IS Oil F&A F& A Pricing Pricing –Introduction to Configuration Background In Oil and Gas industry, the price of certain petrochemical products like Benzene, Ethylene et al may vary every day. Since the shipping process for petrochemical products can take long, especially when the shipping method is seamarine, it is common that the price is determined !y the average of these prices over a time range "a week or month# plus a surcharge. $hird party providers like %rgus, &'%I, Opis pu!lish the market price of these products on a daily !asis( these prices are commonly known as )uotes. In order to accommodate the !usiness need to calculate the price of an order !ased on e*ternal )uotes over a period of time, S%+ introduced -% pricing in IS Oil.
ow it works Before formula pricing is introduced or implemented, !usinesses used to use spreadsheet for price calculation. Simple ones can !e average of / week )uotes on Benzene, while comple* ones can !e like 0.1/Benzend20.3Ethylene2surcharge 0.1/Benzend20.3Ethylene2surcha rge then average !y one month. Spreadsheet would work fine if you have ten orders a day re)uiring spreadsheet calculation, !ut imagine when you need to refer to your spreadsheet hundreds of times a day, finding the right spreadsheet, plugging num!ers, coming !ack to S%+... S%+... In IS oil -% pricing, these special formulas can !e stored i n the system and later used ! y sales order or purchase orders for automatic calculation. It is assumed that you have a good understanding in ho w standard pricing procedure works, thus we will not go into condition techni)ue in this documentation. ormula pricing is differentiated at condition type and condition record level. &omparing to regular pricing, -% pricing has a formula to !e maintained for each formula pricing record, it ena!les varia!le dates for calculation, and further allows client to define multiple rules and compare two calculation results and pick the desired final rate.
Introduction and &onfiguration Formula Condition Type ormula pricing is identified at the condition type configuration in 405. ormula pricing has the calculation type as 6, commodity +rice, while regular condition types have the calculation type as percentage, )uantity, fi*ed amount, weight, etc7
ormula pricing condition type8
9egular pricing condition type8
Formula Pricing Condition Record $he difference in the calculation t ype would affect your screen in 4://. Below there is a screenshot of how 4:// for formula pricing looks. ;ote a new icon for maintaining formulas showed up, while scales is no longer an option, nor can you enter a num!er amount directly for this condition record. 4:// for formula pricing
%fter you make an entry for your condition record like what you do with regular conditions, select the line and click on maintain formula and it will take you to the screen where you can create a new formula. ;ote this is the first method of creating a formula.
Formula Repository ormula can !e created directly using $=code O3I>. %s S%+ convention, O3I? is for formula change, O3I1 for display. Once you give a name for the formula, system takes you into the !elow screen for formula maintenance. ;ote you can copy and modify from an e*isting formula !y clicking on the 9epository +roposal icon as !elow.
If you click on @inal and +rovisional 9ulesA, you will see the following screen for date determination maintenance.
9eference date could !e GI date, or +ricing date, after system decides a reference date, you can offset it to a !ase date, e.g. /st of ne*t month, 'onday of ne*t week. $ime unit of measure and C of time units are applied to this !ase date and form a time range. $here is also a check !o* for @E*cl !ase dateA. B y selecting this field, you determine that the )uotation on the reference date is to !e e*cluded during the calculation of the )uotation in the defined time period.
;ormally two sets of date determination will !e applied for a formula, provisional and final. $his is used in case you donDt want to wait until end of month to !ill the customer, thus you define a provisional date using one week )uotes and !y the end of month you can re!ill the difference !etween provisional determined price and final determined price to the customer. ith that said, in your pricing analysis you might find the status of a formula price to !e either provisional determined or final determined.
F&A pricing in Sales Orders FetDs take a look at ho w ormula pricing works in sales orders. hen you go to conditions ta! in item level, you can find a magnifying glass in front of formula condition type.
%fter clicking on the magnifying glass, it takes you into the formula details ust like what we see in O3I?
;ote % term has a status of @0/, evaluated successfully using final ruleA. e discussed this previously in maintaining a formula. rom here, you can further change the formula !y clicking on @maintain formulaA i con, you can save the changed formula under a different name.
Before we go into the configuration on -% pricing, letDs first do a )uick comparison on formula pricing and regular pricing from a high level.
Regular pricing: i* date only from pricing date, condition value maintained manually in documents or determined directly from record in 4://
Formula Pricing: Both fi*ed date and varia!le dates possi!le, condition value determined in directly through formula, while formula can !e maintained in salespurchase documents or 4://. ependent on formula and e*ternal )uota feeds
F&A pricing Configuration +re=re)uisites !efore you start -% pricing8
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External quotations
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F&A condition records
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Routine for date determination
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Access sequence
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Formula Condition t!es assi"ned to our !ricin" !rocedure
&onfiguration for -% pricing can !e found in under Industry solution Oil - Gas "ownstream# menu path in S+9O.
External Quotations 6uotations are !rought into sap either !y daily feeds through interface or program, or entered manually through $ransaction code O3IH.
Maintain formula & Average Pricing user exits $his is where you maintaindevelop pricing related routines. eDve seen them during e*planation on formulas( this is the central place for all routines development.
ormula & A#era"e $ricin" in the %il & as 'ndustr
In case you have noticed my other !logs then you must have already got an idea a!out the Jpstream - ownstream Industry +rocess Overview - S%+ Solutions in the Oil - Gas Industry. If you did not get a chance, for Jpstream refer8 htt!())scn.sa!.com)communit)oil*and* "as)+lo")2,15),4)2-)u!stream*industr*!rocess*o#er#ie*sa!*solutions or ownstream refer ( htt!())scn.sa!.com)communit)oil*and* "as)+lo")2,15),4)2/)donstream*industr*!rocess*o#er#ie*sa!*solutions
0e ha#e alread discussed a+out the onstream 'ndustr alue Chain here ou ha#e noticed that arketin" Accountin" & $ricin" com!onent !las quite a crucial role hile e talk a+out %il & as 'ndustr. A$ com!onent is +asicall enhanced ith man additional functions such as contract !ricin" cumulati#e contract call o6 !ricin" customer !ricelist default !rice lists etc. required for the donstream oil +usiness.
Now let’s focus about Pricing portion in te !ownstream "n#ustr$% ifferent +ricing methods and strategies can !e followed !y the ownstream !usiness to cater different needs 8 • • • •
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&ontract +ricing &umulative &ontract call=off +ricing Gross - ;et 4olume +ricing ormula - %verage +ricing etc. A"ain from the transfer !ricin" methods !oint of #ie the frequentl used !ricin" methods are(
arket +ased !ricin" Cost +ased !ricin" 7e"otiated !ricin" Free market !rices for +oth in!uts and out!ut Cost !lus mar"in for #alue of ser#ices rendered etc. 8iddin" is done + the Commodit traders for oil futures contract and ultimatel the are res!onsi+le for the %il !rices. 9hese kind of contracts are +asicall a"reements to +u or sell oil at a s!eci:c date in the future for an a"reed*u!on !rice. For exam!le( External quotations of %il !rices are !ro#ided + $latts Reuters etc
et’s un#erstan# wat is Formula & Average Pricing & w$ it is useful •
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'n %il and as industr the !rice of certain !etrochemical !roducts like 8en;ene Ethlene et al ma #ar e#er da.
these !rices are commonl knon as quotes. 'n order to accommodate the +usiness need to calculate the !rice of an order +ased on external quotes o#er a !eriod of time < A$ introduced F&A !ricin" in '< %il.
Next point comes 'at is te purpose of Formula & Average Pricing • •
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F & A $ricin" indicates Formula and A#era"e =F&A $ricin". 9his method of $ricin" uses external quotations such as $latts Reuters and others to determine the !rice of a material. 9he !ur!ose of F & A $ricin" is to ena+le the calculation of !roduct !rices +ased on external quotations o#er a set time !eriod. 9he calculation is !erformed ith com!an*de:ned calculation rules. Currenc ?uctuations ithin the time !eriod are taken into account either + dail con#ersion or + a#era"in". F & A $ricin" can +e used +oth on the !urchasin" = & sales side =<.
(ow )usiness wor*s wit te F & A Pricing •
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ost of the 8usinesses !referred to use the s!readsheet for !rice calculation. For exam!le( 't could +e a#era"e of 1 eek quote of 8en;ene hile com!lex ones can +e like ,.@18en;end,.3Ethlenesurchar"e then a#era"e + one month. Boe#er the s!readsheet method has its !ortion of dra+ack( 9ime Consumin" to :nd out ri"ht s!readsheet $lu""in" 7um+ers Referrin" the
Now its time to *now about Formula & Average Pricing in +AP F & A $ricin" in
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'n '< oil F&A !ricin" these s!ecial formulas can +e stored in the sstem and later used + sales order or !urchase orders for automatic calculation. Formula !ricin" is di6erentiated at condition t!e and condition record le#el. Com!arin" to re"ular !ricin" F&A !ricin" has a formula to +e maintained for each formula !ricin" record it ena+les #aria+le dates for calculation and further allos client to de:ne multi!le rules and com!are to calculation results and !ick the desired :nal rate. The process fow or F & A Pricing is as ollows:
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Defne Formulas to be used or F & A Pricing Defne Condition Type or F & A Pricing Using Pricing Date to Determine the Rule Using F & A Pricing During Inoicing
+AP ,on-guration for Formula & Average Pricing F & A $ricin" can +e con:"ured from the folloin" ' 7ode(
'ndustr
The prerequisite or the F & A Pricing Conguration will be as ollows: •
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9he .roup ,on#itions :eld should not +e acti#ated in customisin"(
9he corres!ondin" condition t!es =for exam!le FA,, and the access sequences must +e de:ned and included in the !ricin" !rocedure in Customi;in". 9he !rice quotations used + F&A !ricin" are de:ned in the quotation ta+le. 0e can either use ta+le %'CD$ !ro#ided in
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Automatic Pricing for "nvoice /eri-cation is important to set:
'n Customi;in" for the 'ndustr
9his is done + choosin" A$ =arketin" Accountin" and $ricin" Formula & A#era"e $ricin"e:ne co! rules for in#oice recei!t.
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0e can enter data as required + the $r9=!ricin" t!e for in#oices :eld. 9he !ricin" t!e for in#oices controls ho the sstem carries out re!ricin" durin" in#oice #eri:cation.
9he settin"s for controllin" in#oice #eri:cation and !rice date control +ased on the "oods recei!t can +e made in the 'nfo record and the endor master data record.
9he settin"s made there are automaticall co!ied to su+sequent !urchase documents.
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9o access the info record choose En#ironment 'nfo record. 'n the info recor# choose oto $urch. %r". data 1=$urchase %r"ani;ation 1 then make the folloin" settin"s(
For "oods recei!t*+ased in#oice #eri:cation select .R0base# "/ in the Control area of the
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screen
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For price #ate control enter data as required in the Pricing #ate cat% -el# in the Conditions area of the screen
Purcasing !ata 1 /en#or: •
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%n the initial screen of the #endor master record choose !oto Purchasing org% data Purchasing data then ma'e the ollo(ing settings) For "oods recei!t*+ased in#oice #eri:cation select !R#based in% eri% in the Control data area of the screen. For !rice date control enter data as required in the Pricing date cat% :eld in the Conditions area of the screen
!i2erential "nvoice: •
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'n the oil industr arran"ements are often made ith customers to calculate in#oices +ased on the a#era"e !rice of a !roduct o#er a certain !eriod of time.
'f the !roduct is deli#ered +efore the a#era"in" !eriod has ela!sed it is necessar to create a !ro#isional in#oice.
0hen the a#era"in" !eriod has ended and the :nal !rice is knon the !ricedi6erence is in#oiced + creatin" a di6erential in#oice.
Formula ,on#ition 3$pe •
ormula pricing is identified at the con#ition t$pe configuration in $ransaction &ode 405.
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ormula pricing has the calculation type as 6, commodity +rice, while regular condition types have the calculation type as percentage, )uantity, fi*ed amount, weight, etc.
9egular +ricing &ondition $ype Formula Pricing ,on#ition $he difference in the calculation t ype would affect our screen in 4://. ;ote a new icon for maintaining formulas showed up, while scales is no longer an option, nor can we enter a num!er amount directly for this condition
record.
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%fter we make an entry for our condition record like what we do with regular conditions, select the line and click on maintain formula and it will take us to the screen where we can create a new formula.
;ote this is the first method of creating a formula. e can also choose a pre created formula repository in the system.
$ransaction &ode L O3/> - O3/? can !e used in order to create ormula 9epository. Once we give a name for the formula, system take us into the !elow screen for formula maintenance. ;ote we can copy and modify from an e*isting formula !y clicking on the 9epository +roposal icon
1-5- ies
I am working on a pricing procedure and i have difficulties to understand how )uotations and formulas fit in the pricing procedure.
$o get pu!lication averages prices into pricing, you need to have three things in place.
/. ailyeekly pu!lication prices prices in OI&6+ $a!le H. &ondition record maintenance with or without suita!le ormula repository 3. ;ecessary configuration !ehind it.
$a!le OI&6+ re)uires configuration of Industry solution O-G =M '%+ =M -% +ricing =M 6uotation Source, $ype - ata.
ormula repository is a template and re)uire num!er ranges config.
&ondition type used for -% pricing should have &alculation type N6N. &ondition record is specific to key com!ination and link the repository proposal to condition record.
hile creating Sales orderBilling, system will consider all rules and prices and returns provisional or final value. $he value in document cannot !e changed manually !y user.
!utton.
In evaluation go to N%N term or NBN term to find secondary level analysis. If the value is in foreign currency, !ased on e*change rate setup, system automatically convert to document currency.
$o get pu!lication averages prices into pricing, you need to have three things in place.
/. ailyeekly pu!lication prices prices in OI&6+ $a!le H. &ondition record maintenance with or without suita!le ormula repository 3. ;ecessary configuration !ehind it.
$a!le OI&6+ re)uires configuration of Industry solution O-G =M '%+ =M -% +ricing =M 6uotation Source, $ype - ata.
ormula repository is a template and re)uire num!er ranges config.
&ondition type used for -% pricing should have &alculation type N6N. &ondition record is specific to key com!ination and link the repository proposal to condition record.
hile creating Sales orderBilling, system will consider all rules and prices and returns provisional or final value. $he value in document cannot !e changed manually !y user.
!utton.
In evaluation go to N%N term or NBN term to find secondary level analysis. If the value is in foreign currency, !ased on e*change rate setup, system automatically convert to document currency.
ithin your pricing procedure you can turn any of your < condition t ype as -% pricing relevant !y making the calculation type as N6N commodity pricing "405#. %nd voilPQQ you will see a magical !utton in front of the condition type in your document pricing procedure. $his !utton opens the gate to the world of formula and average pricing. rom here onwards you can play around the way it descri!es in the help.sap.com link provided earlier. Fet me know if you get stuck anywhere.
Formula & A#era"e $ricin"
Formula & A#era"e $ricin" ormula and %verage pricing is functionality availa!le in S%+ IS=Oil. $he prices in Oil industry fluctuates dail y. +rice )uotes for material gets picked up daily !ased on availa!ility of )uotes !y different oil E*changes "$hird party )uotation provider#. Oil distri!ution and marketing companies need to use this price for sales. S%+ IS=Oil provides the functionality of ormula and %verage pricing to meet this re)uirement. Everyday +rice )uotes from different oil e*changes like +latts, Opis, ;yme* comes to S%+ through interface - saved in Standard or &ustomized @A ta!le. Each 'aterial is li nked to a particular +rice )uote uni)uely in -% pricing. $he purpose of formula - average pricing is to ena!le the calculation of product price with the help of e*ternal )uotations over a set period of time. $he price can !e further modified with company defined calculation rule !efore it is used. $he system also takes into account currency fluctuation within the time period. •
Duotations can +e s!eci:c for a da or can +e a#era"ed o#er a !eriod of time a"reed +eteen %il Com!an and customer.
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9he a#era"ed time !eriod are set out in !ricin" and !ament term !olicies.
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9he handlin" of eekends and !u+lic holidas must +e s!eci:ed ithin formula.
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9he quotations can +e con#erted into local currenc usin" an a"reed exchan"e rate t!e. $here are two ways in which the )uotation can !e converted into local currency.
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Con#ertin" the dail quotation usin" dail exchan"e rate. 9akin" the a#era"e of the quotations and con#ertin" usin" an a#era"e of exchan"e rates. S%+ has two sets of rules for defining the averaging period L +rovisional and final rules. +rovisional 9ule L $his calculation rule is used !y S%+ when data re)uired like e*ternal )uotations to perform the final calculation is not known. +rovisional rules are used at the time of creation of Sales order, where there is a possi!ility that at the time of creation of SO, the price )uotes are not availa!le. ence, still the order needs to !e saved. inal 9ule L inal calculation rule is used to determine the final price of the product. inal rules are used at the time of creation of Invoice, where in, a re=pricing happens, looking out for all availa!le prices in the price ta!le, and finally, saving the document. $here are some situations "like e*ternal )uotations are not posted !y third party or Batch o!s which update ta!les are failed# when e*ternal )uotations for re)uired time period are not availa!le in the system. In this situation final price of material is not known so invoice is created with the help of provisional rule. Once inal price is availa!le in the system ifferential invoice or &redite!it note can !e raised against original invoice as per !usiness process.
