Abu Dhabi National Oil Company: ERP Implementation - Case Study Example

Abu Dhabi National Oil Company-ERP Implementation Case Study Analysis Student’s Name Institutional Affiliation Table of Contents Table of Contents 2 Introduction 3 Company Background 3 Business Challenges that Prompted ADNOC to Implement ERP System 4 Benefits Derived from the Implementation of the ERP System 5 Challenges and Failures in the Implementation of the ERP System 7 Comparison of the Situation before and After Implementing and ERP System 7 Conclusion 8 References 9 Abu Dhabi National Oil Company-ERP Implementation Case Study Analysis Introduction Grabot, Mayère and Bazet (2008) noted that enterprise resource planning (ERP) system is increasingly becoming an important tool that businesses use to solve problems. This is because an ERP tool allows a company to integrate its business processes and automate back-office activities that are related to human resource, technology, sales, marketing and manufacturing among others. This document will analyze the challenges that Abu Dhabi National Oil Company (ADNOC) has faced over the years and how the implementation of an ERP system helped it solve the problems. The discourse will also examine the benefits that the company has derived from the implementation of an ERP system since its implementation. Company Background Abu Dhabi National Oil Company (ADNOC) is a United Arab Emirates (UAE) oil and gas exploration and production company. ADNOC was incorporated in 1971 and has since growth to become one of the world's largest oil reserve exploration and production companies as shown in figure 1 (Albadri, 2012). Currently, it is believed that ADNOC is the fourth largest oil company in the world. The company has expanded its business operations significantly over the past four to increase its competitiveness in the industry. Currently, the company not only explores oil and gas reserves, but also has a strong interest in both downstream and downstream, such as shipping, transportation, marketing and distribution of oil throughout the world. ADNOC currently operates two oil refineries, including Umm Al Nar and Ruwais (Albadri, 2012). Additionally, the company has also expanded its operations in the country and beyond and currently has subsidiaries that are involved in oil exploration, production, marketing, and distribution. Few examples of the ADNOC subsidiaries include ADCO, ADMA-OPCO, TAKREER, NDC, ADNATCO-NGSCO, IRSHAD, and BOROUGE. Business Challenges that Prompted ADNOC to Implement ERP System Despite the success that Abu Dhabi National Oil Company has enjoyed over the years, the company has also faced numerous challenges that required the implementation of an ERP. The major challenges for ADNOC have been in its distribution, which is one of the largest in the region (Hamilton, 2003). ADNOC Distribution has over 3,000 daily users and handles more than 250 million financial transactions yearly at its filling stations distributed in different locations in the UAE. The growing global demand for petroleum and oil products has seen the company continue to expand its services in the Arab Gulf and the Middle East. A survey found that the company's distribution in its domestic market has been expanding at the rate of between 10% and 15% yearly (Sutton, 2014). ADNOC's transactions at the filling station are also expected to double to 500 million every year over the next two years. The faster growth that the company has witnessed over the years in its distribution has resulted in a number of challenges that needed integration to improve efficiency. The major challenge has been felt in the company's information technology department, which has been overwhelmed when it comes to enhancing the business processes and costs (Albadri, 2012). Secondly, the company has been facing a major challenge in handling the data volumes of the company that has been increasing rapidly due to the faster growth of the business over the past few decades. Thirdly, the company has also been faced with the challenge of consolidating several versions of its operating system to handle simpler administrative functions. Additionally, the company reveals that it has been facing a major challenge when it comes to handling the large volume of online transactions, as well as maintaining high-quality service provision for hundreds of its customers in filling stations. Further, ADNOC's has not had an effective customer relations management, enterprise asset management, as well as billing system (Department of Economic Development, 2014). Therefore, to solve these challenges, the company implemented SAP recently in 2014 to help integrate the system and address these challenges after signing an agreement with SAP as shown in figure 2. Therefore, to solve these problems, ADNOC decided to implement an SAP system. The company reveals that it implemented a SAP system to consolidate all the IT functions to enhance efficiency of service provision to customers. In this regard, the implementations of the SAP saw the company consolidate major back office functions, including transport, marketing, processing, distribution and storage into a single database as shown in figure 3. Benefits Derived from the Implementation of the ERP System The implementation of the SAP helped ADNOC a great deal. Firstly, the company report that the implementation of the ERP system enabled the company realizes a significant improvement in the internal performance. Additionally, the effective implementation of the ERP system helped the company save thousands of processing hours that the company could have spent in the absence of the ERP system annually. Precisely, ADNOC reveals that the implementation of the ERP system saw the company experiences a 15-fold increase in its performance compared to the years before the implementation of the system (ZAWYA, 2014). At the same time, the implementation of the ERP system also reduced the duration required for sale cycle closing, sales analysis and customer sales reporting, which had been a big problem in the company. In total, ADNOC currently saves at least 1,596 processing hours annually in its sales system following the implementation of the ERP system. The implementation of the ERP system has also proved beneficial by enhancing the efficiency with which the company served its smart card customers. As one of the largest oil company in the region, ADNOC reportedly handles more than 20 million oil and gas transactions monthly. This is not easy, especially when the approach adopted is slow. In this respect, the company reveals that it has benefited a great deal since it implemented the ERP system, which has increased the speed with which their credit cards customers are served by more than 20% compare to before the implementation of the system (Sutton, 2014). Additionally, the implementation of the system has also reduced the monthly billing processing time to just 10 minutes down from the previous 220 minutes. The banking transactions have also improved by more than 20 times, which has seen the company saves up to 3,420 processing hours, according to Magal and Word (2011). Benefit has also felt in the company's supply chain management, where performance reportedly improved by more than 60 times compared to the years before the implementation of the ERP system. For instance, the company reveals that its inventory report runs reduced to just eight seconds, down from the previous eight minutes. Delivery also improved following the integration of transport and logistics as shown in figure 4. The company's database is licensing cost also reduced significantly following the implementation of the ERP system by about 40% (ZAWYA, 2014). ADNOC management states that the reduction in the licensing cost saw the company's total ownership cost also reduce significantly after the consolidation of the company's different database functions into a single platform. Additionally, the implementation of the ERP system also proved beneficial to ADNOC because it helped eliminate close to 90 percent of performance bottlenecks. Challenges and Failures in the Implementation of the ERP System Despite the success that has been achieved following the implementation of the ERP system by ADNOC, the company reveals that the implementation of the system was marred by a myriad of challenges. For instance, the implementation of the system required a huge capital investment, which affected the company financially. The other major challenge faced in implementing the ERP system was resistance to change (Sutton, 2014). The company reveals that some management and staff were strongly opposed to the implementation of the system for fear of job loss because of the integration of different functions in the company. Nevertheless, those charged with the duty of drawing up the plan and implementing the ERP system managed to convince those who resistant to the implementation of the system. Accordingly, the company is currently reaping huge benefits from the implementation of the system. Comparison of the Situation before and After Implementing and ERP System As noted earlier, the implementation of an ERP system has made a significant transformation in the way business is conducted at ADNOC. Since the company implemented the ERP system, ADNOC has experience significantly improvements in business performance in all the departments where business process functions were integrated (Hamilton, 2003). Today, the company enjoys a high level of efficiency, thanks to the successful implementation of the ERP system. For instance, the successful implementation of the ERP system has enhanced data response time, improved productivity among the company's internal users and distributors of energy, as well as improving the quality of services offered to customers, especially those in the filling stations. The implementation of the system has also increased efficiency in the stores. For instance, unlike in the past where processing used to take long hours, currently it takes a matter of few minutes to process transactions (ZAWYA, 2014). The implementation of the ERP system has also resulted in about 40% reduction in licensing cost compared to the previous years. Additionally, the implementation of the ERP system has helped enhance the performance of data transfer, loading and reliability and minimized administration requirements among others. Conclusion Abu Dhabi National Oil Company (ADNOC) is a UAE oil company. ADNOC was founded in 1971 and has experienced significant growth to become one of the largest oil companies in the world. Despite the success that the company has enjoyed over the years, ADNOC has also faced a number of challenges that has forced it to implement an ERP system. The implementation of the ERP system has proved successful in helping the company solve the challenges it has been facing in its IT, supply chain, accounts as well as marketing by integrating all the functions into a single platform. This is helped improve performance, reduce licensing cost, as well as minimizes administration requirements among other benefits. Nevertheless, ADNOC should consider offering additional training to its end-users on how the ERP system works to help improve efficiency and effectiveness of its application. References Albadri, F. (2012). Cases on enterprise information systems and implementation Stages: Learning from the Gulf Region. Hershey, PA: IGI Global. Department of Economic Development. (2014). Change management conference 2014 concludes in Dubai. Retrieved from https://ded.abudhabi.ae/en/media-center/news/Management-Conference Grabot, B., Mayère, A., & Bazet, I. (2008). ERP systems and organizational change: A socio-technical insight. New York, NY: Springer Science & Business Media. Hamilton, S. (2003). Maximizing your ERP system: A practical guide for managers. London: McGraw Hill Professional. Magal, S. R., & Word, J. (2011). Integrated business processes with ERP systems. Hoboken, NJ: John Wiley & Sons. Sutton, M. (2014). ADNOC and SAP sign strategic partnership. Retrieved from http://www.itp.net/600859-adnoc-and-sap-sign-strategic-partnership ZAWYA (2014). ADNOC Selects SAP solutions to enable it excellence in the UAE oil and gas industry. Retrieved from https://www.zawya.com/story/ADNOC_Selects_SAP_Solutions_to_Enable_IT_excellence_in_the_UAE_Oil_and_Gas_Industry-ZAWYA20141111102817/ Appendix Figure 1 Source: https://ded.abudhabi.ae/en/media-center/news/Management-Conference Figure 2 Source: http://www.itp.net/600859-adnoc-and-sap-sign-strategic-partnership Figure 3 Source: http://www.itp.net/600859-adnoc-and-sap-sign-strategic-partnership Figure 4 Source: https://www.zawya.com/story/ADNOC_Selects_SAP_Solutions_to_Enable_IT_excellence_in_the_UAE_Oil_and_Gas_Industry-ZAWYA20141111102817/ Read More