Elements of the downstream
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Final Distribution. Retailing. Terminals & Wholesalers. Elements of the Downstream. Crude Acquisition and Transportation. Bulk Distribution. Refining. MARKETIN G. RISK MANAGEMENT. Supply, Market & Transport Products. Market & Distribute Wholesale Products. Sell Retail Products.

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Elements of the downstream

Final Distribution

Retailing

Terminals & Wholesalers

Elements of the Downstream

Crude Acquisition and Transportation

Bulk Distribution

Refining

MARKETING

RISK MANAGEMENT


Downstream vision

Supply,

Market &

Transport

Products

Market &

Distribute

Wholesale

Products

Sell

Retail

Products

“Embrace volatility”

- Financial markets

- XML standards

“Win & keep customers”

- Dealer/jobber sophistication

- Push pricing & availability

“Lights out refinery”

- Web process control

- Collaboration across plants

“Individual merchandizing”

- Grocery nets & standards

- Scan based trading

Downstream Vision

Drill down is 5 Forces

Facing the Downstream

page from overview section

Supply,

Market &

Transport

Crude

Refine &

Process

Feedstocks

“Global optimization”

- Oil Monitor.com

- Global Marine.com


Five forces facing the downstream

Five Forces Facing the Downstream

  • Global market liberalization

  • Continued margin pressure across the chain

  • Disengagement of refining-marketing by majors

  • Growing importance of trading competency

  • Size no guarantee of competitiveness

  • Logo From “CERA week 2000”

  • Link to CERA

  • 2000 Website

  • Paul Skinner

  • Tom O’Malley

  • Ken Lay

  • Link to other

  • Websites


Cera the new prize from commodity to customer

CERA “The New Prize: from Commodity to Customer”

  • The energy industry is facing a transformation in which the personal connection to the customer will play an increasingly greater role. The shift in focus from commodity to customer will require that energy companies create new service- and technology-oriented organizations. New entrants that are more customer oriented and more comfortable with new technologies will pose an ever-present threat. Traditional energy companies risk finding themselves relegated to lower-valued commodity markets.

  • Three forces drive the latest stage of development: globality, technological innovation, and sustainable development. Globality empowers customers, who will become more demanding and face a greater choice of suppliers, and offers opportunities to the energy industry to source worldwide. Technological innovation enables both customers and suppliers to capture value all along the value chain. Even sustainable development can be viewed as a problem or an opportunity, but the skills involved in working with a broader constituency will require a new form of leadership.

This page is a drill down item for

Five Forces Facing the Downstream


Trade crude outline

Trade Crude Outline

  • Process and CSFs

  • Theme and Issues

  • Problem Definition (potential demo)

  • Web site catalog (industry and non-industry)

  • Web Value Added


Top industry issues

Top Industry Issues

Same as Five Forces Facing the Downstream

see overview section


Trade crude process

Trade Crude Process

  • Forecast Demand & Supply

  • Make & Document Deals

  • Arrange Transportation

  • Manage Risk/Exposure/Position

  • Settle and Analyze Deals

  • CSFs

  • Strong relationships with producers

  • Instantaneous global access to price and changing market conditions

  • Accurate assays especially for swing purchases

  • Powerful price and market analytics capability

  • Accurate position systemwide - paper and physical


  • Trade crude key issues

    Trade Crude Key Issues

    • Key Theme = Global Optimization

    • Key Issues

    • Large cargo market, few transactions, few sellers

    • Power shifted to producers

    • Transportation costs very important, controllable component

    • Many refinery configurations mandate specific crudes

    • Important to trade off refinery operating costs vs. incremental crude yield and price


    Trade crude problem definition

    Trade Crude Problem Definition

    • Problem Definition:

    • Trading is global - practically 24/7

    • Need more data/better quality data

    • Want to integrate on-line historical data

    • Want information about non-crude markets

    • Need more consistent Feedstock quality information

    • Solution:

    • Web-enabled information, customized to each trader’s requirements

    • Ability to “hand off” trades in progress from Singapore to London to Houston, for example

    • Web-based 24/7 trading systems

    • Solution Benefits/Value:

    • Rapid on-line analysis and answers to common inquiries

    • Increased transparency in the crude markets

    • Increased productivity of workforce


    Trade crude web site catalogue

    Trade Crude Web-Site Catalogue

    • OilMonitor.com

    • Enron.com

    • GlobalMarineHub.com

    • Altra.com (not currently web-enabled)

    • BPUK:E-energyTrade

    • GoCargo.com


    Trade crude web value added

    Trade Crude Web Value Added

    • Integrate-optimize selection &

    • oil movement

    • Rapid response to global conditions

    • Selective quality premiums


    Refine outline

    Refine Outline

    • Process and CSFs

    • Theme and Issues

    • Problem Definition (potential demo)

    • Web site catalog (industry and non-industry)

    • Web Value Added


    Refine process

    Refine Process

    • Plan and Select Feedstocks, Production Forecasting

    • Schedule Feedstocks, Products, Units

    • Operate to Plan/Schedule

    • Operate Safely

    • Blend, Store and Ship on-spec Products

    • Adjust for Variations and Measure Performance

  • CSFs

  • Maximize Variable Margin

  • Optimal Economic Utilization

  • Minimize Give-away and Energy Usage

  • Maximize Controller Utilization and Improve Unit Reliability

  • Meet or Exceed SHE Requirements


  • Refine key issues

    Refine Key Issues

    • Key Theme = Interactive Refining

    • Key Issues

    • Pressure on refining margins

    • Collaborative Planning

    • Feedstock/Product quality

    • Deviations from plan/schedule

    • Data consistency/visibility over hydrocarbon supply chain

    • Delay in decision process

    • Real-time Performance Management


    Refine problem definition option 1

    Refine Problem Definition - option 1

    • Problem Definition for Feedstock Quality Selection:

    • Lack of transparency in true crude oil quality

    • Transport quality degradation not tracked or sufficiently analyzed

    • Outdated crude oil quality representation results in non-optimal crude slate

    • Undetected crude oil quality variation decreases refinery performance

    • Most feedstock quality processes are still very manual and time-consuming

    • Solution:

    • One centralized internet hub for oil quality information

    • Automated data gathering/retrieval/model loading

    • Shared costs/resources for crude oil quality tracking

    • Solution Benefits/Value:

    • Improved crude slate optimization

    • Improved quality of domestic common streams (LLS, WTI, WTS)

    • Reduced crude testing costs; reduced time cycles for quality updates

    • Profit Improvement of $0.04 - $0.15/bbl of crude


    Refine problem definition option 2

    Refine Problem Definition - option 2

    • Problem Definition for Performance Mgt.

    • Company strategy and operating goals are unclear

    • Disparate performance measures (KPIs), across departments

    • Measures are not integrated with follow-up action plans

    • Above factors lead to incidences of micro-management, and answering the same question multiple times

    • Drive economics for functional silos rather than across functions

    • Solution:

    • Web-enabled performance management tool

    • Aligned measures and clear articulation of business objectives

    • Solution Benefits/Value:

    • Aligned and empowered workforce

    • An evergreen process for continuous improvement, action plans incorporated into system

    • Rapid on-line analysis and answers to common inquiries

    • Increased productivity of workforce

    • “What gets measured gets managed”


    Refine problem definition option 3

    Refine Problem Definition - option 3

    • Problem Definition for Supply Chain Planning:

    • Delayed communication and decisions regarding high $ impact events

    • No mechanism to quickly “re-publish” operating plan once “copies are made and the meeting is over”

    • No common view of economic drivers across supply chain, “what’s ‘my’ optimal vs. what’s ‘your’ optimal”

    • Disparate planning decision support tools with no visibility outside of functional “walls”

    • Accuracy of planning model constraints

    • Solution:

    • Packaged intranet platform for collaborative planning -- “Virtual Plan”

    • Common standards for planning documents; defined processes, workflow

    • Solution Benefits/Value:

    • Better decisions and faster decision cycles

    • Rapid deployment of IT platform; low cost roll-out

    • Managed work processes; knowledge organization and capture

    • Profit Improvement of $010 - $0.30/bbl of crude


    Refine web site catalogue

    Refine Web-Site Catalogue

    • Myplant.com Honeywell

    • Refiningonline.com

    • Processcity.com AspenTech

    • SHE?


    Refine web value added

    Refine Web Value Added

    • Collaboration across plants or functional departments

    • Consistent performance management with accountability

    • K/management & best practices

    • Data consistency and rapid decision process


    Trade product outline

    Trade Product Outline

    • Process and CSFs

    • Theme and Issues

    • Problem Definition (potential demo)

    • Web site catalog (industry and non-industry)

    • Web Value Added


    Trade product process

    Trade Product Process

    • Forecast Supply & Demand

    • Make & Document Deals

    • Arrange Transportation and Exchanges

    • Manage Risk/Exposure/Position

    • Manage Inventory & Position

    • Settle & Analyze Deals

  • CSFs

  • Accurate demand forecast daily

  • Instantaneous global access to price and changing market conditions

  • Understand transportation and exchange options by network

  • Powerful SCM optimization analytics capability

  • Accurate position systemwide - paper and physical


  • Trade product key issues

    Trade Product Key Issues

    • Key Theme = Exploit Volatility

    • Key Issues

    • Many transactions, many sellers

    • Power shifted to large consumers

    • Network optimization important

    • Daily matching of supply and demand by network

    • Grade complexity: seasonality, blend components, pipeline grades


    Trade product problem definition

    Trade Product Problem Definition

    • Problem Definition:

    • Trading is global - practically 24/7

    • Need more data/better quality data

    • Want more specific information about relating to cargoes

    • Want more specific information relating to products inventories

    • Need access to changes in supply and demand plans in real time

    • Solution:

    • Web-Based 24/7 products trading systems

    • Web-enabled information, customized to each trader’s requirements

    • Ability to “hand off” trades in progress from Singapore to London to Houston, for example

    • Solution Benefits/Value:

    • Rapid on-line analysis and answers to common inquiries

    • Increased transparency in the market

    • Increased productivity of workforce

    • End to information overload


    Trade product web site catalogue

    Trade Product Web-Site Catalogue

    • NRGline.com etc. Products brokerage site

    • Houston Street.com - announcement of JV with Equiva

    • RedMeteor.com announced commodities trading site

    • Cygnifi-JPMorgan - Derivatives on Web


    Trade products web value added

    Trade Products Web Value Added

    • Enables 24/7 global, electronic trading

    • Integrate external deal with internal work

    • Hedged pricing alternatives


    Market wholesale outline

    Market Wholesale Outline

    • Process and CSFs

    • Theme and Issues

    • Problem Definition (potential demo)

    • Web site catalog (industry and non-industry)

    • Web Value Added


    Market wholesale process

    Market Wholesale Process

    • Forecast & Arrange Supplies

    • Negotiate Contracts

    • Set Price & Terms

    • Manage Customers & Orders

    • Settle and Analyze Performance

  • CSFs

  • Responsive and clear business strategy with this channel of trade

  • Competitive and defensible pricing

  • Mix of nationwide and regional customers

  • Mix of branded and unbranded customers

  • Dealing with a mixed population of large, sophisticated and small, unsophisticated customers


  • Market wholesale data dump discussion

    Market Wholesale Data Dump Discussion

    • Key Theme = Win and Keep Customers

    • Key Issues

    • Supply chain -ATP

    • Large and Small Jobbers Are Different

    • Small need virtual site - be their internet for accounting, procurement, payment - virtual P&L

    • Every thing a large oil company has internally, should transfer into jobbers for them to operate efficiently. Too small to make large investments in IT, want retail pools for better deals. Acct systems online. SHE

    • Immediate availability of product at a reasonable price may not be an issue anymore

    • Large Unbranded Jobbers (mass merchandisers) Hypermarkets

    • National Accts. Aviation, Bunker, etc ??

    • Large jobbers ExxonMobil for example don’t mind station divestiture. Will need low cost money, investment banker support as they grow with opportunities.

    • Branded jobbers don’t have infrastructure to support their growth. Trucks, terminals, etc.

    • Image and Brand Support. Jobbers are charged for that. Credit card will stay part of it. Aren’t charged for processing own cards (do for VISA, etc.)

    • Want hedged contracts (avgas,heating oil, etc.)

    • Branded online accounts for customer to see

    • Majors sell more premium brand than non-major


    Wholesale marketing issues first pass

    Wholesale Marketing Issues First Pass

    • Jobber Issues

    • Open and responsive access to major’s capabilities: acct., SHE, contracts, etc.

    • Improved infrastructure to support growth

    • Image, brand and credit card support

    • Competitive (and hedged) pricing

    • Network wide reliable and ratable supply


    Market wholesale problem definition

    Market Wholesale Problem Definition

    • To Be Determined

    • Possible presentation of Compaq dealer website channel.connect


    Market wholesale web site catalogue

    Market Wholesale Web-Site Catalogue

    • OceanConnect.com Bunker Site

    • BP Amoco Chemical Site for National Acct. Customers

    • Chevron's CRA For Dealers and Agents

    • Connect.com Compaq Dealers

    • Trademarkets w/I2

    • HAVE YOU SEEN ANY OTHERS?


    Market wholesale lessons learned

    Market Wholesale Lessons Learned

    • Push pricing and product availability

    • Major account (VMI) auto stock replenishment


    Sell retail outline

    Sell Retail Outline

    • Process and CSFs

    • Theme and Issues

    • Problem Definition (potential demo)

    • Web site catalog (industry and non-industry)

    • Web Value Added


    Sell retail process

    Sell Retail Process

    • Operate Site

    • Promote & Merchandise Products

    • Optimize Merchandise Inventory

    • Set Retail Prices

    • Process Sales Transactions

  • CSFs


  • Sell retail key issues

    Sell Retail Key Issues

    • Key Theme = Individual Merchandising

    • Key Issues

    • Data detail on customer info


    Sell retail problem definition

    Sell Retail Problem Definition


    Sell retail web site catalogue

    Sell Retail Web-Site Catalogue

    • CRM Live

    • Scan Based Trading

    • CPRF Initiatives

    • Tommy, can you take Terry’s list and track down some retail (and wholesale) websites -


    Sell retail web value added

    Sell Retail Web Value Added

    • Individual merchandising

    • Tie to credit card data

    • Scan based trading


    Other industry initiatives

    Other Industry Initiatives


    Other industry initiatives1

    Other Industry Initiatives

    • - Industry Web initiatives - Bob Crowley/Hydrocarbon Processing


    Other industry initiatives2

    Other Industry Initiatives

    • - Full Value Procurement

      • Sparesfinder.com

      • e.conomy.com

      • NetworkOil.com

      • Chevron - Ariba

  • Shell - Commerce One

  • Drill down to Zeus speeches

    Thu. Keynote “Capturing the Value of “E”merging Technologies in Supply Management” PwC

    Thu. Track A “Upstream Case Study: Establishing an E-Procurement Service in the Oil & Gas Industry” Wellbid Inc.

    Thu. Track B “E-Procurement Case Study” T. Stephens, The Procurement Centre

    Thu. Track B “Wilson Supply: An Online System for Oil & Gas Supply Chain Management” Wilson Supply

    Thu..Track B “Leveraging ERP Systems with an E-Procurement Solution” E&Y

    Fri. “Network Oil: Creating an E-Commerce Marketplace for Oil & Gas” Network Oil

    Fri. “Transforming MRO Catalogues: A Case Study” WorldOil.com

    Drill down to Links

    Chevron.com, Ariba.com, NetworkOil.com, Sparesfinder.com, commerce1.com e.conomy.com others?


    Value chain integration in procurement

    Contract Mgmt

    MRP

    Purchasing

    Company X

    Planning

    Extranet, ERP

    Order Mgmt

    Approval

    ERP

    E-Procurement

    Application

    ERP

    Production

    Goods Receipt

    Inventory Mgmt

    Invoicing

    Billing

    Strategic

    Supplier

    Operations

    Payment

    A/R

    Project Execution

    Reporting

    Extranet,

    Catalog

    On-line

    Auction

    Trading

    Community

    Internet

    Internet

    e-Distributor

    e-MRO

    Value Chain Integration in Procurement

    • Electronic relationships where information is shared with suppliers and service providers in accordance with their strategic value.


    Other industry initiatives3

    Other Industry Initiatives

    • - Property data at your desktop

      • Indigo.com


    Other industry initiatives4

    Other Industry Initiatives

    • EDI vs. XML - PIDX (Lucerne Team)

    Charles is looking at the Lucerne docs - path to spreadsheets is

    share\zeus\standards\edi standards current and edi standards future

    Drill down to Zeus Speeches

    Fri. “The BizTalk Project: How XML Will Revolutionize E-Commerce in the Energy Industry” API,BizTalk, MicroSoft


    B2b environment and options

    B2B Environment and Options


    B2b environment and options1

    B2B Environment and Options

    What is going on out there (from Lucerne Master v5)

    • Dis- intermediation

    • Aggregators

    • Networks

    • Etc.

    File is share\zeus\tools_technology_trends\lucerne_tool documentation

    put more information behind the next slide


    Forrester dissecting e business alternatives

    Forrester: Dissecting E-Business Alternatives

    Market

    Description

    model

    A market for commoditylike products. It fulfills last-minute

    buy-and-sell needs for industry players with preexisting

    Exchanges

    business relationships. Example TradeMatrix.com

    A mechanism for lowering the acquisition price for

    Bid

    products typically purchased via RFPs or RFQs. It enables a

    systems

    wide range of suppliers to bid competitively in real time.

    A one-stop shopping venue. It streamlines purchasing by

    Aggregators

    concentrating many product catalogs for buyer groups. Examples Commerce1 and Ariba

    A mechanism for liquidating surplus at best possible

    prices. It enables a wide range of potential buyers to bid

    Auctions

    competitively for products at below-market prices.

    Order should be:

    Bid Systems

    Auctions/Reverse Auctions

    Aggregators

    Exchanges

    Extranets

    A secure, invitation-only site over the public Web where

    Extranets

    end users buy directly from sellers.


    B2b environment and options2

    B2B Environment and Options

    • First Mover Principles - Chemical Examples

    Marty will get info.

    From D. Dickinson


    Traditional producer eastman chemical the most advanced

    Traditional Producer:Eastman Chemical - The Most Advanced

    • E-Business Program

    • E-commerce allows buyers to browse and purchase chemicals, get help, check orders and billing on-line

    • E-procurement initiative with CommerceOne

    • Supplemented the procurement process with a corporate procurement card for purchases under $2000

    • Internet enabled VMI offering

    • Owns stake in Chemconnect.com

    • Procurement Benefits

    • 5% reduction in prices paid for office supplies by bringing more purchases into contract

    • Reduced order cycles from one week to 24hours on critical commodities and 48hours on others

    • Lowered administration costs- made an annual saving of $100 000

    • Total ROI (% within first 10 months) was 126%


    Elements of the downstream

    New Entrants: E-Chemicals

    • Business Model

    • Industrial chemical e-distributor

    • 20 major chemical suppliers, 1000 products, over 500 registered customers

    • Agreements with chemical suppliers (including DuPont, Elf Atochem North America)

    • After an order is placed, E-Chemicals picks up the product, delivers it, and does the billing

    • Sell and deliver industrial chemicals online in small-quantity orders through strategic agreements with suppliers and service companies

    • Select a product, get a price,order and track shipments on line

    • Provide e-commerce based procurement solutions

    • Offers a free on line registration

    • Order from multiple suppliers on a single purchase order


    New entrants and their business models

    New Entrants and Their Business Models

    • Chance & Hunt

    • Published a website containing an electronic brochure of its products and services

    • Automating the recording of stock and automatically ensure new stock is delivered

    • Site carries details about the company, regularly updated product lists, specifications, data sheets, special offers and promotions, after sales support and technical back-up

    • Formerly taking and processing orders by e-mail

    • CheMatch

    • Focuses exclusively on providing a 24-hour global trading platform that serves the needs of producers, distributors, traders, and buyers of high-volume, bulk commodity petrochemicals

    • Charges $ 0.001 per gallon transaction fee

    • Merged with PetroChem.net to add information services

    • Claims that about 10 transactions take place per week at an average value of $500 000. About $300 million-$500 million of spot deals have been done on the site this year.

    • Started with minimal industry knowledge which seems to have affected them badly

    • ChemConnect

    • A bulletin board service (since ‘95)

    • An online suppliers directory (since ‘96)

    • A trading site - World Chemical Exchange (since August ‘99)

    • Site additionally carries news and research, links to other industry sites and e-commerce information

    • Now an online dynamic chemical marketplace with over 10,000 members

    • Broad range of products: agro-to-petro-to research chemicals

    • Provides online suppliers directory

    • Registration and use are free

    • Recruiting equity investment partners at present for reduced transaction fees


    E business how strategy through implementation

    Business Imperative

    Current and Future Upstream / Energy Market

    Ideas / Tradeoffs

    Complexity

    Speed

    Cost

    Functionality

    E-Business: How - Strategy through Implementation

    4 Box Model

    7Co Model

    Priority Initiatives

    Drill down

    to 7CO model

    Implementation


    The 7co model

    Community

    Content

    Competition

    Company

    Collaboration

    Corporate

    agenda

    Computing

    The 7Co-Model


    Community key questions

    Key questions:

    What non-virtual community is your organisation part of today?

    What virtual community does that imply for your organisation in the connected world?

    What combination of non-virtual and virtual community do you strive for?

    Why will this group act as a community? What are the common elements and what are the business drivers?

    What will be the new dynamics of the desired virtual community? Which are the new value drivers?

    What is the new value add in the community? Who will be best positioned in the new community?

    Community - Key questions


    Content key questions

    Key questions:

    What will be the impact of e-business on your current value add to your current community?

    So, what E-Business play will you go for?

    How will you position your company in the desired community?

    What will be your value add in the new community?

    Will you be able to make 22

    What core competencies will you base your value proposition on?

    Why these core competencies?

    What alternatives are there?

    What will your new Customer Value Strategy be?

    Content - Key questions


    Collaboration key questions

    Key questions:

    What activities are considered core and which are considered non-core?

    What non-core activities should be e-sourced?

    In the new community and based on the desired content, who do you need to collaborate with?

    What are the risks and opportunities of working with these business partners?

    What alternative business partners are available for you in the connected world?

    Based on what criteria should you select business partners?

    How will you perform ‘business partner management’?

    Collaboration - Key questions


    Competition key questions

    Key questions:

    What will the new competitive game be in the connected world? What will the new competitive advantage come from? How sustainable will it be?

    What are the barriers to exit the traditional play? So which of your current competitors are best positioned to enter the new e-business play?

    What new competitors can you expect to face in the connected world?

    How will barriers to entry change? How can you raise barriers to entry in the connected world?

    Do you need to collaborate with traditional competitors (e.g. to raise barriers to entry for the newcomers)?

    Competition - Key questions


    Company key questions

    Key questions:

    What will your new value proposition be in the connected world?

    Which are the new value drivers in the connected world? Which apply specifically to the community and content you want to play?

    What is the impact of the connected world on shareholder value? How will your enterprise be valued in the connected world?

    Which are the new revenue and cost drivers in the connected world? How will this impact your profitability?

    What business model should you choose?

    What operational models should you choose?

    Company - Key questions


    Computing key questions

    Key questions:

    What technological trends are key to your business? How will technology enable the connected enterprise?

    How will these technologies develop in the short and long term?

    What will the impact of these developments be on your business?

    How can you best align your IT strategy with your business goals?

    How about web-enabling your ERP systems?

    How feasible is it?

    What will the impact be?

    Computing - Key questions


    Corporate agenda key questions

    Key questions

    What will be your roadmap for to transform to the connected world?

    What change strategy will be chosen to implement the connected enterprise in your organization?

    What risks are there involved in the transformation towards the connected world?What will be the price of doing nothing?

    Corporate agenda - Key questions


    Wrap up

    Wrap Up


    Wrap up1

    Wrap Up

    • What does this mean for Business and the Industry

    • The “How” of e-business


    Keys to successful e business implementations

    Keys to Successful E-Business Implementations

    • Clearly identify how your project objectives link to critical business issues before starting.

    • Don’t treat e-business as just a “front end” - it changes the way you operate.

    • Remember that e-business must be a business-driven, not an IT, initiative.

    • From a skilled e-business team that combines both business and IT.

    • Identify and encourage senior business champions who are committed to the project.

    • Balance unit ownership with central leadership, coordination and development.

    • Plan thoroughly how to integrate -business into your existing business system.

    • Understand the legal and security requirements that e-business brings.

    • Pay attention to culture and change; they are more challenging than technology.

    • Include key business partners in your initiative.

    Since e-business is more than just a technology, it can involve many of the company’s internal operations, as well as those of key business partners. It also affects how firms view both their strategy and their operations.Consider these keys to successful e-business implementation based on the experiences of companies already pioneering in this area:


    Downstream may fragment into value networks with little vertical integration

    Design &

    Engineering

    Teams

    Retail

    Management

    Refining

    specialists

    Transportation

    Brokers

    Crude &

    Product

    Traders

    Logistics

    Providers

    Downstream may fragment into value networks, with little vertical integration

    • “Inventing the Organisation of the 21st Century”

    • Source : adopted from MIT


    Industry transformation section e business enables strategy

    Distribution

    Exploration

    Production

    Development

    Brokers

    Retailers

    Portfolio

    Managers

    Industry Transformation sectionE-Business Enables Strategy


    E business trends headlines

    E-Business Trends & Headlines

    • Recent E-Business trends are driving world-class companies to reshape their business models.

    According to Forrester Research,

    annual B-2-B e-business is projected

    to surpass $1.3 trillion by 2003.

    Manufacturers seeking ways to reach the consumer, will sell directly to them. Logistics and distribution will be integrated with ordering and production.

    According to “The Industry Standard”, a car parts supplier, Magna, had six T1 lines to its customers, each of which cost more than $1,000 a month. This cost led to the creation of a virtual private network “ANX” Automotive Network Exchange for

    the auto industry and its suppliers built on web-enabled technologies. This led to a monthly cost for Magna of $20!

    Ford purchased a minority share of

    internet car shopping site CarPoint,

    to promote a "build-to-order" system

    in which the manufacturing process is

    directly influenced by online customer

    preferences and grants shoppers a direct

    connection to the manufacturer's inventory

    In a survey of 400 global CEO’s, 4 out of 5, or 80%, felt that Electronic Business would significantly, if not completely, reshape competition in their industries.

    Source: Electronic Commerce

    Toyota recently announced it would be building a custom order Camry within 5 days at its plant in Ontario, Canada.

    Mergers and acquisitions are fueling

    the need for flexible integrated systems

    that connect trading partners and

    industries, especially in the energy utility sector.


    Leading edge firms are web enabling the supply chain to gain competitive advantage

    Leading edge firms are web-enabling the supply chain to gain competitive advantage

    Extend reach

    Dell computers sell 17% overseas with no increase in sales costs

    Improve efficiency

    A sub-process level change at a UK retailer will yield a $750,000 cost saving according to a PwC study

    Reduce staff costs

    AMD believes it will save up to $125M by eliminating staff in procurement processes

    Integrate processes

    ABI/Inform say Chrysler, Ford & GM could save $1B per annum by using E-Business to integrate the supply chain

    Reduce cycle time

    USA industry SCM benchmarks show cycle-time reduction: 70% -90% and error rate reduction of 90% through E-Business

    Suppliers

    Enterprise

    Customers

    Product

    Realization Process

    Strategic Materials

    Voice of Customer

    Delivered Orders

    Order

    Fulfillment Process

    Direct Materials

    Returns and Repairs

    Order

    Capture Process

    Selling/Buying

    Support Processes

    Customer Care

    Reduce processing costs

    TradeEx reduced re-ordering cost from $55-$75 per transaction to $10 p/t. The bottom line benefit was $9M saved per year.

    Indirect Materials

    Settlements

    Revenue enhancement

    PwC client, StorageTek target benefit of $18M from sales force automation

    Supplier Relationship Processes

    Customer Relationship Processes

    Customer satisfaction

    Genstar launched on-line booking service - with significant client usage resulting in day one profits covering total investment


    Presentation themes

    Presentation Themes

    • Web is one of the most far reaching "disruptive" technologies to hit any industry

    • It can enable a thoroughness in decision process and enrichment in staff never before available

    • Many tools & techniques available: no single solution dominant

    • Globality and dynamics of downstream make it a strong candidate to achieve dividends

    • Downstream behind other industries and there are lessons to be learned

    • New operating models must be built on defensible business value improvement principles

    Same as presentation themes

    slide in the overview section

    -or- do you want recap/review...

    in the title?


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