Optimization of Parts Valuation process

in Airline Industry
Contents

Background..................................................................................................................................................2
Types of Aircraft Spare Parts.......................................................................................................................2
As Is Inventory Valuation.............................................................................................................................3
To Be Business Need...................................................................................................................................3
Business Benefits.........................................................................................................................................3
How the TO BE process works in SAP..........................................................................................................3
Conclusion.................................................................................................................................................10
Background

This document describes about how the Aircraft Parts valuation process is optimized in SAP for
Delta Airlines.

Delta Air Lines is a major United States airline headquartered in Atlanta, Georgia, in the United
States. The airline operates an extensive domestic and international network serving all
continents except Antarctica. Delta Air Lines and its subsidiaries operate over 5,000 flights every
day and have approximately 80,000 employees. The airline's hub at Hartsfield-Jackson Atlanta
International Airport is the world's busiest airport by passenger traffic and number of landings
and takeoffs.

The Maintenance, Repair and Operations (MRO) supply chain planning process, controlling and
accounting the flow of repairable parts, is more complex and challenging; but effectively
managing rotable parts reduces the cost for your aftermarket operation and increases
profitability.  It is crucial that the MRO supply chain is well integrated to provide visibility of
serviceable and unserviceable parts between the repair shop, supplier, warehouse and customer.

Types of Aircraft Spare Parts

Material Types –SCEPTRE (Legacy) Vs SAP system

SAP Legacy Description Definitions

Material Material
Type Type

ZROT 9 Configuration A non-valuated material (no costing information is associated

Tracked Parts with the material master) that has an associated asset master
record to capture financial values. A ROTABLE material is
repaired until it has to be scrapped and may last for the life of
the aircraft. (unlimited repairs)

o Asset Master Linkages

ZREP 4 Key repairable  A non-valuated material (no costing information is

associated with the material master) that has an
associated asset master record to capture financial
values. Key repairables have some degree of repair
and are retired in asset management when they are
scrapped.
o Asset Master Linkages
ZLLP 9/4 with Life limited  A non-valuated material (no costing information is
LLP parts associated with the material master) that has an
associated asset master record to capture financial
Indicator
values. The life of the material is limited based on hours
or cycles of use
o Asset Master Linkages

ZEXP 3 Expendable  A valuated material including consumables, operating

parts supplies, and raw material. These materials are
expensed at issue.
o Materials are expensed at time of issue with
reference to the lot-trace-batch
o No Asset Master linkages

As Is Inventory Valuation

In AS IS, Spare Parts procurement and valuation is processed in Legacy system (SCEPTRE).

To Be Business Need

 Implement the Procurement of Spare Part process (PO, GR, IR) into SAP
 Track the Spare parts units management in MM and value management in Asset
Accounting
 Create the process for automatic creation/retirement/scraping of Spare Part assets
based on the goods movements (receipts booking, Scrapping).

Business Benefits
 Integrated Asset accounting process with MM Goods movements
 Saves lot of manual efforts in managing the asset accounting process in SAP.
 Improving the accuracy and operational efficiency

How the TO BE process works in SAP

Integration points between Material Master record and Asset Master Record.

Material master record number is external and created using the concatenation of MPN: CAGE CODE.

MPN is Manufacturer Part Number

Cage Code is Manufacturer Vendor Number

FFFC (Form Fit function class) serial number value is also maintained in the Material Master record.
Multiple materials (different MPNs and Cage Codes) can have the same FFFC value. The key function of
the FFFC is to recognize the parts with common functionality. These parts are interchangeable parts in
the Aircraft maintenance process. For example COKE and PEPSI will have the same FFFC serial
Number.

All of the above 3 values are key references for the reconciliations between Asset master quantity verses
Material Master quantity.

Below is the example of Material and Asset Master Record

MM03 –Material Master Display

AS03-Asset Master Display

Automatic Asset Accounting updates from Logistics Material movements:

All Purchase Order receipts for these types of materials will be processed in logistics thru the standard
MM process. Since the standard price is always maintained as Zero in the Material Master the entire PO
price amount is posted on Price difference clearing account (Technically Asset clearing GL account is
mapped in the Account determination of Price difference). So as per the account determination setting
the receipt process will post the below entry.

Asset Clearing A/C Dr (GR Qty X PO Price)

GR/IR Clearing A/C Cr (GR Qty X PO Price)

From MM side only Material master quantity is updated. No Inventory valuation in MM.

The designed Custom enhancement will auto post the asset accounting postings (additions, retirements
and transfers). Custom enhancement reads the Logistics material movement documents data and
prepares and creates the IDOC for Asset accounting process. For example if custom enhancement reads
the 101 movement document then it creates the IDOC data that is needed for Asset creation BAPI/ Asset
addition BAPI.

Custom enhancement will create multiple asset master records for the same material. An asset master
record per month per material is maintained. For example Material ‘XYZ123’ with Qty 15 is received on
5th Feb 2011 (first purchase in 2011) then Custom process will create an asset record with Qty of 10 and
Capital date of 5th Feb 2011. If the next receipt is received on 20 th Feb 2011 then it is processed as
addition to the exiting asset. All other subsequent receipts in the same month will be processed as
additions to the exiting asset master. The receipts in the next month will be processed with another new
Asset Master record with Next month date as Capital date. All subsequent months receipts will follow
the same process (an Asset record per month per material). Purchase price is posted as the APC value of
the asset.

If the custom process reads the Scrap or retirement type of movement then it creates the IDOC data for
Asset accounting process. For example the Custom process reads 551 movement type documents then it
processes the Asset retirement posting. The earliest purchased Asset master records are retired first.

The IDOC data is processed by standard IDOC processing mechanism (Message Type/BAPI).

Here are the some of the examples of IDOC message types handled by the custom enhancement.

601 "Accommodation or Surplus Sale w/Sales Order

602 "Reverse Accommodation or Surplus Sale

311 "Transfer of material within Surplus Plant

631 "Transfer from QA to Surplus

312 "Reverse Transfer within Surplus Plant

632 "Reverse Transfer from QA to Surplus

633 "Surplus Consignment

634 "Return from Surplus Consignment

551 "Scrap material

552 "Reverse Scrap

309 "Material to Material Transfer

z39 "Material to Material Transfer MIRS

310 "Reverse Material to Material Transfer

z31 "Reverse Material to Material Transfer MIRS

411 "Transfer from Consignment Inventory

z41 "Transfer from Consignment Inventory

412 "Transfer to Consignment from DAL Inventory

z42 "Transfer to Consignment from DAL Inventory

261 "Material Issue to a Capital Work Order EO

262 "Reverse Material Issue to a Prod Order

Material Movements and corresponding Custom IDOC message type for Asset Accounting updates.

601,633,551 and z42 ZABAVN

602,655,634,552 and z41 ZABA08

411,412 ZFB01

262 zfb08_ab08

311, 631, 312, 632, 309, 310, Z39 and z41 ZABUMN
IDOC Type and Custom Function Module attached to the IDOC message type to process:

1)

IDOC Type: ZAB08

ZASSET_PROCESS_AB08 (FM to process the IDOC)

Collect the data and create the asset accounting postings (Create asset/Additions)

2)

IDOC Type: ZABAVN

ZASSET_PROCESS_ABAVN

Collect the data and determine the Asset Master and quantity to be retired. Then the below BAPI is called to post Asset
Retirement.

CALL FUNCTION 'BAPI_ASSET_RETIREMENT_POST'

3)

IDOC Type: ZABUMN

ZASSET_PROCESS_ABUMN

This collects the data and process the Asset Transfers (Inter Company and Intra Company)

Conclusion
This process improves the operational efficiency by reducing the cycle times in Supply Chain,
Inventory and asset accounting departments.

Improved the accuracy and operational efficiency