Process Fitness ProgrammeBasic slides

March 2006

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Contents

• Programme Objective and role as enabler

• Context and visual identity

• Reasons to improve our systems and processes

• Enabling BP to compete

• Benefits to stakeholders

Schedule & Areas of work

• 2002-2004 Establishing, Starting up and Expanding the programme

• The 3 elements of the Programme

• Leadership Team

• 2005 overview & 2006 overview

• Improve Workstream Overview & Process Area Objectives

• Design – Overview of phases

Overview of Programme

Process Fitness Programme objective

Process Fitness will develop and implement sustainable solutions based on simple, consistently executed SAP enabled processes.

This will support the delivery of R&M strategies and generate additional value and efficiencies for customers, suppliers, the organisation and our employees.

Process Fitness enabling the businesses to deliver benefits for: • Customers and Suppliers: transformed experiences with improved service & transactional excellence• The organisation: embedding capabilities to deliver sustainable growth in line with R&M strategies• Employees: integrated, simplified processes to reduce duplication and increase efficiency

Process Fitness Programme context

• In BP continuous improvement is part of our culture. Process Fitness is about improvements to create value, enhance customer service and increase our competitive performance.  

• Process Fitness is helping to formalise our approach to process & systems improvement, so that together, we can find better ways of doing things now and redesign the way we do things in the future.  

• Process Fitness is about working together with the businesses and functions across R&M to enable our customer offers.

• We focus on the core analytical and transactional processes that impact the lives of our customers and employees every day. Making processes more efficient, effective and integrated will enable our organisation to focus on delivering value and be more competitive. 

• The DNA spiral structure is the visual identifier for the programme, illustrating the R&M intention to make process fitness an integrated part of what we do, part of the genetic material of our organisation and therefore part of our DNA.

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Process Fitness:strategic context

• Our stated aim in R&M is to grow organically, after a period of major company acquisitions

• Organic Growth means growing new and existing customers

• Our processes are important, as they have a fundamental impact on how our customers, suppliers and employees view us

• To grow and become one of the world’s leading marketing companies, our processes have to become world-class

• We will improve processes by identifying duplication, lack of clarity and inefficiency

• Making processes more effective, efficient and integrated will help us to focus on delivering value and to be competitive

• Process Fitness is a major contributor to the R&M strategy to be fit for our customers and fit for the future

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CompetitorsHave made headway in their process journeys:Shell• Replacing 140 ERPs with 1- Process ledExxon• Integration of Downstream and Chemicals on a single platform

• Systems and processes becoming more complex

• 13 different platforms in Europe inherited from years of mergers and acquisitions (Mobil JV, Castrol, ARAL) does not enable business integration

Employee and supplier experiencesEmployees spend unproductive time compensating for weak processes:

Voice of the CustomerCustomer surveys say our processes are below expectations:

Market trends• No clear leader - 5 global competitors

share 50% of the market• Customers are consolidating/ looking

for global capability

Process Fitness: reasons to improve our systems and processes

Technology and processesBP struggles with fragmented systems and poor data integrity:

• 15% of invoices sent to customers in one PU were incorrect• 60% of customer orders incorrectly entered in one PU

• 50% of fast-track deliveries are mistake driven in one PU• Only 40% of orders get into system correctly first time around

8Business Model

System DeploymentModel

Multiple,LocalisedDesigns

One global design & standards

Integrated Processes

Commercial

GMS

Multiple processes

Process Fitness: enabling BP to compete

BP is one of many world class organizations, who implementing improvement programs, to ensure their processes and systems enable their organisational competitiveness

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Process Fitness:benefiting stakeholders

SUPPLIERS• BP orders accurately and

pays bills on time, reducing supplier costs

• Ability to link processes directly to BP and can minimize human intervention - lower costs mean better prices for BP

EMPLOYEES• Reduced time solving

problems caused by inefficient processes.

• More time to focus on value-added activities for customers

CUSTOMERS• Don’t have to change

processes to fit BP• Delivery of the right

product to deadline, with correct billing

SHAREHOLDERS• BP has proved they can grow

organically, maintaining their

growth performance and

shareholder return

• Processes happen automatically and correctly, customers can spend time focusing on their businesses

• People feel they are marking a positive difference to customers

• Common process language shared across Segment, able to share best practice

• BP has made the most of their

acquisitions• BP’s focus on operational excellence has

made a difference in creating new value• BP’s underlying performance vs.

competition encourages me to invest in their company

• Managed by BP consistently all over the world as one supplier, able to offer better global prices

Schedule and areas of work

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Process Fitness: 2002-2004Establishing, starting up and expanding the programme

•April 2002 Downstream (now R&M) conference in Berlin to start

the customer-focused journey and highlights need for improvement

•April 2003 First “Process Fitness” team established to meet needs

•May-Dec 2003 Process Fitness methodology development

•Jan 2004 Process “Accelerators” – process improvement projects launched to test and prove the methodology and deliver early wins. •April 2004 SAP becomes R&M standard for provision of core IT systems•July-Nov 2004Development of business case for a

process-based, global and Segment-wide project•Dec 2004 SET approval given•1Q 2005 Mobilization: ‘Design’ ‘Improve’ activity & associated SPU teams

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Process Fitness is one Programme integrated across R&M. This enables to create insights and learning gathered from initial process improvements to inform systems redesign. Capabilities and business engagement developed in Improve will ensure successful deployment. By integrating Improve and Design initiatives, there is a balance of shorter-term and longer-term benefits delivery.Process Fitness incorporates three inter-related workstreams:

Programme and Process Management, Programme Governance

Highlights so far

Highlights so far

• Substantial value delivered in 2005 with PF enabling the businesses to deliver c.$180m through process improvements. A further $400m targeted in 2006.

• Design Programme entered Define stage

• Total Financial Prize - $3bn over 6 years

Refining functionality deployment starting at Nerefco in 1Q 2007Marketing deployment In Iberia targeted in 3Q 2007

2 Improve Programme

• Process accelerators & Workout tool: Purchase to Pay, Transportation

Management, Pricing, Crude & Feedstock Optimisation (part of IRIP), Lubes Lean Manufacturing and Order to Cash, Commercial Optimisation and Refinery Maintenance

• Creates process expertise within business

• Creates funding & cross fertilizes Design

1 Design Programme• integrated global process & data

design • focus on core processes & capabilities• enabled by system replacement

3Deployment

Programme• Deployment

of processes & systems

• based on value, systems, region

Process Fitness3 elements of the programme

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• 2005 Improve above Plan• High level Design complete• SELECT FM approved• Detailed design starting Feb

2006

-

Launch ProcessAccelerators

Jan 2004

First “Process Fitness" team

April 2003

DEPLOY

‘DESIGN’

2007

2008

200620052002 2003 2004

WE WERE HERE

Create the Agenda Scale the capabilityProve the concept

2004-2005 2006-20082002- 2003

Process Fitness 2005Embedding process improvements & capability and kick-starting the Design work

2009

‘IMPROVE’

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• 2005 Improve above Plan• High level Design complete• SELECT FM approved• Detailed design starting Feb

2006

-

Launch ProcessAccelerators

Jan 2004

First “Process Fitness" team

April 2003

DEPLOY

‘DESIGN’

2007

2008

200620052002 2003 2004

WE ARE HERE!!!

Create the Agenda Scale the capabilityProve the concept

2004-2005 2006-20082002- 2003

Process Fitness 2006:Engaging the businesses with to produce detailed Design work and the further embedding of Improve in the business

2009

‘IMPROVE’

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Process Fitness: Improve WorkstreamPaving the way for Design and Deployment

Improve teams are helping the business to increase efficiency in 9 core process areas, prioritised by R&M

- Order to Cash (O2C) - Purchase to Pay (P2P) - Crude & Feedstock Selection (C&FS) - B2B Negotiated Pricing - Commercial Optimisation in Europe (CO) - Fuels Index Pricing Accelerator (FIPAC) - Refinery Maintenance - Transportation Management Accelerator (TMA)

- Lubes Manufacturing

Forecast total benefits of $170m delivered in 2005 and over $400m in 2006

Paves the way for design and deployment of new systems by:

- building capabilities and business engagement- creating understanding and insights

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ProjectsProjects ObjectiveObjective RationaleRationale

Refinery Maintenance

Reduce maintenance and turnaround cost reduction in refineries. Improvements in Asset Management and Maintenance will yield an increase in availability.

Fuels Index Pricing

Project Lead

Project Lead

Order to Cash process improvement to drive BP towards better and more consistent service to customers, create operational and working capital efficiency and enhance employee satisfaction through • accurate and timely invoicing • improved credit management • improved end to end cycle time

Maximise net price realisation from the customer (in non-fuels markets) through: • optimisation customer offers • defining true customer profitability and aligning performance management • improving compliance to discounting/cost recovery policies • managing unprofitable customers • cost reduction by customer behavioural change after offer analysis

Deliver significant sustained value, as committed to in our FM, by safely implementing sustainable, common, streamlined P2P buying methods (Fastrack & Gated) for all 3rd party spend for the top 10 countries (85% of non non- hydro carbon spend across R&M).

• Customers are finding BP difficult to do business with (especially strategic accounts)

• Several initiatives currently underway result in a duplication of effort

• Lack of a standard approach to pricing across the R&M segment

• Similar efforts in other companies and BU's have created significant value

• BP has no common P2P processes or systems across R&M

• Lack of strategic agreements causes significant leakage to occur

Create a common crude & feedstock selection operating model - design & specify the components/capabilities that can be implemented across the system that will leverage the distinctive asset trading relationship BP operates today.

• Current Crude & Feedstock Selection is not common across the refineries and trading offices.

• Operational processes, accountabilities and structures vary widely.

Order to cash Improve

B2B Negotiated

Pricing

Purchase to Pay (P2P)

Crude & feedstock selection

Tim Carmichael

Marshka Kiera

Stewart Glover

Brad McCracken

Uduak Udofia

DwainScott

Improve efficiency of Transportation Management processes to reduce Secondary Transportation costs (approx 1bn$ in scope). Improve supply reliability, which will positively impact customers thus revenue generation.

Transportation

Management

Mark Strauch

• BP has fragmented approach to secondary transportation across the segment.

•It is difficult to measure the performance of the maintenance process and how it ultimately impacts availability and as a result people are not rewarded for doing things that eliminate problems

Increase gross margin in Fuels, develop & operationalize a standardized pricing and demand forecasting approach to reduce uncertainty, risk, optionality, and brand value. (US/WRS/ANZ).

• Changes in external environment have led to the emergence of more sophisticated customers creating new opportunities for price leakage

• Internal benchmarking has identified significant differences across the globe

Process Fitness: Improve Workstream:Objectives of the key process improvement areas

Underpinned by over 100 projects across all SPUs delivering early wins!

Commercial Optimisation

Lubes Lean

The European Commercial Optimisation Accelerator is exploring how incremental value can be released through a more integrated approach across the fuels Value Chain. This involves optimising pricing and volume allocation decisions from customer to crude to maximise returns for the BP Group.

Reduce Lubes manufacturing costs across blend plants. E.g. Reduced lead times and cycle times, Flexibility to more cost effectively tailor manufacturing runs to dynamic market demands.

Clive Christison

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•High level view of future solution

•Assessment of technology and capability needs

•First mapping to new applications

•Process visions describing a common processes model.

•Understand the change impacts

•High level view of future solution

•Assessment of technology and capability needs

•First mapping to new applications

•Process visions describing a common processes model.

•Understand the change impacts

•Create “configuration document” or Template

•Some processes simulated in pilots.

•Change Agenda worked in detail

•Country and OU involvement

•Specific requirements taken into account

•Create “configuration document” or Template

•Some processes simulated in pilots.

•Change Agenda worked in detail

•Country and OU involvement

•Specific requirements taken into account

•The rubber hits the road.

•Country level implementation teams

•The solution is configured in the applications

•Implementing hardware, software and scenario testing

•Training and change programs are delivered

•The rubber hits the road.

•Country level implementation teams

•The solution is configured in the applications

•Implementing hardware, software and scenario testing

•Training and change programs are delivered

HL designblueprint

Detail designPilot tests

construction Testing & Go live

Process Fitness: Design Workstream

High LevelDesign

High LevelDesign Deploy & Sustain Deploy & Sustain

SELECT4/5 months

DEFINE6 months

Gate EXECUTE GateGate

1st July 05 1st Feb 06 1st Aug 06 country GO LIVE1st Qtr 07

Europe implemented

Q1 09

DetailedDesign

DetailedDesign

P90“Appraise”

P90“Appraise”

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Program DirectorPeter Duffy

Design VPCraig Bealmear

Improve VP Blair Kelly

Change Mgt & HR VP

Ann Ewing

Senior AdviserCraig Iseli

Program Office VPKarl-Heinz Seifert

Jeff PitzerRefining

Kirsty BashforthBusiness Marketing

Serena LangLubes

Ronnie ForbesRetail

DCT LeadSheila Doyle

• Program Director reports to R&M Group Managing Director John Manzoni

• The Programme and Improve & Design Workstreams each have advisory groups (the PAG, IAG and DAG respectively) to provide guidance and peer assistance. The members are from business and functional leadership

• Each SPU has a Transformation Vice-President (in yellow boxes) who is part of the PAG and the DCT Lead is working very closely with the PF programme.

Process Fitness Leadership Team

Robert GenoveseAromatics & Acetyls The latest version of the detailed organisation charts, can be found on the

Process Fitness web-pageshttp://randm.bpweb.bp.com/default.asp?p=709&mi=1256