An Interview with Mark Evans, CIO of Tesoro Petroleum
Tesoro Petroleum is an independent refiner and marketer of petroleum products. They have refineries in Washington, Alaska, Hawaii and 240 retail stations including Mirastar stations at Wal-Mart's. They also provide marine logistics services.
Their IT strategy was to create an infrastructure that positions Tesoro to benefit from current Internet technology while integrating disparate sources of information with SAP back office. By doing this they hoped to improve Tesoro's business processes, lower costs, make faster turn-arounds and fewer mistakes. They also wanted to decrease the high overhead costs associated with running SAP.
In their Marine Services Division they have fuel and reprovisioning stations for ocean going vessels and oil rigs. The mission of this unit, located on the Gulf coast, was to have a service oriented one-stop shop. While not a big part of Tesoro's operation, it is significant, generating many transactions from the sale of over 6000 different products.
Ships arrive at Tesoro to get the products for reprovisioning of oilrigs. Sometimes they give advance notice they are coming and sometimes they just pull up to the dock and want a fill up. The process starts with a notification to a dispatcher who writes up the order for fuel and lubricants, groceries and so on. The dispatcher gives the order to the dock foreman, who then passes it to the dock hands, who will load the ship while scribbling a description of their load on pieces of paper. They then give the scribbled notes back to the foreman. The captain of the ship has to sign the fuel ticket because the companies won't pay if the captain's signature isn't on the ticket. The process works in reverse in the cases where the boats show up without notice - the dockhands begin loading before the paperwork is started. Then the paperwork is collected by the dispatcher and sent to accounts receivable at headquarters.
There is usually data or documentation missing - dock people aren't generally known for their attention to detail. These details are especially important in the petroleum industry since they pay a lot of federal and state taxes on their products, and mistakes can snowball into large losses.
The Marine Services problem is that SAP is considered hard to use and, with a high turnover of dock workers, there is constant retraining. Mark said SAP is extremely precise from a procedural standpoint, and added that his users often provided inaccurate data entry and erroneous inventory records, which in turn leads to poor forecasts for demand and numerous out-of-stock situations. We all know this leads to unhappy customers and lost sales.
Tesoro wanted to automate the sales order process using the Internet and integrate with the SAP back office transactions. They would redefine the roles of personnel in process flow and make the whole process simpler and easier. This was defined as one of the "quick hits" in their overall e-business strategy plan. Mark said that anything he can save in overhead helps a great deal. Saving a penny a gallon on oil products makes a significant difference with the volume Tesoro does. He said they watched the first wave of Internet e-commerce come and go without making a move because they knew that they couldn't get a workable solution to their problems until they could get a good and simple product to integrate the front end web stuff with the back office. Mark wanted a browser based front end that anybody could use. He continually told his staff that he wanted something like Southwest Airlines reservation page, where almost everybody can easily get a ticket. He said if you can't get a ticket on Southwest from their web site, you probably shouldn't be flying anyway. They borrowed a metric from Microsoft on web pages, following the dictum that if it took more than two minutes to complete the process on the page, then the process was too difficult and the page needed to be redesigned. They leaned heavily on "process architects" who came from various areas of the business, knew the processes being worked on, and could define them to IT and different components of the company. Without a thorough understanding of the business processes, no good working solution could be created, regardless of the tool they used. Mark said it really isn't technology that is the real solution, it is understanding the people and the processes. Technology just makes it quicker and better once the processes are known and defined.
To begin they defined their situation as an Enterprise Application Integration (EAI) program, and they investigated numerous vendors. They considered the SAP tools but wanted more flexibility. Tesoro is a Microsoft shop and they were leaning toward Biz/Talk. They were introduced to Fuego through what Mark called a "brother-in-law deal" which he says happens a lot in the oil industry. In this case it was a fellow church member to one of the executive vice presidents who recommended Fuego.
Mark defined 50 "critical scenarios" for the common business processes Tesoro does all the time. They also identified about a hundred variances to these scenarios. There are a lot of "deals" in the oil industry, each containing a twist that needs to be handled. These twists do not create a neat flow chart. Instead they demonstrate what people did to consummate a sale. Because exceptions will not surface until you get to the granular level of the process, you have to design the process from the very lowest level, according to Mark. Good process managers know that there is no standard process; all of them are unique, creating the need for IT people to be very flexible.
Mark was initially leery of Fuego because he had a lot of experience with case tools but decided to give it a try. It was funded as a research project so if it didn't work it wouldn't be a problem. They formed four sub teams, each a blend of Tesoro and Fuego people, covering architecture, processes, front end and back end.
Tesoro liked FuegoBPM's ease of use, open architecture, and robust functionality. They could test run it without conflicting with any of their ongoing processes. They used the business applications in SAP as the process based objects for Fuego and used Microsoft as the messaging layer. They started with one business process - fuel sales at the dock - and built a straw model from end-to-end. Multiple review sessions proved the process worked well - so they deployed it.
When a ship places an order, the dispatcher selects products via the Web, and FuegoBPM integrates 14 SAP transactions to process the orders. The invoicing and inventory management is also automated and the dockworkers never touch SAP. Neither the customers nor the workers need to know the product code information to initiate the transaction. Once the product name is typed in, the rest of the information for the order is drawn from the back end and the screen is filled out.
Tesoro's goal was to reduce training time to one day, and by using a web format this was achieved. They improved the accuracy of the inventory and simplified the billing procedures. They made SAP easy for everyone to use by insulating the end user from the complexities. Implementing the pilot solution only took five weeks. An added benefit was that the new processes facilitate the capture of performance metrics. They are deploying BPMS to their other Marine Service terminals now. Mark ended his talk by emphasizing the key to the successful results; defining the processes first and then using teams to insure that everything is covered. He said this is grunt work but there is no way to avoid it if you want to insure success. There is no silver bullet; count on the fact that you are not actually doing business the way you think you are. The only way to find out what your processes really are is to get everyone together and dissect it piece by piece. "All business is basically exceptions." he said, "And every deal is unique. To make this work you have to have to synchronize the people, the processes and the tools."
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