E-Commerce in the Oil and Gas Industry

E-Commerce in the Oil and Gas Industry:
Increasing Customer Satisfaction and Getting Paid Faster
© 2013 Ariba, Inc. All rights reserved.

#AribaLIVE
Presenters
• Russ Hunt
Director, Procurement Excellence
Flint Hill Resources
• Brock Hirschman
Director, ePro Operations
W.W. Grainger
• Joseph McNally
VP, Non-Standard Billing
Clean Harbors
© 2013 Ariba, Inc. All rights reserved.2

#AribaLIVE
A BUYER PERSPECTIVE
Russ Hunt, Director Procurement Excellence, Flint Hill Resources

#AribaLIVE
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’s 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.
4 © 2013 Ariba, Inc. All rights reserved.

#AribaLIVE
Why did FHR implement Ariba?
• Incumbent electronic commerce solution was being
discontinued. Failure to act would cause headcount addition in
the accounts payable group.
Incumbent system used for electronic transmission of purchase orders
and electronic receipt of invoices.
Incumbent system limited to small number of suppliers due to off-market
nature 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 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.

#AribaLIVE
Management Approval Value Proposition
• Value proposition used for management approval was based solely
on accounts payable headcount reduction through the receipt of
electronic invoices.
• Other expected benefits that were not quantified include:
Optimization of confirmation process resulting in buyers being
able to focus on higher-value tasks
Data visibility leading to better analysis
Better visibility to supplier issues on a real-time basis
(un-invoiced, bad pricing, delivery issues, etc…)
Forced business process consistency

#AribaLIVE
Document Types
• Outbound PO
Little value to FHR but high value to our integrated suppliers. Some suppliers willing to offer discounts for
electronic POs.
• Confirmation
Required 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, rules
based, 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 Invoice
Fully 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 in
Maximo system).
– Resolution of FHR expected price vs. supplier’s price occurs during the confirmation exception process.

#AribaLIVE
FHR’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 of
a supplier that did transact on Ariba.
• Tiered our supplier base based on criteria:
Annual invoice count
Ariba 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 our
discontinued 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 low
enablement effort were selected.
• Have moved to a more structured approach with scheduled enablements at set intervals. This was done to minimize
the 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 your
IT 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.

#AribaLIVE
Ramp Up Actuals

#AribaLIVE
Achieved Value Proposition
• Payable invoice automation/optimization through electronic processing
HC 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 optimization
Through the automation of the confirmation process we have freed up, on average, 2 hours per day for each buyer (we
expect to capture more value in this area as we enable additional suppliers).
• Data visibility
By having suppliers return their catalog code and contract/catalog price on the confirmation we can better analyze the
data. Prior to Ariba we had limited visibility to detail spend data unless we asked the supplier for the information (high
number 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 ask
price. Using this data to better manage our suppliers.
• Forced business process consistency
Internal – forces all our sites to conform to a set process.
External – forces our suppliers to transact in a compliant manner (accurate and complete data)

#AribaLIVE
Lessons Learned
• Your implementation pain/joy is directly related to how well the supplier handles
their enablement!!!
Finding the correct contacts in the supplier’s company in critical.
– Billing, Order Fulfillment, Acct Mgmt
You cannot stop at the corporate level. In many cases the actual Ariba user is at
a local branch.
– Corporate offices don’t always communicate to the local branches. You need to ensure that the
person accepting the relationship communicates this to the people within the organization that will
do the confirmations and billing.
Test with your integrated suppliers. Monitor first transactions to ensure code rolled to
production correctly (data mapping issues).
Don’t assume that suppliers currently on the network will be a slam dunk. In many cases
field office A may be well versed in Ariba but you are doing business with field office B who
has 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 to
use the Ariba front end.
• Your training documentation and up front efforts are another critical success factor.

#AribaLIVE
FHR – Supplier Collaboration
• Through the implementation of Ariba, FHR gained insight into our
supplier’s processes. In some cases, we found issues within the
supplier’s processes and/or systems that were unknown to us, and in
some cases, unknown to the supplier.
• Through the implementation of Ariba, FHR found holes in internal
processes. The visibility created by Ariba can shine a light on internal
process optimization opportunities.
• By working with our suppliers to optimize the process for both
parties, value was created across the PP process.
• Key Learning: If you can create value in the supplier’s processes, they
are far more likely to readily adopt the tool, which in turn adds value to
the buyer’s organization.

#AribaLIVE
Ariba – FHR Collaboration
• Throughout the implementation process, FHR worked closely with Ariba
to configure the tool to support FHR business processes.
• In many cases, FHR modified existing business processes based on
Ariba tool needs. In these cases, it was determined that Ariba was
enforcing best practices.
• FHR continues to work with Ariba to suggest changes to the product
that FHR believes would benefit the user community (suppliers
and buyers).
• Ariba has been a good partner and has worked with FHR to solve
problems that were encountered during the implementation. In some
cases, Ariba has modified their processes to better support the tool
and FHR.

#AribaLIVE
A SUPPLIER PERSPECTIVE
Brock Hirschman, Director ePro Operations, W.W. Grainger

#AribaLIVE
Brock’s Evolution with eProcurement
EDI
&
Dumb
Terminals
1992
PC’s
1987
CD-ROM
Catalogs
1994 1996
WWW
ARIBA
&
E-WAY
2000
PC’s
1987
EDI
&
Dumb
Terminals
1992
CD-ROM
Catalogs
19941996
WWW
ARIBA
&
E-WAY
20002010
MOBILE
2010 +
MOBILE

#AribaLIVE
Grainger’s eCommerce Evolution
Motor
Book
Dumb
Terminal
Motor Book
1st Catalog Produced (41-Items)
Microfiche Readers
Sellers Show Customer Pricing
Dumb Terminals
Branches Enter Orders
Microfiche
Price Files
Web & Inventory Management
1st Website OrdersGrainger.Com
ePRO Integration with Ariba
Punchout Catalogs Integrated
Commerce
CMI / VMI
Customer & Vendor
Managed Inventory
Mobile Web & Apps
1st Industry iPhone/Android

#AribaLIVE

#AribaLIVE
Supporting eProcurement Through
Grainger Work-Streams
BUY
MANAGE
SUPPORT
TOOLS
DISCOVER
FIND

#AribaLIVE
Customization
• Built Uniquely For Buyers
• Flexible and Scalable
• Tailored to the Product Buyer’s Need

#AribaLIVE
Challenges & Obstacles
• Executive Sponsorship
• IT Resource Prioritization
• Change Management
• Legacy Processes
Buyer:
• Invoice Only
• Punchout w/o PO
• Hosted Catalogs
• Lack of Buyer Resources
Seller:

#AribaLIVE
Benefits
• Compliance
• Cost Savings
• Efficiency
• Safety

#AribaLIVE
Results in Oil & Gas
• 90 Integrated Oil & Gas
• 36% Growth
• 48% eComm $ Connected
• 32% Adoption

#AribaLIVE
In short, E-Procurement allows you to…
Utilize
Fewer
Resources
Lower
Costs Prevent
Unauthorized
Spend Reduce
Errors

#AribaLIVE
A FINANCE PERSPECTIVE
Joseph McNally, VP Non-Standard Billing, Clean Harbors Inc.

#AribaLIVE
Background
• Clean Harbors Vision is to be the premier provider of environmental, energy
and industrial services
• Founded in 1980 Clean Harbors (NYSE: CLH) is a ~$4B company with
over 200,000 customers in North America
• Core Values
Health & Safety is our #1 Priority
We strive to be a Top Tier Supplier in not only the Oil & Gas industry but all
business segments
We take pride in being our industry leader in technology
It is critical that we develop strong partnerships with our customers
• The company continues to make improvements in operating and financial
performance through investments in technology and asset optimization
• We generate approximately 200,000 invoices per month. 50% of our
invoicing is “Non-Standard”. Paperless will become the “New” standard!
• We currently interact with >50 Electronic Invoice systems (like Ariba) to
support our customer requirements

#AribaLIVE
Journey to eCommerce
• It started back in late 2008 with a
customer e-invoice request
• Our approach was to respond
favorably to the customer
• Over the next 2 years the electronic
invoicing requests exploded!
• We were ill prepared. We had no
system integrations and no plan! Our
DSO Suffered!
• Acquisitions fueled customer
demands for more e-Commerce
• It was Scary!

#AribaLIVE
Challenges
• Acquisitions that were made with a strong presence
in the Oil & Gas industry nearly doubled the size of
our company
Nearly all of the large Oil & Gas companies transacting
with us had Electronic Solutions in place or under
various phases of integration!
• We were managing the backlog of invoice and data
processing with no system to support this.
• The electronic invoice market was very dynamic!

#AribaLIVE
What Did We Do?
Needs
Analysis
Senior
Executive
buy in
MIS Project
Initiation
Collaboration
• Analyzed largest
customers and
systems
• Segmented areas to
target our resources
• Determined the
requirements at the
field level
• This problem wasn’t
going away!
• To invest in
solutions
• To solve our
issues and
maintain our
core values
• We collaborated
with our
e-Commerce
solutions providers,
our customers and
our internal
stakeholders

#AribaLIVE
Tremendous Strides!
We have advanced our technological
platforms to gather data
in the field
We have met or exceeded
all of our targeted metrics
and goals
We did not compromise Health &
Safety with any of our solutions
Our customers consider us
a Top Tier provider

#AribaLIVE
Results
• $35 Million in invoice values waiting to
electronically invoice!
• Reduced to $10 Million in 12 months!

#AribaLIVE
Results
• Unbilled went from $4.5M per month to <$500K
• Rejections went from $500K per month to $0
Measuring “Unbilled” –
Results for Husky Energy after integrating our platforms

#AribaLIVE
Customer Feedback
As mentioned, you have
added a lot of value and
helped us with our SAP
processes! Thank you. We
have come a long way..
thanks for your support. As
with everything life is about
partnerships!
RtP Manager, Global
Energy company
Large e-Commerce
Solutions Provider
I always welcome feedback
from our customers on how
to better earn your business
and strengthen our business
model.
”
“
”
“

E-Commerce in the Oil and Gas Industry

Recomendados

Recomendados

Más contenido relacionado

La actualidad más candente

La actualidad más candente (17)

Destacado

Destacado (20)

Similar a E-Commerce in the Oil and Gas Industry

Similar a E-Commerce in the Oil and Gas Industry (20)

Más de SAP Ariba

Más de SAP Ariba (20)

Último

Último (20)

E-Commerce in the Oil and Gas Industry

Notas del editor