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E-Commerce in the Oil and Gas Industry

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Join this panel of leading sellers representing MRO, environmental services, and other key categories of supply to the oil and gas industry. This panel will discuss how eCommerce has transformed the ...

Join this panel of leading sellers representing MRO, environmental services, and other key categories of supply to the oil and gas industry. This panel will discuss how eCommerce has transformed the oil and gas industry, how oil & gas buyers and sellers can benefit from moving their source-to-settle and market-to-cash processes online, and an eCommerce roadmap for industry leaders.

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  • it started back in 2002 w/ a customer requestfirst motivation: simply to keep the customerit started as a single individual project …… which made it expensive!e-pro readiness turned out to be a USP (Unique Selling Point)more and more wanted to use usbut: we even rejected the first ARIBA customer!
  • Our customers consider us a Top Tier provider as we can adhere to their needsWe have advanced our technological platforms to gather data in the field with handheld devices, iPads and integrated driver communication systemWe have met or exceeded all of our targeted metrics and goalsWe did not compromise Health & Safety with any of our solutions, in fact we enhanced it by providing better and more up to date information to our field personnel

E-Commerce in the Oil and Gas Industry E-Commerce in the Oil and Gas Industry Presentation Transcript

  • E-Commerce in the Oil and Gas Industry:Increasing Customer Satisfaction and Getting Paid Faster© 2013 Ariba, Inc. All rights reserved.
  • #AribaLIVEPresenters• Russ HuntDirector, Procurement ExcellenceFlint Hill Resources• Brock HirschmanDirector, ePro OperationsW.W. Grainger• Joseph McNallyVP, Non-Standard BillingClean Harbors© 2013 Ariba, Inc. All rights reserved.2
  • #AribaLIVEA BUYER PERSPECTIVERuss Hunt, Director Procurement Excellence, Flint Hill Resources© 2013 Ariba, Inc. All rights reserved.3
  • #AribaLIVEFlint Hills Resources (FHR)FHR is a direct, wholly owned subsidiary, of Koch Resources LLC, which is whollyowned by Koch Industries, Inc, a privately held company involved in most aspects of theoil and gas industry. The operations of FHR and its subsidiaries include the following:Three crude oil refineries (approximately 816,525 bpd of crude oil refining capacity);Six chemical production facilities;Four ethanol production facilities and two biodiesel facilities;A 50% interest in Excel Paralubes, a general partnership engaged primarily in themanufacture of lubricant base oils;Proprietary pipelines and pipeline investments (located principally throughout the Mid-continent and Gulf Coast regions of the United States);FHR’s is the United States’ 9th, and the World’s 24th, largest refiner. In addition, FHR isthe United States’ 5th largest producer of ethanol. FHR is also a leading producer andmarketer of petrochemicals, producing about nine billion pounds of building-block chemicals.4 © 2013 Ariba, Inc. All rights reserved.
  • #AribaLIVEWhy did FHR implement Ariba?• Incumbent electronic commerce solution was beingdiscontinued. Failure to act would cause headcount addition inthe accounts payable group.Incumbent system used for electronic transmission of purchase ordersand electronic receipt of invoices.Incumbent system limited to small number of suppliers due to off-marketnature of EC tool and cost to enable new supplier.Incumbent system could not handle freight, credits or blankets.• FHR wanted to move past basic electronic commerce into avalue added method of transacting with suppliers. FHR felt wecould create a competitive advantage in our PP process byoptimizing our processes and leveraging new tools.5 © 2013 Ariba, Inc. All rights reserved.
  • #AribaLIVEManagement Approval Value Proposition• Value proposition used for management approval was based solelyon accounts payable headcount reduction through the receipt ofelectronic invoices.• Other expected benefits that were not quantified include:Optimization of confirmation process resulting in buyers beingable to focus on higher-value tasksData visibility leading to better analysisBetter visibility to supplier issues on a real-time basis(un-invoiced, bad pricing, delivery issues, etc…)Forced business process consistency6 © 2013 Ariba, Inc. All rights reserved.
  • #AribaLIVEDocument Types• Outbound POLittle value to FHR but high value to our integrated suppliers. Some suppliers willing to offer discounts forelectronic POs.• ConfirmationRequired by FHR on all but service POs.Allows us to run business rules on unit price, availability and estimated delivery data.FHR has automated a large percentage of the confirmation process with a structured, rulesbased, exception process.Able to capture approx 2 hours per day, per buyer in time savings.• Advance Ship Notice (ASN)When used by the supplier, allows us to see shipping documents and in some cases tracking information.Would be optimal if all suppliers utilized.• Inbound InvoiceFully automated – has allowed for headcount reduction in accounts payable group.Forced adherence to FHR data requirements.Forced adherence to billing amount; must equal FHR PO unit price (elimination of pricing suspensions inMaximo system).– Resolution of FHR expected price vs. supplier’s price occurs during the confirmation exception process.7 © 2013 Ariba, Inc. All rights reserved.
  • #AribaLIVEFHR’s Implementation Approach• FHR has made Ariba adoption a key focus and gives preference to suppliers who will transact on the network.In several cases, suppliers unwillingness to transact on the network has caused FHR to move business from that supplier in favor ofa supplier that did transact on Ariba.• Tiered our supplier base based on criteria:Annual invoice countAriba status (currently on network or not)Type of supplier (Materials, Service, Chem/Cat, etc…)Complexity of transactions (blankets, spot, etc…)• First group was a “test group” made up of predominantly of suppliers that were previously transacting on ourdiscontinued EC platform. All were existing Ariba customers.• Subsequent groups were based on value added to FHR. High invoice count suppliers or those perceived to be lowenablement effort were selected.• Have moved to a more structured approach with scheduled enablements at set intervals. This was done to minimizethe internal resources required to manage.To set your pace your will need to get a feeling for your internal resource that you want to dedicate to enablements to include yourIT team.• Plan is to enable all “eligible” suppliers with transaction counts that exceed our threshold.We will remove suppliers from the network who have marginal invoice counts but high support costs.8 © 2013 Ariba, Inc. All rights reserved.
  • #AribaLIVERamp Up Actuals9 © 2013 Ariba, Inc. All rights reserved.
  • #AribaLIVEAchieved Value Proposition• Payable invoice automation/optimization through electronic processingHC reduction due to elimination of keyed invoices.Time saved researching invoice that come in without complete/valid information (PO number, Workorder or Location).More timely payment/capture of discounts.Reduced calls to AP to find status of invoice (received, payment date)• Buyer optimizationThrough the automation of the confirmation process we have freed up, on average, 2 hours per day for each buyer (weexpect to capture more value in this area as we enable additional suppliers).• Data visibilityBy having suppliers return their catalog code and contract/catalog price on the confirmation we can better analyze thedata. Prior to Ariba we had limited visibility to detail spend data unless we asked the supplier for the information (highnumber of “material” orders).By taking in the supplier’s price we can see where we have issues between our expected price and the supplier’s askprice. Using this data to better manage our suppliers.• Forced business process consistencyInternal – forces all our sites to conform to a set process.External – forces our suppliers to transact in a compliant manner (accurate and complete data)10 © 2013 Ariba, Inc. All rights reserved.
  • #AribaLIVELessons Learned• Your implementation pain/joy is directly related to how well the supplier handlestheir enablement!!!Finding the correct contacts in the supplier’s company in critical.– Billing, Order Fulfillment, Acct MgmtYou cannot stop at the corporate level. In many cases the actual Ariba user is ata local branch.– Corporate offices don’t always communicate to the local branches. You need to ensure that theperson accepting the relationship communicates this to the people within the organization that willdo the confirmations and billing.Test with your integrated suppliers. Monitor first transactions to ensure code rolled toproduction correctly (data mapping issues).Don’t assume that suppliers currently on the network will be a slam dunk. In many casesfield office A may be well versed in Ariba but you are doing business with field office B whohas no idea what Ariba is.Be aware of the hidden support costs (to include IT) and tailor your enablement around this.“Flippers” who transact infrequently may require more support as they tend to forget how touse the Ariba front end.• Your training documentation and up front efforts are another critical success factor.11 © 2013 Ariba, Inc. All rights reserved.
  • #AribaLIVEFHR – Supplier Collaboration• Through the implementation of Ariba, FHR gained insight into oursupplier’s processes. In some cases, we found issues within thesupplier’s processes and/or systems that were unknown to us, and insome cases, unknown to the supplier.• Through the implementation of Ariba, FHR found holes in internalprocesses. The visibility created by Ariba can shine a light on internalprocess optimization opportunities.• By working with our suppliers to optimize the process for bothparties, value was created across the PP process.• Key Learning: If you can create value in the supplier’s processes, theyare far more likely to readily adopt the tool, which in turn adds value tothe buyer’s organization.12 © 2013 Ariba, Inc. All rights reserved.
  • #AribaLIVEAriba – FHR Collaboration• Throughout the implementation process, FHR worked closely with Aribato configure the tool to support FHR business processes.• In many cases, FHR modified existing business processes based onAriba tool needs. In these cases, it was determined that Ariba wasenforcing best practices.• FHR continues to work with Ariba to suggest changes to the productthat FHR believes would benefit the user community (suppliersand buyers).• Ariba has been a good partner and has worked with FHR to solveproblems that were encountered during the implementation. In somecases, Ariba has modified their processes to better support the tooland FHR.13 © 2013 Ariba, Inc. All rights reserved.
  • #AribaLIVEA SUPPLIER PERSPECTIVEBrock Hirschman, Director ePro Operations, W.W. Grainger© 2013 Ariba, Inc. All rights reserved.14
  • #AribaLIVEBrock’s Evolution with eProcurement© 2013 Ariba, Inc. All rights reserved.15EDI&DumbTerminals1992PC’s1987CD-ROMCatalogs1994 1996WWWARIBA&E-WAY2000PC’s1987EDI&DumbTerminals1992CD-ROMCatalogs19941996WWWARIBA&E-WAY20002010MOBILE2010 +MOBILE
  • #AribaLIVEGrainger’s eCommerce EvolutionMotorBookDumbTerminalMotor Book1st Catalog Produced (41-Items)Microfiche ReadersSellers Show Customer PricingDumb TerminalsBranches Enter OrdersMicrofichePrice FilesWeb & Inventory Management1st Website OrdersGrainger.ComePRO Integration with AribaPunchout Catalogs IntegratedCommerceCMI / VMICustomer & VendorManaged InventoryMobile Web & Apps1st Industry iPhone/Android16 © 2013 Ariba, Inc. All rights reserved.
  • #AribaLIVE© 2013 Ariba, Inc. All rights reserved.17
  • #AribaLIVESupporting eProcurement ThroughGrainger Work-Streams© 2013 Ariba, Inc. All rights reserved.18BUYMANAGESUPPORTTOOLSDISCOVERFIND
  • #AribaLIVE© 2013 Ariba, Inc. All rights reserved.19Customization• Built Uniquely For Buyers• Flexible and Scalable• Tailored to the Product Buyer’s Need
  • #AribaLIVEChallenges & Obstacles• Executive Sponsorship• IT Resource Prioritization• Change Management• Legacy Processes© 2013 Ariba, Inc. All rights reserved.20Buyer:• Invoice Only• Punchout w/o PO• Hosted Catalogs• Lack of Buyer ResourcesSeller:
  • #AribaLIVEBenefits• Compliance• Cost Savings• Efficiency• Safety© 2013 Ariba, Inc. All rights reserved.21
  • #AribaLIVEResults in Oil & Gas• 90 Integrated Oil & Gas• 36% Growth• 48% eComm $ Connected• 32% Adoption© 2013 Ariba, Inc. All rights reserved.22
  • #AribaLIVEIn short, E-Procurement allows you to…© 2013 Ariba, Inc. All rights reserved.23UtilizeFewerResourcesLowerCosts PreventUnauthorizedSpend ReduceErrors
  • #AribaLIVEA FINANCE PERSPECTIVEJoseph McNally, VP Non-Standard Billing, Clean Harbors Inc.© 2013 Ariba, Inc. All rights reserved.24
  • #AribaLIVEBackground• Clean Harbors Vision is to be the premier provider of environmental, energyand industrial services• Founded in 1980 Clean Harbors (NYSE: CLH) is a ~$4B company withover 200,000 customers in North America• Core ValuesHealth & Safety is our #1 PriorityWe strive to be a Top Tier Supplier in not only the Oil & Gas industry but allbusiness segmentsWe take pride in being our industry leader in technologyIt is critical that we develop strong partnerships with our customers• The company continues to make improvements in operating and financialperformance through investments in technology and asset optimization• We generate approximately 200,000 invoices per month. 50% of ourinvoicing is “Non-Standard”. Paperless will become the “New” standard!• We currently interact with >50 Electronic Invoice systems (like Ariba) tosupport our customer requirements© 2013 Ariba, Inc. All rights reserved.25
  • #AribaLIVEJourney to eCommerce© 2012 Ariba, Inc. All rights reserved.26• It started back in late 2008 with acustomer e-invoice request• Our approach was to respondfavorably to the customer• Over the next 2 years the electronicinvoicing requests exploded!• We were ill prepared. We had nosystem integrations and no plan! OurDSO Suffered!• Acquisitions fueled customerdemands for more e-Commerce• It was Scary!
  • #AribaLIVEChallenges• Acquisitions that were made with a strong presencein the Oil & Gas industry nearly doubled the size ofour companyNearly all of the large Oil & Gas companies transactingwith us had Electronic Solutions in place or undervarious phases of integration!• We were managing the backlog of invoice and dataprocessing with no system to support this.• The electronic invoice market was very dynamic!© 2013 Ariba, Inc. All rights reserved.27
  • #AribaLIVEWhat Did We Do?© 2013 Ariba, Inc. All rights reserved.28NeedsAnalysisSeniorExecutivebuy inMIS ProjectInitiationCollaboration• Analyzed largestcustomers andsystems• Segmented areas totarget our resources• Determined therequirements at thefield level• This problem wasn’tgoing away!• To invest insolutions• To solve ourissues andmaintain ourcore values• We collaboratedwith oure-Commercesolutions providers,our customers andour internalstakeholders
  • #AribaLIVETremendous Strides!© 2013 Ariba, Inc. All rights reserved.29We have advanced our technologicalplatforms to gather datain the fieldWe have met or exceededall of our targeted metricsand goalsWe did not compromise Health &Safety with any of our solutionsOur customers consider usa Top Tier provider
  • #AribaLIVEResults© 2013 Ariba, Inc. All rights reserved.30• $35 Million in invoice values waiting toelectronically invoice!• Reduced to $10 Million in 12 months!
  • #AribaLIVEResults• Unbilled went from $4.5M per month to <$500K• Rejections went from $500K per month to $0© 2013 Ariba, Inc. All rights reserved.31Measuring “Unbilled” –Results for Husky Energy after integrating our platforms
  • #AribaLIVECustomer Feedback© 2013 Ariba, Inc. All rights reserved.32As mentioned, you haveadded a lot of value andhelped us with our SAPprocesses! Thank you. Wehave come a long way..thanks for your support. Aswith everything life is aboutpartnerships!RtP Manager, GlobalEnergy companyLarge e-CommerceSolutions ProviderI always welcome feedbackfrom our customers on howto better earn your businessand strengthen our businessmodel.”“”“
  • Questions?© 2013 Ariba, Inc. All rights reserved.33