Global Oil & Gas Company Boosts Margin by $350 Million

One of the world’s largest oil and gas companies partnered with PROS to optimize pricing for its business-to-business fuels and lubricants segment by using PROS pricing solutions.

CHALLENGE

The company faced significant challenges in trying to manage pricing worldwide as a result of each region of the company – and each business unit within these regions – setting prices differently. To help eliminate the resulting negative margin transactions that no one was accountable for, this global company developed a strategic vision aimed at creating efficient and integrated end-to-end pricing processes and maximizing the profit captured in each market segment.

To realize this vision, the company planned a global pricing program that coupled a rollout of SAP with PROS best-in-class pricing software. With SAP enabling the proper contract administration processes, PROS pricing solutions would provide the engine to drive key pricing processes of price setting, price administration, deal management and pricing analytics.

SOLUTION

PROS proven history with SAP integration was key to the company’s decision to partner up. The company required flawless integration with the newly implemented SAP enterprise resource planning environment utilizing SAP Process Integration web services and a seamless rollout of the solution to all business units.

To produce a quick win for the company without compromising the longer-term, multicountry and multiphase implementation, PROS followed a phased, regional implementation plan:

• Phase 1: PROS was implemented in two key countries before SAP was implemented to reduce time to value and generate a quick return on investment for the company.
• Phase 2: This larger phase of the project coupled the PROS solution implementation with a global SAP rollout.

The regions included in the initial phase of implementation almost immediately eliminated negative margin transactions through the realization of a couple of key benefits:

•  Visibility into term contracts provided additional negotiating power and credible decision support.
•  Sales and pricing managers were empowered to more effectively target their customers and close more profitable deals.

This portion of the project was deemed so successful that it was expanded into an additional region while other regions entered the planning stage.

RESULTS

With SAP providing the administration framework, PROS pricing solutions enabled sales and pricing managers to deliver optimized prices based on market conditions. The solutions also established a mechanism for sales and pricing performance accountability throughout the organization. The PROS solution implementation, combined with the SAP administration framework system, enabled this company to exceed its original expectations.

Pricing managers were able to execute intraday price changes on time and as needed while salespeople gained improved visibility into the real profitability of spot and term deals. Finance managers could analyze investments and cash flows of company contracts for multiple regions to eliminate negative margin transactions. With the ability to react quickly to market forces and prevent destructive price erosion, the company expects year-over-year benefits totaling approximately $350 million.

CONCLUSION

PROS solutions optimized the company’s pricing processes in several ways:

• Integrated with SAP so that sales and pricing managers could set optimized prices.
• Helped wholesale fuels pricing managers set daily – and often intraday – spot prices.
• Enabled lubricants pricing managers to periodically adjust public list prices.
• Helped the lubricants sales team negotiate complex, long-term contracts, of which discounts, rebate programs, investments and cash payment terms impact overall deal profitability.