Solution in Detail Transportation and Logistics Fuel Management PDF
Content
Solution in Detail
Transportation and Logistics
Executive Summary
Solution Overview
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Flight-Centric Fuel Management
© 2013 SAP AG or an SAP affiliate company. All rights reserved.
Executive Summary
Solution Overview
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Staying Competitive While Fuel Costs Escalate
Fuel Price Volatility
Flight-Centric Management
Optimal Fuel Management
Twenty years ago, fuel was a low-cost commodity and the business focus was on
reliable and timely supply at all operated stations. But since 2006, fuel has replaced
labor as the largest single operating cost item. With increasing fluctuations in fuel
prices, it is more difficult to manage fuel costs and the overall impact on aircraft
routes and network profitability.
SAP Innovations
39%
Of airlines said they could
improve fuel hedging with
strategies that better reflect
their risk tolerance and
hedging goals
Source: Mercatus Energy
Advisors
Driven by the need to protect earnings and
maintain profitable operations, airlines are
sharpening their focus on risk management.
In fact, 82% of major airlines currently have
fuel hedges in place to help manage fuel
price volatility.*
Discoveries of new crude oil resources have
been falling in recent years, global demand has
been rising, and air traffic is expected to double
in the next 15 years.
Due to these pressures, airlines face a growing
need to explore the use of alternative fuels
such as ethanol, methanol, biodiesel, and
At the same time, airlines need to comply with
a range of regulations including the Sarbanes- synthetic paraffins. In pursuing alternative fuel
Oxley Act and hedge-accounting laws. This has sources, airlines can reduce carbon emissions
and improve their environmental impact while
led to a strong demand for business solutions
ensuring the viability of their long-term supplies.
that are designed to meet these challenges.
There are many pressures that contribute to
greater volatility and higher fuel prices.
*Source: The State of Airline Fuel Hedging & Risk
Management in 2012, Mercatus Energy Advisors,
www.mercatusenergy.com
2 / 24
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Executive Summary
Solution Overview
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Flight-Centric Fuel Management
Fuel Price Volatility
Flight-Centric Management
Optimal Fuel Management
Fuel is not managed in isolation within any airline. It requires close collaboration
among business planning, supply, logistics, flight operations, accounting, controlling,
treasury fuel supply, and refueling organizations. Flight industry best practices
dictate that flight-oriented fuel management activities and processes yield the
greatest benefits to airlines.
SAP Innovations
Best-Run Transportation
and Logistics
Many airlines face challenges in verifying fuel
invoices due to inadequate capture of fuel
uplift information. SAP software integrates fuel
uplift and fuel burn data with flight operations
processes, links uplift data with each flight,
and calculates fuel burn and cost for individual
flights. With the software, airlines can accurately
capture fuel uplift data, check the data against
procurement contracts, and verify invoices.
Supplier invoices can be generated automatically
based on fuel uplift and procurement contract
details.
The flexible solution enables airlines to capture
fuel tickets on paper, and in electronic form,
based on Aircraft Communications Addressing
and Reporting System (ACARS) messages and
electronic flight bag data.
The software integrates with risk and hedging
functionality. Risk, or exposure, can be based
on procurement contract and fuel forecast
information. With the risk data, airlines can
define hedging strategies and perform hedging
transactions while complying with applicable
accounting rules and regulations.
3 / 24
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Optimal Fuel Management Impacts the Bottom Line
Fuel Price Volatility
Flight-Centric Management
Optimal Fuel Management
SAP Innovations
With SAP solutions, airlines can manage fuel use efficiently – which accounts for
about 40% of operating costs – on a daily basis. Connecting departments and
optimizing processes enable near-real-time analysis of fuel costs and the impact on
profitability. This improves decision making and enables airlines to factor risks into
fuel hedging strategies and to measure the effectiveness of risk strategies
continuously.
No loss in data integrity when airlines exchange data among departments
Faster processes, immediate data updating, data availability for all departments, supplier
invoice verification, and improved productivity with reduced data duplication
270%
Hedging closely integrated with the complete fuel management process, helping ensure high
quality data input into pricing engines and improved hedging decisions
Increase in jet fuel prices for
the period of June 2003 to
June 2013
Unified view of fuel data for analysis and reporting, especially when used with electronic
logbooks or ACARS
Source: index mundi
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
4 / 24
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Executive Summary
Solution Overview
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SAP Innovations
Fuel Price Volatility
Flight-Centric Management
Commodity management solutions from SAP leverage the latest technology
innovations to enable fast responses to market dynamics and real-time visibility
into fuel risk. All of this is packaged into low-cost, low-risk, yet highly scalable,
flexible rapid-deployment solutions.
Optimal Fuel Management
SAP Innovations
SAP database and technology solutions,
powered by the SAP HANA platform, enable
managers to monitor high volumes of fuel
transactions, both physical and paper derivatives,
in real time. Airlines can quickly react to market
changes and reduce overall fuel risks.
Analytics solutions provide a 360-degree view
of the business, regardless of which department
is responsible for process steps. Airlines can
manage fuel positions based on risk strategies.
Airlines can establish criteria for managing fuel
risk. For example, they can create and define a
standard view of fuel across disciplines, with
the flexibility to manage risks to fit profiles.
Mobile solutions enable flight operations and
ramp staff to capture fuel transactions on the
ramp and feed the data in real time to the next
process steps, regardless of organizational
boundaries.
Fuel data can be captured electronically
from refueling organizations, fuel suppliers,
electronic aircraft logbooks, and ACARS
messages.
SAP software lets airlines capture fuel uplift
and fuel burn per flight and enables invoice
verification based on the relevant fuel price
index values.
5 / 24
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Executive Summary
Solution Overview
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Integrated Processes and Information
Solution Overview
Management and Hedging
Risk Management and Hedging
Identify, qualify, and mitigate risks associated with fuel price volatility.
Fuel Procurement
Fuel Sales
Operations Monitoring
Fuel Procurement
Efficiently manage processes for buying fuel and fuel-related services.
Fuel Sales
Efficiently manage processes for selling fuel or fuel-related services.
Demand Management
Why SAP?
Flight Operations Monitoring
Capture fuel-related transactions and perform operational analysis.
6 / 24
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Executive Summary
Solution Overview
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Fuel Management for Airlines
Solution Overview
Management and Hedging
Risk Management
and Hedging
Fuel Procurement
Fuel Sales
Flight Ops
Monitoring
Fuel Procurement
Fuel Sales
Operations Monitoring
Demand Management
Marketing
Procurement,
Sales,
and Logistics
Flight
Schedules
Forecast
Contracts
with
Commodity
Pricing
Purchase
with
Commodity
Pricing
Exposure
Management
Why SAP?
Sales with
Commodity
Pricing
Credit
Management
Hedge
Management
Paper Trades
Delivery to
Customer
Treasury
Fuel Risk
Reporting
Finance and
Accounting
Fuel management software
enables processes such as
fuel procurement, sales, risk
management, and operations.
Flight
Operations
Define Risk
Policy, Profile,
Review
Invoice from
Supplier
Capture Fuel
Uplift
MTM: Paper,
Physicals, and
Inventory
Deal
Settlement
Take-Off and
Landing
Calculate Fuel
Burn Per Flight
7 / 24
Hedge
Effectiveness
and Accounting
Invoice to
Customer
AP, AR,
General
Ledger,
Profitability
Analysis
Post Fuel
Costs to Flight
© 2013 SAP AG or an SAP affiliate company.
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Executive Summary
Solution Overview
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Risk Management and Hedging
Solution Overview
Management and Hedging
Capabilities
Benefits
11%
Of companies follow
innovative hedging practices
to protect against supply
market volatility
Source: SAP Performance
Benchmarking
To succeed, airlines need to identify and
quantify their exposure to commodity
price and foreign exchange risk. Airlines
need to take effective, proven steps to
mitigate risks while complying with
government regulations.
The SAP Commodity Risk Management
application helps airlines manage price risks
by eliminating spreadsheets, increasing
transparency, and enabling the production of
timely reports on fuel positions and exposures
to market prices. Airlines can assess fuel risk
positions from commodity procurement and
commodity sales transactions in real time and
react quickly to business and market changes.
The software supports deal capture and
processing of commodity-based financial
derivatives transactions, accounting integration,
and hedge accounting for derivatives. Airlines
can generate up-to-date reporting on the
complete commodity portfolio.
8 / 24
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Executive Summary
Solution Overview
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Commodity Risk Excellence
Solution Overview
Management and Hedging
Capabilities
Benefits
SAP Commodity Risk Management integrates
tightly with the SAP Commodity Procurement
application and the SAP Commodity Sales
application to capture exposure positions
from forecasts and physical transactions and
compile risk positions automatically.
Financial hedging transactions are captured
and used to update the appropriate risk
positions. To manage these paper trades,
the software allows airlines to import and
store market prices, handle confirmations
and counter confirmations, and help ensure
segregation of duties.
Hedge management lets airlines define hedge
plans, maintain hedging relationships, measure
the effectiveness of hedges, and post hedge
accounting results to the general ledger.
Deal settlement functions and tight integration
with accounting enables airlines to manage
margins, perform month-end valuations, post
profit and losses, settle paper deals, and create
payments and invoices.
Robust commodity risk reporting analytics gives
airlines a view into risk positions and risk policy
compliance in real time.
9 / 24
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Executive Summary
Solution Overview
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Improve Commodity Hedging Efficiency
Solution Overview
Management and Hedging
Capabilities
Benefits
SAP software provides clear, real-time
visibility into the organization’s portfolio
of commodity positions. This means
that airlines can gain efficiencies in
commodity risk hedging, hedge
accounting, and risk policy compliance.
SAP Commodity Risk Management enables
airline executives to manage risks in real time,
based on the unique approach and strategy
that each organization employs.
Now risk management decision makers can get
fast access to trusted, high-quality information.
SAP Commodity Risk Management provides a
single version of the truth for evaluating and
executing the appropriate hedges according to
company risk policy.
Integration with financial accounting
functionality 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 needs
to worry about audits and the regulatory
compliance of risk management. They are free
to focus on managing the airline’s commodityrelated business.
10 / 24
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Executive Summary
Solution Overview
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Fuel Procurement
Solution Overview
Fuel Procurement
Capabilities
Benefits
80%
Of decision makers think
access to the right information
at the right time is critical to
their business
Source: SAP Performance
Benchmarking
SAP solutions enable airline organizations
to price fuel according to market quotes.
Airlines can automate their pricing
calculations and streamline invoicing
processes by enhancing procurement
activities with commodity-specific
functions in the SAP ERP application.
With the SAP Commodity Procurement
application, organizations can improve the
speed and efficiency of their fuel procurement
processes.
SAP Commodity Procurement extends the
standard procurement functionality of the SAP
ERP application. Sophisticated functionality
automates processes and enables advanced
commodity pricing on procurement documents.
SAP Commodity Procurement supports
provisional, differential, and final invoices.
Now airlines can price fuel based on frequently
changing market quotes such as the Platts,
the New York Mercantile Exchange (NYMEX),
London Metal Exchange (LME), Chicago
Board of Trade (CBOT), and Marche a Terme
International de France (MATIF). Airline
executives can give managers the ability to
maintain the negotiated pricing rules in the
system to automate price calculations.
11 / 24
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Executive Summary
Solution Overview
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Efficient Fuel Procurement
Solution Overview
Fuel Procurement
Capabilities
Benefits
SAP Commodity Procurement enables airline
executives to create commodities procurement
contracts and purchase orders efficiently.
They can create quantity contracts for defined
periods, maintain fuel quality requirements, and
link pricing formulas, including price calculation
rules. The software prices commodities
using data from exchanges including Platts,
the NYMEX, LME, CBOT, and MATIF.
Airlines can create call-off orders with
references to contracts, create spot purchases,
and reprice orders using quality factors and
formulas from the original contract.
Provisional and differential invoicing allows
companies to post invoices before all prices
and qualities have been determined and full
payment is possible – and even before delivery.
And management can do all this without the
subsequent hassle of creating multiple debit
and credit notes.
Invoices can be matched at the flight level, and
verification can be based on fuel tickets, both
electronically and manually.
The centralized software pulls data from
multiple sources and enables airlines to view
all deals that need to be invoiced.
12 / 24
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Executive Summary
Solution Overview
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Improved Pricing and Invoicing Reduces Error Rates
Solution Overview
Fuel Procurement
Capabilities
Benefits
SAP software supports comprehensive,
collaborative processes for efficient
and accurate procurement and fuel
payments, and it reduces errors and
manual interactions. With the software,
airlines can perform procurement and
payment activities for large and small
volumes of fuel.
SAP Commodity Procurement helps airlines
improve the overall efficiency of fuel procurement
processes.
The software extends the functionality of SAP
ERP for advanced commodity pricing and
streamlines, automates, and simplifies
processes. The software reduces errors and
eliminates out-of-system calculations, reduces
manual interactions, and posts clear and
concise invoice receipts for each purchase
according to all available information at any
point in time.
Treasury integration allows airlines to transfer
accurate commodity exposure positions to
risk management in real time. Companies get
a clear view into the physical positions of
commodities; a streamlined process for pricing
and settling commodities, according to market
conventions; and the ability to manage risk in
times of high volatility.
Integration with flight operations functionality
helps ensure accurate capturing of fuel uplift
and error-free invoice verification.
13 / 24
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Executive Summary
Solution Overview
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Fuel Sales
Solution Overview
Fuel Sales
Capabilities
Benefits
Extend ERP functionality to support the
selling of commodities, and gain the
ability to create commodity contracts
priced on market quotes, automate
price calculations, and streamline
invoicing.
SAP Commodity Sales software is designed
to run the complete contract-to-cash process,
including logistics and settlement of commodities.
The software extends SAP ERP functionality to
handle commodity-based contractual pricing
and provisional, differential, and final invoicing.
Integration with the company treasury enables
airlines to transfer commodity exposure positions
to risk management.
The software gives managers the ability to
maintain negotiated pricing rules in the system.
The rules are used to automate price calculations
and enable the pricing of commodities based
on frequently changing market quotes.
14 / 24
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Executive Summary
Solution Overview
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Efficiently Sell Commodities
Solution Overview
Fuel Sales
Capabilities
Benefits
SAP Commodity Sales software extends the
functionality of SAP ERP to automate the
creation of sales contracts and sales orders for
fuel. It helps airlines with complex commodity
pricing, such as average pricing over multiple
months, using data from exchanges such as
Platts, NYMEX, LME, CBOT, and MATIF.
Airlines can create quantity contracts for defined
periods; maintain commodity quality requirements;
and link pricing formulas, including price calculation rules. They can create call-off orders with
reference to contracts and reprice orders using
quality factors and formulas from the original
contract.
The centralized software pulls data from
multiple sources and provides a single view
of all deals that need to be invoiced.
Provisional and differential invoicing allows
companies to create invoices before all prices
and qualities have been determined, and full
payment is possible before delivery. And they
can do all this without the subsequent hassle
of creating multiple debit and credit notes.
15 / 24
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Solution Overview
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Improve Pricing to Increase Profit Margins
Solution Overview
Fuel Sales
Capabilities
Benefits
Get a firm handle on complex fuel
pricing, streamline the invoicing
process, and enable real-time
commodity exposure management.
SAP Commodity Sales software automates
commodity-based contractual pricing and
enables provisional and differential invoicing
to improve overall efficiency fuel sales.
It also integrates with SAP Commodity Risk
Management software, so whenever new or
changed sales documents are posted, airlines
gain real-time risk exposure management.
automating price calculations (eliminating the
need for complex manual calculations) and
reduces 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 contract
creation to final invoicing and auditing.
SAP Commodity Sales helps reduce days sales
outstanding by shortening the contract-to-cash
cycle time. It increases efficiency by fully
16 / 24
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Flight Operations Monitoring
Solution Overview
Operations Monitoring
Capabilities
Benefits
SAP Innovations
36%
Higher operating margins
for organizations that use
IT to enable strategic and
competitive advantages
Source: SAP Performance
Benchmarking
Fuel-related information is captured by
flight operations in aircraft logbooks.
By feeding flight operations data into
fuel management software, airlines
can calculate fuel uplift and cost fuel
burns for each flight with a high level
of accuracy and in near-real time.
Fuel uplift information is collected by flight
operations from supplier fuel tickets, which are
used to create fuel supplier invoices. Fuel uplift
data is also captured in aircraft flight logbooks
after fuel volumes are converted into weight
with calculations based on the specific gravity
of the fuel. This is key because fuel is managed
within the aircraft according to weight. Aircraft
instruments display fuel carried on board by
weight.
Fuel ticket information is captured in different
ways, depending on the sophistication of
fuel suppliers, refuelers, and aircrafts. Fuel
information can be captured manually by noting
data from fuel tickets into aircraft logbooks and
then transferring the data to SAP software. The
fuel data can also be captured electronically
through mobile devices, electronic logbooks,
ACARS messages, or a combination of
methods.
17 / 24
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Executive Summary
Solution Overview
Operations Monitoring
Capabilities
Benefits
SAP Innovations
24%
Lower IT spend per employee
when organizations have a
single solution to manage the
business
Source: SAP Performance
Benchmarking
Solution Overview
Contact Us
Manage Fuel at Aircraft and Flight Levels,
and Provide Enterprise-Wide Visibility
SAP software captures fuel uplift data from
fuel tickets, sends it to aircraft logbooks, and
automatically posts fuel goods receipt
transactions for the first step in the invoice
verification process.
The software extends this process to calculate
flight fuel burn, enabling airlines to calculate
flight fuel costs accurately in near-real time
without additional staff effort.
Fuel levels are measured in aircraft fuel tanks,
and the software provides an auditable stock
adjustment based on actual measurements –
data that previously had low visibility.
SAP software provides flexibility in data
capture. Airlines can capture data manually
through paper logbooks and fuel tickets, as
well as with electronic logbooks and ACARS
messages. This simplifies the implementation
of capture processes and provides a speedy,
efficient, and highly detailed data capture.
Flight operations data is integrated with fuel
management processes, giving management
a single complete view of fuel situations and
supporting detailed analysis and reporting.
For existing SAP customers, rollout of the
software is expedited, as it uses standard
modules, primarily in the SAP Enterprise
Asset Management solution.
The software can be extended to cover ground
services operations and other direct flight costs,
including catering.
18 / 24
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Executive Summary
Solution Overview
Operations Monitoring
Capabilities
Benefits
SAP Innovations
52%
More employees use mobile
solutions when business
processes are redesigned to
enable access to supporting
applications
Source: SAP Performance
Benchmarking
Solution Overview
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Bringing All Departments Together to Help Lower Fuel
Costs
There is a great deal of fuel-relevant
flight operations data that is not available
to help optimize fuel procurement and,
most important, for fuel analytics.
Airlines need enterprise-wide access to
this data for an accurate and complete
view of end-to-end business process
performance.
Flight-centric fuel management, an airline
industry best practice, helps ensure data
integrity across departments. SAP software
speeds fuel management processes and
makes updated data immediately available
to all departments.
The software improves enterprise productivity
by eliminating duplicate data entry.
Fuel hedging processes are closely integrated
with fuel management for high quality data input
into pricing engines and improved decision making.
The software provides a single, complete
view of the fuel situation and supports detailed
analysis and near-real-time reporting, especially
when used in conjunction with electronic
logbooks.
The software enables verification of supplier
invoices and automates routine tasks, including
contract price updates, forecasts, budget
calculations, invoice verification, evaluated
goods receipts, and electronic invoicing.
The software also extends to cover ground
services and catering activities.
19 / 24
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Innovations for Flight Operations Monitoring
Solution Overview
Operations Monitoring
Capabilities
Benefits
SAP Innovations
40%
Higher employee productivity
where mobile access is
provided to employees across
all levels
Source: SAP Performance
Benchmarking
With mobile solutions and Big Data
analytics, airlines can capture fuel data
and perform instant analysis to optimize
fuel costs and route profitability.
Insert
image #
here
E-enabled aircraft generate large volumes
of data. To be competitive, airlines must
tap into this data to enhance business
processes, particularly for key areas such
as fuel costs.
Make Sense of E-Enabled Aircraft Data
Track aircraft performance using a single data
repository with predefined or customized key
performance indicators (KPIs) to analyze fuel
performance. Understand the relationships
between KPIs for insight into aircraft performance
through root cause and predictive analysis.
Large volumes of data generated by modern
aircraft are no longer an obstacle to performing
near-real-time analysis.
Capture Data on the Ramp
More and more airlines deploy mobile solutions
on the ramp to support line maintenance and
line services. Capturing fuel-related data in
real time at the source enables near-real-time
performance tracking and helps ensure
immediate management attention in cases of
deviation from agreed standards.
20 / 24
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Strategic Demand Management Value Map
Solution Overview
Management and Hedging
Fuel Procurement
Business Planning
and Consolidation
Business Planning
and Consolidation
Fuel Management
Risk Management
and Hedging
Network and
Route
Performance
Management
Profitability and Cost
Management
Fuel Sales
Operations Monitoring
Demand Management
Why SAP?
Fuel Procurement
Fuel Sales
Flight Ops
Monitoring
Enable fuel procurement,
sales, risk management,
and operations processes.
21 / 24
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Why SAP?
Solution Overview
Management and Hedging
Integrated commodity management solutions from SAP help airlines optimize fuel
procurement, sales, risk management, and operations processes. Airlines can gain
a consolidated, real-time view of the fuel situation and market trends and react
quickly to market changes.
Fuel Procurement
Fuel Sales
Operations Monitoring
Demand Management
Why SAP?
Tightly Integrated, Comprehensive Software
Directly transfer procurement and sales information to SAP Commodity Risk Management to
optimize fuel price hedging.
Improved Fuel Pricing
Define rules for processing physical commodity deals with a fully integrated price calculation
engine.
Better Reporting and Legal Compliance
Gain real-time data collection and reporting functionality, and integrate information with finance and
accounting solutions.
Integrating Operations
Enable manual and automatic data capture, and eliminate duplication for high data integrity,
operational efficiency, and speed.
22 / 24
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Solution in Detail
Transportation and Logistics
Executive Summary
Solution Overview
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CMP 25676 (13/08)
http://scn.sap.com/community/transportation-and-logistics
www.sap.com/commodity
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Transportation and Logistics
Executive Summary
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Flight-Centric Fuel Management
© 2013 SAP AG or an SAP affiliate company. All rights reserved.
Executive Summary
Solution Overview
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Staying Competitive While Fuel Costs Escalate
Fuel Price Volatility
Flight-Centric Management
Optimal Fuel Management
Twenty years ago, fuel was a low-cost commodity and the business focus was on
reliable and timely supply at all operated stations. But since 2006, fuel has replaced
labor as the largest single operating cost item. With increasing fluctuations in fuel
prices, it is more difficult to manage fuel costs and the overall impact on aircraft
routes and network profitability.
SAP Innovations
39%
Of airlines said they could
improve fuel hedging with
strategies that better reflect
their risk tolerance and
hedging goals
Source: Mercatus Energy
Advisors
Driven by the need to protect earnings and
maintain profitable operations, airlines are
sharpening their focus on risk management.
In fact, 82% of major airlines currently have
fuel hedges in place to help manage fuel
price volatility.*
Discoveries of new crude oil resources have
been falling in recent years, global demand has
been rising, and air traffic is expected to double
in the next 15 years.
Due to these pressures, airlines face a growing
need to explore the use of alternative fuels
such as ethanol, methanol, biodiesel, and
At the same time, airlines need to comply with
a range of regulations including the Sarbanes- synthetic paraffins. In pursuing alternative fuel
Oxley Act and hedge-accounting laws. This has sources, airlines can reduce carbon emissions
and improve their environmental impact while
led to a strong demand for business solutions
ensuring the viability of their long-term supplies.
that are designed to meet these challenges.
There are many pressures that contribute to
greater volatility and higher fuel prices.
*Source: The State of Airline Fuel Hedging & Risk
Management in 2012, Mercatus Energy Advisors,
www.mercatusenergy.com
2 / 24
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Flight-Centric Fuel Management
Fuel Price Volatility
Flight-Centric Management
Optimal Fuel Management
Fuel is not managed in isolation within any airline. It requires close collaboration
among business planning, supply, logistics, flight operations, accounting, controlling,
treasury fuel supply, and refueling organizations. Flight industry best practices
dictate that flight-oriented fuel management activities and processes yield the
greatest benefits to airlines.
SAP Innovations
Best-Run Transportation
and Logistics
Many airlines face challenges in verifying fuel
invoices due to inadequate capture of fuel
uplift information. SAP software integrates fuel
uplift and fuel burn data with flight operations
processes, links uplift data with each flight,
and calculates fuel burn and cost for individual
flights. With the software, airlines can accurately
capture fuel uplift data, check the data against
procurement contracts, and verify invoices.
Supplier invoices can be generated automatically
based on fuel uplift and procurement contract
details.
The flexible solution enables airlines to capture
fuel tickets on paper, and in electronic form,
based on Aircraft Communications Addressing
and Reporting System (ACARS) messages and
electronic flight bag data.
The software integrates with risk and hedging
functionality. Risk, or exposure, can be based
on procurement contract and fuel forecast
information. With the risk data, airlines can
define hedging strategies and perform hedging
transactions while complying with applicable
accounting rules and regulations.
3 / 24
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Optimal Fuel Management Impacts the Bottom Line
Fuel Price Volatility
Flight-Centric Management
Optimal Fuel Management
SAP Innovations
With SAP solutions, airlines can manage fuel use efficiently – which accounts for
about 40% of operating costs – on a daily basis. Connecting departments and
optimizing processes enable near-real-time analysis of fuel costs and the impact on
profitability. This improves decision making and enables airlines to factor risks into
fuel hedging strategies and to measure the effectiveness of risk strategies
continuously.
No loss in data integrity when airlines exchange data among departments
Faster processes, immediate data updating, data availability for all departments, supplier
invoice verification, and improved productivity with reduced data duplication
270%
Hedging closely integrated with the complete fuel management process, helping ensure high
quality data input into pricing engines and improved hedging decisions
Increase in jet fuel prices for
the period of June 2003 to
June 2013
Unified view of fuel data for analysis and reporting, especially when used with electronic
logbooks or ACARS
Source: index mundi
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
4 / 24
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SAP Innovations
Fuel Price Volatility
Flight-Centric Management
Commodity management solutions from SAP leverage the latest technology
innovations to enable fast responses to market dynamics and real-time visibility
into fuel risk. All of this is packaged into low-cost, low-risk, yet highly scalable,
flexible rapid-deployment solutions.
Optimal Fuel Management
SAP Innovations
SAP database and technology solutions,
powered by the SAP HANA platform, enable
managers to monitor high volumes of fuel
transactions, both physical and paper derivatives,
in real time. Airlines can quickly react to market
changes and reduce overall fuel risks.
Analytics solutions provide a 360-degree view
of the business, regardless of which department
is responsible for process steps. Airlines can
manage fuel positions based on risk strategies.
Airlines can establish criteria for managing fuel
risk. For example, they can create and define a
standard view of fuel across disciplines, with
the flexibility to manage risks to fit profiles.
Mobile solutions enable flight operations and
ramp staff to capture fuel transactions on the
ramp and feed the data in real time to the next
process steps, regardless of organizational
boundaries.
Fuel data can be captured electronically
from refueling organizations, fuel suppliers,
electronic aircraft logbooks, and ACARS
messages.
SAP software lets airlines capture fuel uplift
and fuel burn per flight and enables invoice
verification based on the relevant fuel price
index values.
5 / 24
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Integrated Processes and Information
Solution Overview
Management and Hedging
Risk Management and Hedging
Identify, qualify, and mitigate risks associated with fuel price volatility.
Fuel Procurement
Fuel Sales
Operations Monitoring
Fuel Procurement
Efficiently manage processes for buying fuel and fuel-related services.
Fuel Sales
Efficiently manage processes for selling fuel or fuel-related services.
Demand Management
Why SAP?
Flight Operations Monitoring
Capture fuel-related transactions and perform operational analysis.
6 / 24
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Fuel Management for Airlines
Solution Overview
Management and Hedging
Risk Management
and Hedging
Fuel Procurement
Fuel Sales
Flight Ops
Monitoring
Fuel Procurement
Fuel Sales
Operations Monitoring
Demand Management
Marketing
Procurement,
Sales,
and Logistics
Flight
Schedules
Forecast
Contracts
with
Commodity
Pricing
Purchase
with
Commodity
Pricing
Exposure
Management
Why SAP?
Sales with
Commodity
Pricing
Credit
Management
Hedge
Management
Paper Trades
Delivery to
Customer
Treasury
Fuel Risk
Reporting
Finance and
Accounting
Fuel management software
enables processes such as
fuel procurement, sales, risk
management, and operations.
Flight
Operations
Define Risk
Policy, Profile,
Review
Invoice from
Supplier
Capture Fuel
Uplift
MTM: Paper,
Physicals, and
Inventory
Deal
Settlement
Take-Off and
Landing
Calculate Fuel
Burn Per Flight
7 / 24
Hedge
Effectiveness
and Accounting
Invoice to
Customer
AP, AR,
General
Ledger,
Profitability
Analysis
Post Fuel
Costs to Flight
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Risk Management and Hedging
Solution Overview
Management and Hedging
Capabilities
Benefits
11%
Of companies follow
innovative hedging practices
to protect against supply
market volatility
Source: SAP Performance
Benchmarking
To succeed, airlines need to identify and
quantify their exposure to commodity
price and foreign exchange risk. Airlines
need to take effective, proven steps to
mitigate risks while complying with
government regulations.
The SAP Commodity Risk Management
application helps airlines manage price risks
by eliminating spreadsheets, increasing
transparency, and enabling the production of
timely reports on fuel positions and exposures
to market prices. Airlines can assess fuel risk
positions from commodity procurement and
commodity sales transactions in real time and
react quickly to business and market changes.
The software supports deal capture and
processing of commodity-based financial
derivatives transactions, accounting integration,
and hedge accounting for derivatives. Airlines
can generate up-to-date reporting on the
complete commodity portfolio.
8 / 24
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Commodity Risk Excellence
Solution Overview
Management and Hedging
Capabilities
Benefits
SAP Commodity Risk Management integrates
tightly with the SAP Commodity Procurement
application and the SAP Commodity Sales
application to capture exposure positions
from forecasts and physical transactions and
compile risk positions automatically.
Financial hedging transactions are captured
and used to update the appropriate risk
positions. To manage these paper trades,
the software allows airlines to import and
store market prices, handle confirmations
and counter confirmations, and help ensure
segregation of duties.
Hedge management lets airlines define hedge
plans, maintain hedging relationships, measure
the effectiveness of hedges, and post hedge
accounting results to the general ledger.
Deal settlement functions and tight integration
with accounting enables airlines to manage
margins, perform month-end valuations, post
profit and losses, settle paper deals, and create
payments and invoices.
Robust commodity risk reporting analytics gives
airlines a view into risk positions and risk policy
compliance in real time.
9 / 24
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Improve Commodity Hedging Efficiency
Solution Overview
Management and Hedging
Capabilities
Benefits
SAP software provides clear, real-time
visibility into the organization’s portfolio
of commodity positions. This means
that airlines can gain efficiencies in
commodity risk hedging, hedge
accounting, and risk policy compliance.
SAP Commodity Risk Management enables
airline executives to manage risks in real time,
based on the unique approach and strategy
that each organization employs.
Now risk management decision makers can get
fast access to trusted, high-quality information.
SAP Commodity Risk Management provides a
single version of the truth for evaluating and
executing the appropriate hedges according to
company risk policy.
Integration with financial accounting
functionality 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 needs
to worry about audits and the regulatory
compliance of risk management. They are free
to focus on managing the airline’s commodityrelated business.
10 / 24
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Fuel Procurement
Solution Overview
Fuel Procurement
Capabilities
Benefits
80%
Of decision makers think
access to the right information
at the right time is critical to
their business
Source: SAP Performance
Benchmarking
SAP solutions enable airline organizations
to price fuel according to market quotes.
Airlines can automate their pricing
calculations and streamline invoicing
processes by enhancing procurement
activities with commodity-specific
functions in the SAP ERP application.
With the SAP Commodity Procurement
application, organizations can improve the
speed and efficiency of their fuel procurement
processes.
SAP Commodity Procurement extends the
standard procurement functionality of the SAP
ERP application. Sophisticated functionality
automates processes and enables advanced
commodity pricing on procurement documents.
SAP Commodity Procurement supports
provisional, differential, and final invoices.
Now airlines can price fuel based on frequently
changing market quotes such as the Platts,
the New York Mercantile Exchange (NYMEX),
London Metal Exchange (LME), Chicago
Board of Trade (CBOT), and Marche a Terme
International de France (MATIF). Airline
executives can give managers the ability to
maintain the negotiated pricing rules in the
system to automate price calculations.
11 / 24
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Efficient Fuel Procurement
Solution Overview
Fuel Procurement
Capabilities
Benefits
SAP Commodity Procurement enables airline
executives to create commodities procurement
contracts and purchase orders efficiently.
They can create quantity contracts for defined
periods, maintain fuel quality requirements, and
link pricing formulas, including price calculation
rules. The software prices commodities
using data from exchanges including Platts,
the NYMEX, LME, CBOT, and MATIF.
Airlines can create call-off orders with
references to contracts, create spot purchases,
and reprice orders using quality factors and
formulas from the original contract.
Provisional and differential invoicing allows
companies to post invoices before all prices
and qualities have been determined and full
payment is possible – and even before delivery.
And management can do all this without the
subsequent hassle of creating multiple debit
and credit notes.
Invoices can be matched at the flight level, and
verification can be based on fuel tickets, both
electronically and manually.
The centralized software pulls data from
multiple sources and enables airlines to view
all deals that need to be invoiced.
12 / 24
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Improved Pricing and Invoicing Reduces Error Rates
Solution Overview
Fuel Procurement
Capabilities
Benefits
SAP software supports comprehensive,
collaborative processes for efficient
and accurate procurement and fuel
payments, and it reduces errors and
manual interactions. With the software,
airlines can perform procurement and
payment activities for large and small
volumes of fuel.
SAP Commodity Procurement helps airlines
improve the overall efficiency of fuel procurement
processes.
The software extends the functionality of SAP
ERP for advanced commodity pricing and
streamlines, automates, and simplifies
processes. The software reduces errors and
eliminates out-of-system calculations, reduces
manual interactions, and posts clear and
concise invoice receipts for each purchase
according to all available information at any
point in time.
Treasury integration allows airlines to transfer
accurate commodity exposure positions to
risk management in real time. Companies get
a clear view into the physical positions of
commodities; a streamlined process for pricing
and settling commodities, according to market
conventions; and the ability to manage risk in
times of high volatility.
Integration with flight operations functionality
helps ensure accurate capturing of fuel uplift
and error-free invoice verification.
13 / 24
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Fuel Sales
Solution Overview
Fuel Sales
Capabilities
Benefits
Extend ERP functionality to support the
selling of commodities, and gain the
ability to create commodity contracts
priced on market quotes, automate
price calculations, and streamline
invoicing.
SAP Commodity Sales software is designed
to run the complete contract-to-cash process,
including logistics and settlement of commodities.
The software extends SAP ERP functionality to
handle commodity-based contractual pricing
and provisional, differential, and final invoicing.
Integration with the company treasury enables
airlines to transfer commodity exposure positions
to risk management.
The software gives managers the ability to
maintain negotiated pricing rules in the system.
The rules are used to automate price calculations
and enable the pricing of commodities based
on frequently changing market quotes.
14 / 24
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Efficiently Sell Commodities
Solution Overview
Fuel Sales
Capabilities
Benefits
SAP Commodity Sales software extends the
functionality of SAP ERP to automate the
creation of sales contracts and sales orders for
fuel. It helps airlines with complex commodity
pricing, such as average pricing over multiple
months, using data from exchanges such as
Platts, NYMEX, LME, CBOT, and MATIF.
Airlines can create quantity contracts for defined
periods; maintain commodity quality requirements;
and link pricing formulas, including price calculation rules. They can create call-off orders with
reference to contracts and reprice orders using
quality factors and formulas from the original
contract.
The centralized software pulls data from
multiple sources and provides a single view
of all deals that need to be invoiced.
Provisional and differential invoicing allows
companies to create invoices before all prices
and qualities have been determined, and full
payment is possible before delivery. And they
can do all this without the subsequent hassle
of creating multiple debit and credit notes.
15 / 24
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Improve Pricing to Increase Profit Margins
Solution Overview
Fuel Sales
Capabilities
Benefits
Get a firm handle on complex fuel
pricing, streamline the invoicing
process, and enable real-time
commodity exposure management.
SAP Commodity Sales software automates
commodity-based contractual pricing and
enables provisional and differential invoicing
to improve overall efficiency fuel sales.
It also integrates with SAP Commodity Risk
Management software, so whenever new or
changed sales documents are posted, airlines
gain real-time risk exposure management.
automating price calculations (eliminating the
need for complex manual calculations) and
reduces 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 contract
creation to final invoicing and auditing.
SAP Commodity Sales helps reduce days sales
outstanding by shortening the contract-to-cash
cycle time. It increases efficiency by fully
16 / 24
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Flight Operations Monitoring
Solution Overview
Operations Monitoring
Capabilities
Benefits
SAP Innovations
36%
Higher operating margins
for organizations that use
IT to enable strategic and
competitive advantages
Source: SAP Performance
Benchmarking
Fuel-related information is captured by
flight operations in aircraft logbooks.
By feeding flight operations data into
fuel management software, airlines
can calculate fuel uplift and cost fuel
burns for each flight with a high level
of accuracy and in near-real time.
Fuel uplift information is collected by flight
operations from supplier fuel tickets, which are
used to create fuel supplier invoices. Fuel uplift
data is also captured in aircraft flight logbooks
after fuel volumes are converted into weight
with calculations based on the specific gravity
of the fuel. This is key because fuel is managed
within the aircraft according to weight. Aircraft
instruments display fuel carried on board by
weight.
Fuel ticket information is captured in different
ways, depending on the sophistication of
fuel suppliers, refuelers, and aircrafts. Fuel
information can be captured manually by noting
data from fuel tickets into aircraft logbooks and
then transferring the data to SAP software. The
fuel data can also be captured electronically
through mobile devices, electronic logbooks,
ACARS messages, or a combination of
methods.
17 / 24
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Executive Summary
Solution Overview
Operations Monitoring
Capabilities
Benefits
SAP Innovations
24%
Lower IT spend per employee
when organizations have a
single solution to manage the
business
Source: SAP Performance
Benchmarking
Solution Overview
Contact Us
Manage Fuel at Aircraft and Flight Levels,
and Provide Enterprise-Wide Visibility
SAP software captures fuel uplift data from
fuel tickets, sends it to aircraft logbooks, and
automatically posts fuel goods receipt
transactions for the first step in the invoice
verification process.
The software extends this process to calculate
flight fuel burn, enabling airlines to calculate
flight fuel costs accurately in near-real time
without additional staff effort.
Fuel levels are measured in aircraft fuel tanks,
and the software provides an auditable stock
adjustment based on actual measurements –
data that previously had low visibility.
SAP software provides flexibility in data
capture. Airlines can capture data manually
through paper logbooks and fuel tickets, as
well as with electronic logbooks and ACARS
messages. This simplifies the implementation
of capture processes and provides a speedy,
efficient, and highly detailed data capture.
Flight operations data is integrated with fuel
management processes, giving management
a single complete view of fuel situations and
supporting detailed analysis and reporting.
For existing SAP customers, rollout of the
software is expedited, as it uses standard
modules, primarily in the SAP Enterprise
Asset Management solution.
The software can be extended to cover ground
services operations and other direct flight costs,
including catering.
18 / 24
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Executive Summary
Solution Overview
Operations Monitoring
Capabilities
Benefits
SAP Innovations
52%
More employees use mobile
solutions when business
processes are redesigned to
enable access to supporting
applications
Source: SAP Performance
Benchmarking
Solution Overview
Contact Us
Bringing All Departments Together to Help Lower Fuel
Costs
There is a great deal of fuel-relevant
flight operations data that is not available
to help optimize fuel procurement and,
most important, for fuel analytics.
Airlines need enterprise-wide access to
this data for an accurate and complete
view of end-to-end business process
performance.
Flight-centric fuel management, an airline
industry best practice, helps ensure data
integrity across departments. SAP software
speeds fuel management processes and
makes updated data immediately available
to all departments.
The software improves enterprise productivity
by eliminating duplicate data entry.
Fuel hedging processes are closely integrated
with fuel management for high quality data input
into pricing engines and improved decision making.
The software provides a single, complete
view of the fuel situation and supports detailed
analysis and near-real-time reporting, especially
when used in conjunction with electronic
logbooks.
The software enables verification of supplier
invoices and automates routine tasks, including
contract price updates, forecasts, budget
calculations, invoice verification, evaluated
goods receipts, and electronic invoicing.
The software also extends to cover ground
services and catering activities.
19 / 24
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Innovations for Flight Operations Monitoring
Solution Overview
Operations Monitoring
Capabilities
Benefits
SAP Innovations
40%
Higher employee productivity
where mobile access is
provided to employees across
all levels
Source: SAP Performance
Benchmarking
With mobile solutions and Big Data
analytics, airlines can capture fuel data
and perform instant analysis to optimize
fuel costs and route profitability.
Insert
image #
here
E-enabled aircraft generate large volumes
of data. To be competitive, airlines must
tap into this data to enhance business
processes, particularly for key areas such
as fuel costs.
Make Sense of E-Enabled Aircraft Data
Track aircraft performance using a single data
repository with predefined or customized key
performance indicators (KPIs) to analyze fuel
performance. Understand the relationships
between KPIs for insight into aircraft performance
through root cause and predictive analysis.
Large volumes of data generated by modern
aircraft are no longer an obstacle to performing
near-real-time analysis.
Capture Data on the Ramp
More and more airlines deploy mobile solutions
on the ramp to support line maintenance and
line services. Capturing fuel-related data in
real time at the source enables near-real-time
performance tracking and helps ensure
immediate management attention in cases of
deviation from agreed standards.
20 / 24
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Strategic Demand Management Value Map
Solution Overview
Management and Hedging
Fuel Procurement
Business Planning
and Consolidation
Business Planning
and Consolidation
Fuel Management
Risk Management
and Hedging
Network and
Route
Performance
Management
Profitability and Cost
Management
Fuel Sales
Operations Monitoring
Demand Management
Why SAP?
Fuel Procurement
Fuel Sales
Flight Ops
Monitoring
Enable fuel procurement,
sales, risk management,
and operations processes.
21 / 24
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Why SAP?
Solution Overview
Management and Hedging
Integrated commodity management solutions from SAP help airlines optimize fuel
procurement, sales, risk management, and operations processes. Airlines can gain
a consolidated, real-time view of the fuel situation and market trends and react
quickly to market changes.
Fuel Procurement
Fuel Sales
Operations Monitoring
Demand Management
Why SAP?
Tightly Integrated, Comprehensive Software
Directly transfer procurement and sales information to SAP Commodity Risk Management to
optimize fuel price hedging.
Improved Fuel Pricing
Define rules for processing physical commodity deals with a fully integrated price calculation
engine.
Better Reporting and Legal Compliance
Gain real-time data collection and reporting functionality, and integrate information with finance and
accounting solutions.
Integrating Operations
Enable manual and automatic data capture, and eliminate duplication for high data integrity,
operational efficiency, and speed.
22 / 24
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Find Out More About How Your Organization Can
Become Best-Run
Benchmark Your Performance
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benchmarking program from SAP – available free to SAP customers and select prospects.
The SAP benchmarking program has helped more than 3,000 organizations assess their
strengths, uncover areas for improvement, and identify best practices and IT strategies that
generate clear, tangible value – not someday, but today.
Visit valuemanagement.sap.com >>
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package, you get everything you need to be up and running quickly – including preconfigured
software and implementation services – in just weeks. With a defined scope and predictable
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It lets members help one another solve problems, learn, and invent new ways to get things
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Solution in Detail
Transportation and Logistics
Executive Summary
Solution Overview
Contact Us
CMP 25676 (13/08)
http://scn.sap.com/community/transportation-and-logistics
www.sap.com/commodity
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