How can Oil and Gas operators optimise rentals management in SAP?

Rentals management within the Oil and Gas industry has always been challenging. Even companies which are using SAP or other ERP systems only use these systems to manage the demand and supply of the materials they own. Rentals, on the other hand, are mostly managed via local spreadsheets with heavy dependence on vendors for tracking rentals.

This blog identifies key areas to improve rentals management from an operator’s perspective.

Read on to learn how we have helped operators streamline rentals processes based on my own first-hand experience.

In the absence of a centralised process for rentals management, most companies have very little control over their rentals, potentially resulting in extended rental periods. Most of the time, rental requestors and job owners are unaware of deviations between planned vs actual rental periods and the first opportunity they learn about the deviation is on receipt on an invoice.

This means that firstly valid deviations in rental on-hire periods could result in delayed rental invoice processing. Secondly and more importantly, invalid deviations are very difficult to challenge.

SAP’s answer to manage rentals for the Oil and Gas industry is to use the SAP Plant Maintenance (PM) or Project Systems (PS) module in combination with External Service and Remote Logistics module (RLM).

The idea is to create all rentals demand via PM work orders (for Maintenance) or PS network orders (for Drilling and Projects). These demands are then converted into purchase orders in SAP with tracking lines for each rental item to be mobilised. These tracking lines give Operators with the ability to receive, mobilise and return rentals giving increased visibility of not only the status of each rental (waiting, mobilised, demobilised), but also by looking at the rental receipt and return date in SAP, we could calculate the number of on-hire days.

At a high level, below is how the rentals management process would look like in SAP:

The above process offers considerable improvements in terms of giving the ability to enter itemised rental demands in SAP and then tracking them based on their statuses and on-hire days. However, there are some gaps/ improvement opportunities within this process which could compromise some of the key benefits it could offer.

Leading SAP specialist Absoft has helped Oil and Gas operators to streamline SAP rental management functionality in a number of areas. Based on Absoft’s experience of implementing the above mentioned SAP process, we can suggest and develop solutions to fill the gaps in the standard SAP solution, thus giving Oil and Gas operators a solution which helps them maximise the true potential of the rental management functionality in SAP.

  • Consistent Information Flow 

Consistent information flow within the organisation and with external parties is important to ensure key rental information is passed from the vendor to the job owner and finally to the requisitioner. Otherwise, there is a potential that key rental information will be missed during the requisition creation stage which would adversely affect all subsequent processes. Absoft can engage with stakeholders to agree on a process/format to manage the rental information flow.

(View point A on the diagram below.)

  • Outline Agreements

Using SAP outline agreements, organisations can ensure that the rental catalogues are set up in SAP up front. The detailed rental information on the outline agreements can be used during the requisition creation stage instead of manually entering it. Time spent on the analysis and maintenance of outline agreements in SAP is time well spent. Absoft’s supply chain consultants can analyse your existing SAP outline agreements and help you ensure the rental agreements are fit for use.

(View point B on the diagram below.)

  • Automatic Requisition Creation

With itemised rental requisitions, the step to enter requisitions in SAP with or without outline agreements could be time consuming. Absoft can develop an automatic requisition creation facility thereby decreasing time, effort and data entry errors during requisition creation.

(View point C on the diagram below.)

  • On-hire / Off-hire Notifications

Within the rentals process, vendors could potentially deliver rentals in advance on the outbound side and / or delay the pick up on the return side which could result in unnecessary disputes and extra on-hire days. To avoid these issues and to agree on rental on-hire periods with vendors prior to invoice submission, we could send automatic notification emails to vendors at on-hire/off-hire stages. This would give both parties the option to discuss and agree on rental periods well before invoice submission. Absoft can help by designing and developing a solution to send these notification emails.

(View point D & E on the diagram below.)

  • Tracking Reports

Standard SAP doesn’t offer user friendly reports to track rentals easily. Absoft has developed bespoke reports to address this gap and to show rental statuses using traffic lights. The traffic lights allow users to focus on rentals which are overdue or their overdue date is quickly approaching. Absoft can build these reports for rental tracking based on your requirements to make rental tracking easy.

(View point F in the diagram below.)

  • Invoice Processing

With itemised rentals, invoice entry and processing could prove to be challenging as well. Absoft can help your organisation to automate invoice processing to minimise manual intervention

(View point G on the diagram below.)

You can see where the above improvements fit within the rentals process and how they impact our process in Absoft’s flowchart diagram:

In addition to the process improvements discussed above, Absoft can suggest a number of key factors for a successful rentals tracking project.

  • Management buy-in and commitment from all stakeholders: Well Ops, Operations and Maintenance, Logistics, Supply Chain, Finance etc.
  • Dedicated and trained resources for requisitioning, rental coordination, invoice verification etc.
  • Vendors play a very important role in rentals management. Don’t under estimate the effort to get your vendors on board.
  • Oil and gas companies could try and standardise rental terms and conditions with vendors to avoid having too many variants as to when an item is considered on hire/off hire, who is responsible for transports between vendors and onshore supply base?, what charges are applicable during stand by periods? etc. This could reduce the complexity in rental coordination and tracking. No doubt when it comes to rental T’s&C’s, there will always be exceptions. However, the key is to reduce the exceptions.

In summary, SAP has the potential to improve rentals management for oil and gas organisations and Absoft can help organisations to realise this potential by delivering end-to-end rental traceability in SAP and reducing rental spends in an environment where organisations are constantly looking for operational cost efficiencies.

If you’d like to learn more about Absoft’s rentals management capabilities, read our related blog on "Effective Container Fleet Management in SAP" or to discuss your experience and challenges, we’d be delighted to hear from you as part of our blog.

Alternatively, for a more confidential discussion, make an enquiry below.

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by Farooq Durrani, Principal SAP Consultant