Soup to nuts? Not quite for SAP asset management as oil drilling firm employs supply-chain add-on to save $6.8m

That's a pretty expensive gap in S4/HANA

When Precision Drilling, a global company that serves the oil and gas industry, upgraded its asset management application to SAP S/4HANA two years ago, it was expecting the software to handle data going into its supply chain systems. But it soon discovered that was not the case.

Speaking at the American SAP User Group (ASUG) conference on asset management this week, Graham MacLeod, vice president of asset integrity and quality management at Precision Drilling, described how the company had just gone live with supply-chain add-on Metanoia in the US, completing a global rollout which plugged the gap left by SAP and saved $6.8m in six months.

"Since SAP go-live, our main focus has been on the integration points to asset management, and a huge aspect of this has been with the supply chain," he said. "However, we found that the standard SAP Equipment Bill of Materials was not effective for us: it was too difficult for our users to verify the correct part which led to many errors in ordering processes, increasing the use of free text procurement and vendor invoice management issues."

To support complex assets, like factory machinery or oil drilling equipment, companies need access to a lot of different data such as parts diagrams, maintenance instructions, operations manuals, warranty information, stock on hand. Metanoia's systems provide access to that data from one place, the company says.

"What Metanoia allows us to do is digitise information about parts, and link each component material master inventories and interchangeable spare parts," MacLeod said. "This has given our maintenance and operations teams and buyers more confidence in the components they are ordering and has significantly increased the use of material masters, and we have more or less eradicated the use of free text procurement for the last six months."

Organisations that buy in this way save money because they reduce their off-contract spending and drive more value through the supplier deals they have in place.

But the issues around supply chains and procurement systems does not detract from the success of the S/4HANA upgrade overall, MacLeod claimed. The decision was taken in 2017 to replace a SAP ECC asset management system, the core of which dated back to 1998. The object was not just to reduce equipment downtime, which is very costly in capital intensive industries, but also to improve the overall efficiency of maintaining equipment.

Although too complex to describe here in detail, the full presentation is available from the ASUG conference website. Needless to say, it required a lot of attention to master data and get buy-in from senior management and maintenance workers to ensure master data is meaningful and accurate.

Those hoping to reap the benefits from enterprise asset management also need to ensure that master data is continually maintained. "That work is never done," MacLeod said.

In a member survey conducted in 2019, ASUG showed that only 19 per cent of companies using SAP for asset management were on the S/4HANA in-memory database application. It found 66 per cent were still on ECC, although 66 per cent of asset management professionals were considering upgrading to S/4HANA.

Like all oil companies, Precision Drilling faces tough challenges. The industry has been hit by a double whammy of COVID-19 disruption to production and demand, combined with Saudi policy to crash the global oil price. In late March, Precision Drilling announced to shareholders a reduction in capital spending and fixed costs and updated to its cash position and strategic priorities.

Yet interest in data has never been greater, MacLeod said. "Taking definitive action by making decisions based on your data: I can't stress enough how much traction I have had in the past six months based on this approach. Even in this kind of market, I've been given funds and resources to implement initiatives that will drive efficiencies and significant cost savings in our organisation."

Many industries will be severely stressed by the coming economic storm. Those with a grip on their data will be better placed to weather it and survive to see to brighter times. ®