Oil and gas organizations offer significant system support for better trading. The margins per trade are always in focus and companies constantly must improve on these margins. Conversely, scheduling depends on individual judgments and historical patterns and typically happens in a predetermined manner. In general, scheduling lacks the financial visibility to maximize gains from the trade deals.

Most organizations evaluate trading and scheduling separately instead of looking at the entire chain of events as part of one activity. Traders and schedulers work independently on day-to-day trading or scheduling decisions. This limits an organization’s ability to sense and respond to opportunities and threats. Furthermore, the disparate IT systems reduce the visibility on the scheduling and trading actions. Instead, traders and schedulers share knowledge only in interpersonal discussions or meetings, an inefficient process.

To address this gap, SAP offers SAP Trader’s and Scheduler’s Workbench (TSW) for the SAP Oil & Gas industry solution to allow traders and schedulers to work together. Available from R/3 4.6C onward, SAP TSW manages current and future demand, supply, and transportation information. The different tools in TSW offer cockpit views for efficient scheduling in different scenarios.

I’ll walk you through a typical oil and gas IT landscape to show you what it looks like with and without SAP TSW. Then I’ll explain some of SAP TSW’s features, such as three-way pegging and the stock projection worksheet. Finally, I’ll highlight some of the business effects you can achieve when your SAP TSW implementation is complete. For more information about SAP TSW, refer to the “Additional Information” sidebar below.

Typical IT Landscape

Figure 1 shows a traditional IT landscape in which the organization uses R/3 for transaction processing and a third-party tool for scheduling and trading activities. First the trade deal flows to R/3 (1), and then the system transmits the scheduling data along with the trade deals to the scheduling tool (2). Next, the scheduling tool creates the product movement schedule (nomination), which it transmits to R/3 (3). In turn, R/3 sends the confirmed nominations to the receiving locations (4). The locations transmit the actual product movement to R/3 (5), which informs the scheduling tool about the actual product movement (6). This data transmission across different systems can be based on synchronous or asynchronous methodology through the integration layer around R/3.

Figure 1

System landscape with R/3 interfaced to third-party trading and scheduling tools

The landscape, though integrated, includes a trading tool, a scheduling tool, and the R/3 system, each with its own design. The difference in design can bring many challenges which can make the entire process inefficient. Some of the key challenges are:

• Integration: Error logs remain an area of continuous and regular monitoring. As an error log grows, the time lag for the data increases. In addition, when you apply a new Support Package, you can encounter new integration issues with the third-party tools.
  
  
• Master data management: Apart from the one-time setup, managing your master data is an intensive exercise whenever you change an existing master data object. For example, shifting business from one location to another requires coordination with the trading and scheduling tools for a smooth switchover. In certain cases, introducing a new field in master data requires revalidation of interface mapping.
  
  
• Data flow: Using third-party tools means that your data must flow between two interfaces to provide complete information from one system to the user. For example, a trader needs to see in the trading tool if his deal has been nominated and to what extent.

Moreover, any scope change with multiple systems leads to more effort. For instance, a new validation to restrict the system from nominating certain deals may require customizing and development tasks on R/3 as well as the trading and scheduling tools. Such scope changes can lead to high IT spends for a given return.

IT Landscape with SAP TSW

Figure 2 shows an IT landscape with SAP TSW as the scheduling tool, which is tightly integrated with R/3 design. The trade deal flows to R/3 (1). The system then uses this data along with the master data to help schedulers create the product movement schedule (nominations). The confirmed nominations are then transmitted to the product movement locations (2). The locations transmit the actual product movement to R/3 (3), which creates tickets, material documents, and financial documents in R/3. In this landscape, the scheduling tool is the first target of integration, so the scheduling process becomes more interactive with R/3.

Figure 2

An integrated R/3 design for planning and scheduling bulk movements

In planning, SAP TSW provides all the desired information to the scheduler from the back-end R/3 system, which allows the scheduler to schedule based on the real-time data. This information is not limited to just inventory positions or the current situation of sales and purchase deals. With some customization, SAP TSW can also provide information — such as the product price and provisional price — to assist scheduling.

Apart from this, SAP TSW offers automated transaction processing based on the movement scenarios. As a result, it is easier to train users to actualize a ticket in SAP TSW compared to training them on different transactions in Sales and Distribution (SD) and Materials Management (MM). Actualizing a ticket in SAP TSW involves fewer steps and only one transaction, compared to many transactions in two different modules.

Three-Way Pegging and the Stock Projection Worksheet

Use the blueprinting phase to capture the scheduling performance indicators and the information schedulers require. The starting point in discussions between the schedulers and managers could be to identify the process by which to gauge the efficiency of scheduling. From there, the discussion could move on to designing the scheduling process in SAP TSW, which tool to use for each process, and what customizations are required. Let me introduce you to two of the main SAP TSW tools: three-way pegging and the stock projection worksheet.

If you plan to use SAP TSW in a trading environment, the schedulers need to see the supply and demand availability at the same time to schedule movements. Three-way pegging, which involves the demand items, available supply, and transportation, helps schedulers with this process. In my example, the process is more like two-way pegging because the transportation window is hidden (Figure 3).

Figure 3

Three-way pegging in transaction O4T3WP

The top left window shows the Demand Items (sales deals) and the top right window shows the Supply Avails (purchase deals). The bottom window displays the Distribution Schedule. Schedulers select a sales deal from the right side of the screen and peg (match) it with a purchase deal on the left side. Clicking on the Assign button moves the information down to the Distribution Schedule window to create the distribution schedule.

Schedulers then publish this schedule to create nominations. In my example, the three-way pegging transportation window is not required because the product movement happens at the same location. In other words, the product is not moving — it only changes ownership at the same location. At the same time, the stock projection worksheet, shown in Figure 4, provides high-level information about the inventory on hand and the demand supply gap.

Figure 4

Stock projection worksheet (transaction O4TB_RDALV)

Three-way pegging and the stock projection worksheet work together to help with the following:

• Improve cash flow: Schedule the movements with maximum margins first. Assuming that you have no stock on hand, you can fulfill a sales deal by pegging it with a purchase deal (preferably at the same location). The sales deal picked up for pegging should have the highest per unit price. Similarly, the supply deal you peg it against in three-way pegging should have the lowest per unit cost.
  
  
• Lower inventory: If the stock projection worksheet shows inventory on hand, then you should use this inventory first to meet the sales demands (subject to stock holding norms). Delay purchases as much as possible based on the inventory on hand and contractual obligations.
  
  
• Minimize inter-location transfer cost: The stock projection worksheet allows you to better plan your stock on hand. Inter-location transfers are usually required to fulfill the demand of one location from another or to reduce inventory buildup at a particular location. The stock projection worksheet shows current and future stock positions, which allows schedulers to minimize inter-location stock transfers.
  
  
• Data entry time lag: In an interfaced environment, you can have data lags at multiple places. For example, a trade deal can be visible in a scheduling tool for scheduling a day late, or the product movement schedules reach R/3 with delays, thereby delaying the actual product movement. In an integrated real-time environment, product movements can happen as per the schedule and the system can record them on a real-time basis. This allows timely billing of sales to customers without any systemic lag.

It is not necessary that the product movement happen based on the business objectives mentioned above. A change in plans at the vendor or customer organization or a bookout can lead to a re-planning effort at the last moment. In such situations, the schedulers must arrive at the next best scheduling decision to meet the business objectives.

However, with minimal data entry time lag (due to an integrated environment) and faster decision making (due to complete and real information provided by tools) on the part of schedulers, you can communicate product movement schedules in advance. This gives vendors more time to plan their movements, which reduces last-minute changes.

Process Improvement

Figure 5 shows the SAP TSW business process at a high level. SAP TSW provides the tools to promote collaboration between traders and schedulers. For instance, traders and schedulers can use the stock projection worksheet to understand the buildup of inventory at a specific location for a given month. This allows the traders to create sales deals that minimize inter-location transfers.

Figure 5

An overview of the recommended business process using SAP TSW

To get the most out of your SAP TSW implementation, you should create customized reports that measure each of the performance indicators for the scheduling process. Analyzing the scheduling action of these trades can yield opportunities to further streamline the product movement. I suggest creating at least two customized reports to measure the performance of the trading and scheduling groups. One report would focus on the total cost of trades and another report would focus on scheduling efficiency.

Total cost of trades. Traders should not calculate the margins based on the deals signed and average cost numbers. This approach accepts the costs as is, thereby foregoing the opportunity to enhance the actual trading margins. For instance, costs such as average inventory holding costs or average stock transfer costs can vary from year to year.

Using a total cost of trades report in conjunction with SAP TSW allows traders to see where they can reduce these costs annually with better planning and coordination. Trading effectiveness that you measure based on the actual profit made results in higher collaboration between trading and scheduling. As a result, you can focus on the margins lost due to inefficiencies so that they don’t affect next year’s cost numbers.

Scheduling efficiency. Timely data entry in R/3 on the part of the schedulers is one of the crucial factors that affect all subsequent processes. For example, when creating tickets, you can have a time lag between the product movement and the ticket creation/actualization dates. Similarly, the nomination creation date and product schedule date show how early nominations are created. Inventory levels and inter-location transfers are additional parameters that can measure scheduling efficiency.

Figure 5 displays the IT usage by each of the groups involved, reporting needs (performance indicators), and transaction documents created as part of the business process. You can also see how the system landscape with SAP TSW can bring a structured approach to the scheduling process. The system tools along with the performance reports drive collaboration, which is crucial to bringing real returns to the investment involved.