In the face of big business challenges, many executives are inclined to introduce dramatic change. Lower profits? Reduce headcount. Falling productivity? Deploy new automation. Complaints about product quality? Shake up the supply chain.
But when one leading energy company experienced the trifecta of falling prices beginning in 2016, COVID-19, and customer demand for greater sustainability, its leaders opted to stay the course.
OMV, an Austrian multinational integrated oil, gas, and petrochemical company headquartered in Vienna, treated these significant business challenges as an opportunity for growth and change.
The company pressed ahead with its planned four-year digital transformation initiative – including the digitalization of its procurement operations.
“We wanted to create not just a single savings program, but rather a sustainable procurement organization that would continuously add value to the business,” Martin Traxl, head of strategy and digitalization for OMV. “Digitalization was the heart of our transformation.”
Expansion without revolution
This brought great benefits when the pandemic hit operations. While other companies closed, OMV carried on using its new digital source-to-contract process. Employees worked remotely, from Vienna and New Zealand to Abu Dhabi, processing contracts digitally with no time lags or friction losses.
OMV’s digital procurement transformation also smoothed its 2021 acquisition of a 75% share in Borealis, a leading global chemicals company. Now, OMV includes nearly 25,000 employees, operations in 120 countries, and consolidated sales of €16.6 billion.
“No revolution was needed,” says Traxl. “We have a central procurement solution as well as procurement systems in each division. This layered approach means we can simply plug in another procurement solution to accommodate acquired businesses and still have a centralized, integrated way of handling procurement.”
From cost savings to strategic value
Mergers between oil, gas, and energy (OG&E) companies and chemicals firms are increasingly common, thanks to the synergies between those industries – and the opportunities enabled by joining forces. OG&E companies need to reduce emissions, increase profit margins, and prepare for the coming energy transition. In this environment, merging with enterprises that produce higher-value chemical products further down the value chain simply makes sense.
When the acquisition of Borealis was originally announced, OMV’s then-CEO estimated anticipated synergies of up to €700 million. In mid-2021, Chairman Mark Garrett said that these synergies may actually total €800 million by 2025.
Digital procurement helps deliver those savings, says Traxl. “This business strategy change, from oil and gas to chemicals, demands change on the procurement side. We must modify what we buy because we’ll need different goods, services, and innovations.”
As part of its second wave of digital transformation, OMV is also changing how it buys goods and services. “For instance, instead of simply sourcing products, we are entering into more strategic partnerships,” he says. “We want procurement to actively contribute to the business’ success.”
Connecting procurement with sustainability
The OMV procurement team is also actively contributing to the company’s overall sustainability efforts – a critical challenge for all OG&E companies.
“We are responsible for a certain footprint in terms of indirect goods we buy and their associated CO2 emissions,” explains Traxl. “We must ensure that our suppliers are acting sustainably and that we work together with them to contribute to a reduced carbon footprint.”
OMV is careful to evaluate sustainability in all its sourcing decisions. Instead of simply considering a product’s price and technical capabilities, the company’s procurement team also assigns a sustainability value.
SAP Business Network supports this effort, presenting a single face to the supplier community. The network stores information about each supplier, including qualitative data about supplier sustainability. It also streamlines information sharing and tracking by acting as a single source of digital truth.
Yet these changes are just the beginning. “I also believe procurement needs to play a role in bringing sustainable ideas and projects together with suppliers,” Traxl adds. “Our new procurement vision gives sustainability a rather prominent role.”
Preparing for the future of OG&E
Looking ahead, OMV plans to continue its digital transformation journey – adding skills and capabilities while building initiatives that enhance the agility of its procurement activities. The company plans to address its business challenges with multiple ongoing, evolving initiatives. “There is not one secret ingredient to fix this,” he says.
In the coming year, the procurement team plans to focus on two project streams: enabling the transformation of OMV by increasing innovation and supporting the circular economy by expanding on the team’s know-how and activities.
Together, these efforts will increase procurement’s strategic value to the company. “Combined with our focus on sustainability, our procurement team will actively contribute to make OMV even more prepared to meet the challenges of our industry,” says Traxl.