sap oil chapter2

7/29/2019 SAP Oil Chapter2

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

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

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

ments.q Provide additional quantity fields enabling stock balances to be stored in

multiple units of measure (for example volume at ambient temperature,corrected volume based on standard temperature and apparent mass).

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

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

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

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

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The ASTM/API calculation function enables highly accurate automatic

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

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

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

(UoM) desired.

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The ability to convert units of measure and to post movements of materialsimultaneously provides the company with accurate quantity levels of

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

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

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

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The following HPM enhancements are provided within the R/3 IS-OilDownstream component:

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IS-Oil incorporates an interface to ASTM/API c-code routines to convertvolume quantities and product densities at ambient temperatures to volume

quantities and densities at standard temperatures for material movementsand inventory measurements. The system supports the standard ASTMTables 53 and 54, including the German rounding rules, ASTM Tables 23and 24 for relative densities and ASTM Tables 5 and 6 for API gravitycalculations. The calculation is performed on goods movements relating tooil materials, with the ability to calculate specific units of measure. Theuser can configure whether the calculations are performed in display mode,or in the background, and whether the values calculated can be overwritten

by manual entry or not. The system also provides an ASTM/API desk topcalculator to perform quantity conversions when no goods movement hasoccurred.

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

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

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


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A transaction exists in R/3 IS-Oil Downstream in which the issue from the

first plant is linked by a transfer tracking number to the receipt of thesecond. Thus, the tracking number allows for the calculation of gains andlosses associated with a company movement, as well as tracking the statusof the material movement. The corresponding excise duty gain/loss is alsocalculated.

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

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

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The following features in the Core R/3 System are particulary applicable tothe oil and gas industry.

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

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


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

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


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

that data redundancy is kept to a minimum.

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

Clients and Companies

For any given organization, there may be a variety of ways that the locationstructure could be represented within the SAP R/3 System. This is done bymirroring current or desired organizational structures of the business. The

decision is driven primarily by how corporate information is gathered,aggregated and reported.

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An oil company (the SAP client) may have divided its organization into

business functions. Thus, the SAP companies would be the independentbusiness units of the oil company, as illustrated in the figure below.

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

Plant

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

q Crude storage terminals

q Finished product marketing terminals

q Refineries and manufacturing complexes

q Pipelines, or pipeline segments

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

q To store and report inventory in a summarized manner

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

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


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Storage Location

A storage location is a subdivision within a plant, enabling inventory to bemanaged at a more detailed level. Each plant must contain at least one

storage location. The storage location field is a four digit alphanumeric field.Storage locations enable the management of inventory in smaller units.

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

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

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

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

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

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

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

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


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

Client

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

q Material number and description

q Stockkeeping unit of measure

q Material type

q Industry sector

q Quantity calculation method

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

based on the quantity in the stockkeeping UoM.

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

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the material and has important control functions. For example, the material

type determines which department-specific data the user can enter for thematerial.

Company

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

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

q Conversion group

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

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

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

conversion calculations.Plant

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

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

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

At plant level, stock balances in the stockkeeping unit of measure are held for

a number of different types of stock. These include total stock, unrestricteduse stock, stock in transfer, consignment stock and reserved stock.

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

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


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Storage Location

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

q Stock balances in stockkeeping UoM for different types of materialquantity

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

Batches

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

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

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

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

q Customer Consignment Stock - Stock owned by your company, but

stored at a site belonging to a customer

q Suppliers and Customers packaging to be returned

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

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


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

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Thus, it is usual (and a legal requirement for excise duty calculations) tomaintain inventory balances in a UoM at a fixed temperature (for exampleliters at 15 Celsius, L15). However, most goods movements occur at ambienttemperature, with the temperature at which the movement occurred beingmeasured along with the density of material moved. The quantity correctionfunctionality provided by R/3 IS-Oil Downstream system enables conversion

between volumes measured at different temperatures into UoM at a standardtemperature, for inventory management and reporting. It is also possible tocalculate the weight of a material. All UoMs relevant to a material can bedefined and calculated automatically when a movement of the material takesplace.

Functions Utilizing Different Units of Measure

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

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

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

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Since all UoMs defined for a material are calculated for every movement

type, the Exchanges functionality is able to track exchange balances inmultiple UoMs.

Quantity Calculation Method

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

Quantity Determination

There are two possibilities for entering quantities in the R/3 IS-Oil

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

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

Quantity Conversion

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

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

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

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

The two methods are illustrated in the following diagram.


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Units of Measure Available

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

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

q Plant

q Storage location

q Batch level

q Special stock

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

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

q Deliveries

q Physical inventory documents


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Material-Specific Information Used in the Quantity Conversion Calculations

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

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

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

Carrying out the Quantity Conversion Calculations

For some transactions, it is a requirement to be able to enter temperature and

density measurements made at the time of the goods movement. The R/3 IS-Oil Downstream system provides this capability. Dependent on transactiontype, it is possible to configure the R/3 IS-Oil Downstream system to performthe quantity conversion calculations by one of four different methods:

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Automatic Conversion Calculation

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

Semi-Automatic Conversion Calculation

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


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Manual Conversion Calculation

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

Semi-Manual Conversion Calculation

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

Calculation of Gross/Net Weights and VolumesThe R/3 IS-Oil Downstream system performs automatic ASTM/APIcalculations of weights and volume in the shipment process.

Base Sediment and Water Calculation

Base Sediment and Water (BS&W) is a percentage of the total quantity that isnon-oil material. This value is to be subtracted from the ASTM-correctedquantity and is applied to volumes when activated. Activation takes place

by product type specified in a table. The BS&W is an integral part of allmaterial movements. The meter calibration factor is applied to all targetvolumes, when BS&W is activated.

Gain/Loss Handling with Plant-to-Plant TransfersThe two-step plant-to-plant transfer functionality has been enhanced toenable the reconciliation of individual goods issues and goods receiptsassociated with a physical shipment.

Performing Quantity Conversion Calculations When No Goods

Movement Has Occurred

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

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Checking the Results of Quantity Conversion Calculations

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

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

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

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Standard Inventory Information Available

The R/3 IS-Oil Downstream component provides extensive functionality forstoring and reporting inventory information. The inventory information

stored at the different levels of the common hierarchy were discussed in thesection entitled Product Hierarchy. Other inventory management functionsand the reporting capabilities of the system will now be considered.

Physical Inventory

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

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

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

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

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

q Create a post to physical inventory difference list

q If possible, correct the physical inventory measurements, for example if

differences can be traced to input errorsq Post the differences. This involves adjusting the book inventory to reflect

the physical inventory measured and the generation of the associatedfinancial adjustments.

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

Inventory Balancing

Each material movement is posted in the SAP R/3 System as a document,and stored in a movements history file. Material movements are categorized

by movement type. The movement type defines the nature of the movement,for example goods issue to production or plant-to-plant transfer.

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

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

Inventory Reporting

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

The user can drill-down in the hierarchy to see all of the product inventoryfor the company, plants and storage locations within a plant. Individual

batches at a storage location are also displayed by this transaction.

In R/3 IS-Oil Downstream, this transaction enables the additional, oil-specific information recorded in the system to be displayed. The transaction


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enables inventory balances in additional UoM, as well as the stockkeeping

UoM, to be reported.

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


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

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

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q The mixing of similar materials



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

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

The rebranding is provided by a material-to-material transfer posting. Inorder to perform a material-to-material transfer posting in R/3, it is

necessary that both materials be managed in the same stockkeeping unit.ASTM/API quantity conversions are provided for both functions.

sap oil chapter2

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