leveraging automation in non-traditional p2p process flows...non-traditional p2p process flows...

Leveraging Automation in Non-Traditional P2P Process Flows

Aaron Rubinstein

Anadarko Petroleum Corporation

About Anadarko

• One of the world’s largest independent oil and natural gas exploration and production companies – Find, develop, and

produce oil, natural gas, and NGLs

– Develop and operate midstream energy infrastructure

• Global operating footprint

Upstream

• Exploration

• Field Development

• Production Operations

Midstream

• Transportation

• Processing

• Storage

Downstream

• Refining & Petro-Chemicals

• Wholesale & Marketing

• Retail Distribution

Oil & Gas Value Chain

Sup

po

rt Services

About Me

• Manager of Shared Services & Technology for Global Supply Chain organization

– Lead shared services supply chain functions

– Define and execute roadmap for supply chain process and technology

P2P Technology at Anadarko

• SAP – Single instance globally

– Requisitions, Purchase Orders, Goods Receipts

– Supply Chain Planning, Plant Maintenance, Project Systems

– Invoice processing and payment

• Oildex OpenInvoice – Supplier portal

– Electronic invoicing (B2B and direct entry)

– PO integration (PO flip)

– Contracts integration

• 80K – 120K invoices per month, ~90% electronic

Non-Traditional P2P Process Flows

• Oil and gas supply chain is inherently complex

• Industry operating model involves contracting with specialized service providers to perform many of the physical operations conducted in the field. – Presents challenges from

a P2P perspective

P2P Challenges with Oil & Gas Services

• 24/7 operations – Services can be

planned or unplanned

– Services can be initiated directly by supplier personnel

• Services can be discrete or highly repetitive


• Geographically distributed operations – Tens of thousands of well locations – Remote areas – Unmanned sites – Requesters, Supply Chain, AP, and Financial Approvers

often far removed from service locations


• Services can be complex

– Both in terms of the work performed and pricing structures

• Exact mix of equipment, materials, and labor required is often unknown until the service is underway


• Service providers range from multinational corporations to sole proprietors

– eCommerce capabilities are across the board


• Traditional P2P process flows often not a good fit

– Some companies force it to work at the expense of efficiency

– Standard industry practice is to accept a direct invoice after services are completed. AP professionals manually code and verify invoice accuracy.

Requisition

Purchase Order

Receipt

Invoice

Payment

PO Buying Channel

Anadarko Conceptual P2P Process

Sourcing Strategy

Supplier Contract

Non-PO Buying Channel

Requisition Approval Purchase

Order Receipt Invoice

Call Out Field Ticket Invoice Approval

Payment

Challenges with Non-PO Invoices

• Manual invoice coding and verification

– Code GL accounts to invoice line items

– Verify invoice pricing against service contracts

– Verify operations approval against field tickets

• Accuracy became increasing challenging as invoices volumes grew

• Required a small army of invoice processors


• Periodic third-party audits uncovered millions in billing errors

– High volume of simple pricing errors, misapplied contract discounts, delays in applying price adjustments, etc.

– Recoveries were often less than full value

– Audit services were costly and only focused on largest suppliers


• Lack of real-time visibility to costs incurred

– Final invoices often received 30+ days after services completed

– Challenges with accrual accuracy

– Difficulty managing costs against budgets

• Cost control is critical in complex capital projects

• Lack of controlled Req/PO process upfront increases difficulty of managing spend compliance

The Vision

1. Automated real-time invoice price verification

2. Automated validation of services invoiced against approved field tickets

Automated Invoice Price Verification

• Functionality existed in OpenInvoice

• 1,500+ active contracts; pricing schedules needed to be converted and loaded

• Staffed two FTEs to administer program

• Designed workflow integrating CLM process to OpenInvoice

• Change management effort with Supply Chain Category Managers and Suppliers

• 18 months from kick off to full enablement


Draft Contract

Obtain Pricing Data

Execute Contract

QC and Upload to

OpenInvoice

Activate For Price

Validation

Category Manager (Supply Chain)

Contract Admin

Support


Submit Electronic

Invoice Supplier

Category Manager (Supply Chain)

Automated Price

Validation

Review Alerts Dispute

Over- Charges

Accounts Payable

Review Invoice Dispute

Approve

Forward to Financial Approver Approve

No Over-Charges

For illustrative purposes only (actual pricing has been edited)


• “Direct entry” suppliers see same price validation alerts that we do

• Invoices with over-charges routed to Supply Chain personnel responsible for contract

– Approve or dispute invoice

• Currently intercepting $300K/month in invalid invoices

Lessons Learned

• Requires dedicated FTEs to administer program

• Requires close alignment with Sourcing teams

• Contract terms do not always translate to invoices – Disconnect between supplier Sales and AR teams

• Period immediately following execution of a new contract or amendment is most critical for price verification

• Engage suppliers during the contract execution phase

Lessons Learned

• Data generated by contract validation process is highly valuable

– Identify gaps in contract coverage and detect cost leakage in real time

– Attack off contract spend at the line item level

– Enrich spend data by integrating standardized service descriptions and category classification

Lessons Learned

• Suppliers are required to select applicable service contract when submitting an invoice – Supplier A/R personnel may not be familiar with

contract details – Need to indicate applicable contract when calling out

services or approving field tickets

Electronic Field Tickets

• Field tickets are generated by service providers upon completion of a scope of work – Itemize service details including labor, materials, and

equipment with quantities utilized

– May or may not include pricing

– Tickets are signed by authorized Anadarko field personnel to indicate work was completed to our satisfaction • Ticket approver may be on location or at a regional office

– Signed field tickets are attached as backup documentation when submitting final invoice • Multiple tickets may be consolidated on a single invoice


• Field tickets are ubiquitous in Oil & Gas

• Despite high rates of electronic invoice adoption, hundreds of thousands of paper field tickets remained in our P2P process

• Source of substantial inefficiency for Anadarko and our suppliers

Paper Field Ticket Process Flow

Supplier Perform Service

Generate Paper Field

Ticket

Deliver Ticket to

APC Personnel

Approve Ticket

Retrieve Approved

Ticket from APC

Submit Invoice

with Approved

Ticket

Verify and Code

Invoice

Approve Invoice

• No validation of authorized approver

• No master data validation

• Manually reconcile invoice to ticket

• Duplicate ticket risk • Ticket variance risk

Anadarko (“APC”)

• Inefficiency of physical ticket handling • Lack of visibility to ticket data

• Scanning and document handling inefficiencies

• Errors transcribing coding data from ticket to invoice


• Began working with Oildex last year to design and develop new application

– Goal was to eliminate inefficiencies with paper tickets and automate ticket-to-invoice reconcilliation

• Launched pilot in January 2016

• Began full supplier enablement this summer

Electronic Field Ticket Process Flow

Supplier

Anadarko (“APC”)

Perform Service

Submit Digital Field

Ticket

Approve Ticket with

App

Submit Invoice

(or perform ticket “flip”)

Code Invoice Approve Invoice

• Secure approvals • Mobile enabled • Syncs with APC master data • Captures SCM contract IDs

• Instant electronic submission • Visibility to ticket status at all times

• Automated ticket verification • Improved controls due to focusing

scrutiny on ticket-invoice variances

• Auto-approval under certain conditions

• Faster ticket-to-invoice cycle time • Improved invoicing efficiency

Automated Ticket-Invoice

Validation


• Simple app for ticket approvers

Automated Field Ticket to Invoice “Flip” for Suppliers

Contract Validation

Field Ticket Validation

For illustrative purposes only (actual pricing has been edited)

Future Direction with Field Tickets

• Expanding electronic field ticket program

• Leverage electronic field tickets to streamline the acquisition of operational data

– Oil and water volumes

– Labor hours

– Cost estimates

• Automated field ticket approvals

– Leverage equipment sensor data and machine learning algorithms

Questions?

Aaron Rubinstein Manager, Shared Services & Technology, Global Supply Chain Anadarko Petroleum Corporation [email protected]

leveraging automation in non-traditional p2p process flows...non-traditional p2p process flows...

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