Alliance Structure Terminal Automation

Strategic Sourcing Eindhoven, 19 June 2012

Agenda

Introductions Organizational Forms and Change

Reference Model
Firm Characteristics Alliance Conditions Formation Operation

Outcome

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Introduction Vopak An independent tank storage provider

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Vopaks objectives

Accelerate implementation business best practices Supportive to operational policies

Leverage market automation products / skills

Reduce time to market

First time right project delivery

Cost leadership

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Introduction Vopaks presenter Louis Janssen

Role: Manager Terminal Automation and IT & Vopak Netherlands Background: Chemical Engineering, Business Process management & IT

Business: Oil, Chemicals, FMCG, Logistics

Solutions: Production Automation, MES, ERP

Roles: PA engineer / project manager, program manager for international SAP implementations and manager common systems.

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Introduction Emerson Industrial Automation provider

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Emersons objectives

Enhanced development of Emersons solution

Provide life cycle management Licensing of functionality to compete on the market Competitive low threshold Competitive reliability and project predictability Cost competition

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Introduction Emersons presenter Cor Vermeijs

Role: Director Terminal Automation Europe Background: Vehicle Technology Instrumentation and Control Engineering Business: Oil, Pharmaceuticals, Chemicals, Logistics Solutions: Integrated Automation Solutions for Terminals Roles: Research Engineer, Process Automation & Maintenance Engineer, Sales Engineer, Project Manager, Sales Manager

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Different Organizational Forms

Key Features
Normative Basis Communication Conflict Resolution Flexibility Commitment Tone Actor Preference Mixing of Forms

Hierarchy
Employment Routines Fiat Supervision Low High Formal Bureaucratic Dependent Informal organization Profit centers Transfer pricing

Alliance
Secondment Relational Reciprocity Reputation Medium High Committed Mutual benefit Interdependent Equality Flexible rules Recent Systems

Market
Contract Prices Haggling THE Law High Nil Precision Suspicion Independent Repeat Transactions Contracts

Source: adapted from Walter Powell

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Cha(lle)nge
Change is a Challenge
So change doesnt happen automatically nor overnight!

Qui Bono
- Charles Robert Darwin

Change is driven by benefits, benefits in for example:

Competences: Speed: Capacity: Flexibility: Certainty: Access to other resources than your own Responsiveness to opportunities Outsourcing work outside formal organization Quick allocation of resources Mutual solidarity

Intelligence:

Sharing market information

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Strategic Alliances

Source: Wikipedia

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Organizational Fit

Many start here

Optimal Situation Where is Sustainable Competitive Advantage?

High Cultural Fit

Strategic Fit

High

No Synergies

Low

Low

Source: David Faulkner

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Alliance Development Model

ALLIANCE ENVIRONMENT

ALLIANCE CONDITIONS

FORMATION

OPERATION

OUTCOME

Firm Characteristics

Collective strengths Inter partner conflicts Interdependencies

Contracting phases: ( Wilson D.T. 1995) Defining objectives Relation boundaries Value creation

Growth Reformation Termination

Stabilization Reformation Decline Termination

Source: Das & Teng 2002

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Firm Characteristics

Emerson Vopak Leader in industrial Leader in automation business tank storage business Recognition of Automation Recognition of Terminal Industry as Strategic Market as Performance Enabler Automation as Core Focus on Core business Global foot print Global foot print

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Firm Characteristics

Value Creation (stable)

Learning (unstable)

Cooperation

High

Low

Static (dissolution)

Value Appropriation (danger)

High

Low Competition Source: David Faulkner

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Alliance Conditions
Collective Strengths Knowledge management Multidisciplinary teams Joint project methodology Inter-partner conflicts Governance required for preventing local divergence
(alternative solutions, functional, financial, planning cycle)

Interdependencies Organizational alignment creates interdependencies, requiring trust.

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Formation
Objectives and Value Creation
Vopak Emerson Accelerate implementation Enhanced development of business best practices Emersons solution Supportive to operational Provide life cycle policies management Leverage market Licensing of functionality to automation products / skills compete on the market Reduce time to market Competitive low threshold First time right project Competitive reliability and delivery project predictability Cost leadership Cost competition
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Efficiency

front runners

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Formation
Boundaries => Governance
Partner Board

Quality Assurance Program Management Project Execution Customer Support Solution Management User Community

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Strategic Position

Dependent

Level of Dependency

Opportunistic Behaviour

Strategic Collaboration

Independent

Traditional Adversarial

Tactical Collaboration

Uncertain Level of Certainty Source: Paul Cousins

Certain

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Operation
Growth Today in the phase to transform the proof of concepts into an active portfolio Reformation From a co-making development initiative to an implementation partnership Termination Business case monitoring by both partners

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Outcome
Stabilization Product is licensed and general available Product is operational in terminals of multiple customers Service level agreements are in place (performance) Reformation More on demand service Decline and Termination Reduced strategic value Transformation back to transactional relation

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Operational Example
Customer Service

Planner
Movement from Tank to Jetty

Desk Operator

Field Operator

Jetty Operator

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Operational Example
Customer Service

Planner
Movement from Tank to Jetty

Desk Operator

Field Operator

Jetty Operator

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Outcome
Results
Truck Turn Around Time
Reduced by 30% Better Capacity Planning

Terminal Efficiency

~2000 Truck Loads/Operator

Reduced by 20% Reduced # Claims

Paper Work Quality of Service

Vopak Logistics Services OSV

Results
Award Winning Automation Solution

TOM Award 2011

30% more efficient Improved Speed of Service Reduced Safety Risks

Terminal Efficiency Order Handling Heath, Safety & Environment

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Vopak Terminal Westpoort

Thank You
More details in following back ground information

Any further questions?

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Background information

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Partner board

Strategic Alignment Approval of

Yearly planning cycle (business & budget) High level scope and generic developments Costing structure

Performance dashboard
Evaluation Target setting

Meeting Frequency: once per quarter, by phone or physical

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Partner board - Roles

Chairman Vopak Global director Operations

Ultimate owner of Vopaks strategies in the operational area Ultimate functional owner Vopaks processes and best practices Arbitrates possible issues in relation with Vopaks operational policies and processes Ultimate owner of Emersons business development within alliance Represents all Emerson regional sales representatives Owns the governance of alignment with local sales reps Mediates possible sales and commercial issues among Emerson program office and local sales reps

Regional sales representative (Emerson)

Information and Technology representative (Vopak CIO)

Ultimate owner of the Vopaks architecture and IT policies Arbitrates possible issues in relation with Vopaks IT policies and processes Represents the Emerson product and solution developments Owner of product and solution strategy (functionality and technology) Ultimate owner of all Emerson services to be provided for projects and support Secures sufficient capacity and capabilities to fulfill program demands Mediates possible issues in relations of service deliveries

Solution representative (Emerson)

Service representative (Emerson)

Reporting members
Program Management (Vopak & Emerson) Other program managers depending on agenda

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Portfolio Planning Process

Yearly Budget Cycle
Vopak Global Operations Vopak Program Manager

Emerson Business Development

Vopak Program Manager Emerson Program Manager

Portfolio Forecast

Capacity Forecast

Quarterly Update

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Program Management

Business Development
Execution yearly planning cycle (business & budget)

Functional Scoping Release Management Portfolio Management

Project forecasting Capacity forecasting

Local sourcing and partnering Costing Model Project evaluation KPI Mgt Meeting frequency: starting monthly, next bi-monthly

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Program Management - Roles

Program Manager (Vopak and Emerson)

Daily Vopaks vocal point for the individual project managers Ultimate responsible of the program execution Manages the program budget in relation with common initiatives Monitors and reports on progress local implementation Leading in forecasting and portfolio management terminal implementations (Vopak only) Leading in capacity demand and portfolio management for developments (Emerson only)

Business Developer Emerson

Daily Emersons focal point for business initiatives Owner of the pricing structure within the Alliance Ultimate owner of the commercial proposals and agreements Emerson owner of the KPI proposals and measurements

Purchasing representative Vopak

Owner of the cost structure within the Alliance Ultimate Vopak owner of the contracting process Vopak owner of the KPI measurements and target setting

Ad hoc: Possible Business Principals Specific Projects

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Solution Management

Early involvement in user requirements Ownership release management Alignment Blueprint Application Architecture
Modularity Scalability Interfacing Brownfield approach

Technical Architecture
Market gate keeping Vopak infrastructure alignment

Meeting frequency: twice per year

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Solution Management - Roles

Solutions Development manager (chairman)

Ultimate responsible for TAS solution in terms of functionality, quality and performance Manages the functional governance Plans upgrades, releases and fixes Manages the solution Roadmap Interface with Business Development, Program Management and Customer Support Responsible for functional (modular) architecture of TAS Solution in order to create scalability for different types of terminals Responsible for technical software architecture Ensures performance, flexibility and maintainability of the TAS solution Linking pin to user requirements Monitors alignment with Blueprint Linking pin to user community and monitors fulfillment Vopak functional requirements by Emerson solution Linking pin to Vopak IT/ Automation community to align infrastructure, standards and security

Application Architect

Technical Architect

Emerson Business Process consultant

Vopak user representative

Vopak solution representative

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Customer Support

Responsible support methodology/procedures Acceptance delivered projects/solutions Closing SLA Local implementation support procedures Reports on KPIs
Includes consolidation quarterly terminal meetings

Proposes improvements ITIL

Incident Management Change Management Continuity Management Configuration Management Problem Management

Meeting frequency: twice per year

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Customer Support - Roles

Service Account Manager (Emerson)

Responsible for SLA Management with Vopak central and with Vopak local OpCos Responsible for contact with Vopak user community regarding usage and support for TAS solution Mediates possible issues in relations of customer support service deliveries

Customer Support Manager

Ultimate responsible for quality of Customer Support service according to SLA Secures sufficient capacity and capabilities to fulfill customer support demands

SLA Manager Vopak central

SLA Focal point Vopak local

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User Community

Periodical User meeting

Solution user feedback Feedback Projects and Customer Support New requirements Alignment Release Management

Meeting frequency: yearly

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User Community - Roles

Vopak Program Manager (Chairman)

Ultimate owner of periodical requirements roll-in Plans the periodical user events Proposes priority setting and budget requirements to the steering committee Owns the communication process in the user community

Vopak local members (per division)

Represents local (future) user community Functional link to Vopak Business Process Consultant

Vopak Business Process Consultant

Content manager for the Automation Blueprint Aligns and consolidates requirements from the various terminals

Emerson Business Process Consultant

Challenges the Vopak requirements on basis of peer industry experiences Assess the Vopak requirements on impact Aligns with Emerson Solution development

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Quality Assurance

Lifecycle Management methodologies

Projects Solution Development (projects & changes) Support

Rolling out and support methodology

Auditing Reports to partner board No dedicated QA meeting but fixed agenda point on program mgmt and steering committee meeting

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Quality Assurance - Roles

Quality Assurance Manager Emerson

Defines and specifies standard processes, procedures and deliverables to ensure quality of service delivery from Emerson Monitors program and projects executing according to standards Reports deficiencies

Subject matter specific auditors

Auditing specific parts of projects, like project management, software development, etc.

Quality Assurance Manager Vopak (peer reviews, operational representative, IT representative)

Readiness for FAT Readiness for Shipment Readiness for Go-Live Health assessment support

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Functional Governance
Common requirements Business Best practices OpX policies International legislation .

1st OpCo requirements

Nth OpCo requirements

Functional Governance

Terminal Automation Template

Common Enhancements 1st OpCo Enhancements Nth OpCo Enhancements 1st OpCo Organizational Change Nth OpCo Organizational Change

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Project Execution

Early involvement in user requirements specification (fit analyses)

Local terminal ownership

Program is supportive in preparations

Central solutions development under program regime Local implementation with program support Alignment Emerson-Vopak project methodologies required

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Project Execution - Roles

Project Manager Emerson local

Ultimate responsibility for the local execution in terms of scope, time, budget and quality

Project Manager Vopak local

Ultimate responsibility for the local implementation in terms of scope, time, budget and quality

Emerson central lead engineer

Responsible for the local technical implementation, development and configuration of TAS solution Interface to Solution Management regarding local specific issues

Vopak local business representative

Sign-off the final project acceptance on behalf of the local business

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Propositions on Trust, Control & Risk

Trust
Goodwill Trust Competence Trust

1.Goodwill Trust
reduces Perceived Relational Risk but not Perceived Performance risk

2.Competence Trust

1,2 & 9
Risk Perception

reduces Perceived Performance Risk but not Perceived Relational Risk

3.Perceived Relational Risk

is reduced more by Behaviour Control than by Output Control

4.Perceived Performance Risk

is reduced more by Output Control than by Behaviour Control

6,7 & 8

Relational Risk Performance Risk

5.Social Control
reduces both Perceived Relational Risk and perceived Performance Risk

6.Output Control and Behaviour Control Control

undermine Goodwill Trust and Competence Trust

3,4,5 & 10
Behaviour Control Output Control Social Control

7.Social Control
enhances both Goodwill Trust and Competence Trust

8.Goodwill Trust and Competence Trust

Enhances Output-, Behaviour-, and Social Control

9.The lower the accepted Relational Risk level

the higher is the needed Goodwill Trust level

10.The lower the accepted Performance Risk level

the higher is the needed Competence Trust level

Source: Das & Teng

11.The lower the accepted Relational Risk level

the higher is the needed Behaviour- and Social Control

12.The lower the accepted Performance Risk level

the higher is the needed Output- and Social Control

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