The downstream oil and gas industry has one of the most complex supply-chain operations that include supply at refineries, fluctuating demand, multiple freight handoffs, transportation and more. To overcome the challenges brought by inefficiencies in the system, companies in this sector are investing heavily in more advanced technology and analytics. According DHL, best-in-class supply chain management can lead to a 20-percent supply chain cost reduction and 15-20 percent improvement in maintenance team productivity1.
However, the small and medium scale companies often find it difficult to implement such changes owing to the huge capital expenditure required to install ERP solutions, along with a lengthy deployment period, often more than 12 months, associated with such installations. This discourages them to adopt industry best practices based ERP solutions, and forces them to often continue with home-grown or bespoke applications; most commonly Excel spread sheets that affect their performance and profitability.
With the growing demand for OpEx model for their ease of use, flexibility, affordability and scalability, service providers in this segment are leveraging SAP’s offering of Partner Managed Cloud (PMC) to offer downstream companies the entire ERP solution on a subscription basis. The service provider (Partner of SAP) owns the infrastructure, product licenses, hosts the application setup on the servers, and deploys the solution built on SAP. The customer only pays for the subscription fees for the term period that he avails the services. This greatly benefits the customer in the following ways:
- No upfront capital expenditure - The customer only pays a subscription fee on a monthly or yearly basis that forms part of his operational expenditure.
- No need to periodically renew licenses - As the customer only subscribes to the services as a package and is not the owner, he does not have to bother about renewing it.
- No need to invest in upgrading the infrastructure or software after few years - With advancement in technology, the hardware and application requirements also change over time. This requires companies to invest in upgrading their system over a period of time. But with the subscription service this task resides with the service provider.
- Hassle-free maintenance and application support - As the service provider provides similar services from the same set of infrastructure, licenses and application, it is easier for them to follow best practices in its maintenance and support system. It becomes more viable for the provider to offer round-the-clock service at short notices.
- Improved efficiency and profitability - The use of best-in-class ERP solution enables the customer to use advanced analytics and technology to locate gaps in the supply chain. It also helps him to look for the best way to plug it.
Thus, by subscribing to SAP-based ERP solution, downstream SMEs can easily use a cutting edge supply chain technology for a fraction of cost, especially when you look at the long term benefits and scalability options.
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