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Marathon Oil: Expanding Process and System Solutions
to Deliver Improvements to On Time Payment
Tracie Slone
Global Procurement Manager
Marathon Oil Corporation
Who We Are
2013 marks 126th year in business
Now a global, independent exploration
and production company
Focused on:
Safety
Profitable growth
Liquids-rich resources
Being socially responsible
2 Marathon Oil Corporation
Marathon Oil Facts & Figures For the year ended 12/31/2012
Established in 1887
Market Cap: ~ $25 billion (as of 9/03/13)
Revenues: $15.7 billion
Net Income: $1.6 billion
Capital Expenditures*: $3.4 billion
Net Liquid Hydrocarbon Sales: 282,000 BPD
Net Natural Gas Sales: 902 million CFD
Net Synthetic Crude Oil Sales: 47,000 BPD
Net Proved Liquid Hydrocarbon, Natural Gas and Synthetic Crude Oil Reserves: 2.0 billion BOE
Employees: ~3,400
Headquartered in Houston, Texas
*Excludes acquisitions and includes accruals
3 Marathon Oil Corporation
Marathon Oil Global Operations
4
Driving Growth and Value Liquids Rich Shale Resource Plays
Marathon Oil Corporation
Bakken
Oklahoma Resource Basins
Eagle Ford
5
Eagle Ford ~200,000 core net acres 2Q 2013 averaged 80,000 net BOED 2013 target ~85,000 net BOED
Bakken ~390,000 net acres 2Q 2013 averaged ~39,000 net BOED 2013 target ~40,000 net BOED
Oklahoma Resource Basins ~220,000 net acres 2Q 2013 averaged 13,000 net BOED Pace of development linked to NGL and gas prices
Marathon Oil Corporation
-
50
100
150
2011 2012 2013 2014 2015 2016 2017
MB
OED
Eagle Ford Shale Production growth profile
6
P10
P90
P10
P90
Global Exploration Portfolio
Marathon Oil Corporation 7
Gross acres Gross unrisked potential resource range
Gabon Pre-salt
Cretaceous Sandstones
Norwegian Sea Utgard High
Cretaceous-Jurassic Sandstones
Kurdistan Fractured Mesozoic-Permian
Carbonates
Gulf of Mexico Subsalt Miocene and Paleogene
Sandstones
620,000 acres 1,400 - 3,000 MMBOE
648,000 acres 550 - 1,550 MMBOE
2,200,000 acres 1,300 - 3,000 MMBOE
12,300,000 acres 1,100 - 2,350 MMBOE
Ethiopia & Kenya Tertiary-Cretaceous
Rifted-Basin Sandstones
5,500,000 acres 700 - 2,700 MMBOE
500,000 acres 750 – 2,250 MMBOE
My Dual Role – IPO and Business Management
8
Asset Area Employees Contractors Total
UK* 17.5 1 18.5 Norway* 9.5 3 12.5 Poland* 1 0 1 Kurdistan* 3 2.5 5 EG* 22 17 39 Houston 19 2.5 21
Total 72 25.5 97.5
31%
43%
19%
7%
IPO Assets GP Functional Responsibilities
Contracting
Mat Ctrl / Logistics
Buyers
P2P / Admin
Supply Chain Mgr.
IPO
Tracie Slone
Procurement & Logistics (Africa/Asia)
Steve Sonnier
Contracts Mgr (Africa/Asia)
Dahlia Mughrabi
Supply Chain Mgr.
Kurdistan
James Holt
Supply Chain Mgr.
UK
James MacGregor
Supply Chain Mgr.
Norway
Donnie Macleod
EG
Drilling Program
Mike Finch
EG
Aina Dybevik
Pat Sanders
*Embedded within Asset Team
58%
4%
10%
28% MEGPL
EG LNG
Kurdistan
GP Residual
Marathon Oil Corporation
Scope of Services – GP Business Management
Customers/End Users:
All end users of Source to Pay processes and solutions.
– All 200 plus members of GP
– Any Department that has third party spend.
– Accounts Payable (IBM)
Annual Volumes at a Glance:
26,000 PO’s
64,000 line items
3,000 RSO’s
10,000 Active Contract Records
10 Systems and Tools
4 Outsource Providers
500,000 invoice documents (approx 44,000 each month)
Function Estimated Users
Buying/ Contracting
115
Receiving Goods/Materials
210
Material Controllers
30
Materials Delivered/ Services Rendered
Field Ticket Signed & Coded
Receipt Entry
Invoice Receipt
Invoice Exception Process
Vendor Payment Sourcing/ Contracting
Buying Channel Selection/Order Placement
The Challenges - 2012
10
Paying vendors on time
The Challenges - 2012
Not taking advantage of negotiated discounts
11 Marathon Oil Corporation
The Challenges – 2012
Not taking advantage of electronic invoicing technology
12 Marathon Oil Corporation
The Root Cause(s)
Significant Growth in Invoice Volume due to Business Model
What works for 20,000 doesn’t work for 40,000 – Controls
– Systems
– Processes
Fragmentation in Role Execution – Over 200 individuals accountable for Confirmation of Services, across 10+ orgs
Monitoring and Accountability – Reporting
– Goals
– Ops/Technical Approval Timing
– Vendors not providing appropriate info
Training Gaps – Central Training Role had diminished
– Project work had taken more sources away from the Core Support
13 Marathon Oil Corporation
The Solutions
There is no silver bullet
Multifaceted action plan with focus on Systems, Process, and Training
Focus Areas:
1. Expand our use of electronic invoice submittal (EDI/XML, web form)
2. Expand use of systematic solutions for low risk/low dollar transactions
3. Expand use of systematic solutions for invoice creation/payment
4. Build systematic solutions to address vendor status Q&A
5. Develop expanded methods of holding vendors accountable to provide required information accurately
6. Build systematic solutions to drive response to workflow
7. Expand monitoring plans
8. Assess roles and service delivery
14 Marathon Oil Corporation
Using Electronic Invoicing
Within the States, less than 50% of invoices were being received via electronic invoicing.
MRO was limited in the criteria being utilized to select good e-invoicing candidates.
MRO was attempting to handle training and onboarding of e-invoicing candidates without the expertise or resources to properly support efforts.
Why electronic invoicing?
Paper invoicing compliance on coding, proper Purchase Document usage, etc is manual. E-invoicing automates this.
E-invoicing technical support and AP support teams have strong skills and quick response time.
Total cost is less.
Data comes in required format or it is rejected.
SAP Service Entries are automated and internal confirmation of work is simpler to execute.
Time from submittal to entry into SAP system (once info is accurate) is greatly reduced (clock starts sooner to get vendors paid) versus paper invoicing.
15
Electronic Invoices - Focus on Improvements
From less than 50% to 70% of invoices being received electronically in less than a year.
How? Hire the right internal resource to
drive the program
Set the right goals
Educate the clients
Revise criteria to consider big picture value
Understand what we were good at, and not good at or staff for – and use third party provider to handle onboarding, vendor training, etc.
Use big batch loads of vendors with third party
Enhance contractual requirements for electronic invoice submittal with vendors
16
How PIDX e-Invoice Standards helped Marathon
Low Dollar/Low Risk Transactions
In excess of 10,000 low dollar transactions each month
Requiring system confirmation and physical Service Entry
Significant time spent processing 25% of the volume, but less than 5% of the value.
– Entry to SAP
– Approval (written and systematic)
– Invoice compliance
FastTrac- Developed process and system functionality that would allow for reduction of manual work activity for low dollar/low risk transactions.
– Manual entry to SAP replaced with systematic solution
– Approval continues by written signature on work tickets
– Invoice compliance process expanded (sampling increased)
Currently: 25% (plus) reduction in transactional work
18
Using the System for Invoice Creation
Historical use of ERS or Auto Payment based on receipt was minimal.
International usage
Expanded usage of ERS solutions, specifically focused on material purchases within the US for delivery to IPO locations.
Already had Goods Receipts proactively being done.
Process was timely.
Third party handled most of the entry work.
Alternative of expanded e-invoicing solution where ERS faced challenges.
Why?
Eliminates invoice and GR/IR imbalances.
Increases ability to meet payment terms.
19
Vendors with Questions
High volumes of calls to the AP Call Center, SAP Processors, Engineers, and Supply Chain Personnel
Where is my invoice?
The Challenge – How to reduce the distractions on MRO staff and the frustrations the vendors were experiencing in determining invoice status?
1. Expanded use of e-invoicing allows vendors to have real time access to invoice status
2. Used third party e-invoicing provider to develop a Portal that extracts invoice information for paper invoice vendors and allows vendors, once onboarded, to check status of invoices via the online Portal.
– Piloting in US
– Expanding to International
20
Vendors Invoice Doesn’t Meet Expectations – Return to Vendor
The Challenge – MRO staff were spending heavy amounts of time handling incomplete or inaccurate invoices.
Wrong Purchasing Document (Or Missing Purchasing Document)
Wrong Line Item
Wrong Cost Coding Information
The Solution – Change the process to reward vendors for proper submittal of invoices
Implemented Return to Vendor Standards where vendor does not submit all required information
– Invoice Back Up
– Purchasing Doc and Line Item
When using EDI, compliance to
requirements is automated
– Challenges when using a paper solution
21
Getting Approvals
The Challenge – Invoices in excess of defined dollar values required additional approvals prior to payment. Invoices were being workflowed to Drilling & Completions / Operations and were getting “stuck” due to responsiveness issues.
The Solution – Build escalation logic to push approvals via authority hierarchy.
Rules implemented regarding time that an invoice is allowed to sit in an inbox before it moves to the next level.
Provided monthly reports on the “problem areas”.
The Result – Reduced time that invoices sit in queue to be approved.
22
Roles, Service Delivery, Monitoring and Accountability
Individuals accountable for execution of the various phases of Source to Pay are spread through the company.
Service Entry Processing
Invoicing Handling
Approvals
Monitoring plans had fallen in some areas, due to volumes and priorities.
Actions deployed
1. Voice of Customer sessions held to gather feedback on performance of various phases of Source to Pay.
2. Reporting and Role Delivery reviewed by leadership and individuals held accountable where gaps existed.
3. Pending – Role-based goals to be deployed by end of year.
4. Centralization of some functions being piloted (Service Entries).
Discount Management - Now
24 Marathon Oil Corporation
Where We Are Now!
25 Marathon Oil Corporation
What Is Next
Full assessment of the Source to Pay Process and Systems
We reacted to a problem, but do we have it right?
Use of mobile solutions
Evaluation of roles and work allocation
Improvements in service delivery
Evaluation of use of e-invoicing solutions in international locations (2014)
26 Marathon Oil Corporation