solution in detail transportation and logistics fuel management pdf

8/9/2019 Solution in Detail Transportation and Logistics Fuel Management PDF

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Solution in Detail

© 2013 SAP AG or an SAP affiliate company. All rights reserved.

Transportation and Logistics

Flight-Centric Fuel Management

Executive Summary Solution Overview Contact Us



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2 / 24 © 2013 SAP AG or an SAP affiliate company. All rights reserved.

Staying Competitive While Fuel Costs Escalate

Driven by the need to protect earnings andmaintain profitable operations, airlines aresharpening their focus on risk management.In fact, 82% of major airlines currently havefuel hedges in place to help manage fuelprice volatility.*

At the same time, airlines need to comply with

a range of regulations including the Sarbanes-Oxley Act and hedge-accounting laws. This hasled to a strong demand for business solutionsthat are designed to meet these challenges.

There are many pressures that contribute togreater volatility and higher fuel prices.

Discoveries of new crude oil resources havebeen falling in recent years, global demand hasbeen rising, and air traffic is expected to doublein the next 15 years.

Due to these pressures, airlines face a growingneed to explore the use of alternative fuelssuch as ethanol, methanol, biodiesel, and

synthetic paraffins. In pursuing alternative fuelsources, airlines can reduce carbon emissionsand improve their environmental impact whileensuring the viability of their long-term supplies.

*Source: The State of Airline Fuel Hedging & RiskManagement in 2012, Mercatus Energy Advisors,www.mercatusenergy.com

Twenty years ago, fuel was a low-cost commodity and the business focus was onreliable and timely supply at all operated stations. But since 2006, fuel has replacedlabor as the largest single operating cost item. With increasing fluctuations in fuelprices, it is more difficult to manage fuel costs and the overall impact on aircraftroutes and network profitability.

Flight-Centric Management

Fuel Price Volatility

SAP Innovations

Optimal Fuel Management


39 %Of airlines said they couldimprove fuel hedging withstrategies that better reflecttheir risk tolerance andhedging goals

Source: Mercatus Energy Advisors

http://www.mercatusenergy.com/http://www.mercatusenergy.com/


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Many airlines face challenges in verifying fuelinvoices due to inadequate capture of fueluplift information. SAP software integrates fueluplift and fuel burn data with flight operationsprocesses, links uplift data with each flight,and calculates fuel burn and cost for individualflights. With the software, airlines can accuratelycapture fuel uplift data, check the data againstprocurement contracts, and verify invoices.Supplier invoices can be generated automaticallybased on fuel uplift and procurement contractdetails.

The flexible solution enables airlines to capturefuel tickets on paper, and in electronic form,based on Aircraft Communications Addressingand Reporting System (ACARS) messages andelectronic flight bag data.

The software integrates with risk and hedgingfunctionality. Risk, or exposure, can be based

on procurement contract and fuel forecastinformation. With the risk data, airlines candefine hedging strategies and perform hedgingtransactions while complying with applicableaccounting rules and regulations.

Flight-Centric Fuel ManagementFuel is not managed in isolation within any airline. It requires close collaborationamong business planning, supply, logistics, flight operations, accounting, controlling,treasury fuel supply, and refueling organizations. Flight industry best practicesdictate that flight-oriented fuel management activities and processes yield thegreatest benefits to airlines.




SAP Innovations


Best-Run Transportationand Logistics

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With SAP solutions, airlines can manage fuel use efficiently – which accounts forabout 40% of operating costs – on a daily basis. Connecting departments andoptimizing processes enable near-real-time analysis of fuel costs and the impact onprofitability. This improves decision making and enables airlines to factor risks intofuel hedging strategies and to measure the effectiveness of risk strategiescontinuously.

Optimal Fuel Management Impacts the Bottom Line

No loss in data integrity when airlines exchange data among departments

Faster processes, immediate data updating, data availability for all departments, supplierinvoice verification, and improved productivity with reduced data duplication

Hedging closely integrated with the complete fuel management process, helping ensure highquality data input into pricing engines and improved hedging decisions

Unified view of fuel data for analysis and reporting, especially when used with electroniclogbooks or ACARS

Routine task automation, including contract price updates, forecasts, budget calculations,invoice verification, and electronic invoicing

Extensible solution to cover variable flight costs such as ground services and catering

270 %Increase in jet fuel prices forthe period of June 2003 toJune 2013

Source: index mundi




SAP Innovations


http://www.indexmundi.com/commodities/?commodity=jet-fuel&months=120http://www.indexmundi.com/commodities/?commodity=jet-fuel&months=120


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SAP database and technology solutions,powered by the SAP HANA platform, enablemanagers to monitor high volumes of fueltransactions, both physical and paper derivatives,in real time. Airlines can quickly react to marketchanges and reduce overall fuel risks.

Analytics solutions provide a 360-degree view

of the business, regardless of which departmentis responsible for process steps. Airlines canmanage fuel positions based on risk strategies.

Airlines can establish criteria for managing fuelrisk. For example, they can create and define astandard view of fuel across disciplines, withthe flexibility to manage risks to fit profiles.

Mobile solutions enable flight operations andramp staff to capture fuel transactions on theramp and feed the data in real time to the nextprocess steps, regardless of organizationalboundaries.

Fuel data can be captured electronicallyfrom refueling organizations, fuel suppliers,

electronic aircraft logbooks, and ACARSmessages.

SAP software lets airlines capture fuel upliftand fuel burn per flight and enables invoiceverification based on the relevant fuel priceindex values.

SAP InnovationsCommodity management solutions from SAP leverage the latest technologyinnovations to enable fast responses to market dynamics and real-time visibilityinto fuel risk. All of this is packaged into low-cost, low-risk, yet highly scalable,flexible rapid-deployment solutions.




SAP Innovations



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Integrated Processes and Information

Risk Management and HedgingIdentify, qualify, and mitigate risks associated with fuel price volatility.

Fuel ProcurementEfficiently manage processes for buying fuel and fuel-related services.

Fuel SalesEfficiently manage processes for selling fuel or fuel-related services.

Flight Operations MonitoringCapture fuel-related transactions and perform operational analysis.

Management and Hedging

Solution Overview

Fuel Sales

Fuel Procurement

Demand Management

Operations Monitoring

Why SAP?



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Fuel management softwareenables processes such asfuel procurement, sales, riskmanagement, and operations.

Fuel Management for Airlines



Solution Overview

Fuel Sales

Fuel Procurement

Demand Management


Why SAP?

Finance and Accounting

Marketing

Procurement,Sales,and Logistics

Treasury

FlightOperations

Define RiskPolicy, Profile,

Review

FlightSchedules

Contractswith

CommodityPricing

Purchasewith

CommodityPricing

Sales withCommodity

Pricing

HedgeEffectiveness

and AccountingInvoice fromSupplier

MTM: Paper,Physicals, and

Inventory

Capture FuelUplift

Risk Managementand Hedging

Flight OpsMonitoring

Fuel SalesFuel Procurement

CreditManagement

ExposureManagement

HedgeManagement

Calculate FuelBurn Per Flight

Paper Trades

Fuel RiskReporting

DealSettlement

Delivery toCustomer

Invoice toCustomer

Forecast

Post FuelCosts to Flight

AP, AR,GeneralLedger,

Profitability Analysis

Take-Off andLanding


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The SAP Commodity Risk Managementapplication helps airlines manage price risksby eliminating spreadsheets, increasing

transparency, and enabling the production oftimely reports on fuel positions and exposuresto market prices. Airlines can assess fuel riskpositions from commodity procurement andcommodity sales transactions in real time andreact quickly to business and market changes.

The software supports deal capture andprocessing of commodity-based financialderivatives transactions, accounting integration,

and hedge accounting for derivatives. Airlinescan generate up-to-date reporting on thecomplete commodity portfolio.

To succeed, airlines need to identify andquantify their exposure to commodityprice and foreign exchange risk. Airlinesneed to take effective, proven steps tomitigate risks while complying withgovernment regulations.

Risk Management and Hedging

11 %Of companies followinnovative hedging practicesto protect against supplymarket volatility

Source: SAP PerformanceBenchmarking

Capabilities


Benefits

Solution Overview


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SAP Commodity Risk Management integratestightly with the SAP Commodity Procurementapplication and the SAP Commodity Salesapplication to capture exposure positionsfrom forecasts and physical transactions and

compile risk positions automatically.Financial hedging transactions are capturedand used to update the appropriate riskpositions. To manage these paper trades,the software allows airlines to import andstore market prices, handle confirmationsand counter confirmations, and help ensuresegregation of duties.

Hedge management lets airlines define hedge

plans, maintain hedging relationships, measurethe effectiveness of hedges, and post hedgeaccounting results to the general ledger.

Robust commodity risk reporting analytics givesairlines a view into risk positions and risk policycompliance in real time.

Deal settlement functions and tight integrationwith accounting enables airlines to managemargins, perform month-end valuations, post

profit and losses, settle paper deals, and createpayments and invoices.

Commodity Risk Excellence


Capabilities


Benefits

Solution Overview


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SAP Commodity Risk Management enablesairline executives to manage risks in real time,based on the unique approach and strategy

that each organization employs.Now risk management decision makers can getfast access to trusted, high-quality information.SAP Commodity Risk Management provides asingle version of the truth for evaluating andexecuting the appropriate hedges according tocompany risk policy.

Integration with financial accountingfunctionality helps to reduce manual work,eliminate sources of error, and increase the

overall efficiency of risk management activities,processes, and reporting.

As a result, top management no longer needsto worry about audits and the regulatorycompliance of risk management. They are freeto focus on managing the airline’s commodity -related business.

SAP software provides clear, real-timevisibility into the organization’s portfolioof commodity positions. This meansthat airlines can gain efficiencies incommodity risk hedging, hedgeaccounting, and risk policy compliance.

Improve Commodity Hedging Efficiency


Capabilities


Benefits

Solution Overview


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With the SAP Commodity Procurementapplication, organizations can improve thespeed and efficiency of their fuel procurement

processes.SAP Commodity Procurement extends thestandard procurement functionality of the SAPERP application. Sophisticated functionalityautomates processes and enables advancedcommodity pricing on procurement documents.SAP Commodity Procurement supportsprovisional, differential, and final invoices.

Now airlines can price fuel based on frequentlychanging market quotes such as the Platts,the New York Mercantile Exchange (NYMEX),

London Metal Exchange (LME), ChicagoBoard of Trade (CBOT), and Marche a TermeInternational de France (MATIF). Airlineexecutives can give managers the ability tomaintain the negotiated pricing rules in thesystem to automate price calculations.

SAP solutions enable airline organizationsto price fuel according to market quotes.

Airlines can automate their pricingcalculations and streamline invoicingprocesses by enhancing procurementactivities with commodity-specificfunctions in the SAP ERP application.

Fuel Procurement

80 %Of decision makers thinkaccess to the right informationat the right time is critical totheir business


Capabilities

Fuel Procurement

Benefits

Solution Overview




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SAP Commodity Procurement enables airlineexecutives to create commodities procurementcontracts and purchase orders efficiently.They can create quantity contracts for definedperiods, maintain fuel quality requirements, andlink pricing formulas, including price calculationrules. The software prices commoditiesusing data from exchanges including Platts,the NYMEX, LME, CBOT, and MATIF.

Airlines can create call-off orders withreferences to contracts, create spot purchases,and reprice orders using quality factors andformulas from the original contract.

Provisional and differential invoicing allows

companies to post invoices before all pricesand qualities have been determined and fullpayment is possible – and even before delivery.

And management can do all this without thesubsequent hassle of creating multiple debitand credit notes.

Invoices can be matched at the flight level, andverification can be based on fuel tickets, bothelectronically and manually.

The centralized software pulls data frommultiple sources and enables airlines to viewall deals that need to be invoiced.

Efficient Fuel Procurement


Capabilities

Fuel Procurement

Benefits

Solution Overview


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SAP Commodity Procurement helps airlinesimprove the overall efficiency of fuel procurementprocesses.

The software extends the functionality of SAPERP for advanced commodity pricing andstreamlines, automates, and simplifiesprocesses. The software reduces errors andeliminates out-of-system calculations, reducesmanual interactions, and posts clear andconcise invoice receipts for each purchaseaccording to all available information at anypoint in time.

Treasury integration allows airlines to transferaccurate commodity exposure positions torisk management in real time. Companies get

a clear view into the physical positions ofcommodities; a streamlined process for pricingand settling commodities, according to marketconventions; and the ability to manage risk intimes of high volatility.

Integration with flight operations functionalityhelps ensure accurate capturing of fuel upliftand error-free invoice verification.

SAP software supports comprehensive,collaborative processes for efficientand accurate procurement and fuelpayments, and it reduces errors andmanual interactions. With the software,airlines can perform procurement andpayment activities for large and smallvolumes of fuel.

Improved Pricing and Invoicing Reduces Error Rates


Capabilities

Fuel Procurement

Benefits

Solution Overview


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SAP Commodity Sales software is designedto run the complete contract-to-cash process,including logistics and settlement of commodities.

The software extends SAP ERP functionality tohandle commodity-based contractual pricingand provisional, differential, and final invoicing.Integration with the company treasury enablesairlines to transfer commodity exposure positionsto risk management.

The software gives managers the ability tomaintain negotiated pricing rules in the system.The rules are used to automate price calculations

and enable the pricing of commodities basedon frequently changing market quotes.

Extend ERP functionality to support theselling of commodities, and gain theability to create commodity contractspriced on market quotes, automateprice calculations, and streamlineinvoicing.

Fuel Sales

Capabilities

Fuel Sales

Benefits

Solution Overview



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SAP Commodity Sales software extends thefunctionality of SAP ERP to automate thecreation of sales contracts and sales orders forfuel. It helps airlines with complex commoditypricing, such as average pricing over multiplemonths, using data from exchanges such asPlatts, NYMEX, LME, CBOT, and MATIF.

Airlines can create quantity contracts for definedperiods; maintain commodity quality requirements;and link pricing formulas, including price calcula-tion rules. They can create call-off orders withreference to contracts and reprice orders usingquality factors and formulas from the originalcontract.

Provisional and differential invoicing allowscompanies to create invoices before all pricesand qualities have been determined, and fullpayment is possible before delivery. And theycan do all this without the subsequent hassleof creating multiple debit and credit notes.

The centralized software pulls data frommultiple sources and provides a single viewof all deals that need to be invoiced.

Efficiently Sell Commodities


Capabilities

Fuel Sales

Benefits

Solution Overview


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SAP Commodity Sales software automatescommodity-based contractual pricing andenables provisional and differential invoicing

to improve overall efficiency fuel sales.It also integrates with SAP Commodity RiskManagement software, so whenever new orchanged sales documents are posted, airlinesgain real-time risk exposure management.

SAP Commodity Sales helps reduce days salesoutstanding by shortening the contract-to-cashcycle time. It increases efficiency by fully

automating price calculations (eliminating theneed for complex manual calculations) andreduces revenue leakage due to miscalculations.

As a result, airlines can increase profit margins,limit the impact of commodity price volatility,and simplify the selling process – from contractcreation to final invoicing and auditing.

Get a firm handle on complex fuelpricing, streamline the invoicingprocess, and enable real-timecommodity exposure management.

Improve Pricing to Increase Profit Margins


Capabilities

Fuel Sales

Benefits

Solution Overview


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Fuel uplift information is collected by flightoperations from supplier fuel tickets, which areused to create fuel supplier invoices. Fuel uplift

data is also captured in aircraft flight logbooksafter fuel volumes are converted into weightwith calculations based on the specific gravityof the fuel. This is key because fuel is managedwithin the aircraft according to weight. Aircraftinstruments display fuel carried on board byweight.

Fuel ticket information is captured in differentways, depending on the sophistication offuel suppliers, refuelers, and aircrafts. Fuel

information can be captured manually by notingdata from fuel tickets into aircraft logbooks andthen transferring the data to SAP software. Thefuel data can also be captured electronicallythrough mobile devices, electronic logbooks,

ACARS messages, or a combination ofmethods.

Fuel-related information is captured byflight operations in aircraft logbooks.By feeding flight operations data intofuel management software, airlinescan calculate fuel uplift and cost fuelburns for each flight with a high levelof accuracy and in near-real time.

Flight Operations Monitoring

Capabilities


Benefits

SAP Innovations

Solution Overview

36 %Higher operating marginsfor organizations that useIT to enable strategic andcompetitive advantages





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SAP software captures fuel uplift data fromfuel tickets, sends it to aircraft logbooks, andautomatically posts fuel goods receipttransactions for the first step in the invoiceverification process.

The software extends this process to calculateflight fuel burn, enabling airlines to calculateflight fuel costs accurately in near-real timewithout additional staff effort.

Fuel levels are measured in aircraft fuel tanks,and the software provides an auditable stockadjustment based on actual measurements – data that previously had low visibility.

SAP software provides flexibility in datacapture. Airlines can capture data manuallythrough paper logbooks and fuel tickets, aswell as with electronic logbooks and ACARSmessages. This simplifies the implementationof capture processes and provides a speedy,efficient, and highly detailed data capture.

Flight operations data is integrated with fuelmanagement processes, giving managementa single complete view of fuel situations and

supporting detailed analysis and reporting.For existing SAP customers, rollout of thesoftware is expedited, as it uses standardmodules, primarily in the SAP Enterprise

Asset Management solution.

The software can be extended to cover groundservices operations and other direct flight costs,including catering.

Manage Fuel at Aircraft and Flight Levels,and Provide Enterprise-Wide Visibility

24 %Lower IT spend per employeewhen organizations have asingle solution to manage thebusiness



Capabilities


Benefits

SAP Innovations

Solution Overview

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Make Sense of E-Enabled Aircraft DataTrack aircraft performance using a single datarepository with predefined or customized keyperformance indicators (KPIs) to analyze fuelperformance. Understand the relationshipsbetween KPIs for insight into aircraft performancethrough root cause and predictive analysis.Large volumes of data generated by modernaircraft are no longer an obstacle to performingnear-real-time analysis.

Innovations for Flight Operations Monitoring

Capture Data on the RampMore and more airlines deploy mobile solutionson the ramp to support line maintenance andline services. Capturing fuel-related data inreal time at the source enables near-real-timeperformance tracking and helps ensureimmediate management attention in cases ofdeviation from agreed standards.

40 %Higher employee productivitywhere mobile access isprovided to employees acrossall levels


With mobile solutions and Big Dataanalytics, airlines can capture fuel dataand perform instant analysis to optimizefuel costs and route profitability.

E-enabled aircraft generate large volumesof data. To be competitive, airlines musttap into this data to enhance businessprocesses, particularly for key areas suchas fuel costs.


Capabilities


Benefits

SAP Innovations

Solution Overview



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Strategic Demand Management Value Map

Enable fuel procurement,sales, risk management,and operations processes.



Solution Overview

Fuel Sales

Fuel Procurement

Demand Management


Why SAP?

Network andRoutePerformanceManagement

Profitability and CostManagement

Business Planningand Consolidation

Fuel Management Risk Managementand Hedging Fuel Procurement Fuel Sales

Business Planningand Consolidation

Flight OpsMonitoring


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Why SAP?Integrated commodity management solutions from SAP help airlines optimize fuelprocurement, sales, risk management, and operations processes. Airlines can gaina consolidated, real-time view of the fuel situation and market trends and reactquickly to market changes.

Tightly Integrated, Comprehensive Software

Directly transfer procurement and sales information to SAP Commodity Risk Management tooptimize fuel price hedging.

Improved Fuel PricingDefine rules for processing physical commodity deals with a fully integrated price calculationengine.

Better Reporting and Legal Compliance

Gain real-time data collection and reporting functionality, and integrate information with finance andaccounting solutions.

Integrating OperationsEnable manual and automatic data capture, and eliminate duplication for high data integrity,operational efficiency, and speed.



Solution Overview

Fuel Sales

Fuel Procurement

Demand Management


Why SAP?


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Benchmark Your Performance

Position your organization for dominance in this new economy with the business performancebenchmarking program from SAP – available free to SAP customers and select prospects.The SAP benchmarking program has helped more than 3,000 organizations assess theirstrengths, uncover areas for improvement, and identify best practices and IT strategies that

generate clear, tangible value – not someday, but today.

Go Live in Weeks

Here’s the fastest way to run your business better: our rapid -deployment solutions. In onepackage, you get everything you need to be up and running quickly – including preconfiguredsoftware and implementation services – in just weeks. With a defined scope and predictablecosts, there are no surprises.

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Solution in Detail


Transportation and Logistics

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CMP 25676 (13/08)


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solution in detail transportation and logistics fuel management pdf

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