E-commerce in oil and gas has had a rough ride since the
heady days of the dot com boom. UpstreamInfo, PetroCosm and other oil and gas
e-ventures have failed spectacularly. So it was particularly interesting to
attend the 2004 Trade-Ranger Community Conference last month, attended by about
100 members. Since Trade Ranger was established, considerable changes have taken
place. Merger and attrition have reduced the numbers of buyers. Those remaining
are predominantly EU-based. The general focus of e-procurement also has shifted
slightly downstream, where buyers and sellers of chemicals and finished products
will likely offer a more attractive target for
Baker Hughes’ (BH) suppliers are faced with ‘a large number of e-procurement initiatives’ according to Steve Sidney. Integrating such solutions is expensive. While Baker Hughes (BH) is enthusiastic about e-procurement for order fulfillment, it is less keen on catalog-based ordering. Catalogs are an integral part of the BH proprietary offering. While there is ‘potential’ for integration with customer ordering processes, ‘timing and readiness of customers remains unclear’.
Joop van Dierendonck said that Dow Chemicals was ‘really going for’ e-business with a major integration of Dow eMart with Trade Ranger. Dow’s e-procurement strategy aims at reducing costs and errors by integrating procurement with ERP. Last year ago, Dow’s eConnect project started using MRO purchasing, which handles 80% of worldwide transactions. Purchase orders are sent to suppliers by AutoFax (65%) or EDI (35%). The Current objective is to move to ‘e-execution’ via Trade Ranger; to ‘discourage EDI and promote XML’. Last year, 73% of Dow’s 5 million invoices were paper. This year this will be reduced to 32%. Invoicing staff is now down to 8 people. Dow now wants to do the same on the buy side, eliminating manual entry and hundreds of jobs. Dow is working with TR on a multi-generation plan for current and future technologies and software vendors.
Rosanna Di Leo reports that today, e-auctions, with a $1.1bn commitment, amount to 20% of Total’s overall spend. e-RFX (e-call for tender etc.) contrasts with the traditional approach of cover letter, appendices, follow-ups, mails and telephone conferences. Total’s branded e-RFX, e-Novation comprises a browser front-end to documentation, follow-up, RFQ, evaluation, communications etc. ‘all in one box’. e-auctions put established suppliers ‘back into the melting pot.’ This leads to greater competition, visibility and traceability of prices. Total’s refiners were reluctant to do this kind of purchasing – but they came around and e-Sourcing has grown from zero in 2000 to 650 e-RFXs in 2003 with € 74 million at auction. Total has a clear group policy and good management support for this. Overall, Total purchases around 23bn/yr – so the e-procured is only 4% of what is potentially e-purchasable. ‘We have a long way to go’. Di Leo compares this situation to the introduction of email in 1992, when there were similar doubts. Internet access and short training is all that is needed.
‘Procurement on steroids’ is how Stephanie Sherrod describes Shell Oil Product’s (US) web-based purchasing. Purchase to pay, (P2P) enables strategic sourcing, enhances compliance and improves spend analysis and commodity reporting. Shell’s iNeed is P2P solution integrated with SAP and Trade Ranger. By setting up vendors for automated clearing house (ACH) payment, Shell has reduced the cost of paper checks and wires. Trade-Ranger’s XML-based connectivity links Shell’s SAP-based invoicing with suppliers including Dell, McJunkin and Wesco. An estimated $100 million/year of low value purchasing has been eliminated.
TR president John Wilson sees a conflict in the medium term between TR’s ‘independent’ hub and the expanding ‘supplier relationship management’ offerings from software behemoth SAP. The plenary discussion addressed this and related issues (see this month’s lead) without a clear outcome. SAP’s Usman Sheikh acknowledges that SAP now goes well beyond ERP. NetWeaver has brought ‘unprecedented flexibility’ including a fully integrated SRM solution. But NetWeaver also heralds a ‘more open’ environment for competition. Sheikh said, ‘We have retained our proprietary rights for too long, our management is ready to open up. NetWeaver is the first step.’
© Oil IT Journal - all rights reserved.