Digitalization and Automation of Procurement Processes
OMV Drives Holistic Transformation to Value-based Procurement Strategy
For the past four years, the Vienna -based group, founded in 1956, has been transforming its procurement digitally. The goal: to increase efficiency and effectiveness. Klaus Blachnik, Chief Procurement Officer (CPO) und Senior Vice President, und Martin Traxl, Head of Strategy & Digitalization, describe the ambitious project in an interview.
CHEManager: Mr. Blachnik, Mr. Traxl, as part of the Digital Journey launched in 2017, OMV is consistently pursuing the digitalization and automation of its procurement processes. What triggered the transformation?
Klaus Blachnik: In 2015/16, oil prices reached extremely low levels, and with them the economic challenges grew. Therefore, we started a holistic transformation in procurement in 2017, integrating organization, personnel, but also processes and systems in a value-oriented procurement strategy. As a backbone, we opted for SAP with S/4 and Ariba.
Martin Traxl: Given that OMV is an international enterprise with numerous subsidiaries, the company previously used all kinds of individual and local systems. This system landscape had been growing historically, not only with us, but certainly also with competitors. For example, we used to have several SAP clients/systems, which we are now transforming into a new, harmonized S/4HANA-based landscape.
So, the goal was to harmonize the system landscape?
K. Blachnik: The goal was to provide systems that stringently align and integrate processes across all companies and countries, and to do so with a fast roll-out. This targeted solution enables group-wide control and transparency of purchasing processes with significant effectiveness and efficiency, among other things through a high level of automation of transactional processes. The solution also offers all users simple ways to exchange information, data and documents.
How do you assess the state of digitalization in your industry in general?
K. Blachnik: The oil, gas and chemical industry is not sleeping; a lot has happened in digitalization. About ourselves: We already started in 2017 and very quickly took important steps, such as the electronic signature, which we introduced worldwide across the company. This made completely paperless purchasing possible, which helped us extremely during the Corona crisis. Our employees were able to continue working remotely from the comfort of their homes without any delays or losses. We know from benchmarks that we not only achieved our goals very early – they also regularly position us in the "top" and "leaders" areas.
How did this happen and in which steps?
K. Blachnik: We have set up a separate department for digitalization in Procurement, which is headed by Martin, and have then consistently and systematically developed things in all areas. Of course, the migration of all systems to S/4 takes time, we are still in the middle of it, but we have already finished other topics, such as Ariba Sourcing and the electronic signature; we have also reached a very good state of the SAP Central Procurement implementation. In addition, a new aspect has been added, as we increased our shareholding in Borealis to 75 percent in autumn 2020. This of course implies further steps as it added chemicals to oil and gas, which means new challenges and, subsequently, a second transformational wave.
Is the transformation an avant-garde project of the general OMV digitalization?
K. Blachnik: There is something to that. When we started, we agreed with the company that we would run certain purchasing processes as fast track projects, which would then also serve as lighthouses within the company: If, for example, the electronic signature works in purchasing, other areas of the company can also use it and achieve an enormous increase in efficiency.
M. Traxl: In this context, it is also worth mentioning that our implementation of Central Contracting as part of SAP Central Procurement is one of the very first ones in the world.
Which digital technologies accompany and support the transformation?
M. Traxl: The core is the SAP solution, meaning Ariba, S/4 Central Procurement and the operative S/4 systems. Around this we are building various add-ons, such as RPA, chat bots or machine learning cases. We also use a sophisticated procurement analytics solution, as well as a comprehensive e-learning offering. We use classic solutions, as well as innovations. However, they always must fit our core, build additional functionalities and generate added value.
To what extent do you cooperate with external companies in the transformation?
M. Traxl: A transformation program of this scale needs a strong internal team from Procurement and Internal IT, but of course also experienced and committed external partners. The most important aspect is that everyone then works together with passion and conviction towards the common goal. In addition to the strong know-how of the consulting implementation partner – in our case Apsolut – a strong line of communication from the partner to the software supplier SAP is also necessary.
K. Blachnik: Before Corona, the project team met physically on a regular basis. Due to the pandemic, everyone was forced to work remotely. Nevertheless, our project continued stringently and without delay. A completely new virtual team spirit emerged throughout the entire team – Procurement, IT, implementation partner.
Were there no areas of friction during the extensive transformation?
K. Blachnik: We have involved staff through numerous workshops with opportunities for criticism and suggestions for improvement. We also set up a comprehensive e-learning program, which was used over 2,000 times despite being voluntary. It proofed to be very important that the management systematically and consistently communicated its messages on and about the transformation to the employees.
M. Traxl: In addition to classic change management and other communication activities, small, informal sessions – we called them "coffee talks" – have proven particularly effective, where employees get to talk, ask questions and are informed.
What added value has already been realized through the transformation?
K. Blachnik: We have already achieved value creation or business value for the company in a measurable way, that is, increased efficiency and effectiveness, as well as cost reduction, innovations, new technologies etc.
How do you evaluate progress?
K. Blachnik: We have a comprehensive KPI system based on data from all purchasing processes. This allows us to continuously monitor progress and see on a daily basis whether we are going in the right direction. In parallel, we undertake benchmarking every two years to see how other companies are positioned and what we can learn from other industries.
When will the transformation be complete?
K. Blachnik: That certainly goes on continuously. But of course, we have milestones for the completion of certain topics. For example, the next S/4 go-live is targeted for January 2022.
M. Traxl: With the increase of our shareholding in Borealis to 75 percent, we are of course readjusting our digital procurement strategy, but fortunately the architecture we have chosen provides an excellent basis for this. So, it is an ongoing process, even if the main steps have already been taken.
What is urgent on the agenda?
K. Blachnik: The next 12 months will clearly be dominated by the S/4 activities and the harmonization of purchasing processes with Borealis: After we have created a corresponding joint purchasing organization as of July 1, 2021, the purchasing processes will now be optimized across the group.
In 2020, during the pandemic, OMV achieved a turnover of around €16.6 billion. How will this change in the current business year?
K. Blachnik: At OMV and in the industry as a whole, turnover is strongly determined by the volatile upward and downward fluctuations in oil and gas prices; production volumes also play an important role. From this point of view, the turnover figures in our industry have only little significance – but of course we report the turnover figures.
At OMV, the figures additionally change considerably due to the increase in the Borealis shares: In 2021, we achieved a turnover of €13.7 billion for the first half of the year compared to €16.6 billion full-year turnover in 2020. And of the €13.7 billion turnover, the chemicals sector accounts for almost 50 percent.
„The oil, gas and chemical industry is not sleeping; a lot has happened in digitalization.“
Klaus Blachnik, Chief Procurement Officer (CPO) and Senior Vice President of OMV, has more than 30 years of international experience in procurement and supply chain management in various industries. He graduated from the University of Kaiserslautern, Germany, as an industrial engineer with a focus on mechanical engineering.
“A transformation program of this scale needs a strong internal team, but of course also experienced and committed external partners.“
Martin Traxl studied business informatics at the Vienna University of Technology and the University of Vienna. He has worked at OMV since 2009, initially in IT and Value Chain Management. Since 2019, as Head of Strategy & Digitalization, he has been leading the global Digital Procurement Transformation as well as the SAP Ariba and S/4 Procurement implementation.