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Improving the Strategic MRO Process


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Improving the Strategic MRO Process

  1. 1. B Improving the Strategic MRO Procurement Process Lionel Jellins: ExxonMobil Dan Carpenter: Flint Hills Resources Andre Rego: Grainger1 © 2012 Ariba, Inc. All rights reserved.
  2. 2. Introductions • ExxonMobil (XOM) Lionel Jellins; Global IT Ventures and Operations Manager • Flint Hills Resources (FHR) Dan Carpenter; Procurement Excellence Director • Grainger Andre Rego; eCommerce Strategy Product Manager2 © 2012 Ariba, Inc. All rights reserved.
  3. 3. Antitrust Discussion • Importance of the discussion with XOM, FHR and competitors in the room • Both companies recognize that there are alternative trading platforms and recognize that buying and selling organizations should choose the appropriate trading platform3 © 2012 Ariba, Inc. All rights reserved.
  4. 4. Session Overview • Collaborative Procurement for strategic MRO MRO: Maintenance, Repair, Operations • Value of linking Supply Chain with the Demand Chain • Technologies allowing more sophisticated collaboration4 © 2012 Ariba, Inc. All rights reserved.
  5. 5. Improving the B Strategic MRO Procurement Process Lionel R. Jellins; Global IT Ventures and Operations Manager© 2012 Ariba, Inc. All rights reserved.
  6. 6. A Safety Minute… Static at the Gas PumpsWhy?• You know that you cannot smoke at the gas station. What is less well known is that static electricity can cause sparks that may ignite gas vapors, resulting in a fire or explosionWhat can you do?• Never use cell phones while pumping gas• Never get back into your vehicle while filling up; the contact of your clothes with the fabric of the car seat may build up static electricity which could create a spark when you touch the nozzle• Be aware of sources of static electricity and sparks. Touching items such as: door handles, steering wheel or car radio could cause static charges that might ignite gas vapors resulting in a fire or explosion Source: Adapted from URC/UTeC Safety Communications
  7. 7. ExxonMobil Corporation • US-Based Oil and Gas Company • Vertically integrated from Exploration and Drilling to Refining, Marketing, and Chemicals • Global Procurement Organization since 2000 • “Relentless focus on Value and Cost”7 © 2012 Ariba, Inc. All rights reserved.
  8. 8. ExxonMobil Global Procurement • 2,800 Employees (Purchase to Pay) • 1/3 of employees located in Business Service Centers (Prague, Buenos Aires, and Bangkok) • Over 100K suppliers in 52 countries • $50+ Billion Procurement managed Spend • Over 200K Purchase Order annually via Network • On-premise, SAP Connected (7 Instances) • Key IT Partner >>> Ariba8 © 2012 Ariba, Inc. All rights reserved.
  9. 9. ExxonMobil and Ariba Collaboration • Upstream • Downstream Category Management T&E and Pcard 100K+ Active Projects Over 75K Users Agreement Management ASN Connectivity ~20K Active Agreements 1400 Suppliers since 2007 Analysis SAP Fax Connectivity Reports – Audit Requests Over 200K PO’s annually eRFX Requisitioning 4K+ Events 17 Punch-out Catalogs 2K+ Reverse Auctions Category Procurement eForms9 © 2012 Ariba, Inc. All rights reserved.
  10. 10. ExxonMobil Future Vision • Touch-less >>> Expanding PO Collaboration via AN • Supplier Connected >>> Expanding use of Ariba eCatalogs and Punch-outs >>> eCatalog Connectivity via OCI • Intuitive User Interfaces >>> Assessing Contracts Workbench10 © 2012 Ariba, Inc. All rights reserved.
  11. 11. Improving theB Strategic MRO Procurement Process Dan Carpenter – Procurement Excellence Director
  12. 12. Flint Hills Resources (FHR) FHR is a direct, wholly owned subsidiary, of Koch Resources LLC, which is wholly owned by Koch Industries, Inc, a privately held company involved in most aspects of the oil 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 the manufacture of lubricant base oils; • Proprietary pipelines and pipeline investments (located principally throughout the Mid- continent and Gulf Coast regions of the United States); • FHR is the United States’ 9th, and the World’s 24th, largest refiner. In addition, FHR is the United States’ 5th largest producer of ethanol. FHR is also a leading producer and marketer of petrochemicals, producing about nine billion pounds of building-block chemicals.12 © 2012 Ariba, Inc. All rights reserved.
  13. 13. Why did FHR implement Ariba? • Incumbent electronic commerce solution was being retired by software supplier. Tool was off-market with limited value-added capabilities. • FHR wanted to move past basic electronic commerce into a value-added method of transacting with suppliers. FHR felt we could create a competitive advantage in our PP process by optimizing our processes and leveraging new tools. • FHR has been on the Ariba Network since April 2011.13 © 2012 Ariba, Inc. All rights reserved.
  14. 14. Collaboration • FHR felt it was key to create a process that was mutually beneficial to both parties. • As part of the initiative, FHR was moving to full order automation from requisition approval to invoice payment We internally redefined “automated” to include providing accurate and complete information to the supplier to allow them to capture the benefits of automation. • Looked across the entire process to understand the impact our confirmation and invoicing business rules would have on our suppliers (make sure we were not placing an “unfair” burden on our suppliers).14 © 2012 Ariba, Inc. All rights reserved.
  15. 15. Collaboration: Case Study • Used strong relationship with Grainger to gain efficiencies. Example: Allow Grainger to confirm back price they believe to be correct and handle variances through our business rules and an exception management process. – Alternative was to reject all variances and place the full burden of resolution on the supplier, even though our data told us that Grainger had a very high accuracy rate and that the majority of exceptions were created by data issues on FHR’s side. • Used a back-end audit process to monitor the exceptions to ensure adherence to contractual pricing. Very small overhead in the process. – This method only works if you have a strong relationship with your supplier and are confident that an after-the-fact resolution can be handled effectively and efficiently.15 © 2012 Ariba, Inc. All rights reserved.
  16. 16. Collaboration: Case Study • Used data coming back through the network to work with Grainger on invoicing process opportunities. Able to communicate with Grainger that we had a number of partially invoiced purchase orders and work on ways to avoid going forward (improved cash flow to Grainger and less RBNI for FHR). • Used data coming back through the network to understand what we were buying from Grainger and leverage this into better aggregation and standardization. • Worked directly with Grainger during the enablement process to identity opportunities in their system to facilitate compliance with FHR business requirements.16 © 2012 Ariba, Inc. All rights reserved.
  17. 17. Challenges/Opportunities • Supplier enablement ♦ Must understand key contacts within your supplier’s organization and ensure that they are aware of the enablement effort and have been trained. ♦ Ensure that suppliers are clear on your business requirements relative to confirmations, ASNs and Invoicing. ♦ Think of each branch office as a unique supplier. • Processes ♦ FHR used the Ariba implementation as an opportunity to review our processes and make changes that enhanced our PP process. ♦ Enablements highlighted some internal process issues.17 © 2012 Ariba, Inc. All rights reserved.
  18. 18. Metrics • Currently transacting with 229 suppliers • Process approximately 36,000 Purchase Orders annually through the network • Processing approximately 204,000 invoices annually “touch-less” through the network – 44% of “eligible” invoices run through Ariba in a touch-less manner18 © 2012 Ariba, Inc. All rights reserved.
  19. 19. Flint Hills Resources Vision/Future • FHR will continue to enable suppliers to the extent it adds value to both FHR and the supplier. • FHR will continue to work with suppliers to create long-term value for both parties. • FHR is looking into the potential of the E-Sourcing tool and Dynamic Discounting.19 © 2012 Ariba, Inc. All rights reserved.
  20. 20. Improving the B Strategic MRO Procurement Process Andre Rego: eCommerce Strategy Product Manager20© 2012 Ariba, Inc. All rights reserved.
  21. 21. Grainger OverviewNorth Americas leading B2B broad line supplier of Maintenance,Repair and Operating supplies.(expanding presence in Asia and Latin America) Trusted eProcurement Partner - Ariba Ready Platinum Supplier with extensive knowledge and experience in eProcurement solutions One-stop-shop - Over 1 million MRO products, 3,400 suppliers - eCommerce and Inventory Management Solutions - Extensive distribution network FORTUNE Most Admired Companies in the World, #1 Diversified Wholesalers Internet Retailer Top 500, #15 Overall and #1 in Category21 © 2010 Ariba, Inc. All rights reserved.
  22. 22. Why Business Commerce? • Customer preferences are changing... Industry experts estimate that 40% of MRO will be transacted online by 2014. It is no longer a choice. • Leverage business commerce to develop long-term strategic partnerships. Become customer’s first choice. • Meet customer needs at all levels: Find MRO products fast Gain greater visibility to all MRO spend (planned and unplanned) Manage and reduce purchasing costs through automation Drive compliance to negotiated contract to achieve maximum savings22 © 2012 Ariba, Inc. All rights reserved.
  23. 23. The Perfect Order • Customers that invested on Ariba or other eProcurement solutions expect more and more a retail-like experience Fast to find products Easy to place orders and to pay based on agreed terms Efficiency gains through full automation (low transaction costs from req to check) • Unlike retail websites that control most of the online experience, eProcurement solutions require greater collaboration across internal departments and the entire supply chain • The good news: it is possible!23 © 2012 Ariba, Inc. All rights reserved.
  24. 24. The Perfect Order • Using all the tools currently available and collaborating with your key Suppliers, you can give your users a retail-like experience: It all starts with the right Platform: – A world-class eProcurement solution that can support the entire req-to-check process With a great shopping experience: – Accurate and up-to-date product and supplier data available every time Seamless and accurate ordering: –Electronic Purchase Order transmitted to Supplier (connected directly to ERP system) – Electronic Purchase Order Acknowledgment transmitted back to requester – Electronic Shipping Notification transmitted back to requester Seamless and accurate invoicing: – Electronic Invoice transmitted to customer’s ERP system Easy payment: – Electronic payment completes the cycle24 © 2012 Ariba, Inc. All rights reserved.
  25. 25. The Perfect Order - Value • For BUYERS: Retail-like experience Timely delivery of products Reduced procurement costs Reduced inventory due to increased trust in delivery times Reduced invoice rejections and increased auto invoice to PO matching • For SUPPLIERS: Reduced PO receipt and fulfillment costs Accurate PO decreases costs of returns and credit processing Reduction/elimination of invoice rejections that cause payment delays25 © 2012 Ariba, Inc. All rights reserved.
  26. 26. The Perfect Order – Opportunity • The Aberdeen Group found that the average requisition to order cost before eProcurement was $63.20, and dropped to $32.28 after eProcurement (51% cost reduction). Source: The eProcurement Benchmark Report: eProcurement 2.0, Aberdeen Group, August 2006 • Aberdeen Group’s study shows that, on average, companies utilizing automated matching of Invoices to POs experienced processing costs 36% lower than those not currently leveraging this technology. Source: Invoicing and Workflow, Integrating Process Automation to Enhance Operational Performance, Aberdeen Group, May 201126 © 2012 Ariba, Inc. All rights reserved.
  27. 27. Best Practices • Build strategic partnerships with your suppliers and jointly define the right eProcurement strategy with clear objectives. • Engage the right people throughout the process and understand their specific needs. • Start with a vision for “The Perfect eProcurement Order” and build the steps necessary to achieve that. Your users and suppliers will thank you! • Avoid jumping to electronic invoices without a proper shopping mechanism and electronic ordering process in place. • It is never a one-time event. Develop ongoing change management and engage your strategic suppliers to help you drive adoption.27 © 2010 Ariba, Inc. All rights reserved.
  28. 28. Customer Loyalty • By enabling strategic partnerships at the Corporate level and delivering a consistent experience at a local level: “Having hundreds of buyers at thousands of locations across the United States, Grainger’s eProcurement solution gives us the personalized experience and control we need when purchasing MRO supplies for our extensive network.” - National Retail Store Chain • By delivering an exceptional offer that meet customer needs at all levels and drive value to our customers: “Using Grainger Procurement Solutions to streamline our MRO ordering allowed us to significantly reduce the amount of paper requisitions and time spent tracking down approvals. Our technicians have more time to focus on plant up-time and we have better line of sight to what we are buying.” - Pharmaceutical Manufacturer28 © 2012 Ariba, Inc. All rights reserved.
  29. 29. Open Forum and Q&A29 © 2012 Ariba, Inc. All rights reserved.
  30. 30. Share This Session…NOW…from your mobile! • All presentations are posted: Guidebook mobile app – Search Apple or Android app store for Guidebook – Enter code “collabor8” Or at • Share via email or social media **Come back soon – we are syncing #AribaLIVE audio and video interviews to the presentations**30 © 2012 Ariba, Inc. All rights reserved.