.

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A link is provided from the business location maintenance transaction to standard dialogs of the classification system. For technical reasons, the classification maintenance screen is only available via a specific dialog call and not as part of the standard business location maintenance transaction screen sequence. Within the business location allocation screen and characteristic value assignment screen, exactly the same functions are supported as in the allocation functions from the classification menu. A class type has been created in the classification system for the MRN bu siness location. This is class class typ e “800”. “800”. When a specific business location has been allocated to one or more classes with in the classificati classification on system , it can can be accessed accessed u sing the p ower ful search tools available within this powerful application. The classification system can 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 MRN APPEND APPEND Maintenance Concept Concept discussed discussed below. below.

&KDQJH'RFXPHQW3URFHVVLQJ Using the change document listing feature of MRN, it is possible to display all changes changes w hich hich h ave been mad e in a bu siness siness location location master record a nd all dependent structures such as location partner roles. The changes are recorded recorded by the central R/ 3 change change d ocument p rocessi rocessing ng facili facility. ty.

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There are five selection fields through which the parameters can be set for the list list of change docum ents that the system generates: q

Business location ID

q

Document number

q

From date

q

From time

q

Last Last changed by

Generic specification is possible for all of them except the date and time fields, fields, using th e “*” “*” as a wild card symbo l. User-defined fields in the business location table are also recorded by the change document processor, from the moment that the table is regenerated after after the ad dition of the new fields. fields.

$UFKLYLQJ MRN data archiving removes business location data which is no longer required in th e system, but wh ich ich m ust be retained off-l off-line ine in a w ay that is read ily accessible. accessible.

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Data in the R/ 3 database can only be archived via ar chiving chiving objects objects,, which describe the data structure. For the MRN business location all master and dependent data is archived via the archiving object IS_OIFSPBL. This consists of the location master, assignment records, partner role assignment records, records, change d ocuments, SAPsc SAPscript ript texts and information system records. In addition, any business location entries which have been written to business partner master record record s are deleted deleted and the business partner master records correspondingly updated. The business partner master records are not archived at this time. The application archiving objects are pre-defined in the system.

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The archiving archiving procedu re comprises two main steps: q

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

q

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

The archiving archiving progra ms are scheduled as background jobs, but can also run du ring online processi processing. ng. The The system need not be shut d own du ring archive processing. Routines are also provided to reload business location data from archive files.

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The application of user-defined fields to the business location object is managed through the MRN APPEND Maintenance Concept (MRN AMC). The MRN AMC uses the ABAP Workbench Enhancement Manager. This enables the user to control the implementation of the MRN AMC functionality. functionality. User customization customization is supp orted in terms of both the add ition ition of custom custom d efined efined d ata fields fields and maintenance of those data fields fields by m eans of screen screen d ialogs. The MRN AMC approach is necessary because research has shown that there is little commonality between the business location management requirements of the users with respect to data fields. MRN AMC enables each user installation to define only those data fields that they wish to main tain as pa rt of the MRN Business Business Location table. The comp comp onents of the MRN AMC are: q

APPEND APPEND stru cture maintenance provid ed by the ABAP ABAP Dictionary Dictionary

q

An enhancement containing two CUSTOMER-FUNCTION calls for data transfer

q

The SUBSCREEN concept from the ABAP Screen Painter

q

The table customizing customizing facil facility ity provided by the R/ 3 IMG IMG

All user development of customized data element extensions to the MRN bu siness location location table can can be achieved u sing these four bu ilding blocks. The appr oach of the MRN AMC to th e incorporation of maintenance dialogs which are developed by the user is to use the concept of the “subscreen” provided by the ABAP Workbench Screen Painter. In this, a dialog main screen uses th e “CALL SUB SUBS SCREEN” CREEN” comm and to call a dialog su bscreen to fill fill a pre-defined area of the ma in screen. The installation defined subscreen is defined as a dynpro belonging to a customer work area (also known as “module pool” or “program”), not the MRN bu siness location location wor k area, SAPMOIFA. SAPMOIFA. This means that th e business location 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 after processing. This is achieved by the use of a pair of user exits which can be enabled by the installation. installation.

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/RFDWLRQ2EMHFW/LQNVDQG1DYLJDWLRQ This section deals with the component of the MRN application which supports the creation of links from the business location to other objects in the R/ 3 System System w hich hich can be u sed to d epict epict the bu siness siness location. location.

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As a virtual application, MRN works by providing a primary object in the system to represent the business location, which holds only minimal data about the business location. Other objects in the system are used for this pu rpose. These objec objects ts are referred to as secondary dep ictions ictions of the bu siness location. When these objects are created using application modules in the standar d R/ 3 System, System, the MRN MRN object object link link and navigation componen t can provide a link to existing transactions which are used to display or maintain data w ithin those application application areas. Links are possible to eight different link objects. These are shown in the figure figure below.

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The permissible link definitions which can be made for a specific business location are determined by the location type for that location. For each location type defined in the MRN IMG, it is necessary to identify which of the objec objectt links are supp orted for that type. The entry of the object link data is made using a fullscreen dialog within the business location location master data maintenance transaction. transaction. In cases where all or nearly all object links are definable for the business location (as determined by the type of that location) the screen will contain a large num ber of inpu t fields fields requiring th e user to use the scroll scroll fun fun ction. ction. To avoid this it is possible to invoke a second ob ject link definition screen. This is done by allocating some assignment boxes to the second screen when defining th e perm issible issible object object links links by location type.

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A configurable navigation tool is provided in connection with the link object definitions which can be defined within the business location maintenance transaction. The tool enables user installations to specify the dialog transactions to which the system provides links when the navigation function is used. The range of dialog transactions to which links are supported are customizable via a step in the MRN IMG. Using this customizing facility, it is possible to define the permissible range of dialog transactions to which links can can be sup por ted for each object object link link typ e.

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Add itionally, itionally, for each each “object “object link typ e/ dialog transaction” transaction” combination it will be p ossible to: q

Optionally specify a short text to describe the link (if no entry is made, the targ et dialog tra nsaction text is defaulted from the TSTCT TSTCT))

q

Indicate wh ich SET SET// GET pa ram eters will be activated for each transaction link

q

Indicate if if the transaction transaction is to be called called w ith/ withou t a “skip first screen”

Users will need to take care when defining these entries. However, MRN processing is designed to ignore incorrect incorrect SET SET// GET para meters. Inap Inap prop riate “skip first screen” entries are handled by the dialog transaction itself, i.e. if the first screen cannot be skipped due to a missing entry the system displays the first first screen screen w ith an err or message. If no entry is made in the IMG for the dialog control of a particular link object, the system calls a default dialog. Normally, this is the display master da ta dialog tran saction for for that object link. If one control entry is made for a particular link object, the system calls the specified specified d ialog transaction. If multiple ent ries are mad e for a link link ob ject, the system calls a modal dialog box or “popup window”. The purpose of this popup is to allow the user to choose which link dialog he or she wants to access access when ever mor e than o ne p ossible link is defined for the link object. object. Radio buttons are u sed to ind icate icate to the u ser that a single acce access ss path is to be chosen. A “Dou ble-clic ble-click” k” selection selection is also sup por ted. The diagram below shows how the configurable popup window might look for the asset mast er link object object with thr ee possible choices: choices:

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The num ber of selec selection tion choice choicess is depend ent on th e nu mber of entries made in the IMG. Three Three choices are show n in th e illustra illustra tion above.

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A link is provided from the business location to the CO cost center master data object. The link enables the cost and overhead processing for the business location to be determined. As of the current release, the link is specified specified on thr ee levels: levels: q

Controlling area

q

Cost center ID

q

Valid-to date

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

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Capabilities exist in the underlying architecture of the business location maintenance dialog for the handling of non-time-dependent cost center assignments to the location. This facility is not enabled at this time, but wo uld a llow aut omat ic roll-over of the link to the cost center center record valid for the actual time slot. Currently, a reassignment is required, after cost center period-end has occurr occurr ed.

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/LQNWR3URILW&HQWHU With the incorporation of the controlling area as a profit center differentiator in R/ 3 3.0 3.0D D and later, the definition definition of the link from the bu siness siness location location to the EC-PCA profit center master data object is similar to the link to the CO cost center described above. The profit center is used to depict the business location typically as a strategic business unit within the organization. As of the cur rent r elease, the link is specified specified on thr ee levels: levels: q

Controlling Controlling area

q

Profit center ID

q

Valid-to date

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The diagram below shows how the link between the business location and the cost center center is mod elled.

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As with cost centers, the capability exists in the underlying architecture of the business location maintenance dialog for the handling of non-timedependent profit center assignments to the location. This function is not enabled at this time, but would allow automatic roll-over of the link to the profit center center record valid for the actual time slot. Currently, a r eassignment eassignment is required, after after p rofit rofit center period-end rollover rollover has taken p lace. lace.

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

Asset Asset main nu mber

q

Asset Asset sub-num ber

q

Company code

The diagram below shows how the link between the business location and the asset master is mod elled. elled.

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The capability exists in the underlying architecture of the business location maintenance dialog for the handling of multiple asset assignments to the location, should this be necessary. This function is not enabled at this time, because by using a grou p asset for for th e location location to asset assignment, a flexible flexible solution is provided to the requirement for multiple asset allocation to a particular business location. Again, it should be understood that MRN is a virtual application and therefore asset management functionality is provided only by th e FI-AA FI-AA app licati lication, on, not by MRN. The MRN MRN dialog is able to determine if the asset num ber entered is a main / sub-asset sub-asset num ber or a group asset. asset. If If a group asset is assigned assigned to the business location, this is indicated by a checkbox in the Asset Assignment screen box.

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/LQNWR)XQFWLRQDO/RFDWLRQ A link is provided from the business location to the PM Functional Location master data object. In this way the maintenance status of the business location can be determined. As of the current release, the link is specified on top level fun ctional location location ID only.

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

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The capability exists in the underlying architecture of the business location maintenance dialog for the handling of multiple functional location assignments to the location, should this be necessary. This facility is not enabled at this time, because by optimal structuring of the functional location code using the structure indicator, it is possible to model the breakdow n of a business location location functional location location w ithin the PM system. system. This provides a flexible solution to the requirement for multiple functional location allocation to a specific business location. It is important that plant maintenance functionality is provided only by the PM application, not by the MRN virtu al app licati lication. on.

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A link is pr ovid ed from th e business location to the plan t object object for for reference pu rposes in connection connection with inventory m anagement p rocesses rocesses.. The diagram below shows how the link between the business location and the plant is mod elled. elled.

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As of the current design release, multiple plant assignments for a specific business locati location on are not su pp orted. Note that it is also possible to define a link between the business location and a storage location location for inventory m anagm ent p urp oses. oses. This This is because because it may be appropriate to evaluate business location inventory at storage location level rath er tha n p lant level. It is not envisioned th at both object object link link assignments will be definable at the same time for a business location of a given location type.

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/LQNWR6WRUDJH/RFDWLRQ A link is provided from the business location to the storage location object for reference reference in connection connection w ith inventory managem ent p rocesse rocesses. s.

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The diagram below shows how the link between the business location and the storage location is mod elled elled .

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As of the current design release, multiple storage location assignments for a specific business location are not supported. Note that it is also possible to define a link between the business location and a plant for inventory managment purposes. This is because it may be app ropriate to evaluate bu siness siness location location inventory at p lant level rather than at storage location level. It is not envisioned that both object link assignments will be definable at the same time for a business location of a given location type.

/LQNWR3URMHFWV:%6V A link is provided from the business location to one or more PS project definition record s and/ or pr oject oject Work Breakd Breakd ow n Stru Stru ctures (WBS (WBSs). In this 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 a specific project WBS, the link is specified on a combination of project definition 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 and pop ulates the p roject roject definition ID field field accord accord ingly. The diagram below shows how the link between the business location and the p rojec rojectt d efinition/ efinition/ WBS WBS combination combination is mod elled. elled.

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The user may wish to use one standard project definition to handle similar activities activities w hich tak e place at all bu siness locations. locations. In th is case, case, each location will have its own WBS defined within that standard project definition. For example, an organization maintains an open project project for roof refurbishment. For each explicit roof refurbishment activity at a business location, it can define one WBS. Alternatively, the user may wish to define a project definition for each business location location u nd er w hich each each discrete discrete bu siness siness activity activity is man aged via WBSs.

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Where a CO order has been created to capture overhead postings for a specific business location, a link can be made between the MRN business location location and that ord er. A link can be defined from the bu siness siness location location to one or m ore CO ord ers, and on ly the CO order num ber is entered.

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The diagram below shows how the link between the business location and the CO ord er is modelled. modelled.

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The user may wish to u se one CO order to han dle action-ori action-oriented ented p lanning, as well as monitoring and allocation of costs. Alternatively, different operational areas within the business location could be handled using different different CO ord ers.

/RFDWLRQ3DUWQHU5ROHV The MRN location partner role module records data about the type and status of relationships that exist between business partners of the system owning organization (system client) and the business locations (or business entities) in which that organization has an interest. This information is provided to support administrative procedures, direct links to transactions access accessing ing data about bu siness siness partn ers and the p rovision rovision of a mechanism to facilitate recognition of the business location by reporting tools which exist in the standard R/ 3 Syste System. m.

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The design of the location location partn er role modu le is is intended to recognize the varied relationships which exist in location networks. In particular, it takes into account account the m ultiple involvement of business partners, wh ich ich can occur occur at a single bu siness location. location. The MRN MRN Location Location Partner Role data mod el graphic below below shows th e way in which the multiple relationships between business partners and business locations are depicted and characterized. The model also illustrates the

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

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In the figure, the business location (or business entity) can be seen in the lower left-hand corner, while the object depicting the “partner role” assignment between business location and business partner can be seen in the lower right-hand corner. The partner role assignment has an aggregated dependency on the business location location and partn er role. This This means th at the business locati location on record and the partner role entry must exist before the partner role assignment can be created. The partner role assignment has a referential dependency on the business partner record. The partner role assignment is shown as a time-dependent object, because it describes a specific period of time; this means, in effect, that a partn er role assignment is only “valid” for a specifi specificc period of time. The top half of the diagram shows the business partner object and the different kinds of subtyping for that object. The first major subtype distinction is between the business partner as debitor object and business partner as creditor object. Each of these subtypes is broken down into second second level subtyp subtyp es. The debitor/ customer types of fuels agent, C-s C-store tore agent and service customer, and th e creditor/ creditor/ vendor typ es of leasor leasor and maintenance supp lier lier are illustrated illustrated in the d iagram.

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A reference reference is shown betw een the debitor/ creditor subtyp subtyp es and the location partner role technical category object. This is because the partner role technical category specifies the object type used within the MRN scheme scheme (and generally) generally) to d istingu istingu ish between d ebitor ebitor an d creditor objec objects. ts. The way to r esolve esolve these mu ltiple ltiple relationships relationships is throu gh th e use of a set of tables tables in w hich hich the relation relation betw een the bu siness siness location location and the bu siness siness partn er w ho is active at the bu siness siness location location is recorded recorded . The tables record the characteristics that make up the relation between a business location and a business partner in some unique way. The location par tner r ole design classifies classifies these characteristics in the following w ay: q

Techn Techn ical char char acteristics acteristics - used to classify classify the r ole accord accord ing to technical requirements of the system; for example, the database table used to record record information about a p articular articular typ e of business partner (necessary (necessary because because d iffe ifferent rent d atabase tables tables are used in the R/ 3 System System to d epict business partners)

q

Functional characteristics - used to classify the role according to the functional requirements of the system; for example, the role of the business partner

q

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

3DUWQHU5ROH7\SHV The MRN location partner role type is used to classify the activity of a business partner of the comp any w ith respect to the business locati location. on.

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The location partner role type is a four-character code which is freely configurable by the user installation by means of the MRN IMG. Before it is available for uses, the location partner role must be assigned to at least one partner role technical category (see below). The technical category identifies wh at kind of business partners can be assigned assigned to a particular role. One business partner may p erform erform a num ber of diffe different rent MRN p artner roles at a specific specific business location location or the sam e role at a nu mber of d ifferent ifferent locations locations or a combination of these. This arrangement is show n schematically schematically in the diagra m below.

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Business events events concerned concerned with th e business partn er are recorded recorded in the R/ 3 System in the normal way using established processes in the logistics and financial financial modu les. les. The The location location p artner r ole may sup port the generation of a link to the business partner identified by each role assignment. In this case the partner specific business events may also be used to report on the location.

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The partner role technical category is the medium used to establish the rules by w hich a business partn er object object can can be validated by the system. It is possible to define the technical categories to be used to identify a specific type of business partner w ithin the R/ 3 System System by means of a configuration configuration step in the MRN IMG. Each technical category provides the possibility of defining u p to thr ee process determining technical technical characteristi characteristics cs.. The primary technical characteristic of the business partner is the name of the database table containing the business partner. A basic distinction is therefore made between bu siness siness partners d efined efined in th e KNA1 table, table, which are customers, and those defined in th e LFA1 LFA1 table, wh ich ich ar e vend ors. The secondary technical characteristic of the business partner is the account group. The customer and vendor account groups are used to determine the processing associated with customer and vendor objects, respectively, within th e system. system. The customer customer account grou p in p articular articular m ay d efine efine the processing associated with a customer object in a way which is of central importan ce to the business location location reporting mod el. The third technical characteristic of the business partner is only relevant to customer business partners. This is the SD partner function. In cases where the customer accoun accoun t grou p alone is not su ffic fficient ient to id entify entify the functions of a business partner, it is necessary to define the self-referencing partner function that a partner must carry in order to meet the requirements of the partner role technical category.

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The Location Partner Role maintenance screen sequence provides the user with an effective tool to create, change, display and list location partner role assignments for any given location. The “entry” screen to location partner role functionality is a dialog within the MRN business location location maintenan ce transaction. transaction. Within Within that dialog, the Location Location Part ner Role listing listing screen is always th e first first screen to be p resented to the user. The user can create a new location location partn er role assignment assignment from the listing listing screen by calling calling the “Create bu siness partn er role” function. This This function is available available in create and change mod es of the business location location maintenan ce dialog. The user can change any existing existing location location partn er role assignmen assignmen t from th e listing screen by calling the “Change business partner role” function. This

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function is also available in in create and change m od es of the bu siness location location maintenance dialog. The partner role assignment detail screen will be presented in local local change mode. The user can display an existing existing business partner role entry from the listing listing screen by calling the “Display business partner role” function. This function is available in all modes of the main tenan ce dialog. The partner role assignment listing screen is the access point to all maintenance processing for partner role assignments for a specific business location. The standard location detail header sub-screen is displayed in all business location location maintenance d ialog ialog screens screens as a standard screen screen head er, giving giving th e ID, name and type of the bu siness siness location location being maintained. The partner role assignment assignment listing listing is presented in one of three list modes: q

Active - show ing only roles active for for the cur rent or sp ecified ecified time

q

All - show ing all role assignmen ts for the location

q

Selection election - show ing roles active with in a specified specified p eriod

Each list mode uses a different selection control subscreen, which are shown below. The list mode can be changed by direct overtyping, selection using or or by u sing a pu shbutton on the toolbar. The location partner role assignment detail screen contains a subscreen wh ich is is set according according t o the pr imary techn ical characteristic specified specified by th e partn er role technical technical category category en tered. For example, if the business partner primary technical characteristic = customer name, account group, the follow follow ing BPR BPR d etail sub sub -screens -screens are

is identified as a customer partner (i.e. “KNA1”) the sub-screen will contain general address and other details. The pr ovid ed in the cur rent release:

&RQILJXUDEOH3DUWQHU1DYLJDWLRQ A configurable configurable navigation tool is provided in connection connection w ith the bu siness siness partn er role assignmen assignmen ts, which can be d efined efined within the bu siness siness location location maintenance transaction. The tool enables user installations to specify the dialog transactions transactions to which the system will provide links wh en the nav igate function function is u sed.

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The range of dialog transactions to which links are supported are customizable using a step in the MRN IMG. It is possible to define the permissible range of dialog transactions to which links can be supported for partner role technical category, using this customizing fun ction. ction.

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Add itionally, itionally, for each each “p artner r ole technical technical category/ category/ dialog transaction” transaction” combination it will be possible to: q

Optionally specify a short text to describe the link (if no entry is made the targ et dialog tran saction text will be d efaulted from TSTCT TSTCT))

q

Indicate which SET/ SET/ GET GET param eters will be activated activated for each transaction link

q

Indicate if if the transaction transaction is to be called called w ith/ withou t “skip first first screen” screen”

The processing processing works in a similar way to th at pr ovided for the configurable configurable object link navigation. As with that processing, if no entry is made in the IMG for the dialog control of a particular link object, the system calls a default dialog. Normally, this will be the display master data dialog transaction for the type of partner identified by the partner role technical category.

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In order to supp ort business location location reporting via bu siness siness partn er activity, activity, it is necessary to write the business location ID to the business partner master record of the business partner w hich has been linked to th e location. location. The generation of the location location ID in the bu siness siness partn er master d ata record is achieved achieved throu gh the u se of a fun fun ction ction w hich hich is initiated initiated from w ithin the business location maintenance transaction. This function is triggered whenever the system detects a partner role assignment with a „technical category“ which has been specified as a location category in Customizing.

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When links have been established between the business location and other objects objects or business p artn ers in the system, it is possible to pop ulate statistical information information stru ctures with p erforman erforman ce data w hich hich is specific specific to ind ind ividual locations. A new information structure is provided within the Sales Information System (SIS (SIS)) to r ecord sales activity at t he location level.

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A link to the Sales Sales Information Information System System is pr ovided to sup port sales sales reporting by location location as opposed to the stand ard reporting via ordering p arty. The The link is dependent on the generation of the business location ID in a valid business partner w ith reference reference to which a sales document is created. The ID of the business location associated with the “Ship-to” party specified in the sales document is carried carried in the “Ship-to” “Ship-to” p artner fun ction ction segment at header or line item level. This information is made available to the LIS entry point in the form of both changed and original data. The MRN business location ID is thus available at 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 MRN business location, a subscreen is provided in the sales document business data screen. A subscreen is used to minimize the impact of the modification. If an installation does not use MRN, no business location information will app ear on this screen. screen. Various additional move lines are added to sales document processing to copy the bu siness location location ID to the correct transfer structu res.

/LQNVWR&23$ Reporting of business location profitability is enabled by the availability of the business location and location partner role as fixed characteristics in the Controlling-Profitability Analysis report ing tool (CO-PA). (CO-PA).

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With th ese new fixed fixed char acteristics, acteristics, it it is possible to define both location and location location partn er role fields fields in an operating concern reporting structure. From From structures in which both location and location partner role data is summarized, it is possible to generate reports about location or partner role profitability segments or combinations of these.

*ORVVDU\ %XVLQHVV/RFDWLRQ A ma ster d ata object in in th e IS-Oil IS-Oil System. System. The bu siness location location is a p hysical location which cannot change in space or time, about which the process owning organization wou ld like to record information. The business location location rough ly equates to a physical address. The The location location is not transferrable transferrable w ith respect to ph ysical ysical add ress in norm al circumstances. circumstances.

%XVLQHVV/RFDWLRQ7\SH Normally, the basic business purpose of a business location. The business location type allows the process-owning organisation to categorize the business location location for operational an d technical technical pur poses.

2EMHFW/LQN The only example of a connection connection between th e business location location and another busin ess object object in the R/ 3 System System w hich is used to dep ict the location in terms of a specific or set of sp ecific ecific busin ess processes.

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3DUWQHU5ROH The role or function function in an IS-Oi IS-Oill system system w hich a business partner performs with 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 with respect to the process-owning organization. One business partner may perform a number of business partner roles with respect to the same location. The business partner role must be assigned to one or more partner role technical categories categories in ord er to be usable.

3DUWQHU5ROH7HFKQLFDO$VVLJQPHQW The single instance of a specific partner role at a particular business location for a specified specified p eriod of time.

3DUWQHU5ROH7HFKQLFDO&DWHJRU\ The un d erlying technical specific specification ation of the pa rtner r ole in an IS-Oil IS-Oil system. In effect, the partner role technical category allows the process-owning organization to define types of business business partner in terms of business partner account account group and , where ap plicable, plicable, SD par tner function. The types of business partner th us d efined efined can th en act as the basis for rules governing the validation of business partner links when creating a partner role assignm assignm ent. The business partner role technical category may support integration with R/ 3 processes processes such such as sales order p rocessi rocessing ng an d LIS LIS, or it may be pu rely informational.

9LUWXDO$SSOLFDWLRQ An ap plication plication wh ich ich h as no functionality functionality of its own, but w hich hich p rovides an optimized business view of existing existing functionality functionality w ithin a system. system.

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7UDQVSRUWDQG'LVWULEXWLRQ7' DVSDUWRI,62LO'RZQVWUHDP +LJK/HYHO6XPPDU\ The Transport and Distribution (TD) application area supports requirements specific to distribution in the downstream oil business with enhancements mad e to Core SAP SAP R/ 3 fun fun ctions. ctions. The The TD fun fun ctional ctional enhancements sup port the following following bu siness processes processes assoc associated iated w ith d own stream oil distribution: q

Definition of the m eans of transp ort (vehicle) to be used in d istribution

q

Processes to control the delivery of oil products (scheduling, load confirmation confirmation an d delivery confirmation) confirmation)

q

Processes to control the transfer of product between two companyown ed locations locations

q

Transport of purchased product from vendor

q

Change of stock stock ow nership in line with oil ind ind ustry p ractice ractice

q

Shipmen t cost calculation calculation

q

Integration with other IS-Oil Downstream application areas (HPM, TDP, Exchanges) Exchanges) du ring th e TD TD process

)XQFWLRQ2YHUYLHZDQG2EMHFWLYHV The TD application area provides functions to support three separate shipment processes - scheduling, loading confirmation, and delivery confirmation. The following following oil distribution requ irements are carried ou t across these pr ocesses: ocesses: q

Scheduling of shipments on specified vehicles based on underlying documents

q

Confirmation Confirmation of the actual qu antity loaded on the vehicle vehicle

q

Confirmation Confirmation of th e actual delivered qu antity

q

Tracking Tracking of produ ct during tran sport 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. Schem Schem atically, atically, the fun ction flow flow looks as sh ow n in th e figu figu re 6-1. 6-1.

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The integration integration of TD with th e Core SAP R/ 3 System System enables an oil company to manage shipments in a timely and accurate manner. TD provid es for for the accurate processing processing and tracking tracking of high volum es of orders orders and bulk shipm shipm ents. ents.

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The sched sched uling, loading confirma confirma tion, and delivery confirma confirma tion transactions provide a consistent framework for processing and tracking high volumes of bulk material shipments. These three transactions are suited for the frequent changes that occur occur in the bu lk oil distribution bu siness. siness.

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The sched sched uling, loading confirma confirma tion, and delivery confirma confirma tion transactions were designed to interface with automated systems such as, “Dispatch Optimizers“ and “Automated Loading Systems“.

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Through the use of an “intransit storage location or intransit plant“ it is possible to closely track stock quantities in the distribution process. Intransit quantities are counted once by the system, without the necessity of manual reconciliation. The TD application area uses compartment planning to provide better supp ort for the administration of oil prod ucts that are being being transp orted.

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Through the use of shift and trip functions functions the TD app licati lication on area p rovides a more d etailed etailed schedu ling ling of shipments. Through integration with the equipment master record from the Plant Maintenance component, it is possible to link many of the master data entities such as, vehicles and transport units to equipment master records. The equipment master record can be used both for maintenance planning and execution. execution.

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.H\,62LO)XQFWLRQV6XSSRUWHGE\WKH ,62LO'RZQVWUHDP7'&RPSRQHQW The foll following owing TD fun fun ctions ctions are p rovided within th e R/ 3 IS-Oi IS-Oill Downstream component:

0HDQVRI7UDQVSRUW 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

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Checking th e availability of the veh icle icle

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Checking for overloading of the vehicle

TD provides functions to define define the following following as m aster data: q

Vehicles

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Transport Transport un its and compartments

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Drivers

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Vehicle Vehicle m eters

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Rack meters

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Compatibilities

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%XON6KLSPHQW7\SH The bulk shipment type contains settings used by TD to determine how a shipment is processed. A bulk shipment type must be selected when scheduling a shipment, and cannot be changed once a shipment has been saved. The foll following owing fun ctions ctions are enabled by the bu lk shipment type: q

assigning a vehicle vehicle to a shipm ent, the Vehicle m ode o f transport transport: When assigning vehicle mode within the bulk shipment type is checked against the vehicle mode of transport defined in the vehicle type. If the two are different, for example the shipment type requires a truck and the schedu schedu ler attempts to schedule a tr ain, the system rejec rejects ts the assignment.

q

Compartment load indicator: During scheduling it is possible to combine deliveries and materials for the same compartment. The compartment load indicator in the bulk shipment type determines whether the compartment is to accept only one material of one document, or combinations of documents with the same material or mu ltiple ltiple m aterials. aterials.

q

Intransit Posting Group : The intransit posting group determines how excise excise duty is processed processed for a pr odu ct during ship ment. It is is also used to determine which intransit storage location is used to hold the intransit stock. The intransit posting group determines the valuation types and hand ling ling types used in material movements triggered by TD.

q

Confirm balance load indicator: The Confirm balance load indicator determines how balance loading is carried out. Balance loading is the process of assigning discharge documents to loaded quantities. It is particularly relevant when the actual loaded quantity is different from the scheduled quantity. The balance load indicator determines if and how discharge quantities are processed. processed.

q

Partial Delivery Confirmation : This This function function is used du ring the d elivery elivery confirmation transaction. When selected, the system posts a goods issue against deliveries for which discharge quantities have been recorded. This allows allows inventory to be u pd ated after the first delivery is discharged discharged withou t requiring all discharge discharge qu antities antities to be recorded recorded .

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Shipment Cost Relevance : It is possible to specify the scope of the shipment cost calculation through a series of parameters defined in the bulk shipment type.

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Exchange assignment: Exchange asssignment data entered in the bulk shipment type determines how exchange-relevant deliveries are processed.

6FKHGXOLQJ7UDQVDFWLRQ A transaction is provided to schedule underlying documents (shipping notifications, reservations, or deliveries) into shipments of bulk products. The scheduling process supports the assignment of specific vehicles to shipments.

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During the schedu ling ling process the following following information is necessary: necessary: q

Date of the the shipm ent

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Vehicl Vehiclee used for the shipm ent

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Compar tment into which prod uct is schedu schedu led

/RDGLQJ&RQILUPDWLRQ7UDQVDFWLRQ A transaction is provided to support the loading activity. The oil industry requires the flexi flexibil bility ity to determ ine the actual quan tity loaded, and the p lant and store location from which the product is loaded. It is common for the actual quantity loaded to change from th e quan tity originally originally schedu schedu led. The The system system allows allows loading from different different plants in on e shipm ent. The loading transaction provides the capability to control and manage the following: q

Loading Loading d ate and time

q

Actual quantity of produ ct loaded loaded

q

Store location location and batch from w hich hich th e prod uct is loaded loaded

q

Compar tment into which prod uct is loaded (if (if comp comp artment planning is used)

q

Unplanned rebranding of the product, that is, shipping a replacement product

q

Assignm Assignm ent of qu antities antities left left on the vehicle vehicle from a previous ship ment.

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Loading of the components of a sales material (Bill of Material) and the posting of sales material

'HOLYHU\&RQILUPDWLRQ It is is possible possible that the quan tity of prod uct delivered delivered d eviates eviates from wh at was loaded. It may also occur that planned shipments do not take place (for example when there is insufficient tank capacity at the receiving station). In such a case, the product is either returned on the truck or is delivered to another customer. The delivery confirmation confirmation tran saction saction enables the u ser to reflect these unplanned changes in the delivery, as well as, confirm the actual quantity of produ ct that is delivered delivered to th e customer. The following activities are supported by the delivery confirmation transaction: q

Specifying pecifying d elivery elivery d ate and time

q

Establi Establishing shing actual qu antity shipp ed

q

Handling non-delivered product - either to be returned to the plant or left on the v ehicle

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Han dling of gains and losses losses dur ing transport

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Changing the shipment in order to hand le un planned d eliveries eliveries

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Flexible status handling to allow changes between processes

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2UJDQL]DWLRQ6WUXFWXUHRIWKH7'&RPSRQHQW The organization organization structure for the transportation fun ction ction is shown below: below:

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3ODQW In the case of deliveries, the delivering plant must be entered in the sales order. This is is used to define the shipping p oint wh ich ich is required before before the delivery can be created. In the case of a shipping notification, the receiving plant must be entered in the purchase order. For a reservation a supplying and receiving receiving plant is entered.

7UDQVSRUW3ODQQLQJ3RLQW This is the organizational entity used to plan transportation functions. The transport planning point represents a group of employees responsible for planning transportation. A transport planning point can cover one or many shipping points. In fact, transportation planning points are independent un its and ar e not related to th e other organisational units in Logistic Logistics. s.

,QWUDQVLW6WRUDJH/RFDWLRQ A major function of TD is to keep track of bulk products in respect to both quan tity and value. For For the oil ind ind ustry a special special storage location location is required to track produ ct as it is is transported.

,QWUDQVLW6WRUDJH/RFDWLRQLQWKH6DOHV&\FOH In the standard document flow for sale of product in the Sales and Distribution (SD) module, the products change ownership from the delivering company to the customer when they are goods issued at the end of the delivery process. Goods issue is the point when the goods leave the company’s site. In such a case, the customer takes ownership of the stock as soon 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, and prior to arrival at the customer, TD introduces the concept of the intransit storage location. location. The prod uct(s) uct(s) remain on the d elivering elivering comp any’s any’s books until delivery is confirmed at the customer. This is achieved in TD by the delivery confirmation process triggering the core goods issue process. In this case, a transfer is used to move the stock from the delivering plant to the vehicle during load confirmation. The stock loaded on the vehicle then exists in the intransit storage location. This can be viewed in the Stock Overview report. When the prod ucts are loaded loaded on the vehicle vehicle they are moved from a n ormal stock location to an in-transit store location, with a store-to-store movement. Similarly, imilarly, when th e prod ucts are delivered delivered to the customer a good s issue issue is posted from the in-transit store location to the customer. To achieve this the original original delivery documen t is upd ated w ith the intransit storage location location in the delivery confirmation process before the goods issue is posted. Every transaction in the TD area which includes a goods movement associated with the vehicle (or change of responsibility in case of returns to another plant, for example) causes causes a qu antity u pd ate to the intransit storage location. location.

,QWUDQVLW6WRUDJH/RFDWLRQLQWKH3XUFKDVLQJ&\FOH In the standard Purchasing process for the Material Management (MM) mod ule, a pu rchase order is created, after after w hich a shipp ing notificati notification on can be created to control the shipment of the goods. When the goods are received, a goods receipt receipt is posted in the receiving plant. With TD, the goods receipt is posted in the intransit storage location which represents the stock of the vehicle that is loaded. The stock remains in the intransit storage location until a transfer to the actual receiving plant is initiated initiated d uring the d elivery elivery confirmation confirmation process. process.

,QWUDQVLW3ODQW When shipping large quantities of product of long distances, such as pipeline and marine shipm ents, it it can be necessary necessary to maintain a segregated segregated overview of the intransit stock. In the TD application area this can be accomplished by representing the vehicle as a separate plant, known as an intran sit plan t. It is possible to allocate allocate all veh icles icles (for (for exam ple, barg es) to a single single intransit plant, or alternatively, to set up a separate intran sit plant for each vehicle (for (for exam ple, pip eline). eline). The intransit plant can consist of multiple storage locations for product tracking purposes as the product moves along the route. The allocation of the intransit plant is specifi specified ed in th e un derlying d ocuments that are assigned assigned to the shipm shipm ent.

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9HKLFOHVDQG5HODWHG0DVWHU'DWD A vehicle is a key entity in the transportation of goods. Within TD a vehicle is 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 transport units

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Each transport unit is unique and is made up of a fixed number of compartments

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Each compartment is unique and can be used as an intransit storage location location dur ing shipment

Although the following figure shows a truck as a means of transport, TD supp orts all of the following following m eans of transport: q

Trucks (Roa (Road d transport)

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Trains (Rail (Rail transp ort)

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Ships (Sea transport)

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Barges (Inland (Inland water tr ansport)

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Pipelines

The figure below shows the possible composition of a vehicle, in this case a truck with tw o trailers. trailers.

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The vehicle master data is created through a three layer hierarchy. The layers of master d ata are: q

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Vehicle The highest level for for a m eans of transp ort is a vehicle. vehicle. The The comp lete vehicle vehicle is defined defined in vehicle vehicle master d ata. A transaction transaction is p rovided to supp ort the creation, change, change, and display of vehicle vehicle master data.

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Transp Transp ort unit A vehicle vehicle is is mad e up of at least least one transport u nit. In In the examp le show show n in the figure, figure, the transport u nits would be the mover and the two trailers. trailers. As with the vehicle vehicle master d ata, a transaction transaction is p rovided to supp ort the creation, creation, change, change, and d isplay of transport u nit master data. There is is a one to m any relationship between th e vehicle vehicle and th e transport u nits . For For example a train can be defined defined with on e tractor and man y rail wagons. There is is also a one to m any relationship between transport u nit and vehicles vehicles,, where a transport u nit can be assigned assigned to several v ehicles. ehicles.

Validation Validation checks checks ensure that a transp ort u nit is not concurrently schedu schedu led to more than on e vehicle vehicle in in the same shipm ent. q

Compartment A transport u nit consist consistss of one or man y compartm ents. A comp comp artment is a fixed fixed part of the transport un it. The The same tr ansaction ansaction u sed to create a transport u nit is also also used to create the compartm ents for for the tran sport unit.

Since vehicl vehiclee and transport un it are considered considered generic terms terms an d there is no limitation limitation on the nu mber of transp ort un its in in on e vehicle, vehicle, the master d ata can be used to d efine efine many form s of transportation (for (for example rail, marine, pipeline). pipeline). The The following following paragr aphs provid e further d etails etails on the fucntions supp orted at th e master data level.

9HKLFOH A vehicle is a collection of one or more transport units. Vehicle master data has a header with information stored on the vehicle level and the transport units assigned to the vehicle. Transport units are assigned to the vehicle as vehicle items. items. The vehicle vehicle head er has the follow follow ing da ta: q

Vehicle identification : The vehicle code is used throughout the system to refer to the veh icle. icle. The nu mber ing of vehicles can can eith er be externally or internally based. based. The vehicle vehicle master data is additionally additionally sup ported by matchcode search strategies.

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vehicle typ e is used to d efine efine th e basic char char acteristics acteristics of Vehicle type : A vehicle the vehicle. The type can be used to define whether the vehicle is used for road, rail, marine (sea or inland), or pipeline transportation. The vehicle type also defines what the units of measure are for volume and weight.

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Vehicle compatibility : A vehicle can be allocated to a compatibility group, which has been created previously with certain characteristics. The comp comp atibilit atibility y d efiniti efinition on is checked checked du ring Schedu Schedu ling to d etermine whether the selected vehicle meets the customer requirements specified in the customer customer m aster data.

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License type and number: The license requirements for a vehicle are defined through the assignment of license types. Possible license types are defined in a separate table. When creating a vehicle, a license type is select selected ed to d etermine the requirements for th e vehicle. vehicle. A license license nu mber is entered for a veh icle icle in the vehicle master d ata.

q

Transport unit number: vehicle.

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Carrier: Represents an external vendor responsible for the vehicle. A carrier is created as a vendor in Purchasing (MM) and can be used for shipment costing. costing.

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Route : The route can be used to define various points along which the shipment is transported. If the route is created created in the veh icle icle master d ata record, record, then it is defaulted defaulted into the shipm ent u sing that vehicle. vehicle.

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Status : The status controls whether the vehicle can be selected during scheduling.

identifies the transport units assigned to a

The vehicle vehicle master data is represented in the figure below:

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7UDQVSRUW8QLW As stated previously, a vehicle consists of at least one transport unit. The transport unit id ’s mu st be individu ally assigned assigned to the vehicle in in th e vehicle vehicle master data. The master data for each transport unit must therefore exist before being assigned to a veh icle. icle. A transpor t un it is an independ ent entity forming par t of a vehicle. vehicle. It can can be individu ally described described as a m eans of transport. Examp Examp les of a transp ort u nit are:

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Truck trailer

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Train tractor

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Train Train w agon

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Barge

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Pipeline

The figure figure below shows how the master da ta for a transport un it is is structured .

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The transport u nit master data includes the following: following: q

Transport unit number: The transport unit number is the unique identifier identifier for a transport un it. The The n um ber is freely freely definable definable by th e user. The user can can also use internal num ber ranges generated by th e system. system.

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Transport unit type : A transport unit type is used to define the basic characteristics of the transport unit. The type can be used to define wh ether the transp ort un it is used for road, rail, rail, marine (sea (sea or inland ) or pipeline transportation. The The transp ort un it type also determines whether the transp ort un it is a mover such as a train locomotive, locomotive, or a trailer. trailer.

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Dimensio ns of the unit and un laden and and m aximu aximu m weight.

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The status of the transport un it can can be Availability checking of the unit. The either available, not available, or marked for deletion. For example, the transport u nit status can be set set to unavailable wh en the transp ort unit is being serviced or temporarily out of service. A status of marked for deletion means the transport unit should no longer be used for future shipments and will be deleted from the system when the next reorganization program is run (provided there are no active shipments using that transport u nit).

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Metered transport un its (for (for example trailers) trailers) Meters pe r tr transpo rt uni t: Metered use meter readings to determine the unloaded quantity. In order to use the meter readings of a transport unit, the meters are defined in the system as master data. The predefined meters are assigned to one transport unit.

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Compartments : A transport unit can consist of as many compartments as necessary. It is mandatory to define at least one compartment for a transport unit. A compartment is the lowest level in the definition of a means of tran sport. Information Information about the qu antities of material carried carried on th e vehicle vehicle is stored stored at the comp artment level. level. The The following following d ata is linked linked to compartm ents: m

Minimum/Maximum volume : The system allows the definition of the minimum and maximum maximum volum volum e that a compartment can store. store. The unit of measure used is defined at a transport unit level. The maximum weight and volume are checked during the scheduling transaction. transaction. Whenever the dispatcher overloads a comp comp artment with a particular prod uct, the system system issues an error m essage. essage.

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Product compatibility : A compatibility group can be defined for each compartment. Various characteristics are selected for each compatibility group from a list defined in customizing. During scheduling, the system system checks that the pr odu ct to be loaded loaded into the compartment is compatible with that compartment by checking that the characteristics correspond.

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5DFNDQG9HKLFOH0HWHUV TD supports two types of meters: rack meters and vehicle meters. Rack meters are defined as master data and are tied tied to a p lant and store locati location. on. The store location assignment can be changed. Vehicle meters are defined as part of the vehicle master data. The meters can be used during loading confirmation confirmation and delivery confirmation. confirmation. By By entering th e m eter readings, the loaded an d un loaded qu antity is recorded recorded . If If TD TD is interface interfaced d to a Terminal Automation System or in-cab computer system, the meter readings can be captured autom aticall atically. y. If such systems are not in use, the meter read ings can can be m anu ally ally entered. To provide an audit trail of meter readings, a meter reading reconciliation function 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 th e loading of vehicles, vehicles, in in ad dition to other incidentals, incidentals, such as flushings and meter recalibration. Each meter is listed with the corresponding shipment number, and the start and end readings for each movem ent. Meter adjustment factors can can also be entered.

'ULYHUV A driver is master data and is maintained through a separate transaction. The driver table contains the following following d ata: q

Driver number: Used Used to u niquely identify the driver in th e system. The The driver code can use either externally or internally defined number ranges. The driver master data is supported by matchcode search strategies.

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Driver name

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Personnel number: An external external p ersonnel num ber can be entered, this is not linked into the Core Hu man Resources Resources Modu Modu le of SAP R/ 3 System. System.

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License type : Can specify the types, identification and period the license is valid for.

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Carrier: A driver can be assigned to an external carrier.

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Availability : The status of a dr iver specifies specifies wh ether a d river is available for assignment assignment to a vehicle vehicle du ring scheduling.

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Material Material Maste r The Transportation Transportation view is available available in the prod uct m aster. In In th is view, view, a product compatibility group can be defined. An error or warning message is issued whenever a product is scheduled into a compartment where the characteristics do not match. Whether an error or warning message app ears, is is configured configured in Custom izing. izing.

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Customer Master The transportation view is available for TD functions in the customer master. In this view a vehicle compatibility group can be defined. During scheduling an error or warning message is issued whenever a vehicle does not match the required characteristics to carry out a delivery to the customer. customer. Whether an error or w arning m essage app ears, is configured configured in Customizing.

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3URFHVV)ORZ,Q7' The TD TD process flow flow is based on the assignment of documents to ship ments during scheduling. The TD process flow supports inbound purchases, outbou nd sales, and p rodu ct transfers by integrating integrating with the relevant R/ R/ 3 process flows. The underlying documents that can be assigned to and processed as bulk shipments are reservations, shipping notifications, and deliveries. The foll following owing figure figure shows th e relationship relationship of these d ocuments to the bu lk shipmen t process and the relevant R/ R/ 3 processe processes. s.

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A shipment moves from the scheduling process where the underlying documents and vehicles are assigned to shipments, to the loading and delivery confirmation processes. The shipment status determines if and when a shipment can move from one TD process step to the next. During loading, product is loaded onto vehicles from the schedules. During the delivery confirmation confirmation p rocess, rocess, the delivery delivery of the ship ment is recorded recorded . Within TD it is possible possible to change quan tities tities du ring the schedu schedu ling, ling, loading and delivery confirmation processes. The scheduled quantity is proposed during the loading step, but can be changed. Also, product left on the vehicle from a previous shipment can be added to the current shipment during loading. If at the delivery confirmation, the actual quantity shipped differs differs from from the un derlying document, the und erlying erlying docum ent is up dated .

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,QWHJUDWLRQ:LWK2WKHU,62LO'RZQ ,QWHJUDWLRQ:LWK2WKHU,62LO'RZQVWUHDP&RPSRQHQWV VWUHDP&RPSRQHQWV 9ROXPHWULF&DOFXODWLRQVLQ+30+\GURFDUERQ3URGXFW0DQDJHPHQW Oil product inventories are normally held at a standard temperature (for example 15° Celcius or 60° Fahrenheit). In order to calculate these inventories and movements at a standard temperature, it is necessary to know the temp erature and density, as well as the measur ed volum e of the prod uct. As a single shipment is transported, the measured temperature and density may change. The American Petroleum Institute (API) has published formulae and programs to calculate volumes at standard or any temperature, based on measured temperature and density. These programs are generically referred to as the American Society for Testing Materials (ASTM) calculations. The calculation of other units of measure is also supported. For instance, for different different pu rposes, a material might be measured in tons, poun ds, 60° 60° gallons gallons and 60° 60° barrels. barrels. The The m aterial can can be d efined efined so that the system simultaneou sly tracks a material’s material’s movem ents and inventories in all these these un its of measure. The HPM app licati lication on area of R/ 3 IS IS-Oil -Oil Downstream su pp orts the entry of temperature in TD, and supports calculation of standard volumes using input or default temperatures and densities. TD and HPM are integrated so that TD seamlessly offers support for multiple units of measure within the same transaction. transaction. Temp Temp erature and density are important to the loading and delivery confirmation processes. Scheduling

During the scheduling step, underlying documents are grouped together to form shipments. Because only planned quantities are used at this stage, no ASTM calculations are carried out in scheduling. If any changes to the underlying document quantities are made during scheduling, then the und erlying erlying docum docum ents are are upd ated. Loading Confirmation

During the loading confirmation step, the quantities actually loaded on the vehicle can differ from the quantities in the underlying document and the scheduled quantity. The loaded quantity per product is captured at loading confirmation and assigned to the underlying documents. The updated quantities are posted to the original document item. Entry of ASTM param eters is is supp orted du ring loading. These param eters are maintained at the item level level in in the u nd erlying erlying d ocument. De livery Confirmation Confirmation

During th e delivery confirmation confirmation step, the qu antities antities actually actually d elivered elivered m ay differ differ from the loaded quan tities. tities. The actual actual d elivered elivered qu antity per p rodu ct is captured through the delivery confirmation transaction and posted to the original document item. Entry of ASTM parameters is supported during delivery confirmation as the temperature may have changed since the vehicle vehicle was loaded .

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7DULIIV'XWLHVDQG3HUPLWV In the IS IS-Oil -Oil Downstream compon ent, a valuation record and / or batch is is used to repr esent the tax status of a material. This This is structured so that tax-relevant tax-relevant materials are always batch controlled. Either, Either, the batch m anagem ent function is used or ”dummy“ batches are used based on two types of valuation records, “taxed“ “taxed“ or “u ntaxed“. When goods are physically moved from one storage location to another storage location or to a customer, the excise duty status can change. In TD a vehicle is associated with an intransit storage location and thus can have a different different tax status than both the customer and the d elivering elivering stock stock location. location. When a goods movement in TD results in a change of tax status, the financial postings accompanying the goods movement take account of any du ty or tariff tariff implications. implications. Store Location/Batch

It is a requirement for TD to be able to change the storage location location and batch up to the p oint of loading. loading. The rescheduling fun ction ction for storage location location an d batch is supported in the loading confirmation transaction. When executing the rescheduling function the new store location and batch number are up dated in the und erlying document. For this to be possible, possible, no batch num ber should have been entered entered in the und erying erying d ocum ocum ent when it w as create created. d.

([FKDQJHV Using TD application area, it is possible to schedule deliveries in cases wh ere the produ ct is sup plied from or to an Exc Exchange hange par tner. ([FKDQJH/RDGLQJ%XVLQHVV6FHQDULR

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6FKHGXOLQJ The main objectives objectives of the sched uling fu nction are as follows: q

Group underlying documents (deliveries, shipping notifications, or reservations) reservations) into shipm ents

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Assign Assign shipm ents to app ropriate vehicles vehicles

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Allocate Allocate produ cts and qu antities to the vehicle vehicle comp comp artments

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Optionally assign a drivers to the vehicles

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Change the quan tity of prod uct to be shipped

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Plan transp ort-related ort-related activities activities using the event han dling fun ction ction

The result of the scheduling process is one or more shipment documents. Each shipment document is assigned a number and forms the basis for the loading and delivery confirmation confirmation p rocesses rocesses.. After After a shipment is confirmed, confirmed, the loading document can be printed. The schedule that has been created is only a proposal for the loading process and can be changed, for example, if it is discovered that there is not enough product. An important result of the scheduling process is that the underlying documents which have been assigned to a shipment are blocked so that they cannot be simultaneously assigned to other shipments. The figure below shows t he p lace lace of sched sched uling in th e TD process flow. flow.

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The TD component of IS-Oil supports two options for scheduling. The first approach involves an interface to a third party software product or “point solution“, solution“, know n as a dispatch optim izer. The second second app roach uses an ISISOil TD TD transaction to p erform the schedu schedu ling tasks. The process of scheduling a shipment requires that a vehicle and and underlying document (delivery , shipping notification, or reservation) be assigned to the shipment. Checks exist to ensure that deliveries, shipping notifications, and reservations can be used for a shipment. These checks ensure, for for example, that they are not already in use by another shipm ent or other system process. process.

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9HKLFOH2YHUYLHZ The vehicle vehicle overview overview is used d uring the scheduling p rocess rocess to assign one or more vehicles to a shipment. When scheduling a vehicle, the system checks the mode of transport against the vehicle mode defined for the bulk shipment type. When assigning a vehicle the system prevents the same transport un it from being assigned simu ltaneously to several vehicles vehicles.. After a vehicle has been assigned to a shipment, it is still possible to make changes to the vehicle details. Within the shipment there is a view of the vehicle master data where changes can be made to the vehicle information such as, equipment, identifier, unladen and maximum weight for the transport u nit, and the comp comp artment volum es. Changes mad e to vehicle vehicle data from the shipment view are only valid for the shipment, and are not reflected reflected in the actu al vehicle vehicle master d ata.

'RFXPHQW2YHUYLHZ The document overview transaction is is used d uring schedu ling ling to assign the underlying documents to a shipment. Each underlying document is assigned exclusively to a shipment, meaning that the document is blocked from use by other shipm ents and u pd ates from from oth er transactions. transactions. If If known the document numbers can be entered in the document overview. Alternatively, Alternatively, a document selec selection tion report can be u sed to find d ocuments to assign. The document selection report generates a list of documents that meet t he sp ecifie ecified d selection selection criteria.

&RPSDUWPHQW3ODQQLQJ After the underlying document and vehicles have been assigned to a shipmen t, it it is necess necessary ary to schedule how th e prod uct is to be loaded on the vehicle. Product is assigned to the compartments of the vehicles assigned to the shipment. If a vehicle, such as a pipeline, is defined with only one compartm ent, the compartm ent planning is done autom aticall atically. y. A num ber of checks checks are performed performed du ring comp comp artment p lanning, including including the following: q

Produ ct compatibility compatibility

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Customer compatibility compatibility

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Overloading of the comp comp artment

These checks ensure that the compartment is appropriate to transport the prod uct, and that th e vehicle vehicle has the correct characteris characteristic ticss to d eliver eliver to the customer. The The overloading check check ensures that the p rodu ct quantity does not exceed the weight and volume capacity of the transport unit and compartment.

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6KLSPHQW2YHUYLHZ5HSRUW The shipment overview report provides an up-to-date view of all movements (both planned and actual) for a shipment. When a shipment is scheduled but not yet loaded, all quantities in the shipment overview report are planned quantities. No actual quantities are displayed at this stage. When a shipment item is loaded loaded , the actual actual qu antity is upd ated to reflect reflect the loaded quan tity.

(YHQWV+DQGOLQJ During schedu ling ling events han dling is available available to maintain information on a wide range of tran sport-related sport-related service servicess such as, an inspection inspection at loading or cleaning cleaning services services for for a ship. Event Event d efault group s can be set up for the bu lk shipment typ e. Event Event d efault efault group s autom aticall atically y prop ose event event typ es and event text that have been defined for the bulk shipm ent type. This This could could be used to ensure, for for example, that compartm ent cleaning cleaning is always pr oposed for marine shipments. It is possible to enter the document number of a document related to the event such as, a service service order. A link link is then established established to the d ocument so that it can be viewed d irectly irectly from from events han dling.

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6KLSPHQW&UHDWLRQ During the creation of a shipment, the following information is specified in the shipment document: q

Transportation Planning Point

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Bulk Shipment Type

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Date of the shipm shipm ent

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Vehicles

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Documents assigned assigned to th e shipment

Transportation Planning Point

The transportation planning point is a group of employees responsible for the planning of transportation. It is is an indep enden t un it and is not related in any way to any other organisational units in Logistics (i.e. plants, shipment poin ts etc ). Bulk shipment Type

This is used to group the different types of shipments that can be created and to define the basic parameters for processing them. Some of the param eters that can can be set via the bulk shipm shipm ent type are: q

Allocati Allocation on of shipment nu mbers

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Definition of mod e of transp ort (vehicle, train, etc.) etc.)

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Whether balanced loading is required

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Units of measure of the shipm shipm ent

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Compartment loading gives an indication of how products can be loaded into compartments. As with product compatibility, the compartment load IDs assist the dispatch department in planning the products for a vehicle, that is assignment to compartments. Possible compartment load ID indicators are: 1.

O n e d oc ocu m e n t it it em em i n a co co m p a rt rt m en en t

2. Multiple Multiple docum docum ent items items of of one one material material in a compartm compartm ent 3. Multiple Multiple materials materials per compartm compartm ent (normall (normally y used for for the case case where the whole vehicle is defined with one compartment and no processing processing is done at a compartm ent level) level)

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What sort of compatibility checking should take place (this can occur between prod ucts and comp comp artments and custom ers and vehicles vehicles))

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Intransit posting posting gr oup (which is used in the calculation calculation of any du ty or tax imp imp licati lications ons wh en the pr odu ct is is moved throu gh the TD processing processing cycle)

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Shipment D ates ates

Several dates are included in the shipment, planned date for the load start and en d, actual actual date for the load load start and end, planned date for the delivery delivery confirmation start and end, actual date for the delivery confirmation start and end. Vehicles

One or more vehicles can be assigned to a shipment. For every vehicle it is also possibl possiblee to add a shift and trip. If a trip nu mber is entered th en a check is carried carried out th at the vehicle/ vehicle/ shift/ shift/ trip combination is unique. It It is also also possible to assign assign a carrier and rou te to the vehicle. Selection routines exist to help in the selection of vehicles. Whole vehicles must be selected - it is not possible to select individual transport units or compartm ents for for a shipm shipm ent. Drivers

One or more d rivers can can be entered against a shipm ent - although although the entry of a driver is not m and atory in the shipm ent. The The m atchcode atchcode facilit facility y can be used to selec selectt the d river. Underlying Documents

One or m ore docum ents can can be allocate allocated d to a ship ment. Once a docum ent is allocat allocated ed to a ship ment, it cannot cannot be changed outside the shipm ent. The TD TD component supp orts the following following method s of assigning assigning documents: q

Entry of an explic explicit it document nu mber

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Selection of deliveries using the Document Selection Report. The report can be used to select select documents based up on th e following following criteria: criteria: m

Delivery details

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Shipping notification details

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Reservation details

$VVLJQLQJ3URGXFWV'RFXPHQW,WHPVWR&RPSDUWPHQWV After After selection selection of both d ocuments and vehicles vehicles used for the sh ipment, a plan must be made showing how the vehicle will be loaded. At this time the important level of assignment is the compartment level. Compartment planning is used to assign document items to each compartment of the selec selected ted vehicles vehicles (transport (transport units and compartm ents). The assignment assignment of pr odu cts to compartm ents is processed processed as follows. follows. First, First, the dispatcher selects selects a vehicle vehicle allocated to the shipm ent. The shipm ent contains a list of items to be transported along with a series of check boxes for the comp artments. The d ispatcher selec selects ts w hich material goes into w hich compartment by setting the check box. The system then automatically assigns volumes to the compartment. The assignment can be entered or mod ified ified on an other screen. screen. A nu mber of checks checks are performed at this point includ includ ing the following: following:

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Product Compatibility That the compartment is compatible with the product that is due to be loaded into it.

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Customer Compatibility That the vehicle has the correct characteristics to deliver to that customer.

After successful assignment of all document items, the shipment can be posted. If the the qu antities antities of a docum ent do not fit in in a comp artment, the system w ill ill only automatically assign the quantity that fits in the compartment. The outstand ing quantity can then be allocate allocated d to anoth er comp comp artment ( but n ot necessarily on the same vehicle in the shipment ). The shipment cannot be posted if compartment allocation has not been carried out. It is possible to change the docum ent item quan tities tities from from th e Docum Docum ent Quan tity screen screen in the scheduling transaction. When appropriate, the system displays and up dates the foll following owing d ata: q

Actual weight and volum e per vehicle vehicle

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Actual volume or weight per compartm ent

&KDQJLQJ6FKHGXOHG4XDQWLWLHV Through the shipment it is possible to change the quantity of product to be transported. This allows the scheduler a certain degree of flexibility to determ ine the quantity of produ ct actually actually shipped. The schedu schedu ler may wish to make adjustments, in order to optimize the use of the vehicle. The scheduler can make a judgment on balancing customer service (deliver as ordered) and cost control (efficient transportation). The system allows the following following fun ctions ctions w ith respect to changing quan tities: tities: q

Changing qu antities antities of alloc allocated ated p rodu cts

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Automatic calculation of unallocated quantities by subtracting the allocate allocated d quan tities tities from the d ocument item qu antities antities

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Automatic document u pdate at shipm shipm ent posting posting

When th e schedu schedu ler chooses chooses to change the qua ntity of a shipment item (i.e. (i.e. product) both the availability and credit limit checking functions are performed as set up for a specifi specificc produ ct or customer. This This occurs occurs wh en the quantity of product is increased. The delivery process with respect to overdelivery and underdelivery tolerances continues to be supported in the schedu schedu ling function.

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3RVWLQJ6FKHGXOHG6KLSPHQW Posting the scheduling transaction causes a shipment document to be created created r ecording ecording all the information described described above. The The d ocument statu s is up dated to “schedu led“ at this point. Following the creation of a shipment, changes are made to the underlying docum ent if the quan tity to be shipped h as changed changed du ring schedu schedu ling. ling. This This is an automated process. process.

%LOOVRI0DWHULDO The scheduling transaction, along with loading and delivery confirmation, will support the use of bills of material. The scheduling process will take place at the level of the head er ma terial in the BOM. BOM.

3ULQWLQJ The schedu schedu ling ling transaction supp orts the printing of the loading loading d ocument at a printer determined by u sing the core core outpu t determination process.

&KDQJLQJ'LVSOD\LQJ6KLSPHQW The system provides both Change and Display transactions. The capability to change the shipment will depend on the status of the document. For example, after after scheduling almost any field field can be changed. H owever, after loading con firmation it is not po ssible to change th e vehicle. Matchcodes

Matchcode(s) are defined to support the search strategies for the selection of shipments. Selection criteria for this matchcode are shipment type, status, user etc.

/RDGLQJ&RQILUPDWLRQ The loading transaction starts when a shipment is loaded on to a vehicle. The prerequisite for for loading is scheduling. A shipmen t can not be loaded if it it is not scheduled. A status hand ling function function controls the sequence between TD processes. Status handling is flexible, so that changes can be made to a shipment even after the shipment has moved to the loading or delivery processes. processes. However, changes changes cannot be m ade to the vehicles vehicles or d ocuments, when these have been load or delivery confirmed. The main functions of loading are to record the actual loaded quantities and to update all of the dependent data (shipment, delivery, order, stocks, tax liability, etc.). The place of the loading process within TD is shown below:

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The loading process is the same regardless of whether a Terminal Automation System (TAS) is in use or not for a particular terminal. When such a system is used, the data is transferred from the TAS system to SAP R/ 3 System System using th e same transactions transactions as wh en no au tomatic system system is in place.

/RDGLQJ%XON3URGXFWV The process process of load confirmation confirmation is comp comp leted leted for each each v ehicle/ ehicle/ plant combination. Each vehicle and plant maintains a separate status. After posting the loading confirmation confirmation for one vehicle/ vehicle/ plant the shipm ent is given given the status “p artially artially loaded“. If the loading confirm confirm ation has been p osted for all vehicl vehicles/ es/ plants in the shipm ent, the shipment is given the status “fully loaded“. For every loading confirmation of a shipment it is possible to identify identify the loading date and time. Bulk Product Quantities

Several important processes processes occur occur within th e loading confirmation confirmation step, the most important being the entry of actual loaded quantities. Quantities in scheduling are planned quantities which are proposed at the loading confirmation stage. For bulk produ cts the loaded qu antity can be entered entered in tw o ways: q

Activate proposal (accept the products and quantities proposed from scheduling)

q

Enter loaded quan tities tities directly, directly, if different different from schedu schedu ling prop osal

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Meters (singl (singlee or m ultiple meters can be used to enter the q uantities for for each line item)

q

Prior-to-load quantities can be entered, if product was left on the vehicle from a previous shipm shipm ent

The entry of prod uct qu antities antities has to be accomp accomp anied by the store location location number and the batch number (or valuation record) indicating the origin of the product. The temperature and density of the product must be entered at this stage, via a popup window, so that the ASTM calculation can be done and quan tities tities in other un its of measure calculated. calculated.

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TD offers the capability to define meters for store locations (tanks) from wh ich ich the quan tities tities are read. The meters are maintained as master data and are identified uniquely by a meter code. Based on the meter readings, the loaded quantities are determined. If a differing unit of measure is used for loading than that employed by the meter, the system performs an appropriate conversion either based on ASTM routines or “simple“ conversion factors. For example, if the meter is defined in kiloliters (ambient liters) and loading is done in liters (ambient) one click of the meter is converted into 1,000 liters. It is a requirement (mandatory) to assign a meter to a specific specific plant. On entering a meter code, a check is made to ensure the meter is defined defined w ithin the loading plant. Manufactures/Planned Rebrands

Manufactures or rebrands are a common practice in the oil business. It can happen that two products are mixed to produce a new product during loading onto the vehicle. This is common in the case where additives are added at the loading racks of depots to a base product to produce an enhanced sales prod uct to be delivered delivered to the customer. In the SAP SAP R/ 3 System, a sales Bill of Material (BoM) is used to support this activity. The bills bills of materials that is, sales sales prod ucts are used du ring scheduling w ithout being exploded exploded . However, du ring loading the sales produ ct is is exploded into its constituent components, and the quantities for these components can be entered. Although the bill of material proposes the quantities of the components to be loaded to make th e sales sales prod uct, it it is possible possible to enter the actual loaded loaded quan tities tities of all comp comp onents such as, the base produ ct and th e additive. This is is illustr illustr ated in th e following following exam ple:

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The quantity of the sales product is calculated by adding the loaded quantities of the components and using a weighted average calculation for the temperature and density. The same process also applies to “Planned Rebrand Rebrand s“. In In the oil business this this is used wh en d iffere ifferent nt p rodu ct names are used for stock keeping and sales purposes. The sales product number is entered in th e order, d elivery elivery and the schedule. For For accurate accurate stock keeping it is possible possible to enter the loaded quan tities tities of the actual actual stock keeping keeping p rodu ct.

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/HIWRQ9HKLFOH4XDQWLW\ When d elivering elivering prod ucts to a customer it can occur occur that the comp lete loaded loaded quan tity is not actually delivered. A certain certain quan tity of a prod uct may r emain on th e vehicle vehicle and come back to the d epot. This is referred referred to as the “left-on“left-onvehicle” quantity. The driver reports the left-on-vehicle quantities when he returns to the depot. The system functions surrounding processing of left-onvehicle vehicle qu antity are discussed in the section section “Delivery Confirmation“. If the the vehicle vehicle contains a quantity of bulk p rodu ct from from a pr evious shipment this is indicated indicated at loading confirmation confirmation as the “p rior-to-l rior-to-load“ oad“ quan tity. The The quan tity left left on the vehicle vehicle in a previous shipm ent can be entered or pu lled lled into the current shipment by activating the prior-to-load quantity. This amount together with the newly loaded quantity is then combined into the current shipment. A report can be used to reconcile left-on-vehicle and prior-to-load quantities for a specified period of time. The report displays quantities which have been left on the vehicle and not assigned to any subsequent shipments du ring loading confirmation. confirmation.

&RPSDUWPHQW$OORFDWLRQ The loaded qu antity of a bulk pr odu ct is alloc allocated ated at compartm ent level on the vehicle during the scheduling step. At loading confirmation the user assigns the actual quantity of product loaded onto the individual compartm ents in in the transport un its.

%DODQFH/RDGLQJ During loading, a balance load function is available to ensure that the un derlying docum ent quan tity is is equal to the loaded qu antity. If If the balance balance load ind icator icator is set in Customizing, the material quan tities tities which have been loaded must be assigned to the underlying documents. During balance loading, the loaded quantity is proposed as the discharge quantity in the delivery confirmation process. Balance loading is also a prerequisite for other processes, such as Rapid Delivery Confirmation. Two types of balance loading exist, and the method used depends on how the compartments have been loaded, which in turn is determined by the compartment load indicator. However, when balance loading is required, only the relevant relevant m ethod is used.

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%DODQFH'RFXPHQWV When the compartment load indicator is set to allow only one delivery per compartm ent, the process of balancing balancing docum ents mu st be carried carried ou t. The The process of balancing documents assigns delivery documents to the loaded quan tities. tities. The The m aterials aterials and quan tities tities are allocated allocated to delivery docum ents at the compartm ent level. level.

%DODQFH4XDQWLWLHV When multiple deliveries or multiple materials are allowed for the shipment, the process of balancing quantities must be carried out before loading can be confirmed. Unlike the balance documents process, within balance quantities the quan tities tities allocate allocated d to a particular d elivery elivery or delivery item may be changed or split between several compartm ents. At the balance loading stage, it is also possible to allocate or deallocate documents.

8QSODQQHG5HEUDQGLQJDW/RDGLQJ An example of unp lanned rebrand ing is a case case where the ordered pr odu ct is “Unleaded Regular“. At loading the driver finds that the product is not available. available. It is then d ecided ecided to provide th e customer w ith “Unleaded Sup er“ for the pr ice ice of “Unleaded Regular“. It is is possible to ind ind icate that this type of unplanned rebranding has taken place. The pricing and all the printed documents for the customer refer to the originally ordered product. The goods movements which are generated in the background are based on the actual actual shipped produ ct. ct.

0XOWLSOH0HWHUV In some oil companies it is common practice to load product using more than on e meter. The The mu ltiple ltiple meter function allows allows more than one meter to be used in loading th e vehicle vehicle comp comp artment.

&DSWXUHRI0HDVXUHPHQW'DWD Within the loading confirmation process it is possible to capture an unlimited number of measurement readings for the same product movement. All of the readings are stored in the shipment document for future reference, but are not posted against inventory and are not used to update underlying documents. Measurements that are to be used as the basis basis for inventory inventory p urp oses must be select selected ed for that p urp ose. When loading confirmation is completed, the postings must reflect the correct intransit stock position for the shipment. If there are no differences between the measurements, or the sender and receiver agree on a measurem ent, only one material movement is necessary necessary to move stock to the intransit plant.

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If there is a difference between the measurements, and the first measurement has already been used for the intransit posting, a correction of the loaded quantity is required. How the correction is handled depends on a decision between the sender and the receiver as to where the difference in quantity should be posted. If the receiver accepts the difference, the intransit stock is corrected corrected by p osting a gain or a loss. loss. If the sender accepts accepts th e d iffere ifference, nce, the necessary postings depend on the underlying documents used for the shipment.

6KLSPHQW6WRFN$GPLQLVWUDWLRQ During the loading confirmation process it is possible to correct quantities for shipments w hich hich h ave been completely loaded loaded . Changing the qu antities antities for a completely loaded shipment results in correction postings. What type of posting is made depends on the underlying document used for the shipment. For example, when loading against a shipping notific notification, ation, a goods receipt receipt is norm ally ally p osted. If If the quan tity is increase increased d as the result of shipm ent stock adm inistration, inistration, then an ad ditional goods receipt receipt is posted for the add itional itional quantity. A decrease in quantity results in a reversal of the goods receipt posting.

&RUUHFWLRQVDW'HOLYHU\&RQILUPDWLRQ When a shipm ent is partially partially delivery delivery confirmed confirmed and the und erlying erlying document is a shipp ing n otific otification ation or reservation, it is possible to: q

Change onboard stock movem ents m

Between intransit storage locations

q

Between vehicles

q

Post Post gains/ losse lossess du ring transport

q

Rebrand intransit stock

q

Change tax status of intransit stock

0RYHPHQWRQ%RDUG It is possible to change information about loaded stock for shipments that have a status up to “partially confirmed“. The changes are made from the delivery confirmation confirmation pr ocess. ocess. Using Using the m ovement on board function, function, it is possible possible to change the following following information abou t a loaded shipment:



q

Vehicle

q

Compartment

q

Intransit plant

q

Intransit storage location

q

Batch




q

Material

q

Quantity

3ULQWLQJ/RDGLQJ3DSHUV TD provides the capability to automatically print documents after loading the shipment. The printed docum ents are flex flexible ible in layout and content. An example of a bill of lading is supplied with the system. TD also uses the core output condition technique to allow flexible output definition for the docu men t (prin t, fax, fax, email, etc.) etc.)..

3RVWLQJ/RDGLQJ&RQILUPDWLRQ Status Status of Shipment D ocument

Posting the loading confirmation results in an update of the shipment docum ent. The The status after after loading confirmation confirmation can be on e of the following: following: q

Partial loading - loading loading is finished finished for one or more vehicle/ vehicle/ plant combinations, but still has to be done for other vehicle/ vehicle/ plant combinations before before the shipm ent has been comp letely letely loaded.

q

Completely loaded - loading loading has been d one for all all vehicle/ vehicle/ plant combinations combinations in the shipm ent.

Material Material M oveme nts

At the loading confirmation confirmation p osting osting the p rodu ct moves from norm al stock stock to a vehicle. The vehicle is is repr esented as an “intra nsit storage location“.

([FKDQJHV When products are loaded at the depot of an exchange partner, the loading confirmation is processed differently. This process is shown in the figure 6-13.

)LJ3K\VLFDODQG$GPLQLVWUD )LJ3K\VLFDODQG$GPLQLVWUDWLYH3URGXFW)O WLYH3URGXFW)ORZLQ([FKDQJH RZLQ([FKDQJHVV

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When a product is loaded from an exchange partner, the system performs the posting of a goods receipt to a purchase order (call-off). The goods receipt is the process of recording the actual quantity received in stock and generating the required inventory accounting entries. The product is received received in the “norm al“ storage locati location on and is then moved to the intransit storage location.

7DULIIV'XWLHVDQG3HUPLWV The hand ling of account account p ostings for for tax pu rposes is described described in th e chapter on Tariffs, Tariffs, Duties, and Permits (TDP). (TDP). In short, w hen prod ucts are p hysicall hysically y moved 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. For TD purposes it is important to note that there are physical movements of produ cts cts and thus the tax status definiti definition on has to be sup ported. The “From“ “From“ status is derived from the batch batch wh ere the produ ct is loaded. The “To“ status is defined by the intransit storage location, using customizing tables related to the bulk shipmen t type.

'HOLYHU\&RQILUPDWLRQ The final step in the distribution cycle is the confirmation of the delivery. This the final processing stage of the products which were loaded on the vehicle. The place of delivery confirmation within the TD process flow is shown in the figure figure below:

6FKHGXOLQJ 'HOLYHULHV 'HOLYHULHV 6KLSSLQJ 6KLSSLQJ QRWLILFDWLRQVRU QRWLILFDWLRQV 5HVHUYDWLRQV RU 5HVHUYDWLRQV


/RDGLQJ

'HOLYHU\

FRQILUPDWLRQ

FRQILUPDWLRQ



)LJ7UDQVSRUWDQG'LVWU )LJ7UDQVSRUWDQG'LVWULEXWLRQ3URFHVV)O LEXWLRQ3URFHVV)ORZ RZ

At delivery confirmation, four alternatives can take place with a given produ ct quantity: quantity: q

Produ ct was delivered delivered to a customer (or to another plant in th e case case of a transfer)

q

Produ ct is lef leftt on the vehicle vehicle for the n ext shipment

q

Produ ct is return return ed to a plant

q

Produ ct is lost lost or gained

Delivery Delivery confirmation confirmation mu st be completed for each each v ehicle ehicle in a ship ment. A shipment is completed when all assigned shipments are confirmed. The processing 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 handling function controls the sequence between TD processes. Status handling is flexi flexible, ble, so that changes can be m ade to a shipm ent even after the ship ment has moved to the loading or delivery processes. processes. However, changes changes cannot be made to the vehicles or documents, when these have been load or delivery confirmed. Within the delivery confirmation process, there are several methods of confirming the delivery, depending on the accuracy required for the information, and the amount of time available for processing the shipment. Rapid delivery confirmation confirmation does not r equire that the q uanities delivered delivered be reviewed, and can be performed for one specific delivery or all deliveries with the shipment. Fast delivery confirmation makes it possible to change the quan tities tities delivered delivered from those wh ich ich are prop osed. The delivery confirmation process includes functions for handling unplanned deliveries, and several options for dealing with undelivered product. It is possible to enter delivered quantities manually or by using vehicle meters du ring delivery confirmation. confirmation.

'HOLYHU\&RQILUPDWLRQ The delivery confirmation confirmation transaction sup ports th ree main bu siness siness scenarios: scenarios: q

Complete shipmen t is delivered delivered to the customers as load ed. In this case no gains or losses, no left-on-vehicle quantities and no return to store location postings occur (rapid confirmation).

q

Some deliveries from the shipment are delivered to the customers and are confirmed (partial delivery confirmation). If one chooses not to change quantities for the selected discharge-relevant documents, the same p ostings ostings ap ply as in the first scenario. scenario.

q

Some or all discharge-relevant documents are selected and the user changes the quantities actually delivered to the customers. In this case, the user determines how th e difference difference between the loaded qu antity and delivered delivered quan tity of a p rodu ct is managed (lost, (lost, gained, gained, left-on-vehic left-on-vehicle, le, or retur ned to stock). stock).

In the figure below, the subsequent steps and functions are schematically presented. The rem ainder of this section section d escribes escribes the Delivery Confirmation functions.

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)LJ'HOLYHU\&RQILUPDW )LJ'HOLYHU\&RQILUPDWLRQ6HOHFWLRQ6HTXH LRQ6HOHFWLRQ6HTXHQFH QFH

5DSLG'HOLYHU\&RQILUPDWLRQ Rapid delivery confirmation can be used to confirm one or all of the deliveries within the shipment. This is an especially useful process when gains and losses do not exist. Rapid delivery confirmation can also be useful wh en it is intend intend ed to d eliver eliver as loaded an d th ere are no gains and losses losses to be taken into account. The quantities confirmed confirmed for d elivery elivery u sing rapid confirmation confirmation are the sam e quan tities tities that w ere confirmed confirmed du ring the loading confirmation confirmation p rocess. rocess. To To use rapid confirmation, confirmation, balance balance loading loading m ust hav e already been carried carried ou t for the shipm shipm ent. It is possible to select select ind ividu al deliveries to be confirm confirm ed (p artial delivery). For individually selected documents it is also possible to perform a rapid confirmation. This means that for the selected documents the shipped quan tities tities equal the loaded quan tities. tities.

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)DVW'HOLYHU\&RQILUPDWLRQ The fast delivery confirmation transaction displays all the data necessary to amend and confirm quantities that were delivered. This information includes the meter data entries, receiving plants (for stock transfers), reason codes. This method of delivery confirmation has the advantage that all deliveries for a given vehicle are displayed on one screen.

6HOHFWLRQRI'LVFKDUJH5HOHYDQW'RFXPHQWV3DUWLDO'HOLYHU\ Unplanned D eliveries eliveries

If a delivery cannot be made to the expected customer and, rather than bringing the load back to the depot, it is decided that the product on the vehicle will be delivered to another customer, then the original document in the shipment is modified to show that no delivery, or if appropriate, a partial delivery delivery occurred occurred and a new d ocum ocum ent is added to the shipment for for the new custom er. This is is possible because of the flexible flexible status han d ling in TD. New delivery documents can be added to the shipment. However, a delivery can can only be ad ded to the shipm ent if the delivery exists exists and is not currently „scheduled“ „scheduled“ to another shipm ent.

$PRXQWRI3URGXFW'HOLYHUHGSHU&XVWRPHU It is possible to specify the delivered quantity for each delivered item. By man ual entry of the qu antities, antities, or by entering m eter readings, it is possible possible to specify specify exactly exactly the qu antity of each each p rodu ct delivered delivered to the custom er. ASTM Parameters

The ASTM ASTM param eters are entered and stored at loading confirmation. confirmation. These These parameters can be updated during delivery confirmation (for example due to a temperature change at delivery). A pop-up window for ASTM conversion can be called to specify the new delivery parameters. The ASTM corrected corrected qu antities antities are calc calculated ulated based on these values and u pd ated in the und erlying erlying d ocument, and w ill ill subsequently be used for postings. postings. Left-On-Vehicle

An important aspect of the delivery confirmation is the accounting for any left-on-vehicle quantity, which will be left in the intransit storage location with the ASTM parameters taken during the delivery confirmation. Extra processing processing will be required w hen th e truck is next loaded loaded to take account account of this stock stock in the new shipment. Return Return to Plant

If not all the product was delivered, some of it can be unloaded at a company plant - either the original plant or another one. The The retur n qu antity can also be rebrand ed as a new pr odu ct. For examp examp le, if the prod uct is return ed because it is contaminated, it could be returned under a different product name. Any value d ifferenc ifferences es wou ld be p osted as a gain or loss financially. financially.

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Gains and Losses

If the user posts a different quantity during delivery confirmation, the system considers the difference to be a gain or a loss. If a return plant is not specified the system will prompt the user to specify one. This plant is then ma de resp onsible for for the gains or loss. loss. The system can can also be custom ized to use sp ecific ecific tolerance valu es for gains and losses. If the gains or loss exceeds exceeds the tolerance value the u ser is required to specify specify a reason code for th e gain or loss. The reason codes are freely definable codes. The codes and their explanation are defined in a customizing table. A user specific report can then be bu ilt ilt to analyze the gains and losses. losses. Meters

Meter readings can be used to capture the delivery quantity. Meter data is stored each time a transaction passes through the delivery confirmation. A meter history file captures the information for use in the meter reconciliation function. Two-Step Transfers

TD also also supp orts the transportation function for stock stock movements from on e plant to an other. In In th e Core SAP SAP R/ 3 System, System, this fun fun ction ction is sup ported by using different purchase order types. A transfer order type is used to manage the movement of stock from one plant to another plant within the same company. When using these order types in TD, the additional functions functions are reflec reflected ted in the loading an d delivery confirmation confirmation transactions. transactions. The system generates both a goods issue (from the delivering plant) at loading and a goods receipt (for the receiving plant) at delivery confirmation. confirmation. To To enable these documents to be p rodu ced ced the user is required to specify specify both the storage locati location on and the batch nu mber of the pr odu ct. Excise xcise D uty Handling

As discussed discussed d uring th e loading step the prod ucts receive receive a tax status in the intransit stock. stock. When the p rodu cts are delivered delivered to the customer th ey receive receive a new tax status. The The new tax status is based based on the customer master. For tax posting purposes, a “from“ tax status exists (as discussed in loading confirmation) confirmation) and a “to“ status exists exists as retrieved retrieved from the customer m aster du ring d elivery elivery confirm confirm ation. When a return , gains gains or loss or goods receipt receipt is posted, the “to“ tax status is retrieved from the receiving batch. The effect of these changes to the tax status are reflected in the financial postings accomp accomp anying all the goods goods m ovements.

3RVWLQJ When posting the loading or delivery confirmation, the system updates the status of the shipment document. The following table shows the different posting possibili possibilities ties dep endent on the un derlying docum ents and th eir load load or discharge relevance.






D o cu m e n t D e l i v e ry

Lo ad Rel.

Disch. Rel.

A cti o n

M o v e m e n ts

X

X

L

311 311 Delivering Delivering Plant/ StLc StLc to Intran sit StLc StLc

D

601 601 Intransit StLc to Custom er

D

601 601 Intransit StLc to Custom er

X

Co m m e n ts

Not allowed scheduling

X Shipping Notification

X X

X

L

101 Goods Receipt to Intransit Plant/ Plant/ StLc tLc

L

101 Goods Receipt to Intransit Plant/ Plant/ StLc tLc

D

301 Transfer Plant/ Plant/ StLc tLc

Receiving

Re s e rv ati o n

X

Two-step Transfer

L

301 Delivering Intransit Plant

X

D

301 Intransit Delivering Plant

X

L

301 Delivering Intransit Plant

D

301 Intransit Receiving Receiving Plan t

L

311 Delivering Plant + 641 Goods Issue

D

101 Goods Receipt

D

641 GI to Intransit Receiving Receiving Plan t

X

X

X

X

Not planned during scheduling Not allowed scheduling

X

Plant Plant Plant Plant

at

at

to to to to

Not planned during scheduling

of No Goods Receipt osting for receiving plant

X

Not allowed

6KLSPHQW&RVW3URFHVVLQJ Shipm ent cost processing processing is used to carry out the calculation calculation and settlement settlement of shipment costs with a service agent. The shipment cost process involves several activities within TD: q

Prepare shipm ents for shipment cost processing processing m

Maintain routes in in shipm ent

m

Maintain partn ers (servic (servicee prov iders) in shipment






q

m

Assign Assign loading and discharge points

m

Assign Assign loaded and discharged quan tities tities

Create shipm shipm ent cost cost docum ents

and oth er shipment costs costs q

Settle Settle shipm ent costs with service pr ovider

The following following functions are pr ovided in shipm ent cost processing: processing: q

Entry and management of master data for shipment agreements, rates, and oth er shipment costs costs

q

Calculation of shipm ent costs for for each stage of a shipm ent

q

Settlemen Settlemen t of costs for for each serv ice agent

q

Transfer of shipment costs to Financial Accounting and Controlling

'RFXPHQW6WDJH$VVLJQPHQW Shipm ent stages (legs, (legs, load load transfer points, and border crossing crossing points) are used to record the geograp hical aspects of a shipm shipm ent. The The assignment of the un derlying docum ents of a shipment to th e stages within a rou te is required for the d ocument item quan tity assignm assignm ent, and therefore, also necess necessary ary for the creation creation of a shipm ent cost document an d the settlement settlement of costs costs with a service agent. A shipm ent can consist consist of several several points of departu re and several destinations. destinations. The shipment can require various modes of transport and involve various service agents. The connections between the locations, modes of transport, and service agents are all recorded in TD through the use of stages. To settle costs costs with a service service agent th e shipm ent cost process requires requires the asignm ent of underlying documents to the stages of a route. The shipment cost is based on the quan tity of prod uct transpor ted over the specified specified stages. Using the optional auto stage assignment function, stage reference information (from associated tranportation connection points) can be used to make an autom atic stage stage assignment. For examp le a plant, storage location, location, customer, or vendor information information can be used.

3DUWQHU$VVLJQPHQW Partner d ata is used to represent service agents in in TD. Multiple partners can be assigned to a shipment. The shipment cost process uses the partner assignments to settle all costs of the shipment, such as costs based on the quan tity of prod uct transported over specifi specified ed stages. Partner data can be maintained on the shipment header level (insurance par tner), on th e vehicle level level (carrier), (carrier), or on th e stage level.



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'RFXPHQW,WHP4XDQWLW\$VVLJQPHQW Document item quantity assignment is the assignment of load-relevant document items to discharge-relevant document items for the selected vehicle based on the material information. This is necessary for shipment cost processing, because of the flexibility required to support pipeline and mar ine shipm ents. This flexi flexibility bility is reflected reflected in the following TD fun ctions: q

Separate documents for loading and discharge of a certain quantity within a shipment

q

Splitting of quantities from load-relevant documents to multiple discharg-relevant discharg-relevant d ocuments or vice 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 by the creation of a shipment cost document for a shipment, or can be carried out in a separate step where the document and quantity assignments can be modified.

6KLSPHQW&RVW'RFXPHQW6WUXFWXUH The shipment cost document contains data that is important for processing a shipm ent. This This data rep resents the ph ysical ysical flow flow of a shipmen t. It It can, how ever, 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 shipment costs costs according according to th e method “most expensive main leg“. This method is not yet imp lemented for IS-Oi IS-Oill Down stream r elease elease 1.0D, 1.0D, but it is an examp examp le of wh y a separate d ocument is required for the shipment costs. ' ( / 

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W H V V  O L /   P L O H   P  (   H     P O H V H K W        ' J / V W Q F   L : Q F H  ' (  ' F H H    ' ( /  W ' V ( /  ' V W W Q   ' ' ( /  /  ' ( /

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6KLSSLQJSRLQW )LJ6KLSPHQW&RVW&DOFXODW )LJ6KLSPHQW&RVW&DOFXODWLRQ$FFRUGLQJW LRQ$FFRUGLQJWRÄ0RVW([SHQ RÄ0RVW([SHQVLYH0DLQ/HJ VLYH0DLQ/HJ³ ³

In the example above, the actual shipment flow plays a subordinate role in shipment 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 shipments together. This This is particularly particularly the case when the insuran ce for for a tr anspor tation chain is based based on a p ercentage rate of the total transportation costs. costs. The shipment cost document in the above example requires an appropriate reference to the shipment components for which you have to have separate shipment cost calculation (stages, shipment header). The above examp examp le shows a function of shipmen t cost processing processing wh ich ich w ill be available after Release 1.0D. The shipment cost document which is available in Release 1.0 1.0D D contains th e follow follow ing inform ation: q

q

Cost view m

Overview of items with display of calculated costs

m

Representation of costs for each document item

Document view m

q

Stages m

q

q

Overview of un derlying docum ents that are a part of the shipm shipm ent costs

Overview of stages that are part of these shipm shipm ent costs

Document flow m

The shipm shipm ent cost docum docum ent is integrated integrated into th e SD SD docum ent flow

m

It is is possible possible to call call up the docum ent flow flow from the docum ent

Status management

6KLSPHQW&RVW&DOFXODWLRQ Shipm ent costs costs are calc calculated ulated u sing the cond cond ition ition technique in standar d R/ 3 pricing. pricing. The standard pricing pricing fun ction ction is based on: q

Pricing Pricing procedu re

q

Condition types

q

Access Access sequ ence

q

Conditions

The pricing pricing p rocedure is determ ined by th e following: following: q

Transportation planning point

q

Shipm ent cost group

q

Carrier group

q

Shipp ing type group

The actual shipment cost calculation is carried out either on the basis of the shipment 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 shipment stages, or the underlying documents. The basis calculation can be one of the following: q

Underlying Underlying documents

q

Items from from the un derlying documents

q

Assigned Assigned quan tities tities

q

Vehicle

q

Shipm ent cost document item

$FFRXQW$VVLJQPHQWDQG&2$VVLJQPHQW How shipmen t costs costs are allocated, allocated, and how the GL accounts accounts a nd CO objec objects ts are determined is based on the shipment and the underlying (dischargerelevant) documents, as well as parameters set in Customizing for the shipment cost cost item category. Parameters for account account determination includ includ e: q

Inform Inform ation from from the shipm ent m

q

q

Company code

Inform Inform ation from Customizing m

Plant

m

Valuation class

m

Account Account assignm assignm ent category category

Document type of the und erying document (optional)

Account determination based on the document type of the underlying document is only possible if costs are allocated per document or document item. This allows allows the costs for inboun inboun d an d ou tbound movem ents within the same shipm ent or shipm ent stage to be separated into different different GL accounts. accounts. The CO objects can be determined based on the GL account or from the underlying documents (sales order, delivery, purchase order, or shipping notification). notification). CO objects objects includ e: q

Cost center

q

Profit center

q

CO order

q

CO/ PA objec objectt

The GL accounts as well as the CO objects determined by the system are only prop osals osals and can be mod ified. ified.

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6KLSPHQW&RVW6HWWOHPHQW 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:

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Manual and automatic release of shipment cost documents for settlement

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Creation of external service orders and entry of services provided

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Automatic settlement (ERS procedure)

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Transmission of shipment costs to accounting system

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Self billing (information for the service agent with respective information from shipments and shipment cost cost d ocum ocum ents)

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7DULIIV'XWLHVDQG3HUPLWV7'3 DVSDUWRI,62LO'RZQVWUHDP +LJK/HYHO6XPPDU\ The objective objective of TDP TDP with in R/ 3 IS IS-Oil Dow nstream is to incorp incorp orate functions specific to the oil industry for the handling, calculation, and posting of exci excise se du ty values in the R/ 3 System. System. The IS-Oil IS-Oil System System pr ovides: q

Excise duty (ED) handling from order entry through to invoice generation. Calculation of excise duty liabilities and receivables are made on each movement of dutiable product. Duties can be calculated based on multiple units of measure, including temperature-corrected quantities.

q

Maintenance of the du tiable tiable status of materials. Changes in th e qu antity of taxable inventory are calculated on each movement of dutiable product. The ED-paid inventory values of dutiable products are held separately from from th e book value of the inventory.

q

Functionality Functionality for for ma intaining and using d iffere ifferent nt tax rates for the same prod uct, depend ing on the intend ed u se of that pr odu ct. It is is possible possible to handle duty calculations for material moved between different plants with different different tax rates.

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Licenses, exemptions, and allowances are taken into account in duty calculations.

.H\)XQFWLRQ%HQHILWV By integrating excise excise du ty han dling in Purchasing, Materials Materials Management, and Sales the R/ R/ 3 IS-Oi IS-Oill Downstream component helps oil comp comp anies to calculate their excise duty liabilities correctly, and avoid fines or penalties that m ight resu lt from from incorr ect calculations calculations for the paym ent of taxes. taxes. The key function ben efits are as follows: Specific pecifically, ally, the the TDP app lication lication area ensures th at both the fun ctional ctional and legal requirements governing excise duty are met. TDP covers the identification and calculation calculation of exci excise se du ty liabilitie liabilitiess and claims, claims, wh ich ich occur w henever there ar e movements of dutiable materials between ED-paid and ED-unpaid locations or vice vice versa. ED-paid D-paid represents undbond ed/ tax produ ct where the excis excisee du ty tax is is paid. Ed-unp Ed-unp aid represents bonded bonded / untax prod uct where the excis excisee du ty tax is not yet pa id.

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The TDP application area integrates excise duty handling techniques in Materials Management, Sales and Distribution, and Financial applications thereby lead ing to consistency in in the ha nd ling of excise excise du ties. This functionality automatically proposes certain excise duty parameters and transfers these parameters among applications, thereby reducing the data input effort required by users and reducing the risk of data transcription transcription errors. TDP enables each unit of oil material to be identified as either ED-paid or ED-unpaid stock. This enables a business to track changes in ED-paid stock separately from ED-unpaid stock, and to select stock for issue based on its duty status. This gives companies flexibility in managing their exposure to excise duty tax and hence the flexibility to manage their cash flows accord accord ingly. This This is critical critical in count ries wh ere the va lue of the excise excise du ty in inventory is greater than the value of the material itself.

.H\,62LO)XQFWLRQV6XSSRUWHGE\WKH ,62LO'RZQVWUHDP7'3&RPSRQHQW The following TDP oil industry-specific functionality is provided within the R/ 3 IS-Oi IS-Oill Down stream System: System:

&DOFXODWLRQDQG3RVWLQJRI([FLVH'XW\ Within the downstream oil industry there is a requirement to be able to calculate calculate and repor t on excise excise du ty values wh enever a movement of du tiable tiable material occurs from a ED-unpaid to an ED-paid location or vice versa. In addition, it is necessary to capture the financial implications of material movements between ED-paid locations. Material movements between EDunpaid locations have no financial implications with regard to excise duty identification.

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The TDP TDP app lication lication area builds on Core R/ 3 by defining defining th e rules necessary necessary for excise excise duty calculati calculations, ons, and by p roviding the m echanism echanism to calculate calculate and post th ese exci excise se du ty values in real time. Examp Examp les of some of the posting ru les that are provid ed by TDP incl includ ud e:

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Tax liability postings for movements of dutiable material from an EDunp aid to an ED-paid ED-paid location location

q

Tax claim postings for movements of dutiable material from an ED-paid to an ED-unp ED-unp aid location location

q

Excise duty value of stock to be calculated separately from the material value and to be posted to a separate balance sheet account account

q

On consumption of dutiable materials, the excise duty value of a stock to be calculated separately from the material value and to be posted to a separate consump tion account. account. Relief Relief against inventory is posted against the excise excise du ty valu e in the stock accoun accoun t

q

Excise duty value differences to be calculated and posted whenever movements of d utiable materials materials occur, occur, w here two excise excise duty rates may apply

$670$3,%DVHG([FLVH'XW\+DQGOLQJ The Core R/ R/ 3 System System provid es the function for for holding stock stock in one u nit of measure (the “base” un it of measure). The The R/ 3 IS Oil Downstream Hyd rocarbon Produ ct Management (HPM) application application area enables users to hold stock in in ad ditional units of measure based on ASTM/ ASTM/ API conversions conversions from the base unit of measure. There There are mu ltiple ltiple standard un it of measure views for a given material to cover different requirements for purchasing, pricing, stockkeeping, etc. In addition, quantities are also provided in the excise duty unit of measure. These units of measure are user-definable (for further information, see the chapter chapter on H PM). The TDP application area utilizes these extra quantity units of measure to provide users with the ability to specify which of the various units of measure are used to calculate excise duty values on relevant material movements.

([FLVH'XW\+DQGOLQJIRU3URGXFW([FKDQJHV TDP integrates excise duty handling techniques with the specialized invoice processing processing functions developed for oil prod uct exchanges exchanges in the R/ 3 IS-Oi IS-Oill Downstream Exchanges (EXG) application area. This enables the invoicing of excise excise du ty values, even where m aterial and / or fee fee amoun ts are not invoiced.

$GMXVWPHQWVIRU&KDQJHVLQ([FLVH'XW\5DWHV It is possible to capture the difference in excise duty values resulting from changes in duty rates between accruing the liability and invoicing the customer, and then to record the financial implications of such differences in an approp riate riate manner. TDP enables users to specify how differences in excise duty values between the 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 is posted to the income statement, or handled as an additional excise duty liability liability or claim claim and posted to the balance sheet.

.H\,62LO)XQFWLRQV6HUYHGE\WKH&RUH56\VWHP $XWRPDWLF7UDQVIHURI([FLVH'XW\3DUDPHWHUV IRU3XUFKDVH6DOHVDQG3URGXFWLRQ2UGHU3URFHVVLQJ The Core Core R/ R/ 3 System System provides the framework to au tomate data tran sfer sfer within and between the different functional modules such as Materials Management, Sales and Distribution and Financials. The TDP application area extends this functionality by providing for the automatic proposal (default) and transfer of exci excise se du ty p arameters w ithin pu rchase, sales, sales, and production orders. A separate process then uses those parameters to calculate the excise duty values, and posts the relevant financial documents on a r eal-time eal-time basis. A basic framework upon which functionality for the handling, calculation and posting of exci excise se duty values can can be bu ilt, ilt, is is provided by the R/ 3 Core System, for example, the ability to split valuated materials. Enhancements pr ovided by IS-Oil IS-Oil TDP includ includ e the iden tification tification of the excise excise du ty statu s of a material. Within the dow nstream oil industry there is a requirement to be able to track dutiable material as either ED-unpaid stock or ED-paid stock. This is necessary to enable ED-unpaid and ED-paid stock to be separately controlled and valuated, and also to provide the ability to select stock for issue issue based on its excise excise duty status.

6SHFLILF)XQFWLRQDOLW\IRU1RUWK$PHULFD Certain functions have been identified which are relevant to the North American market. A customer can be exempt from certain taxes depending upon a variety of factors such as material, material group, customer, customer group , mode of transpor tation, origin, origin, destination, destination, and type of tax. The customer customer h as to present his exemption exemption license license and th e num ber mu st be entered into the system. When the exemption license expires, the customer mu st pay th e excise excise tax un til a new license license is provided. Condition types have been created for federal, state, county, and city excise tax rates. An interstate excise tax table defines tax rates for movements between states. Taxes can be charged either by the state of origin or destination.

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'HWDLOHG'HVFULSWLRQRI%XVLQHVV)XQFWLRQV6XSSRUWHG E\WKH,62LO'RZQVWUHDP7'3&RPSRQHQW This section describes in further detail how TDP handles excise duties. The excise excise duty valu es calc calculated ulated an d posted w ithin R/ 3 IS-Oi IS-Oill Downstream can be sum sum marized as: q

Liabilities to pay excise du ty to the tax au thor ity of a specifi specificc coun coun try

q

Tax Claims for returns from the tax authority

q

Excise duty value associated with the quantity of ED-paid inventory held in ED-paid locations

q

The costs of excise duty associated with the consumption of duty-paid inventory

q

Excis Excisee d ut y accounting differences generat ed by sp ecific ecific circum circum stances

q

Excise duty postings associated with gains and losses of product during a tw o-step o-step tr ansfer ansfer

The business parameters which control how excise duty values are posted include the following: q

The exci excise se du ty status of the material being moved; wh ether the m aterial is held held or moved to an ED-unpaid or an ED-paid location location

q

To which exci excise se du ty tax group the material belongs belongs

q

The mineral oil content of a particular material, that is, the percentage of the prod uct deemed liable for duty

q

For For w hat th e material will be used, such as for a pr ocess ocess of manufacture or for use as a fuel

q

The locations involved in a movement; certain locations within a country may ap ply excise excise du ty at redu ced ced r ates

q

The defined purpose of the movement itself, such as a goods issue to scrap scrap the material

q

The date on w hich the movement takes place

In the following following subsections, subsections, the business fun fun ctions ctions w ithin the d own stream oil industry which determine how excise duty values are calculated are described together with the TDP functionality which are provided to calculate these values. Examples of the postings which may result from the TDP fun fun ctionality ctionality are also given as ap prop riate.

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%DVLF3ULQFLSOHVRI([FLVH'XW\+DQGOLQJ Excise D uty Status

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The excise duty status of a dutiable material (ED-unpaid or ED-paid stock) and the natur e of the tax movement determine the natu re of the accounts accounts to wh ich ich p ostings ostings are m ade. For examp examp le: q

Whenever oil-based material is moved internally from a ED-unpaid location to an ED-paid location, it is necessary necessary to p ay excise excise du ties to the auth orities orities and an excise incurred . excise liability is incurred

q

When oil-based material is supplied from an ED-paid location by a vendor and becomes part of the company inventory at an ED-paid location, the company must record an increase in the excise duty inventory value associated with its ED-paid stocks.

A license number can be stored for each storage location, where ED-unpaid stock is held. This license can be printed on delivery documents involving ED-un ED-un paid stock. stock. It is imp imp ortant th at oil material can can be identified identified as either ED-un ED-un paid or EDpaid stock. This enables a business to track changes in ED-paid stock separately from ED-unpaid stock and to select stock for issue on the basis of its du tiable status. It is also critical critical that t he excise excise du ty valu e of inven inven tory be held separately from the underlying value of inventory. To make this possible each material is associated with at least two “valuation types” (valuation (valuation r ecords). ecords). A valuation typ e is a sub-record sub-record for the m aterial which holds the total inventory value and quan tity for for the m aterial of that type. Either a batch number or a valuation for every m aterial valuation type mu st be given for movem ent to allow the system to u pd ate the ph ysical ysical and financial financial balances balances for ED-unpaid and ED-paid materials. The update of the physical stock balance, the financial balances for the material cost of inventory, and for the ED value of inventory occur occur online and real time. The material master record requires the following information for an excise duty material: q

The excise duty tax group to which the material belongs. This is a userdefinable value and allows materials to be treated in the same way for excise excise duty p urp oses. oses. The The excise excise duty grou p to wh ich ich a m aterial belongs partially determines the exci excise se duty r ate which app lies lies to a movement of the m aterial. aterial.

q

The Th e mineral oil content of the material. This determines what percentage of the quantity of the moved material is deemed liable to excise duty.

The excise excise duty status of a par ticular ticular qu antity of inventory is defined in th e valuation record. Total stock on hand at each “plant“ (which could represent a tank farm, refinery, refinery, etc. etc. in R/ 3 IS-Oi IS-Oill Down stream) is held in m ultiple units of m easure in the material master record. In the valuation record, the total quantity of ED-paid ED-paid inventory is stored in the excise du ty rate rate unit of me asure. asure.

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The unit of measure used for the excise duty rate is defined for the excise du ty rate in th e Exci Excise se Duty Rates table. Excise Duty Postings

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Tax Liabil Liabil ities Tax liabili liability ty p ostings can be sp ecifie ecified d according to: q

The nature nature o f the material: material: Materials Materials with d iffe ifferent rent tax group s may be treated differently. differently.

q

The business function of the moveme nt: The R/ R/ 3 System System represents the business fun fun ction ction of a movement by using an internal transaction/event type (goods receipt, issue, transfer, etc.) and a movement type specified by the user for each movement of material in the system. A movement type can distinguish an issue for scrapping material from an issue of materials for for u se in pr odu ction, ction, for example.

The following general accounting rules are followed by the TDP functionality when determining the type of financial posting that is to be made: q

An excise duty liability is generally posted for material movements from Tax Status “ED-unpaid“ to Tax Status “ED-paid“ ,that is, from an EDunp aid to an ED-paid location. location.

q

An excise duty claim is generally posted for material movements from the Tax Status “ED-paid“ to the Tax Status “ED-unpaid“, that is, from an ED-paid location to an ED-unpaid location.

It is possible to specify that excise duty claims be posted to a separate accoun accoun t from th at used for excise excise dut y liabilities. liabilities. Tax Inventory When d utiable material is is received received into valuated inventory, a debit p osting osting is made to an account representing the “excise duty of inventory“. When du tiable tiable material is issued issued from valuated inventory, a credit credit p osting osting is mad e to an account rep resenting resenting th e “excise “excise duty of inventory“. All postings postings to inventory accoun accoun ts representing the valu e of stock stock are m ade withou t excise excise duty online, at the time th e material movement occurs. occurs. ,

Although the “excise “excise duty liabil liabiliti ities“ es“ account account m ay hav e postings mad e to it with a reduced rate of excise duty, the “excise duty of inventory“ account always has postings made to it with the full rate of excise duty for the material. This ensures that a m eaningful revaluation of the excise excise duty value of inventory inventory can be cond ucted w henever there is a change in th e app licabl licablee excise duty rate. Excise Duty Value at Consumption For all material received as ED-paid product directly to consumption, the excise duty value is posted to a separate cost account in the system. The same is true where ED-paid inventory is issued to a department of the company for consumption.

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Excise D uty “ Accounting Differences“ There are several several circ circum um stances wh ere, due to th e natu re of the dow nstream oil business, excise duty accounting differences may require the excise duty calculation and posting process to calculate and post balancing financial entries. The The following are som e examples: q

Movements wh ere a relief relief// redu ction ction in excise excise duty app lies. lies. Such as, wh en oil is sold sold to a customer from ED-paid ED-paid stock stock w ith a red uced excise excise du ty rate. rate.

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In the example, 10,000 liters of oil product are sold to a customer with a red uced excise du ty rate. A redu ction in rate is specified specified u sing a special code - the handling type - during the transaction. The system determines that a handling type of “03” implies a reduced excise duty rate of 500.00 DM per 1,000 liters at 15 degrees Celsius (ASTM calculations are ignored). This occurs occurs d uring the pr ocessi ocessing ng of the m aterial docum ent for this transaction. transaction. The excise liability which is posted as “excise duty cost of goods sold” reflec reflects ts the redu ced ced rate. However, the red uction in excise excise duty inventory is posted with the full rate of excise excise du ty for the m aterial. The full full rate of excise excise du ty is found found by reading the excise excise duty r ates table table with a m asked han dling typ e - i.e. “XX“. “XX“. The difference between the “excise duty cost of goods sold“ and the excise du ty value of inventory posting is posted posted to a “relief/ “relief/ redu ction“ ction“ accoun accoun t. This difference may be treated as a liability in some countries, or as a loss/ loss/ gain in others. The financial financial account account w hich hich is u sed to p ost this difference is controlled via a company-level parameter, which can be configured configured by u sers as app ropriate.

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q

Internal “plant-to-plant“ transfers of material. For example, oil product is sent sent from a refinery to a dep ot for storage prior to sale. In this case, several differences may ar ise: m

Excise duty rates at each plant may be different (possible in coun coun tries, tries, such as Italy, where p referential referential rates of du ty are app lied lied in certain districts). Also in certain countries, a movement of dutypaid stock from one location to another location with a higher excise du ty rate is treated as a liability. liability.

m

During a tw o-step o-step tran sfer sfer (where m aterial is is issued issued from one p lant and held as “intransit“ until received at the second plant), excise du ty rates at the receiving receiving plant may change du ring the course of the transfer. In some countries, such differences may be regarded as liabilities.

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Differences between excise duty liabilities booked and excise duty billed billed may occur both on the pr ocurement side and on the sales side. side. For examp examp le, a compan y m ay book liabiliti liabilities es based on the qu antity of oil product loaded on a truck measured in liters at 15 degrees Celsius. However, it is acceptable to bill customers for excise duty measured in ambient liters. In such a situation, a difference will arise between the excise duty liability recorded and the excise duty billed billed to th e customer.

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Similar differences could arise on the purchasing side if a dutyinclusive price is quoted to a buyer based on a different rate than that used by the compan y to value its its duty-paid inventory.

Excise D uty As sociated w ith Product Product Loss Loss or Gain During tr ansfer ansfer of oil produ ct between locations, locations, the quantity of oil produ ct issued may differ from the quantity of product received. There may be a physical loss loss or gain. A p hysical hysical loss may be du e to m easurement, spillage, spillage, leakage, etc. Excise duty postings which are made for transfers where quantities are monitored at issue and receipt (the two-step transfers) cater to both the scenarios described above. An “excise duty loss or gain“ is posted for the du tiable tiable quantity lost or gained. Excise D uty Rate Rate D etermination etermination Within R/ 3 ISIS-Oil Oil Down stream , it it is possible to control the excise excise du ty rate app lied lied to a m ovement of material based based on a set of param eters, 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 the location location at w hich ma terial is received.

q

By the n ature of the m aterial

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Different material groups may be given different rate structures within R/ 3 IS IS-Oil -Oil Downstream.

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q

With respect respect to the end u se of the prod uct A hand ling type associated associated with a movement of material can can be u sed to denote th e intended use of the m aterial. aterial. In such cases, cases, exci excise se du ty rates vary according according to the ha nd ling ling typ e used for a particular movement.

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The date from w hich hich th e excise excise duty r ate is valid. valid. The calculation process selects historic excise duty rates - from entries within the excise duty rates table - based on the posting date of the goods movement docum ent within the system. system.

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According According to the end use of the pr odu ct. It is possible possible for for u sers to define, wh ether a specific specific movement of material is is to be mad e with a hand ling ling type (a code which defines the end-use of an oil material). Handling types are, in turn, used to specify the excise duty status from which a material is bought, or the status to which it is sold. License numbers (to document relief or exemption from duty) may also be required for certain certain hand ling types.

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Posting of Excise Duty It is possible to control whether an excise duty liability or excise duty claim is posted for a p articular articular m aterials aterials movement.

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D efaults o f Excise Excise D uty Parameter Parameterss One of the aims of TDP is to reduce unnecessary data entry by proposing key excise excise duty p arameters for pur chase orders and sales sales orders. Other key functions functions w ithin the R/ 3 System, System, for for example, the control of prod uction processes using “production orders“ also use the default excise duty parameters.

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([FLVH'XW\+DQGOLQJIRUWKH3XUFKDVLQJ)XQFWLRQ Standard Purchase O rders rders TDP functionality allows the control of excise duty liability postings by company/purchase order type. type . Different purchase order types within the R/ 3 System have different iden tification tification cod cod es. These cod cod es can can be used to help mod ify ify the tax movemen ts allowable allowable within the R/ 3 System. System. Thus Thus a goods receipt receipt to a standar d p urchase order (type NB) within the R/ 3 System System for a ED-unpaid ED-unpaid to ED-paid ED-paid m ovement m ay be configured configured to p rovide excise excise liability postings, whereas a goods receipt to a specialized purchase order may r esult in no liability liability posting being recorded recorded .

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The key data required for exci excise se duty within th e pu rchase order is defaulted defaulted into the order from m aster records records and tables. tables. The Th e handling type from from the company/ purchase order type type is superseded superseded by defaults held in the purchasing information record (the purchasing information information record record holds d ata concerning concerning the p urchase of a sp ecif ecific ic material from a supplier). The Handling type is mandatory for purchase order items for du tiable tiable m aterial. aterial. The excise duty status from which the material is bought, or to which it is sold (from an ED-unpaid location or from an ED-paid location), is defaulted from the handling type. The excise duty status of the stock when it is received is determined by the valuation type w hich it is is given wh en it is moved into stock. stock. The valuation type is a label which which d etermines the d utiable status of material and is carried carried with the material through every material movement.

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Purchase Purchase Prices Prices Inclus ive of Excise Excise D uty

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Where purchases of taxable material include excise duty, it is possible to define purchase order prices so that the system calculates a valid price for the m aterial net of excise excise du ty liabilities. liabilities. This net pr ice is used to v aluat e the material on entry to stock stock or on consum ption. It is is important to h old the n et price in these circumstances so that the material purchase price history can be maintained. Incoming invoices can be split to separate excise taxes from materials to reflect different terms of payment.

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An additional condition in the purchase order item defines the excise duty rate to be used to calculate the excise duty portion of the gross price. Two main typ es of cond cond itions itions are allowed: q

External excise duty rates: rates : These These select select an excise excise du ty rat e au toma tically tically by reading the Excise Duty Rates table in the system using excise duty param eters within the pu rchase order item.

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Internal excise duty rates : These allow the user to specify the rate of excise duty applicable within the gross price using price condition records. The user can then accept the price proposed by the system or enter a price manu ally. ally.

The system system d edu cts the exci excise se du ty p ortion from th e gross (duty-inclusive) (duty-inclusive) price to give a valid net price for the material. At the time the goods receipt is posted, the system p osts the net mater ial cost cost to inventory (or expen se). The excise duty portion is calculated and posted to an excise duty value of inventory (or excise duty expense) account.

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The offset financial entry to the above financial entries is the accrual for the payable (net material cost or excise duty) and is posted to the “goods receipt/ invoice verificati verification“ on“ clearing accoun accoun t. This This accoun accoun t is cleared cleared in th e invoice verification verification process, when the invoice for the total cost (material plu s excise duty) is recorded. It is possible to clear excise duty values separately from the m aterial values. When the invoice is received for the purchased material, the system proposes the total value of the accrued material and excise duty cost for matching. The quantity of material for which the value is matched is also displayed. However, quantities are only displayed in the purchase order unit of measur e, which which m ay not be the excise excise du ty tax rate unit of measur e. The excise excise du ty rate used for the accru accru al calculation calculation is not displayed . Receipts of D utiable M aterial aterial Free Free o f Charge Charge In certain circumstances, oil product may be delivered free of charge while excise duty is still payable on the delivery. Note that pure exchanges of material are not covered by this scenario: the process of accounting for materials and fees in exchanges is covered in depth in the chapter on Exchanges.

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For examp examp le, a sup plier may d eliver eliver gasoline gasoline from an ED-un ED-un paid location location to an ED-un ED-un paid tan k. On receipt, receipt, the produ ct is is foun foun d to be contaminated and is returned. The supplier offers a replacement product, but has to provide the material from a ED-paid stock. The product is purchased “free of charge“ but excise duty is still payable. If a purchase order is raised for the replacement supply, it is possible to define a net price of zero and a gross price which reflects the excise duty cost per unit of material. Conditions, used to define the excise excise duty r ate, are used as in th e example in the section section “Purchase Prices Inclusive of Excise Duty”. This provides a workable solution for free-of-charge deliveries which incur excise duty. The postings wou ld be as follows: follows:

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Subcontracted Purchase Orders

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Within the R/ 3 System System it is possible possible to specif specify y that material be provided to a third-party (contractor) (contractor) who w ill ill use the material to create a separate, final final prod uct. This This business process process is hand led within SAP R/ R/ 3 System System throu gh the use of “subcontracted “subcontracted ord ers“. In the standard system, system, these provide th e ability to track material components at the supplier’s premises during the production process. Subcontracted orders are also used to automatically calculate calculate the inventory (or consum ption) value of the final final m aterial based based on the net values of the component materials provided and the cost of “manufacture“ of the final product. When material is issued to the subcontractor, it is treated as company-owned stock at a new location (i.e. materials sup sup plied to vend ors). In R/ 3, this stock stock is managed at a p lant level, level, because because the stock is not stored stored on the comp any’s any’s prem ises ises but ra ther at th e vendor’s site. Component materials are deemed consumed at the point that the finished finished material is received received as p art of compan y-owned stock. stock.

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Such orders might, for example, be used in the oil industry to monitor and account for issues of material to a third-party refinery with the aim that a final final blend blend ed prod uct be return ed. TDP provides a mechanism for calculating and controlling excise duty postings du ring the process of third p arty “man ufacture“ at a subcontractor. subcontractor.

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The exci excise se du ty p ostings mad e at the time of issue of material to a subcontracted order, and at the time of receipt of the finished product, are entirely userdefinable The figure below gives one example of how the system can be configured 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 excise duty “from“ status of the materials. No financial postings of excise duty liability or excise duty inventory occur for this transaction. In the figure above, the foll following owing m aterial movements w ould take place: place: q

Material “A” is issued issued : ED-unp aid

½

ED-paid

No excise duty liability posted. Material is moved from unrestricted stock in the issuing plant, and the stock of material provided to vendor at the plant level is increased. q

Material “B” is issued: ED-paid

½

ED-paid

No excise duty liability posted. Material is moved from unrestricted stock in the issuing plant, and the stock of material provided to vendor at the plant level is increased. The net effect on excise duty inventory is zero. When the finished material is received into stock, all excise duty entries are posted for this material transaction. Materials consumed in the production process are considered as follows: The excise duty status “from“ of the component material comes from the valuation typ e associated associated with th e material at goods issue to the subcontracted order.

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The exci excise se duty status “to“ for the consum consum ption p osting osting is derived from the Tax Status “from” defined in the purchase order (i.e. the Tax Status of the vendor). In the above figure, postings for consumption of materials provid ed are as follows: follows: q

Material “A” is is consum ed: ED-unp aid

½

ED-paid

From row 3 of the sample table set up in the figure “Example of Configuration for Subcontracted Orders”, it can be seen that no excise duty claim is posted for the consumption of ED-unpaid material. No redu ction ction of excise excise duty inventory occurs. q

Material “B” is consu consu med : ED-paid ED-paid

½

ED-paid

From row 4 of the sample table set up in the figure “Example of Configuration for Subcontracted Orders”, it can be seen that an excise du ty claim claim is posted for the qu antity of material consum consum ed. A redu ction ction in excise excise duty inventory is posted. A separate excise duty calculation is made for the receipt of the finished product: q

Material “C” is received received into stock: ED-unp ED-unp aid

½

ED-paid

From row 5 of the sample table set up in Figure 13, it can be seen that an excise duty liability is posted for the quantity of finished material received into stock. An increase in excise excise du ty invent ory is record record ed. The difference between the excise duty liability posted for the receipt of material into ED-paid stock and the excise duty claims posted for consump tion of du ty-paid m aterial represents represents the net liability liability to the excise excise duty authorities. Third Party Orders

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It may be n ecessary ecessary to buy oil prod ucts for delivery: delivery: q

To a third p arty manu facturer facturer

q

To a customer

Special order types or item categories are used for such purchases. In the standard system, no goods receipt is recorded, as materials do not pass throu gh the comp any’s any’s inventory. In ord er to p ost excise excise duty liabil liabiliti ities es for pu rchased ma terial, terial, it is is necessary necessary to record a valuated goods receipt receipt for the material. This results in the accrual of excise duty liabilities for the goods receipt, but will not result in an update to inventory accounts. The figure below dep icts icts a typical third p arty ord er scenario. scenario.

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Suppl ier´s ier´s Consignmen t Stock Held at Company Premises Premises The R/ R/ 3 IS-Oi IS-Oill Downstream Exchanges Exchanges app licati lication on ar ea deals with complex scenarios where agreements exist to lift product from other companies’ stock. For deta ils of this functiona lity, see the chap ter on Exchanges.

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However, it is also possible that our company may wish to make a straight purchase from a supplier on a consignment basis. Supplier’s consignment stock stock is defined as stock stock w hich remains the sup plier’s plier’s prop erty wh ile ile on ou r prem ises, ises, but w hich hich w ill ill become become ou r compan y’s y’s stock stock at th e mom ent w e lift lift the prod uct. We are assumed to hav e an un limited limited right to d raw off as mu ch oil produ ct from the consignment stock stock as is available 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. The system only allows receipts to ED-unpaid consignment stock from an EDunpaid location at the supplier’s premises, or receipts to ED-paid consignm consignm ent stock from an ED-paid ED-paid location location at the sup plier’s plier’s pr emises. emises. Receipts from Purchase Orders

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In line with all material movem ents, permissible permissible movements for r eceipts eceipts of oil produ ct (and th e resulting financial financial postings) can can be controlled controlled u sing the entries in the excise excise duty/ Tax Status Status table. The financial financial postings shown below are examp les. les. 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 qu ality insp insp ection ection m ay take p lace. Blocked stocks are treated as “non-available“ and may not be reserved or issued. Alternatively, oil prod ucts may be purchased for immed iate consump tion at receipt. receipt.

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excise du ty p ostings covering covering a var iety of scenarios scenarios for Receipts Receipts to inv entory: entory: excise receipts receipts from p ur chase orders to available inventory inventory might look as follows: follows:

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Receipt to blocked stock: Dutiable material can be held as blocked stock with an excise duty status. Excise duty postings take place for the situation in wh ich the material is received to blocked blocked stock. Blocked stock can be valuated, which means that movements to and from blocked stock can create create the r equired excise excise du ty p ostings. ostings.

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non-stock oil material is purchased with the Receipts Receipts to consumption: If a non-stock intention that the costs associated with procurement be charged to expense on receipt, the excise duty portion of the cost is separately expensed. Cost accounting postings for excise duty values can go to a separate cost center, and can be distributed amon g user d epartments. Postings Postings are as follows: follows:

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Multip le Excise D uty Rates (Tax Eleme Eleme nts) for a Purchase Purchase

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It is possible that a number of excise taxes are applied to a single goods mov emen t of taxable ma terial. For examp le, in some count ries, ad d itional environmental taxes may be levied levied on m ovements of oil produ ct. R/ 3 IS IS-Oil -Oil Down stream offers offers the capability capability to: q

Specify up to six “tax elements“ relating to a single movement of taxable material. All tax element excise rates must be based on the same taxable rate unit of measure and must be based on the same dutiable quantity for the movement. Likewise, all tax elements must share the same validity period. Tax elements are defined in the excise duty Rates table. The cumu lative lative value of excise excise duties are d isplayed isplayed on th e main screen. screen.

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Charge each tax element to a different account.

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Oil comp comp anies may w ish to hand le a scenario scenario where m aterials aterials are combined in a productive process to produce a new, finished material. A typical oil scenario scenario might be the blending of oil produ ct at a refinery refinery to prod uce a new material.

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Materials issued to a production process may be oil materials or non-oil materials, or a mixture of the two. For oil materials, it is possible to control whether it is permitted to issue ED-unpaid product to the production process by the type of the material. When a material with an excise duty status is used, the u ser can obtain information information abou t the tax. The TDP functionality assumes that during production, the process takes place as either an “ED-unpaid process“ or an “ED-paid process“. In other word s, the prod uction order carries carries an excise excise du ty status. This is is the status to which raw materials are issued. It is also the excise duty status from wh ich ich th e final final pr odu ct is receive received. d. The final material created in production may be either an oil product or a non-oil product. If the material is an oil-product, excise duty liabilities and excise duty inventory are posted for the receipt of the final material to stock. To summarize, excise duty postings (excise duty liabilities and adjustments to excise excise du ty inventory) are mad e on the basis of the tax movements w hich occur: q

For the issue issue of compon ent m aterials aterials to the p rodu ction ction p rocess rocess

q

For the receipt receipt of the final produ ct to inventory

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In the figure abov e, it is per mitted to issue a gas oil from an ED-pa id stock in the 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 to issue issue h eavy fuel oil from from ED-unp ED-unp aid stocks for for u se in prod uction. The The issue is treated as an “ED-unpaid to ED-unpaid“ movement and no excise duty liabil liabiliti ities es are posted. Again, it shou ld be stressed stressed that allowable mov ements and excise duty liability postings are completely controlled by the user through the configuration configuration of key tables. tables. Once the final product (a light fuel oil) is produced, the receipt to stock occurs from ED-unpaid production to an ED-paid inventory, excise duty liabilities liabilities are calculated calculated for the final m aterial.

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([FLVH'XW\+DQGOLQJLQ,QYHQWRU\0DQDJHPHQW)XQFWLRQ Overview: Inventory Movements

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Dutiable material can be received to inventory, managed within inventory, and issued from inventory using a series of movement types defined in the R/ 3 System. System. Some Some of these possible possible movem ents have been d escribed escribed above. As already discussed, it is possible to control allowable excise duty movements (from ED-unpaid to ED-paid location, etc.) in terms of the business purpose of the movement. Within the R/ 3 System, System, the business purpose of the movement is defined by a combination of event type (issue, receipt, transfer etc.) and movement type (receipt to blocked stock, issue to scrapp ing etc.). etc.). All contr contr ol of exc excise ise du ty statu s with m aterial mov ement s is set set in the Excise Excise Duty/ Tax Status Status table. Users Users can freely freely d efine efine the excise excise du ty postings (liabilities and changes to excise duty inventory) associated with a movement of material. material. In addition to standard movement types, it is possible for users to define their own movem ent types within the R/ R/ 3 Core Core System. System. Standard inventory movements to which excise duty postings can apply include: Receipts to inventory: q

From purchase orders

q

Without purchase order

q

To blocked stock

q

From blocked stock to available stock

q

Return Return ed m aterial from customers

Examples of postings for receipts from purchase orders are given in the section section “Receipts “Receipts from Pu rchase Ord ers”. The The R/ 3 System System also offers offers movement types to receive stock without a purchase order. Excise duty is posted in the same w ay as for receipts receipts from orders. Postings to blocked blocked stock stock are discussed in the section “Receipts from Purchase Orders” and in the section “Returns of Material by Customers”. Movements w ithin a single depot or other location, location, for examp examp le: q

Material to material movements (used for re-brand re-brand ing the prod uct)

q

Movements of material from unvaluated stocks (e.g. vendor-owned stock) to valua ted stocks

If at any point stock which does not belong to the company (e.g. customer stock stock held at the comp any d epot) is transferred to the compan y‘s y‘s ownership, excise duty postings take place based on the Tax Status the material is moved from and to (material movements between physical sites sites). ). See section “Movements of Material” for an explanation of alternatives and excise duty implications.

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Issues of material from inventory: q

Issues Issues to consum ption

q

Issues for scrapping

q

Issues Issues to p rodu ction ction

q

Issues Issues to subcontracted ord ers

If ED-paid material is issued, the excise portion of the material value is expensed separately from the net material cost and at a separate time. The cost accounting posting for excise duty is made to a separate cost center from wh ich ich a d istribution istribution of the cost cost may be m ade. Issues of ED-paid stock to scrap result in an offset posting to a “scrapped material“ cost account. For this purpose, the excise duty value is to be posted to a separate “excise “excise duty scrapp ed m aterial” aterial” account. account. Revaluation Revaluation of Excise xcise Duty V alue of Inventory Inventory w hen Excise D uty Rates Change Excise D uty Rate Change Change s A requirement exists in certain countries to revaluate ED-paid inventory when the excise duty rate for the material changes. If excise duty rates increase, the company may face an additional liability for the increase in excise duty value of stock. Conversely, if excise duty rates decrease, the company may be able to request an excise duty claim for the decrease in excise excise duty v alue of stock. stock. Compan ies can can d ecide ecide w hether or not they wish to condu ct a revaluation p rocess rocess for ED-paid ED-paid inventory.

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A change in excise duty rates is initiated when a new entry is added to the excise duty rates table. Changes to excise duty rates may involve changes to one of the follow follow ing: If ED-paid ED-paid inventory revaluation is switched switched “on“ in the control table, and an ad ditional entry for for a plant an d m aterial tax group is add ed to the excise excise duty rates table, it is necessary to conduct a tax inventory revaluation. It must be remembered that ED-paid inventory is always valuated at the full excise excise duty rate for the p lant and material, wh enever the ED-paid ED-paid material is moved to or out of stock. stock. Mechanism for Revaluation The principal aims aims in d esigning esigning a r evaluation mechanism are: q

To guarantee the integrity of a tax rate revaluation. revaluation . A single set of ASTM ASTM parameters is required so that the stock quan tity on han d can be converted to the excise duty rate unit of measure prior to excise duty revaluation. In In ord er to obtain this set of param eters, and also to provide an agreed quan tity for for th e revaluation, a stock-taki stock-taking ng m ust take p lace lace in the system. This need not be a physical count, however. Functionality is provided to allow “logical“ stock counts to be performed, where the book quantities are proposed as the counted quan tities. tities.

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To maximize the ability to post material movements during the qu antities antities to be revaluation. In order to gu arantee the integrity of the revaluated, all material movements for the particular material and stock stock segmen t level combination th at is the subject subject of a count are d isallow isallow ed in the time period betw een the posting of the stock stock count and the posting of the stock count d ifference. ifference. For For examp le, if if the stock count is related to a normal material item at a storage location then material movements for that p articular articular combination of material and storage location location are n ot allowed . If If on the other h and , the coun coun t is related to a special stock, stock, then material movements involving at the ind ividual material stock stock segment level are disallowed. ,

Assume a “futu re“ rate is add ed to the excise excise duty Rates Rates table for for Depot 01 and excise excise du ty Group C4. C4. A movement is posted w ith a posting date w ithin the validity period of the new rate. The system updates a future quantity and a future valu e field field in the valuation record. Where an h istoric istoric rate of excise excise duty ap plies for for the p osting osting d ate (and a tax revaluation has taken place), the system posts any liability with the excise duty rate applicable for the historic rate. However, because inventory revaluation has taken p lace, lace, any posting to excise excise du ty value of inventory is made at the current rate. An excise excise du ty d ifference ifference is posted . q

flexibil bility ity of To provide a flexible approach: The app roach sup ports th e flexi tax rate definition. A more simplistic approach would have limited the ways in which excise duty rates could be defined. Revaluation of EDpaid inventory is an optional feature and can be switched on and off at the p lant level, level, according 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“ quan tity field. field. The The w ay in w hich the pr ocess ocess operates may be illustrated illustrated in the following figure:

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Each time a material movement of dutiable material takes place, the posting date of the material movement is compared to a “check date“ held in the material valuation record. This determines whether “current“ or “future“ quan tities tities are up dated in the valuation record. Stock-taking tock-taking transactions have been changed to allow allow the op tion of posting stock-taki stock-taking ng w ith or w ithout the p osting osting of a tax rate change. If ED-paid inventory is to be revaluated, stock-taking must first take place. The posting s that w ill arise are as follows: follows: q

Excise Excise du ty inven tory account (d ifferences ifferences from from stock-taking only)

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Exci Excise se du ty losses/ losses/ gains from stock-taki stock-taking ng

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Excise Excise du ty d ifferences ifferences from the tax rate chan ge

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ED-paid inventory account (differences from tax rate change)

Stock-Taking ED-paid Product

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It is is possible possible within the R/ 3 System System to adjust the d uty-paid inventor y account to reflect any addition to, or reduction from the quantity of dutypaid inventory recorded as a result of stock-taking. When a revised inventory count is entered into th e SAP SAP R/ 3 System, System, the following following p ostings ostings occur:

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ED -unpaid Product Product As a general rule, changes in in the recorded quan tity of ED-unp ED-unp aid pr odu ct as a result of stock-taking stock-taking do n ot result in excise excise dut y postings. How ever, some coun coun tries (notably (notably Belgi Belgium um and France) France) operate a system of allowances for stock losses. Losses of ED-unpaid product above a certain allowance result in excise duty liability for the portion above the allowance. Gains of ED-unpaid product within an allowance may be sold without liability liability to excise excise d uty . TDP deals with the u se of allowances allowances for gains/ losses losses of ED-unpaid ED-unpaid product, prior to excise duty claims or liabilities being recorded. These allowances are defined in a table, which calculates the excise duty values and creates creates the p ostings. ostings. Customer Stock

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Where an oil company acts as the facilities manager for a depot, it may be the case that other oil comp comp anies choose choose to store prod uct at the same d epot. The facility manager needs to control the quantity of a product which “custom er“ oil comp comp anies can lift. lift. The facility manager is responsible for the payment of excise duty for lifted quan tities tities of ED-unpaid ED-unpaid stock stock w hich is to be moved to an ED-paid ED-paid location, location, wh ether these qu antities are the facili facility ty m anager’s anager’s own stock stock or another oil company’s stock. The facility manager may be able to bill the excise duty charge to the comp any th at ow ns the stock stock in certain circumstances. circumstances. Customer stocks are unv aluated in that stock values are not recorded recorded in the company’s books, books, whereas the comp any‘s any‘s own stocks stocks are valuated . When a third party stock is moved, the customer stock number must be included in the m ovement. Exci Excise se du ty liabili liability ty p ostings are still still mad e w hen a customer quan tity is moved from a ED-un ED-un paid location location to an ED-paid ED-paid location. location.

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0RYHPHQWVRI0DWHULDO Internal Transfers of Material Dutiable material may be moved between company-owned locations with implications for excise duty postings.

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The full full R/ 3 IS-Oi IS-Oill Down stream solution for inter- and intra-compan intra-compan y transfer of material is covered by the Transport and Distribution (TD) application area. TD enables scheduling, loading, delivery confirmation and load balancing to be handled for all methods of transport. For a full description of functionality in this area, please refer to the chapter on TD. Excise duty values are calculated and posted for each relevant material movement. How ever, some some companies may n ot wish to u se the TD fun fun ctionality, ctionality, or may wish to interface specialized distribu tion systems to the R/ 3 System. For For this reason, TDP functionality ensures that excise duty handling takes into account account standard R/ 3 System System functionality functionality to hand le transfers transfers of material material between locations. The technique used by a company to track material in transit between two locations varies based on the company’s requirements and the nature of the method of transport, e.g. pipeline versus truck. Three broad scenarios can be identified: q

One-step transfers: transfers: In this scenario, the material movement is recorded in the system as an “instantaneous“ transfer from one location to another. There is no provision for intransit stock tracking and no possibility to record gains or losses. These transfer types are suitable for “local“ “local“ transfers, transfers, such as tank to tan k, tank to tru ck, or tru ck to tank.

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Two-step transfers: In this scenario, material is first moved from one location to “intransit” storage and thus in a separate movement from intransit storage to the receiving location. Intransit stock quantities can be monitored by “tracking number” (equivalent to a shipment) and gains and losses can be calculated per shipment. This functionality is not in the standard standard R/ 3 Syste System m and is develope developed d as part of the HPM app licati lication on area as d etailed etailed in the chapter on H PM.

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One and two-step transfers against a “transport“ order This This pr ovides the same basic functionality as described above, but adds the use of a transport order to record the “sale“ of material from one plant to another. A d elivery elivery n ote is created created for the order and contains contains p rojec rojected ted loading and d elivery elivery dates. .

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Excise D uty Value s for Two-Step Transfers Transfers w ithout TD Integration Integration

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General Posting Rules for Excise Duty Values q

Excise duty liabilities (arising (arising wh en taxable material is is moved out of or to an ED-unpaid area): If the receiving location is ED-unpaid, liabilities are po sted for the good s receipt receipt on ly. If If the receiving receiving location is ED-paid ED-paid , liabilities liabilities are posted for th e goods issue on ly.

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Excise duty relief/reduction (arising when taxable material is moved with a red uction in du ty): If the receiving receiving location location is ED-un ED-un paid , relief/ relief/ redu ction ction is p osted for the good s receipt receipt only. If the receivi receiving ng location location is ED-paid, ED-paid, relief/ relief/ redu ction ction is p osted for the good s issue issue on ly.

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Excise d uty rate rate d iffe rences (arising (arising when th e tax rate applicable applicable at the send ing plant is different different from the tax rate at the receiving plant): Tax differences are only posted for the goods issue only. Differences Differences are only posted wh ere a transfer takes place place between tw o ED-paid ED-paid locations. locations.

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Excise duty rate changes (arising when a change in tax rate takes place for the receivi receiving ng p lant between th e time the m aterial is is issued issued from the sending plant an d received): received): Tax changes are only only posted for the final receipt once the gain or loss for the total transfer is know n.

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Excise duty gain/loss (associated with a physical gain or loss of dutypaid prod uct) is is posted for the final final receipt receipt of all produ ct associ associated ated w ith a shipment (transport num ber).

Posting Rule s for Material Material Quantities Quantities in transit are updated at the plant level. Unrestricted use stock and total stock stock quantities are up dated at a lower level. level. To facilitate the handling of gains and losses, the quantity in-transit may be negative. The balance of the quantity in transit against a single transport number must be reduced to zero when the gain and loss postings are completed. Examples of Excise Duty Postings In the examples shown below, the following following assump tions have been mad e:

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Exci Excise se du ty rates at both plant 01 and plant 02 are the same

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Excise duty rates do not change during the cycle of the plant-to-plant transfer

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A single issue issue and a single receipt receipt are mad e

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The price of mat erial at plant 01 and p lant 02 is is identical

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Issue Issue un it of measure, stock stock un it of measure measure an d tax rate unit of measure are identical

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Issue and receipt take p lace on the same d ay: 01. 01.01 01.9 .97 7

Changes in qu antities antities are shown below below the line in each each “T“ account. account.

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In the example below, below, the following following assum ptions have been m ade:

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Exci Excise se du ty rates between plants can var y

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Exci Excise se du ty rates are assum ed to change d uring the cycle cycle of the tran sfer sfer

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Reduced rates of excise duty are applicable

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The price of mater ial at plant 01 and p lant 02 is is identical

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Issue Issue u nit of measure, stoc stock k un it of measure an d tax rate u nit of measure are identical

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Handling of Gains and Losses Losses Exci Excise se du ty gains or losses losses are posted for the associated associated inventory gains and losses. Gains and losses are attributed to the receiving plant. A periodic calculation of gains and losses by analysis of transport number is possible. The transfer cycle would be closed manually after user criteria have been met (for example that no further movement has taken place against a transport num ber in the last ten d ays). At this point a final final goods receipt receipt is posted w ith a zero qu antity, and th e final final delivery indicator is is set.

([FLVH'XW\+DQGOLQJLQWKH6DOHVDQG'LVWULEXWLRQ Movements of dutiable materials within the Sales and Distribution need to be considered for their potential excise duty impact. Examples of the factors that need to be taken into account account includ includ e:

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The Tax Status of the product to be sold: This is determined in the system system by the selection selection of a valuation typ e or batch, from w hich material is deem ed t o be taken (see section section “Excise “Excise Duty Status”). This This is entered in the schedu ling ling or load confirmation confirmation fun ction ction of R/ 3 IS-Oi IS-Oill Downstream.

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Whether the customer has authorization to buy the product at a reduced rate of excise duty: Licenses are maintained in master data tables. During order entry, a license (if required) is defaulted from this master data, if it satisfies the matching criteria for the order line. To make sure that the right license type is determined, there must be a connection between the license type and the condition type in the pricing pricing procedu re.

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The end use that the customer puts the product to and whether this use requires autorization from the excise authorities: A “handling type” code signifying the end use of the product sold may be stored in the customer record, or the sales information record. This information may also be entered d irectly irectly in the order.

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The Tax Status of the location where the customer puts the product, ED -unpaid o r ED -paid: The excise excise duty status at receipt receipt by the customer is defined defined by the hand ling type.

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The date of the material movement: Valid from dates are defined for excise duty rates.

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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 user wan ts to specify specify an excise excise duty r ate wh ich ich is d iffe ifferent rent from th e one u sed to record the liabilities, they can do so by using the price condition records. records. The standard pricing pricing procedu re proposes an exci excise se duty value for the ordered quantity in all sales quotations and orders. See the section section entitled “Excise Du ty Ha nd ling in Sales Sales Orders”.

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Excise Duty Handling in Sales Orders The R/ 3 System System offers man y forms of “sales order“ . It It is possible to raise quotations, orders, contracts, scheduling agreements and deliveries in the system.

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Defaults for excise duty handling are passed to the sales order from customer records or from sales sales information records. Data can be taken from the customer, payee or consignee in in th e order. In all sales orders, the excise duty value associated with an order for EDpaid stock can can be calculated calculated and d isplayed. isplayed. A standar d R/ 3 System System pricing procedure is used to calculate excise duty within a specific order. Similar to the functionality provided for purchasing, two types of price condition are allowed: q

select an excise excise du ty rate au tom atically atically by External Excise Duty: Duty : These select reading the excise duty rates table in the system using excise duty param eters within the sales order item.

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allow th e user to specify the rate of excise excise Internal Internal Excise Excise D uty: uty : These allow duty applicable within the gross price via price condition records. The user can then accept the price proposed by the system or enter a price manually.

The system system ad ds th e excise excise duty portion to th e material price to give give a valid gross price for the material. For goods issues, the system posts the net mat erial cost cost to inventory (or expen se). This concept means that if users want to use the same excise duty rates in the billing as was used in the liability posting, one set of reference data for the duty rates needs to be maintained, namely the excise duty Rates table. Conversely, if users want to specify alternative rates, they can do so by creating price condition records. The figure below portrays this scenario.

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For the m anu al price cond cond itions itions a series series of “price cond cond ition“ ition“ records m ay be defined for excise duty rates. Such records indicate an excise duty rate for a quan tity of material. Each Each p rice rice condition record h as a u ser-defined ser-defined “key“. Two key structures are provided w ith the R/ 3 IS IS-Oil -Oil Downstream System. The keys in each case are: Other fields fields in the condition record are: q

Validity period

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ASTM/ ASTM/ API unit of measu re (base for excis excisee du ty calculation) calculation)

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Duty rate (per du ty quantity)

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Duty qu antity antity

The condition record mirrors the set-up of the Excise Duty Rates table that is used for excise excise du ty hand ling in in the R/ 3 Materials Materials Management function. During order creation, creation, the system searches for excise excise duty condition records with a key structure w hich matches the data in the ord er. If If found found , the excise excise duty rate is applied to the material quantity and the calculated value is add ed to the total order cost. cost. Tax Elements

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It is possible to have several excise duty tax rates associated with a sale of a material. Additional exci excise se and environmental taxes may be levied levied on a sale. sale. This scenario mirrors the one described for the purchasing function. Tax elements for excise duty calculations in the Sales and Distribution function are the same as those defined for the Purchasing function, i.e. they are held in the excise duty rates table. In addition, users can define tax elements in price condition records, if they do not want to use the same rates as those used for the liability liability posting. Up to six excise duty tax elements can be defined. The set-up of excise duty tax element price conditions in the Sales and Distribution function should mirror the set-up of tax elements within the excise duty Rates table. The standard functionality functionality for cond cond ition ition r ecords ecords ensures that calculate calculated d tax elements elements for an SD d ocument can be stored as separate condition types. In addition, it is possible to post each excise duty element separately to the general ledger. Excise xcise D uty Handling in Sales Invoices

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When creating a sales invoice, it is possible to pull over the prices (and excise duties) defined in the order without further revision. However, it is also possible to “reprice“ in the invoice, a pr ocess w hich reevalua tes some or all of the condition records records associated associated w ith an ord er and redefines the price of the pr odu ct if cond cond itions itions hav e changed. The m echanism echanism for recalc recalculating ulating excise duty in the invoice is identical to that used in sales orders. However, certain key criteria in the calculation of excise excise du ty are d ifferent: ifferent: q

The quantity u sed for the excis excisee d uty calculati calculation on in the invoice may be the ordered quan tity, the loaded loaded qu antity or the confi confirmed rmed (delivered) quantity

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The date used for pricing in the invoice (and hence selection of excise du ty rate) may be: the d ate invoice invoice is entered in the system, the d ate of loadin g, the dat e of delivery, etc. etc.

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Licenses: Relief and Exemption Handling Overview Authorities responsible for the collection of excise duties will often issue lice licenses nses or perm its to traders and require that th e license license reference reference num bers be quoted w henever du tiable tiable material is moved.

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In R/ 3 IS-Oi IS-Oill Down stream, excise excise lice licenses nses can be created, maintained and displayed. The presence of a license affects the processing during movement of dutiable product, where license type “rules” are used in the determination and p ossible ossible exemp exemp tion/ redu ction ction of the amou nt of exc excise ise du ty calculated. calculated. A number of different license types are available in the system (described below) and it is possible for a user to create new license types with reference to an existing license license typ e. The license types indicate a different processing method and the use of a different selection of the license master data. The major differences in processing processing are that: q

Excise duty (Europe) and pre-paid permits (Singapore) deal with both movem ent tax and customer invoicing invoicing imp licati lications ons

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North American methods are concerned with the tax determination and licencing licencing issues, at th e time of invoicing on ly

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Vend Vend or licenses licenses are held for record pu rposes

License Master Data It is possible to create, chan chan ge or d isplay licenses. Excise Duty License Types Customers w ho buy du tiable tiable oil prod ucts may h ave an exemption certific certificate ate (for a specific period), which frees them from paying excise duty. Alternatively, a customer may have an authorization number (again for a specifi specificc period) w hich redu ces ces the excise excise du ty p ayable to the sup plier. An excise duty license is always dependent on a customer specification (customer number or customer group), a material specification (material number or material group) and the handling type. The license applies for a specific specific period . The entry of a comp any cod e is optional, but if used , the license license is valid only for that comp comp any code. A maximum quan tity may be entered. entered. In the bu siness siness transactions transactions like order entry, the system system attemp ts to d efault efault a license 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 These taxes are North American du ties wh ich ich are d epend ent on a customer specification (customer number or customer group), a material specification (material number or material group) and the country. The company code, the mod e of transport and the sales docum ent typ e are optional. The The licenses licenses apply for a particular location, which is: q

For the Fed eral Excise Excise Tax, Tax, the cou ntry

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For the State Excise Tax, the state code or an entry in the alternate location field

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For the County Excise Tax, the state code and the county code or an entry in t he alterna te location field field

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For the City Excise Tax, the state code and the city code (county code opt ional) or an entry in the altern ate location field field

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For For the Other N A Tax, Tax, the state code code an d the city code code or the state code and the county code or th e state code, code, the county code and the city city code or an en try in th e alternate location field field The State Excise Tax in most cases applies only for the destination. In some states the tax applies for the origin as well. These states are registered registered in an interstate table. table.

The condition typ es, wh ich id id entify the d ifferent ifferent “excise” taxes, are linked in a separate configuration table to the applicable license types. Multiple condition typ es can can be linked to one license license typ e. The customer customer tax grou p field field in th e customer master minim izes the nu mber of license and condition records required for exempt groups, such as governmental agencies and schools. An “alternate” material group field is also available for minimizing the number of licenses. The Interstate table only requires the entry of specific states or jurisdictions that require licenses at the origin plant. The Interstate table includes the condition type, the state, county, or city that requires the ap prop riate lice license, nse, and th e valid valid “from” and “to” dates. Rather than mod ifying ifying the sup plied “user exits,” exits,” users can can u se the standard pricing condition access sequences to achieve unique requirements, such as the following: q

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A m atch on customer specifi specificc value using core pricing techniques techniques w ould stop the access sequence search, if a condition record was found. The customer- specific conditions are applicable for FOB (customer pick-up at compa ny “p lant”) transactions, transactions, with FOB identified identified in the “Incoterms “Incoterms 1” field.

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A match on plant-specific situations not covered by the standard tax exemption determination user exits, applicable for FOB transactions, wou ld allow the search to continu continu e to the next sequence. Includ Includ ed in th is condition condition w ould be the n ew N orth Carolina tax rules.

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The final FOB access sequence would check for standard condition type tax records, followed by the tax exemption determination user exit for license license validat ion.

A “sales order type” field is included in the license data to satisfy a Canadian legal requirement to enable specific customers to be tax-exempt on exchange related transactions, while being non-exempt for normal sales transactions. Vend or License 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 is man datory, the company code is optional. Pre-Paid Pre-Paid Permit This license type deals with those licenses which are issued for a defined quan tity of du tiable tiable material. The The compan y pays a specifi specified ed am ount for the license and is entitled to sell an agreed quantity of material from an EDunpaid area. The cost of the license is in effect prepaying the tax liability. The lic license ense may app ly to a group of materials materials which have a comm on rate of tax. Each time there is a delivery of the defined material, the quantity balance for the license is reduced until it is exhausted. A follow-on license may be specified specified for ad ditional delivery qu antities. antities. Mandatory inputs are a customer specification (customer number or customer group) and a material specification (material number or material group ). A compan y code and a country are optional. The lic license ense app lies lies for a specific specific period . Duty-Free Permit The du ty-free ty-free perm it is a lice license nse wh ich ich allows tran sfers sfers of prod uct between two ED-unpaid areas or allows the customer to buy duty-free (this would typically apply to an export customer or to a special-use customer such as the armed forces). The permit is dependent on a customer specification (customer number or customer group) and material specification (material number or material group ). A compan y code and a country are optional. The lic license ense app lies lies for a specific specific period . Control Control o f Reduced Excise D uty Rates A reduction in excise duty is indicated by a specific handling type in the Excise Excise Duty Rates tab le. For For each m aterial tax grou p, it is p ossible to specify specify redu ced ced rates of excise excise duty associated associated w ith specific specific user-defined user-defined h and ling ling types. The relationship between a handling type and the requirement for excise duty license details is specified in a reference table. The predefined excise excise price price conditions can also also be u sed to hand le redu ced ced rates.

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Validation of Exemption Licenses and Authorizations Licenses are validated in the sales order and invoice. Returns Returns o f Material by Cus tomers

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It is possible that dutiable oil products may be returned by customers, perhap s because because an u nacceptable nacceptable degree of contamination contamination has occurred an d the customer wishes to obtain replacement product. In such cases, it is necessary necessary to make a special “returns“ ord er in the R/ 3 System. System. This This order has no formal link to the original sales order. It is also possible to create a credit memo for the customer for the value of the material returned. Prices and excise duty values are calculated using price cond cond ition ition records. If the value of the credit m emo is based on the d ate of return of material to stock, it is theoretically possible that the excise duty value credited to the customer is different from the original excise duty charged, if the excise excise duty rate h as changed changed between goods issue and goods return. How ever, the exci excise se duty value can be “overwritten“ in in the credit memo w ith a manual entry. entry. At the time of material return, care should be taken that the excise duty parameters (Tax Status “from“ and “to“ and handling type) reflect those used in the original sales sales order.

([FLVH'XW\+DQGOLQJIRU7UDQVSRUWDQG'LVWULEXWLRQ Key Key areas that are covered by TDP include: q

It is possible possible to make excise excise duty p ostings ostings based on material movem ents with respect to produ ct loading loading or to un loading at the customer site. site.

q

The process that calculates calculates and posts excise excise duty can hand le cases cases where mod es of transport (truck, ship, ship, etc.) etc.) are deem ed to be ED-unp aid or EDpaid locations in their own right, or with cases where the Tax Status associated associated with th e customer is used for the prod uct in the tru ck.

q

Exci Excise se du ty gains and losses losses are calculate calculated d and posted for the material.

Du ty Liability Liability versus D uty Billed D iscrepancies iscrepancies

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The broad rule is that excise duty liabilities to the customs authorities booked for the selling company should match the excise duty billed to the customer. This This can be achieved achieved by ensuring th at the excise excise du ty rates to be used in the R/ 3 MM Module (defined (defined in the Excise Excise Duty Rates Rates table) table) match the excise excise du ty rates to be used in th e R/ 3 SD SD Modu le (defined (defined in pr ice ice condition records) .

How ever, users are able to configure configure the system so that d iffe ifferences rences between booked liabiliti liabilities es and billed billed d uty may arise. arise. For example, in some countries, it is allowable to base excise duty liabilities on quantities of product measured at a standard temperature, while excise duty billed to the customer may be based on the quantity of oil product delivered in ambient liters. Differences between excise duty liabilities

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booked and excise excise du ty billed w ill occur occur in this case. The TDP process which calculates the duty postings, includes parameters to enable users to specify whether excise duty should be balanced, that is, whether additional excise du ty liabili liability/ ty/ claim claim postings for the d iffere ifference nce will be made. If excise duty is not to be balanced, the process tracks the excise duty liability booked against the excise duty billed and accounts for any differences. Differences are treated as a “windfall profit or loss“ with an appropriate adjustment to revenue. Exci Excise se du ty liabili liabilities ties may be p osted for the m aterial movement representing the loading (schedu (schedu led quan tity) or the m ovement rep resenting the delivery at the customer location (confirmed quantity). Differences between the posted liabil liability ity and the excise excise du ty billed billed to the customer can be tracked in the delivery note. The system posts differences for the final goods receipt (if invoicing is completed before the delivery is recorded) or for the invoice creation (if delivery is completed before invoicing). Any difference is posted as a “windfall profit/ profit/ loss“ loss“ against a revenue account. account. Excise duty postings associated with a difference between posted excise liabilities and billed excise duty would look as follows. It should be noted that values only (and not qu antities) antities) are balanced balanced in the d iffe ifference rence posting.

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It is possible to specify whether excise duty balancing is required. In addition, a further indicator must be set to identify whether vehicles used for 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 is taken from the customer’s intended use of the prod uct.

([FLVH'XW\+DQGOLQJIRU([FKDQJH)XQFWLRQV Requirements for excise duty handling with respect to processing of oil product exchanges primarily focus on the integration of standard excise duty techniques with specialized invoice processing functions required for oil-product exchanges. Invoices for exchanges may involve the billing of product costs only, fees only, excise duties only, or any combination of these. A more detailed description description can be foun d in the chapter on Exchanges. Exchanges. Excise duty values continue to be calculated for purchase and sales orders using stand ard excise excise du ty techniques: q

Excise duty values in “purchase“ agreements can be specified in the contract using the price condition technique, if the material price includes excise duty. For goods receipts, excise duty liabilities are calculated calculated using the rates in th e Excis Excisee Duty Rates table.

q

Excise duty values in “sales“ agreements can be specified using either the price condition technique or the Excise Duty Rates table. For goods issues, excise duty liabilities are calculated using the rates in the Excise Duty rates table. table.

Excise D uty fo r Exchange Exchange Invoi ces

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Invoices for exchanges may include any combination of fees, duties and material costs. It is also possible that all invoiced charges may be “netted“ un der the agreement w ith a p eriodic settling settling of accounts. accounts. For prod uct received received from exchange exchange p artners: q

Pure material exchange - no product costs are invoiced. For goods receipts, receipts, exci excise se du ty is charged to th e goods received/ received/ awaiting invoice invoice accrual account. For invoice receipts, the excise duty portion is matched to the entry on th e goods received/ received/ awaiting invoice invoice accrual accrual accoun accoun t. Fees Fees are m atched separately.

q

Exchange with material costs billed. In this case, for goods receipts, excise excise duty is add ed to th e material cost cost and a single posting posting is mad e to the goods received/ received/ awaiting invoice invoice accrual accrual account account at goods receipt. receipt. If an invoice is received, the material and excise duty portion of the cost is cleared cleared as a single item. Fees Fees are matched separa tely.

In the case of invoice netting, all charges under the exchange agreement are cleared and a net payable or receivable is booked against the vendor or customer account account for the exchange exchange p artner, as app ropriate. For full details details of the netting process, please see the chapter on Exchanges.

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5HSRUWLQJ The TDP application area provides the FI-Special Ledger (FI-SL) structure for reporting. A line item table and a summary table structure is provided. The ledger ledger stru ctures enable users to report excise excise duty p ostings ostings based on a variety of key fields, for for examp le: q

Company code

q

Plant

q

G/ L acco account unt

q

Valuation Valuation typ e

q

Tax Statu s moved from

q

Tax Status moved to

q

Hand ling ling type

The process which calculates and posts the excise duty values also “populates” the excise duty Special Ledgers. The figure below shows the relationship relationship of da ta held in a source document used for exci excise se du ty posting and the data that can be held w ithin the excise excise duty special ledgers. The excise duty Special Ledger collects details from all transactions involving dutiable materials, including those that do not involve an excise du ty posting, such such as ED-un ED-un paid to ED-unp aid transactions transactions and transactions transactions mad e at an excise excise du ty rate of zero. With the excise excise du ty Special Special Ledgers Ledgers installed, installed, the stand ard R/ 3 Report Report Writer or Report Report Painter can be used to bu ild ild custom reports.

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%XON'LVWULEXWLRQ5HTXLUHPHQWV3ODQQLQJ %'53DVSDUWRI,62LO'RZQVWUHDP +LJKOHYHOVXPPDU\ One of the building blocks of effective supply chain management in the Oil & Gas ind ind ustry is the accurate accurate mod elling elling of controls and constraints wh ich ich affect affect the hand ling of bulk m aterials. The SAP IS-Oil Downstream Bulk Distribution Requirements Planning application area will provide a range of tools and process optimizations which are intended to support bulk material supply chain modelling across the extended enterp rise. rise. The first first steps tow ard s this objecti objective ve is the develop men t of a range of master data extensions which facilitate the control and definition of objects used by bulk sup ply chain management p rocesses rocesses..

.H\IXQFWLRQEHQHILWV A range of key function benefits are provided at the current release of the SAP IS-Oil Downstream (Bulk Distribution Requirements Planning) Bulk Replenishment Replenishment app licati lication: on: q

The site control pa ram eters function benefit allows you t o set site site controls controls in you r system.

q

The replenishmen replenishmen t control parameters function benefit benefit sup ports the setting setting of replenishment control param eters in in you r system.

q

The storage objects objects function ben efit allows allows you to d efine efine objects objects that store materials in in you r system.

q

The sales sales meters function benefit sup por ts the definition of sales sales meters in your system.

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%XON'LVWULEXWLRQ5HTXLUHPHQWV3ODQQLQJ%'5 %XON'LVWULEXWLRQ5HTXLUHPHQWV3ODQQLQJ%'53DVSDUWRI, 3DVSDUWRI,62LO'RZQVWUHDP 62LO'RZQVWUHDP

.H\,62LOIXQFWLRQVVXSSRUWHGE\WKH5,62LO 'RZQVWUHDP&RPSRQHQW The following master data objects exist at the current release of the SAP IS-Oil Downstream (Bulk Distribution Requirements Planning) Bulk Replenishment application: q

Site control parameters

q

Replenishment Replenishment control parameters

q

Storage objects

q

Sales m eters

In add ition ition some d emonstration Internet transactions transactions are pr ovided to allow allow users of IS-Oil IS-Oil BDRP BDRP to experimen t w ith som e of the p rocesses which w ill be fully fully realised realised in futur e releases releases of the p rodu ct.

.H\,62LOIXQFWLRQVVXSSRUWHGE\WKHFRUH5V\VWHP IS-Oil BDRP master data objects always appear in the system as sub-objects of other master d ata objects. objects. This means that access to BDRP BDRP master data objects objects is always v ia a higher level object. object. For example, the BDRP BDRP master da ta object object ’storage ’storage ob ject’ is stored in th e system in one centr al p lace, but is referenced for for mainten ance pu rp oses by its ow ning object. object. Ow ning objects objects in the case of storage objects can be customer ship-to parties or IS-Oil MRN bu siness locations. locations.

'HWDLOHGGHVFULSWLRQRI%XVLQHVV)XQFWLRQV6XSSRUWHGE\ WKH,62LO'RZQVWUHDP%'53&RPSRQHQW 6LWHFRQWUROSDUDPHWHUV There is a requ irement to record information at the site level wh ich ich is used to control or influence bulk logistical processes such as delivery planning, shipmen t schedu schedu ling ling and u nloading operations. For For example, the forecasti forecasting ng of a replenishment event in terms of quantity and time is dependent on a nu mber of factors. factors. One of these factors factors is is the link link betw een consump tion of bulk pr odu ct at a retail retail site site and the op ening hou rs of that site. If a retail site is is not open for business over the weekend period, no product will be sold at the site and so no consump tion will occur. occur.

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IS-Oil BDRP Site Control Parameters component can be used to record such site level information which is specific to bulk material handling processes. The mechanism mechanism p rovides an ad ditional screen screen for standard site managem ent dialogs, in which both a standard set of site control parameters and user installation defined site characteristics characteristics can can be main tained . Initially, the Site Control Parameter maintenance screen will be available from the SD customer ship-to party maintenance dialog and the IS-Oil MRN business location maintenance dialog.

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Fig. 8-1: 8-1: The effect of sales hours on replenishmen t calculat calculations. ions.

5HSOHQLVKPHQWFRQWUROSDUDPHWHUV You can enter parameters to control replenishment at a delivery site using the IS-Oil IS-Oil BDRP Replenishmen t Control Parameters screen. An ad ditiona l screen is provided within delivery site (e.g. customer ship-to) master data. In this screen you can define replenishment control parameters for each replenishable material at the customer site. An add itional fun ction benefit of IS-Oil IS-Oil BDRP Replenishmen t Control Parameter component is a structure for recording the stock figures figures entered from external system for the delivery site. &XVWRPHU &XVWRPHU

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Fig. 8-2: Stock report report for a delivery site b ased on external external data.

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The IS-Oil BDRP Replenishment Control Parameter component is supplied in prototyp e form form only at the current release. release. Processe Processess which use the data contained contained in th is scree screen n are currently being developed. The structur structur e of this screen and the field definitions on this screen are subject to change, before these processes processes are imp lemented.

6WRUDJHREMHFWV In connection with bulk material handling processes such as delivery planning, scheduling and unloading operations there is a requirement to record information about the tanks, containers or silos which are used to receive the bulk material. For example, the available capacity of customer storage for a particular material should be kn own before before a d elivery elivery is schedu schedu led to that customer, in in order to avoid unn ecessary ecessary return s or even even hazard ous overflows. overflows. In another case it may be mandatory to confirm the compatibility of the target stock receiving object with the material to be unloaded, to prevent damage or contamination. The IS-Oil BDRP Storage Object Characteristic component provides a standard technique within the system to define and maintain one or many storage objects objects for for any given stock holding object object within th e R/ R/ 3 system. At the current release storage objects can be defined for the following stock hold ing objects: objects: q

Customer Ship-to

q

Business Location. Location.

The Storage Object Characteristic component is used to record information about stor age objects objects wh ich ich is specific specific to bulk m aterial hand ling processes. processes. For each storage object, the component provides screens for basic specifications, maintenance data, assignments assignments and linear/ linear/ volumetric conversi conversion on d ata. Individual storage objects are created with reference to storage object types wh ich ich are maintained in custom custom izing. Storage object object types serve both to type storage objects and as reference storage objects for specification and linear/ linear/ volumetric conversi conversion on d ata.

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Fig. 8-3: 8-3: The allocation of storage objects to to a site object within IS-Oil

A facility is provided within the storage object master data to manage the conversion of linear dip values to physical volum es. Such conversions are commonly referred referred to in the ind ustry as tank st rapping rapping conversions. During a delivery or stock stock taking cycle cycle the contents of a particular tank/ silo silo can be evaluated through th e use of a dip reading. The dip read ing is is normally taken with a calibrated rule inserted into a perforated guide tube. The guid e tube ensures vertical verticality ity of the rule. The dip reading is used to measure both depth of product and water in any particular tank or tank group. The tank/ silo silo or tank/ silo silo group consist consist of storage vessel vesselss of irregular irregular shap e - typ ically ically these shap es will sph sph erical or cylind cylind rical. This mean s that the conversion between a linear dip and the volume of product held in the tank is non -linear -linear . The ind ustr y response to this is to define conversion tables wh ich contain a nu mber of conversion constan constan ts. Each Each conv conv ersion constan constan t consists of two fixed values, one of which represents a linear measure and the other the volumetric capacity which is contained in the storage object for a dip of the specifi specified ed linear value. For a given d ip of a specific specific storage object, it is possible to ascertain the volume of product contained within the storage object. object. Because the linear and volumetric values of a sequence of conversion constants d o not hav e to be co-increment co-increment al, it is possible to mod el irregu irregu larly shaped storage objects.

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The IS-Oil BDRP Storage Object Characteristic component supports the definition of sets of linear/ volum etric conver conver sion constants (LVCC (LVCC sets) for: q

Storag e object object types, wh ere the conv ersions ap ply to a ll storage objects objects of a particular type

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Individual storage objects, where the conversions apply only to a single storage object object

6DOHVPHWHUV In connection with bulk material handling processes such as delivery planning, scheduling and unloading operations there is a requirement to prod uct flow flow meter data and convert it to produ ct quan tities. tities. For For example, the material consumption data of a delivery site is required in order to calculate calculate replenishm ent quan tities. The d ata is is available in the form of meter read ings. A log is therefore requ ired of each each meter installed at the site along with the assignm assignm ents of meters to materials at the site. Material consumption quantities can then be calculated by subtracting the current reading from the previous reading for each meter, making adjustments wh ere necessary necessary and aggregating the converted qu antities antities by material. The IS-Oi IS-Oill BDRP BDRP General General Meter Manag ement comp onent provid es a stand ard technique within the system to define and maintain one or many meters for any given stock stock holding objec objectt within the R/ 3 system. system. At the current release meters can be defined for the following following stock stock h olding objects: objects: q

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Customer Ship-to

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Fig. 8-5: 8-5: How the sales meter function benefit wi ll be used to calculate calculate sales quantities

The IS-Oil BDRP General Meter Management component is supplied in prototyp e form form only at the current release. release. Processe Processess which use the data contained contained in th is scree screen n are currently being developed. The structure of this this screen and the field definitions on this screen are subject to change, before these processes processes are imp lemented.

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'HPRQVWUDWLRQLQWHUQHWVFHQDULRV The BDRP BDRP comp comp onent p rovides some d emonstration Internet tran sactions sactions to allow users of IS-Oil BDRP to experiment with some of the processes which will be fully fully realised in futu re releases of the prod uct.

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*ORVVDU\RI%'53VSHFLILFWHUPV OLQHDUYROXPHWULFFRQYHUVLRQFRQVWDQW A pair of values which describe a permanent correlation between a linear quan tity and a volum volum etric quan tity. Linear/ Linear/ volumetric conversion conversion constants constants form the basis of calc calculations ulations mad e to determine th e quan tity of material in a storage object for any given measurement of the depth of material in that storage object. object.

VWRUDJHREMHFW Any object object in th e system for which storage process relevant relevant d ata need to be captured . For example, a delivery delivery schedu schedu ler needs needs to know the maximum capacity capacity of oil oil tanks at both a plant an d a customer business partner.

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VWRUDJHREMHFWFKDUDFWHULVWLF Any variable or d escriptive escriptive text wh ich ich d escribes escribes an object object w hich can be u sed to store materials. Some storage object characteristics are entered and maintained in ap plication plication specific specific objects objects such as p lants and storage locations. locations. Other storage object characteristics can be maintained using the storage object characteristic maintenance tool.

VWRUDJHREMHFWVHTXHQFHQR 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 the numbers 001, 066 and X74.

VWRUDJHREMHFWW\SH The technique used to support the definition of common reference data for storage object char char acteristic segmen t instan ces.

WDQNVWUDSSLQJ The process whereby the quantity of a material in a storage object can be determined from the depth of material in that storage objec object. t. Accurate Accurate tank strapping requ ires the maintenance of a large nu mber of linear/ linear/ volumetric conversion constants. The system uses these constants to calculate a volumetric quantity from from an inp ut linear measure or tank dip.

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IS-OIL

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