Impact of globalisation on Shell

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Many of these editorials are focused on the impact of changes in the Business-Consumer area, and in particular the changes in behaviour of ‘the new consumer’. However, this is not the only significant change happening in the marketplace. In the Business-Business area, in particular, the impact of globalisation is significant. This week’s editorial focuses on the impact of globalisation on one company, Shell, and in particular, its oil products division, and its needs for M.I.

Before 1998, Shell was organised on a national basis, with each country having its own fairly independently operating companies. Each had its own management team, and its own business plan. However, 1998 was an abysmal year for Shell. Something had to change. The country-centric model was no long appropriate for two key reasons:

  • Margins were too low to support standalone businesses, and

  • Customers were looking to set up global relationships

Some of the symptoms of these issues were as follows:

  • There was a need, for example, to move from optimising the profitability of an airport to optimising the profitability of an (international) airline
  • Shell was finding itself left off the bid list for some major customers because ‘you are not acting like a global company’.
  • Customers did not want to negotiate with 100 different country businesses

Shell decided to move from a geographic organisation, with each country responsible for the sales of all products, to a global, line-of-business divisions structure, with five main lines of business: aviation; marine; retail; other business-business; and refineries. This led to global management teams for each line of business with bottom-line responsibility.

This re-structuring in turn led to a need to urgently develop global management information systems. The business case for these systems was much more of the kind ‘must have’ rather than specific business benefits. Without M.I. reflecting the new organisational structure, Shell’s managers wouldn’t be able to manage the business. Shell’s ERP systems were country-based, with very different platforms and data structures depending on local country needs. It was not feasible to re-develop these ERP systems at a global level in the timescales required to support the business, and so Shell decided to build an M.I. data warehouse environment, where local country data could be mapped onto global data structures.

So what impact did the development of this data warehouse have from a CRM perspective? Jim Smitheman, MI Manager for Shell International Petroleum Company Limited, takes up the story: “On the sales and marketing side, the solution will bring consistent global segmentation, without imposing a new organisational structure on operating units, or requiring them to re-implement their enterprise resource planning (ERP) systems, which, given the scale of our business, would have taken a significant time to achieve.

“Customers, products and channels are now coded consistently across the globe, giving management a crystal-clear view of country-to-country performance. The solution will allow us to understand what we’re selling, who we’re selling it to, and how we’re selling it.

“We now have an Information Intelligence system that will accelerate our insight and allow us to respond to business change quickly and with the most appropriate strategy.”

So what technical environment did Shell use to provide this M.I. environment? They used a KALIDO™ Dynamic Information Warehouse solution, to link management information systems across 85 separate operational units, creating a truly global view of customer and product data for the first time. The solution brings together management information to support standardisation and segmentation, as part of the broader Oil Products Management Information System (OP MIS) project.

The KALIDO solution will also allow global customer account managers to view large customers by subsidiary in all the countries in which they operate. With a growing number of customers choosing to negotiate on a global basis with Shell OP, this information is essential for the effective management of these customer relationships. Jim Smitheman comments: “Where multinationals are concerned, we can view a hierarchy of their subsidiaries in different countries, so for the first time we can see the full picture of our dealings with any customer. This kind of segmentation allows us to compare country-to-country performance and focus on new revenue opportunities.”

The flexibility of the KALIDO solution seems to be one of the key reasons for its choice, and it has shown its worth. Jim quotes an example from the USA where Shell bought out Texaco from its retail distribution channel and bought Penzoil Quaker State (a distributor). The M.I. solution was implemented on top of these different ERPs in 3 months. Jim believes they would not have been able to integrate the underlying ERPs in the same timescale. WallMart is a customer of both US operations, and the M.I. solution enables Shell to see the whole relationship with them.

Of course, there are other components of the Shell M.I. solution. KALIDO provides the data warehouse environment, but there is a need for analytical tools to allow management to explore that data and derive management information. Shell uses a variety of tools including: Business Objects, Cognos, and MS Excel Pivot Tables. There is also a need for tools above that level, and Shell are actively exploring the use of Data Visualisation tools. There has also been a significant amount of effort put into developing the interfaces to feed the Data Warehouse with data from the ERP systems in place in each country.

From an IT perspective, the implemented solution has another key benefit. In each country, it is important to minimise the technical skills required to run the system. The system is structured as a ‘Master’ and ‘Slave’ systems, so that much of the support can be provided centrally.

As is usual with Data Warehousing systems, perhaps the biggest implementation issue has been data quality. From using a standard data model to using standard units of measure, there is a range of likely problem areas with implementation of a global M.I. solution. Jim believes that Shell are now well on top of the meta-data issues through the use of a standard data model, though individual countries have the capability of adding additional dimensions for their own purposes. Reference data has nearly all been sorted out.

So how much did this cost? Jim estimates the spend as $30 - $40 million over 5 years, with the bulk of the cost going in standardisation of the ERP data, through the implementation of the ERP – Data Warehouse interfaces. Has it been worthwhile? As always with M.I. systems, it is difficult to demonstrate a direct link between realised benefits and the system, as the M.I. is used primarily to assist management decision-making. However, Jim offers a number of pointers. In 1998, Shell had its worst year. 2001 is its best year. Without the M.I. to manage the business, it is unlikely that such results would have been achieved. At a more detailed level, using the M.I., Shell have managed to close down refineries and rationalise lube oil blending plants in Europe from four down to one.

This case study demonstrates two of the key characteristics of data warehouses:

• The biggest issue in nearly every case is data quality. It’s fine to rationalise the data structures, but never underestimate the issues that will arise when you start looking at the actual data. In our experience, starting to look at those issues as soon as possible will minimise the time delays frequently introduced to sort those issues out.

• The major element of cost is nearly always building the interfaces to feed the data warehouse with data. The data-warehousing environment itself may be relatively inexpensive, but building ‘bespoke’ interfaces from the operational systems to feed the data warehouse with data can be very expensive. Make sure you’ve got a good grip on those costs.
• The flexibility of the Data Warehousing environment, together with the tools to analyse the data, can provide management with a tool flexible enough to support the management of the business.

As always we’d like to hear your comments. Make them below or email me at mailto:[email protected]

On another topic entirely, have you noticed that marketing doesn’t seem to be working any more? It seems as if you have. Last week's editorial on this topic attracted a huge volume of readership and many comments on it. In our view, the move to buyer-centricity is beginning to have a significant effect. If you want to know more about buyer-centricity, you can find a page of links to buyer-centric resources at: BCCF Resources. We hope to re-visit why marketing doesn’t work any more in the near future.

Regards,

Richard Forsyth

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24th Feb 2003 20:24

Richard

Having worked almost all of my career in international environments, the most recent of which went through the very same type of reorganization from country-based operations to LOBs (lines of business), I must say I am pleasantly surprised by the option taken by Shell to go down the datawarehouse route. A lot of companies in the same situation – and maybe Shell itself had it not the time constraints which virtually dictated this as the only option – would have preferred a centralized ERP system.

International projects (ERP, CRM…) with centralized systems are frighteningly expensive and fraught with complexity, both technical and organisational. They should therefore have a justifiable business case based on cross-border services which require international data sharing at transactional (as opposed to reporting) level. Yet many companies not in this category launch international projects for reasons like ‘international reporting’, ‘standardised processes’ or ‘cost reductions through international synergy’. While certainly useful as secondary objectives - when at all possible - they cannot be cost-justified as primary business drivers. This explains why so many international projects fail on a massive scale – which understandably you don’t get to hear about much.

Now though Shell's new business model would probably justify a central ERP system, the fact that it has nonetheless succeeded in building a datawarehouse layer across disparate systems around the globe should serve as a shining example and a salutory lesson for those companies who launch centralized ERP or CRM systems for all the wrong reasons, and end up bogged down in the complexities of a one-size-fits-all solution which only pleases some of the people some of the time (with all the organizational politics and bottom line impact this implies). At the end of the day, the vast majority of international businesses is about common data for reporting purporses, not common systems for transactional data sharing, as this success story cleary shows.

Michael Gentle ([email protected])

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24th Feb 2003 20:24

Richard

Having worked almost all of my career in international environments, the most recent of which went through the very same type of reorganization from country-based operations to LOBs (lines of business), I must say I am pleasantly surprised by the option taken by Shell to go down the datawarehouse route. A lot of companies in the same situation – and maybe Shell itself had it not the time constraints which virtually dictated this as the only option – would have preferred a centralized ERP system.

International projects (ERP, CRM…) with centralized systems are frighteningly expensive and fraught with complexity, both technical and organisational. They should therefore have a justifiable business case based on cross-border services which require international data sharing at transactional (as opposed to reporting) level. Yet many companies not in this category launch international projects for reasons like ‘international reporting’, ‘standardised processes’ or ‘cost reductions through international synergy’. While certainly useful as secondary objectives - when at all possible - they cannot be cost-justified as primary business drivers. This explains why so many international projects fail on a massive scale – which understandably you don’t get to hear about much.

Now though Shell's new business model would probably justify a central ERP system, the fact that it has nonetheless succeeded in building a datawarehouse layer across disparate systems around the globe should serve as a shining example and a salutory lesson for those companies who launch centralized ERP or CRM systems for all the wrong reasons, and end up bogged down in the complexities of a one-size-fits-all solution which only pleases some of the people some of the time (with all the organizational politics and bottom line impact this implies). At the end of the day, the vast majority of international businesses is about common data for reporting purporses, not common systems for transactional data sharing, as this success story cleary shows.

Michael Gentle ([email protected])

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By admin
25th Feb 2003 03:22

THIS ARTICLE WAS AN EYE OPENER FOR PROBABLY ALL THE VIEWERS WHO READ IT,EMPHASISING THE NEED FOR DATA WARE HOUSES IN FACE OF THE HIGHLY VIBRANT GLOBALISATION PROCESS .
ITS SPECIALLY VERY INFORMATIVE FOR MANAGEMENT STUDENTS LIKE US.CASES ARE BEST MEANS OF INFORMING US ABOUT REALITIES AND HELP US INTEGRATE THEORY WITH PRACTICE.

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