Petrochemicals giant Shell wanted to present a single face to customers, gain an integrated view of operations, and maximize economies of scale. How could Shell create such a globally integrated enterprise?
Shell dramatically simplified its business processes, with one of the world’s largest upgrades of SAP software solutions, with design, deployment and consultancy from IBM Global Business Services.
Standardizesand consolidates processes and systems to remove hundreds of millions of dollars of costs
Enablesefficiency gains in global processes
Integrated customer dataprovides the basis for advanced sales, marketing and operational insight
Even the best-run business can run better
Shell Downstream had been using a comprehensive range of SAP software solutions to manage almost every aspect of its business for many years. The company runs a comprehensive range of SAP® ERP applications, including Sales & Distribution, Materials Management, Product Planning, Plant Maintenance, and Financials and Controlling. These applications are complemented by SAP Strategic Enterprise Management (SEM®), SAP Advanced Planning and Optimization, SAP Customer Relationship Management and SAP Business Analytics, with user interaction supported via SAP Enterprise Portal and SAP mobile services.
Beginning in 2005, the “Downstream-One” strategic initiative aimed to reduce complexity and enable change in three key ways: through simpler business models, standard global processes, and common IT systems. The standardization of processes in SAP was the primary enabler for an ongoing initiative to consolidate back-office functions to global centers of excellence located in lower-cost countries.
Where previously each country had its own customer service and financial operations, today these back-office processes are managed by highly qualified professionals working in consolidated global service teams.
This has not only dramatically reduced costs – saving hundreds of millions of dollars – but also freed up customer-facing staff in each country to spend more time with their clients, thereby increasing their ability to generate new revenues.
Continuous improvement and new opportunities
Tom Dailey, GSAP Process Integration Manager for Shell Downstream, comments: “For the first seven years of the Downstream-One program, we rigorously tracked the business benefits, and it was clear that we had saved some hundreds of millions of dollars.
“Our initial focus was around operational improvement: better cash-flow, better credit management through an enhanced view of the customer, increased invoice accuracy, improved ability to deliver orders on time and in full – and so on.
“When the program was more mature, and with the promise of new SAP functionality to help enable our future plans, we turned our attention to continuous improvement and to the opportunities presented by big data and analytics.”
The launch of new SAP products and updates to core SAP ERP software presented the Shell Downstream team with an opportunity to upgrade its complete SAP solution landscape as part of its ongoing journey towards becoming a globally integrated enterprise.
Jan Boll, Vice President and Chief Information Officer at Shell Downstream, explains, “If you keep up with standards, you can make use of richer functionality, better performance and security, and extract more value from your investments. Moving to the latest version of SAP gives you a solid foundation for building further improvements.”
Tom Dailey adds: “We knew that upgrading our SAP landscape would also be a key enabler for new technologies we wanted to introduce around analytics and mobility. For example, deploying SAP HANA in-memory technology to unlock faster insight into operational data depended on successfully completing the upgrade.”
Shell embarked on the largest-scale SAP upgrade ever undertaken, measured in terms of number of components, users and geographies – all of which needed to be completed without causing business disruption.
Jan Boll describes the three main challenges: “The first and most obviously daunting issue was the enormous scale of the upgrade. All the changes – users, countries, different businesses, processes, software components, connections with other systems – had to be covered in one go. It felt like we needed to have 100,000 people jumping in the air at the same time!
“Secondly, the variety of technology and technology suppliers meant that we were dealing with a very diverse landscape. To address this, it was essential to enroll supplier organizations closely to help with preparation and testing.
“Finally, we needed to ensure full interaction with business users for testing and feedback, to guarantee that the upgraded software worked as expected. This included thinking of fall back positions and risk mitigation if the go-live was not successful: for example, how would we cope with non-availability of certain components.”
Shell engaged IBM Global Business Services to help design and implement the business and IT transformation program, and to upgrade its SAP applications to the latest versions.
Jan Boll comments, “Shell and IBM have worked together for many years, and IBM really understands our business objectives. For a global company such as Shell, IBM is able to provide very fast access to resources, in both quality and quantity, to help us respond quickly to a rapidly changing marketplace.”
IBM provided a full range of SAP services across design, build, configuration, testing and implementation support, data cleansing and migration support, organization change, managed test services, performance testing, delivery assurance and global project management.
To accelerate delivery, workload was split between central and local teams; the central team completed the majority of the design and testing activities, while the local in-country teams focused on implementation and roll-out. The majority of the central team were UK-based, but with a global reach. Over time, as the project gained maturity, more and more activities were migrated to India. This enabled Shell to leverage IBM’s highly skilled offshore SAP development resources, reducing costs without sacrificing quality.
From the start of the upgrade project, each Shell team member was allocated an IBM person to work in tandem – the so-called “two in a box” principle – to ensure full knowledge transfer. As work on the project progressed, Shell switched to a one-in-the-box mode, to help expand the team’s scope and to become more efficient.
As Jan Boll remarks, “When I walk around, I don’t know if I’m seeing an IBM or a Shell employee sometimes. We have a long-term relationship with IBM, and the team members understand our business environment and challenges very well. The advantage of working with IBM Global Business Services is that it can mobilize resources fast, in quantity and quality. If at certain stages you need extra resources, IBM can find them.
“IBM brought experience of SAP upgrades and applied it to the Shell Downstream project, and could call upon specific skills and expertise when any issues occurred during implementation, proving very fast resolution.
Jan Boll continues, “With such a large SAP footprint within Shell, we were able to mobilize our internal teams’ experience, too. All the same, it is wise to bring external knowledge into the organization, and seek out experts for the right tasks, and IBM Global Business Services was able to provide resources in depth as we needed them.For a project of this scope and scale, we needed a tight focus on timelines, execution and delivery. I am pleased to say that IBM provided outstanding planning and project management services, exactly as required.”
The team planned to cut over to the upgraded SAP solutions in 48 hours over one weekend, using the SAP AG Near Zero Down Time (NZDT) approach. The plan included an extensive set of key performance indicators (KPIs) to be checked and verified before go-live, and then compared after go-live. The KPIs covered the availability of the system, actual performance against plan, and many detailed business case scenarios.
“With the assistance of IBM, the SAP MaxAttention™ team and many vendors, we came in on time, with no deviation,” says Jan Boll.
“The SAP team was essential to success, providing the necessary support, technical and deployment advice, ensuring that we followed best practice to gain the optimum value from the new software.”
System go-live was 8pm UK time on Sunday 17 February 2013, with the new SAP landscape going into full production on the Monday. The upgrade provided the same or equivalent functionality, ready for solution additions and extensions over the next months. For example, Shell Downstream rolled out SAP Customer Relationship Management software in four subsequent deployments.
Jan Boll reports, “This was an immense task. The reason it was so successful was because we had a team that had worked together for a very long time and had embedded the processes and procedures necessary to make it a success.
“Although the upgrade itself was a Big Bang, the project was not a one-off, but a continuum in a series of activities.
“It is important not to treat an upgrade as an IT problem. You need intense collaboration with business users to make any IT project a success, monitoring progress of your plan and sticking to it. The upgrade had been on our long-term radar for some time, and we touched on the topic with IBM several years prior. Additionally, the project had to coexist with standard business priorities, which led us to make pragmatic decisions to help de-risk the Big Bang and reduce the business impact.
“Advice from IBM Global Business Services has been central to helping Shell Downstream standardize and integrate our systems, applications and data. The new SAP applications will help us to streamline processes across departments and locations, and we are now ideally placed to improve productivity and efficiency.”
Exploiting SAP applications for global success
Today, the heart of Shell Downstream’s operations runs on a global single production instance of the latest SAP solutions. Alongside the resolution of key technical issues, the alignment of all Shell Downstream units on the single SAP instance enables the start of a new journey for further business initiatives, such as the deployment of advanced analytics and mobility solutions.
Many of the SAP application systems and applications are managed and maintained by IBM, through an Application Management Services agreement. IBM is responsible for service delivery, performance and availability, while Shell is free to concentrate on exploiting the advanced features of the integrated SAP solutions.
“We have delivered a stable, global SAP and Connected Portfolio solution that enables us to run our business day to day for every step of making, moving, marketing and selling products, and for managing our finances,” says Jan Boll. “Our customers and vendors are aligned with new processes and policies and experience the full benefits of the new processes and policies, supported by accurate, meaningful and transparent management information. Staff find the new processes and systems easy to work with, releasing more time to spend with customers, and everyone knows the part they play in continuing to increase our efficiency.”
The upgraded SAP landscape is an important enabler for business-driven change at Shell Downstream. Taking advantage of new SAP functionality, delivered faster and more accurately to the business, the company is tackling dozens of tactical and strategic initiatives across multiple areas.
The first major achievement was the Global Available To Promise (GATP) tool, which is part of SAP Advanced Planning and Optimization software. This connects to SAP ERP to perform a significantly enhanced availability check to support allocation of stock to customers during stock shortages or in advance of price increases. The GATP tool improves the efficiency and speed of internal processes and improves service by ensuring the availability of products for key customers.
As another example of enhanced processes in SAP, New Order Confirmation for Lubricants not only provides clear and accurate data for customers, but will also allow them to access information on mobile devices such as tablets and smartphones.
In addition to the Order Confirmation, customers will also now receive an Order Amendment if they change their order before cut-off time or, if they cancel the complete order, an Order Cancellation. This improved communication to customers will lead to a reduction in the number of customers calling in for order status enquiries, resulting in a significant cost savings.
Tom Dailey comments: “An important theme in IT is to find ways to drive further business value from our existing assets and extend their capabilities. The SAP upgrade has unlocked functionality that will be a key enabler for important operational initiatives such as Excellence in Order Management and NextGen in Global Commercial that aim to provide our customers with the best possible order-to-delivery experience.
“Our internal team has been working with our business partners to find ways to leverage these functionalities and we have been able to identify hundreds of potential improvement areas in the process and IT workflow”.
The next wave of value extraction is in the information space, such as customer data analytics and giving staff access to information from anywhere. This will enable employees to understand, analyze, decide and act across business functions, helping Shell Downstream to speed time to market for new products and services.
Shell Downstream recently deployed SAP HANA in-memory analytics for three pilot cases – Retailer Billing, Delivery for Own Account (DFOA) Transaction Analysis, and Hydrocarbon Management Transactional Process Excellence.
Tom Dailey says, “We have pockets of people getting started on analytics and big data, including near real-time analytics with SAP HANA. The expectation from our stakeholders is that big data is the next topic for a major strategic breakthrough.
“As an integrated oil company, we need to understand which oil products will provide the greatest return on our investment in upstream exploration and extraction activities – and that is an enormously complex question that will require us to gain insight into huge volumes of customer, product, operational and sales data. Our upgraded SAP landscape will help by providing a single source of consistent information.”
Jan Boll concludes, “The global SAP implementation is an investment on which we will build future profits. As with any asset, we need to maintain it to get more out of it and lengthen its life. The upgrade has laid the foundation for the coming years, so we can continue to run the business successfully as the world’s most innovative and competitive energy company.
“By simplifying processes and strengthening data management, we are making it easier for our customers to do business with us, and putting them at the heart of our business.”
The Shell group of energy and petrochemicals companies employs around 92,000 people in more than 70 countries and territories. The group produces 3.2 million barrels of oil equivalent every day, runs more than 30 refineries and chemicals plants, and generates revenues of around $450 billion.
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