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Formula & Average Pricing

Formula and Average pricing is functionality available in SAP IS-Oil.

The prices in Oil industry fluctuates daily. Price quotes for material gets picked up daily based on availability of quotes by different oil Exchanges (Third party quotation provider). Oil distribution and marketing companies need to use this price for sales.

SAP IS-Oil provides the functionality of Formula and Average pricing to meet this requirement. Everyday Price quotes from different oil exchanges like Platts, Opis, Nymex comes to SAP through interface & saved in Standard or Customized “Z” table. Each Material is linked to a particular Price quote uniquely in F&A pricing.

The purpose of formula & average pricing is to enable the calculation of product price with the help of external quotations over a set period of time. The price can be further modified with company defined calculation rule before it is used. The system also takes into account currency fluctuation within the time period.

  • Quotations can be specific for a day or can be averaged over a period of time, agreed between Oil Company and customer.
  • The averaged time period are set out in pricing and payment term policies.
  • The handling of weekends and public holidays must be specified within formula.
  • The quotations can be converted into local currency using an agreed exchange rate type.

There are two ways in which the quotation can be converted into local currency.

  • Converting the daily quotation using daily exchange rate.
  • Taking the average of the quotations and converting using an average of exchange rates.

SAP has two sets of rules for defining the averaging period – Provisional and final rules.

Provisional Rule – This calculation rule is used by SAP when data required like external quotations to perform the final calculation is not known.

Provisional rules are used at the time of creation of Sales order, where there is a possibility that at the time of creation of SO, the price quotes are not available. Hence, still the order needs to be saved.

Final Rule – Final calculation rule is used to determine the final price of the product.

Final rules are used at the time of creation of Invoice, where in, a re-pricing happens, looking out for all available prices in the price table, and finally, saving the document.

There are some situations (like external quotations are not posted by third party or Batch jobs which update tables are failed) when external quotations for required time period are not available in the system. In this situation final price of material is not known so invoice is created with the help of provisional rule. Once Final price is available in the system Differential invoice or Credit/Debit note can be raised against original invoice as per business process.

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