L&T Energy Hydrocarbon: Enhancing supplier engagement with more-efficient procurement processes based on real-time data
Explore L&T Energy Hydrocarbon’s journey with SAP
L&T Energy Hydrocarbon (LTEH) provides design-to-build solutions to the global hydrocarbon industry. It wished to address digital threads in procurement processes to enhance efficiency and improve visibility. SAP Business Network and SAP Ariba solutions help the company improve supplier management, sourcing effectiveness, and invoice processing times.
| Industry | Region | Company Size | Partner |
| Oil, gas, and energy | Mumbai, India | >8,000 employees | LTIMindtree |
Japanese auctions per year across
material and service categories.
POs processed in SAP Business Network annually.
active suppliers using SAP Business Network every year.
Head of Central Digital SCM, L&T Energy Hydrocarbon
Refining procurement processes to add value across the supply chain
The L&T Energy Hydrocarbon business (LTEH) of Larsen & Toubro (L&T) provides integrated design-to-build solutions for large and complex offshore and onshore hydrocarbon projects. It has completed more than 600 turnkey projects throughout India, the Middle East, Southeast Asia, and Africa. LTEH undertook an operational excellence program to evaluate its supply chain.
The requisition-to-purchase process in its projects business is highly customized, with complex interactions between engineering, the buying team, the project management team, and suppliers. Customers are deeply involved during the purchasing process, especially in approving suppliers as well as purchase specifications. This resulted in limited supplier options and reduced competitive pressures.
In the purchase-to-pay process, there was suboptimal digital collaboration due to a disconnect between suppliers and LTEH’s ERP system. Collaboration with suppliers on POs, invoices, and payment exchange occurred manually through e-mails or an attachment-exchange mechanism. Invoice posting and supplier payments were not operating at optimal levels of efficiency, resulting in delays in relation to agreed payment terms. Suppliers lacked visibility into invoice processing status, payment schedules, and payment advice, and providing updates to suppliers involved extensive effort. Also, due to a missing three-way digital checkpoint at the invoice submission stage, the Shared Services Center team found multiple errors and holds during the invoice processing stage, requiring additional effort to correct these errors.
With ambitious growth targets, LTEH realized that it required a scalable, cloud-based, and future-ready digital collaboration system to manage significant volume while reducing overall stress in the process. To enable simplified experiences for suppliers, data in its ERP system needed to be up to date and easily available.
Implementing integrated solutions to consolidate supplier-related activities
Building on two decades of experience with SAP software, LTEH wanted to expand its use through integration with cloud-based solutions to meet business growth and improve connections with suppliers. The company chose SAP Ariba solutions to achieve this. Another factor enabling this decision was the ability to smoothly integrate the upstream requisition-to-purchase and downstream purchase-to-pay capabilities with SAP S/4HANA.
The company now employs SAP Ariba Strategic Sourcing Suite, which includes the SAP Ariba Sourcing solution with SAP Business Network Discovery, the SAP Ariba Contracts solution, and the SAP Ariba Supplier Lifecycle and Performance solution for use in upstream processes. LTEH used Japanese auctions for effective and efficient negotiations with suppliers, allowing the company to secure the best discounts even with limited competition. The design of Japanese auctions is such that suppliers must quote their best prices, helping buyers reduce the number of rounds and helping LTEH achieve better pricing outcomes. Most categories are using Japanese auctions now to improve savings.
For the purchase-to-pay process, LTEH used SAP Business Network to digitally collaborate with suppliers for purchase orders, acknowledgments, advance shipping notices, goods receipt notes, service entry sheets, and invoice and payment status. Using single sign-on and a user-friendly interface, suppliers can intuitively access SAP Business Network to complete requisition-to-pay process interactions with LTEH. An average of 30,000 POs are transmitted through SAP Business Network annually, comprising more than 80% of spend volume.
Considering its large supplier base and diversity in terms of size, geography, and categories, LTEH conducts regular training programs both for buyers and suppliers. The business works closely with its implementation partner, LTIMindtree, for implementation services and any technical support required during regular operations.
Head of Central Digital SCM, L&T Energy Hydrocarbon
Gaining transparency into procurement processes with real-time data
By managing direct and indirect procurement in SAP Business Network, LTEH has enabled better control, visibility, and collaboration. Using SAP Ariba solutions, it has consolidated supplier-related activities and improved supplier management.
There are roughly 8,000 suppliers onboarded to the network so far, with another 200 every month. Supplier registrations are live, and their data is streamlined. Suppliers are more satisfied because they receive timely payments and have accurate payment details with the invoice status portal. By paying suppliers on time and adhering to the agreed payment terms, LTEH has improved supplier experiences and performance as well as overall project performance because suppliers are happy to ensure that goods are delivered on time.
The advanced shipping notice indicates that goods and services are dispatched, allowing proper planning not just for projects but also for the finance function, which has access to data for proper provisioning. The company has seen positive results from integrating its suppliers and ERP application with the network. Due to the tight level of integration between SAP Business Network and its ERP, the company has improved overall compliance.
Head of Central Digital SCM, L&T Energy Hydrocarbon
Want to know more about L&T Energy Hydrocarbon?
L&T Energy Hydrocarbon – SAP Ariba Solutions Story (video)
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LTIMindtree is a global technology consulting and digital solutions company that enables enterprises to reimagine business models, accelerate innovation, and maximize growth by harnessing digital technologies. As a digital transformation partner to more than 700 clients, LTIMindtree brings extensive domain and technology expertise to help drive superior competitive differentiation, customer experiences, and business outcomes in a converging world.