The goal: one system, one procurement process across the globe. Amerada Hess began implementing SAP Enterprise Buyer as a fast project at its European operations base in Aberdeen, Scotland. After only 13 months, the company has a streamlined process to support the large number of services ordered internally throughout the organization.

Extracting oil and gas from the ocean floor is a complex process. For almost three quarters of a century, Amerada Hess Corporation has been extracting crude oil and gas and producing and selling refined petroleum products. Each Amerada Hess facility whether extracting oil in the North Sea or storing output in remote areas of the United States relies on a variety of services and goods to be procured. These are ordered by a diverse group of requisitioners: engineers, geologists, supervisors, gas plant operators, secretaries, department managers, and others. They must be able to quickly and efficiently order services and parts, regardless of their company role.

Since 65% 75% of the companys expenditures are on services, the procurement process for services needs to be easy to use. Procurement at Amerada Hess previously involved two different systems, one in the United States based on SAP R/3 4.6 and one in Northwest Europe. Two systems meant two distinct processes for ordering services. Amerada Hess began searching for a single procurement system that would meet all their needs, which included being easily used and accepted by employees, some of whom did not deal with IT and/or procurement systems all day. It was also crucial that the electronic procurement system be integrated into their SAP backend, allowing Amerada Hess to capture data consistently. A third important requirement: The software must deal with the widely varied services they needed to support, such as pipe rethreading, short-term contract labor, and fabrication of specialized equipment.

After evaluating different products on the market, they went with SAP Enterprise Buyer (SAP EBP). We wanted something easy to use, and SAP EBP fitted the bill, Chris Starcke, procurement team lead, recalls. The Shop with Limit functionality also fits well with their specific oil and gas needs for services, many of which are very technical, and only assumptions about duration and costs are known at the time the service is requested. Another important factor: SAP EBP is Web-based, with a familiar look and feel to most users.

Focused project scope

To keep the scope tight and reduce project time, the company focused on staying within its firewall in the companys European operation, based in Aberdeen, Scotland. Reasons for the limited scope included reduced time available for the project and the fact that the e-commerce market is not real mature in the areas where we do a great deal of business, primarily services, says Starcke. Keeping the project within the firewall meant they could refine processes internally and fully train employees before they extend their procurement process to suppliers with online catalogs, portals, and the like.

They decided to implement SAP EBP in the Northwest Europe business first because the IT and business areas together recognized that that region was already a close fit with existing processses, just not the tools. The ultimate goal, to be realized over the next year, is a singular set of sound processes and one global system infrastructure operating from one location, Houston, Texas, United States. Our head of procurement is a strong believer in having a consistent procurement process and set of tools across the board, Starcke says. Interestingly enough, Starckes team handled much of the implementation themselves. Before the installation got underway, though, the company contracted with SAP UK for consulting services as a part of its Package Service. Two senior consultants met with the project team to review the scope of the project, discuss the business case, economics, and other details. The SAP consultants also installed SAPs Best Practices model with a sample catalog. Starcke and his team are happy with the knowledge and professionalism of the consultants. They even called one of them back on an ad-hoc basis throughout the project and at the end of the project to ensure that the implementation met Amerada Hesss needs. Its worked out in our favor that we used SAP as our first call, Starcke says.

Start to finish in 13 month

After the planning phase, Starcke and his team set out to implement a ready system in a relatively short timeframe. After only 13 months, Amerada Hess went live with SAP EBP 3.0. Fast does not always mean perfect, and there were some bumps along the way. Starcke recognizes that the product is relatively new, so he was not surprised when they ran into challenges. One of the first was untangling which business processes in SAP EBP were different from ones Amerada Hess had in place. It helped that the SAP EBP process for requisition was close to what they previously did in the United Kingdom.

Starckes team modified some processes to match the software. One example is the approval process. Here, the modification allowed them to bring in our requisition, order, and receipt process for services to a much higher degree of visibility. They now know about services ordered much earlier, not just when the invoice appears in the office, as was previously often the case. Starcke is now focusing on modifying processes for Amerada Hess Exploration & Production (E&P) in the United States, as the next phase of SAP EBP gets underway.

Because SAP EBP is a very wide component, as Starcke describes it, the company needed to allocate more resources than they had anticipated. They had originally looked at the implementation as adding another SAP R/3 component, but with SAP EBP they were treading new ground a Web-based application. Another challenge was building the system almost from scratch several times; first, when they upgraded from version 2.0 to version 3.0, then building a separate and secure training system and a test system. Starcke has talked to SAP about this being so time-consuming and knows it will be improved. Dialog has already started and we are mapping out our options right now, he says.

Two major work-intensive parts of the implementation were designing and implementing workflow and catalog content. Electronic workflow with-in a Web-based application was some-thing new for the project team, but they handled the configuration and activation itself, as they did for the crucial selection of catalog content and programming of BADIs (user exits).

Selection of catalog content included deciding where and how to replicate material masters, service masters, and so on, into the Requisite Catalog in SAP EBP. Fortunately, in Europe, the company already had a robust catalog content and system in place prior to implementation. This was a tricky design process involving a triangle of interfaces between the SAP R/3 system, SAP EBP, and the Requisite Catalog. They solved these issues by writing an ABAP program to extract data from SAP R/3. Staying within the firewall meant that this extract came only from their materials masters, service masters,and contract master data. Still, it was an extract of 10,000 masters from a total of 100,000-150,000. The tricky part for us was to make sure we got the right 10,000, says Starcke. Once the data was extracted to a file, they used eMerge which is integrated in SAP EBP to read the Microsoft Excel or text files, schedule the import, and insert the data. This process will be modified to integrate external suppliers in subsequent phases.

Throughout the project, the team was thinking about how SAP EBP would be used in other units. This included ensuring that employees were well-versed in the new software and comfortable using it. As Starcke says, Technically, you can put in a system pretty easily, but its the cultural and philosophy changes that are most important. That philosophy has paid off: SAP EBP is now very high profile in the organization and users are more comfortable using the software. We have experienced a much larger audience of users wanting SAP EBP than anticipated. It has actually caused us to address adding licenses, Starcke declares. Requests for SAP EBP are now coming from all parts of the organization. EBP is running pretty smoothly, and we are anxious to get to the next release, 3.5, Starcke emphasizes. SAP EBP provides one system, one process for procurement that they can roll out to other locations as needed. Since each areas specific catalog will reflect its distinct services, this extensive range of data can change daily. To ensure success, a central EBP administrator will be in charge of upkeep of the system. To further streamline procurement, they have established the U.S. dollar as the system-standard currency however, users are able to see and deal with their local currency when they interact with the EBP system. Starcke is now working on a roll out of SAP EBP to the United States, where they recently rolled out Production Revenue Accounting, a component of SAP Oil & Gas. All in all, Amerada Hess has doubled the size of our use of SAP in Exploration and Production in the last year and a half.

AMERADA HESS

Amerada Hess is an integrated oil and gas company of almost 11,000 employees engaged in the worldwide exploration for and production of crude oil and natural gas. Amerada Hess also engages in refining and marketing refined petroleum products, natural gas, and electricity in the United States. The company explores millions of acres both on-shore and offshore and has thousands of wells producing oil and natural gas. Amerada Hess produces crude oil and/or natural gas in the United States, the United Kingdom, Norwegian and Danish sectors of the North Sea, Equatorial Guinea, Gabon, Algeria, Azerbaijan, Thailand, Malaysia, Indonesia, and Colombia. For 2001, the company posted revenues of U.S $13.4 billion. www.hess.com

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