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ERP in Tosco

ERP in Tosco

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Published by Shubro Barua

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Published by: Shubro Barua on Jul 13, 2011
Copyright:Attribution Non-commercial

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04/16/2015

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Background
 
osco Corporation is one of the largest oil refineries in United States. Once a
 
major player in American efforts to develop alternative energy sources, Toscorefocused on its refining operations after enthusiasm over synthetic fuelswaned in the early 1980s. Tosco received $380 million worth of compensationfrom Exxon for its share of Colony. The initial agreement between the twocompanies had stipulated that Exxon would have to buy out its stake in theventure if it ever pulled out, and Tosco exercised that clause in the contract.Most of the money went to relieve debt and recover Tosco's own capitalexpenditures, while some of it went to shareholders in a special one-timedividend. Exxon's payment, however, did not obscure the fact that Tosco'sgamble on oil shale--the entire reason behind the company's birth--had cometo a profitless end. It now had to rely on its refinery business for direction andrevenues.The reorganization did little to ease Tosco's difficulties. Sagging crude oil andgasoline prices made things difficult for a company that suddenly foundrefining to be its sole source of support. Tosco lost over $677 million between1983 and 1986, and, after buying out dissident shareholders inspired byGood, found itself so deeply in debt that its creditors decreed that it shouldhire investment banker Bear Stearns to help arrange a takeover. There were,however, no takers. The company's stock fell to $2.75 per share, down fromits high of $45 in 1980. Feeling that a change of leadership was necessary,Tosco's directors forced Talbot to resign in June of 1986 and replaced himtwo months later with company chairman Clarence Frame. In the meantime,Tosco sold its Bakersfield refinery to Texaco for $22 million. Although thecompany returned to profitability under Frame, its heavy debt load anddepressed stock price forced Tosco to spend the remainder of the decadeunder the pall of takeover speculation. Michael Tennenbaum, a Los Angeles-based director of Bear Stearns, purchased a seven-percent stake in thecompany in 1987. The next year, Argus Energy, a Connecticut-basedinvestment partnership, announced that it had acquired a 40-percent interestin Tosco. In 1989 the company acquired Seminole Fertilizer, but this did notstop the widespread takeover speculation and uncertainty over Tosco'sstatus. Later that year, Argus Energy head man Thomas O'Malley, by now aTosco director succeeded Clarence Frame as chief executive officer.One of the company's first actions under O'Malley was to announce that itwas entertaining takeover bids. Tosco claimed that at least three multinationalcorporations made offers, but refused to announce the identity of the suitors.
 
 
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Informed speculation had it that one suitor was British Petroleum, which wassaid to be interested in establishing a presence on the West Coast throughTosco's Avon refinery. Neither party ever confirmed that this was so, however.Tosco declared in 1991 that none of the offers it had received weresatisfactory, and that it would remain independent. The company thendeclared that it would consolidate operations and cut administrative costs byclosing down its headquarters in Santa Monica, California. Initially, Toscodeclared that it would find a headquarters site in northern California, closer tothe Avon refinery. But it ultimately wound up moving to Stamford, Connecticut,the home of Argus Energy.Indeed, the move may have signaled that Tosco intended to shiftgeographical direction and develop a presence on the East Coast assignificant as its presence on the West Coast. In December 1992 thecompany acquired Exxon's Bayway refinery, located in Linden, New Jersey,for $175 million. The acquisition made it the second-largest independentrefiner in the United States.Exxon's withdrawal from theColony Shale Oil Project in1982 and Colony'sconsequent collapse marked adecisive turning point forTosco, as the company hassince struggled to stabilize itsfiscal health and corporateidentity. With the acquisition ofthe Bayway refinery, itappears that Tosco isdetermined to establish itself as a major independent oil refiner.The company continued its efforts in oil shale extraction until May 2, 1982when Exxon pulled out of the Colony Project joint venture, leaving Toscounable to keep the venture viable in spite of a $1.1 million loan guaranteefrom the U.S. government. Exxon claimed the project's projected $6 billionprice tag made the project no longer feasible, but Exxon was required topurchase Tosco's 40% share in the project as a result of their withdrawal.Major company reorganization followed in 1983. Several takeover bids duringthe 1980s failed to materialize. Tosco declared in 1991 that none of the offersit had received were satisfactory, and that it would remain independent. Thecompany then declared that it would consolidate operations and cutadministrative costs by closing down its headquarters in Santa Monica,California. Initially, Tosco declared that it would find a headquarters site in
 
The refinery is located in the eastern shore of San Pablo bay
 
 
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northern California, closer to the Avon refinery. But it ultimately wound upmoving to Stamford, Connecticut.The move may have signaled that Tosco intended to shift geographicaldirection and develop a presence on the East Coast as significant as itspresence on the West Coast. In December 1992 the company acquiredExxon's Bay way refinery, located in Linden, New Jersey, for $175 million.The acquisition made it the second-largest independent refiner in the UnitedStates. In 2001, Tosco had to go though some equations but overall COMETSwas a successful project. It was easier to implement and use. It took four andhalf of years and cost more than $ 40 million. But it was not like other ITsystems and it was useful and good to use.
Project Implementations of Tosco
As Tosco has the unique business process it maintained, the companydecided on the customized
 
approach. for writing the software programs forCOMETS, Tosco decided to form teams comprised of operational
 
andaccounting users, systems analysts and programmers, and consultants fromAspen Consulting. Most of the Tosco people assigned to the project wereassigned part-time. The teams were made up of 70% Tosco and 30% AspenConsulting. When the COMETS system was implemented in the first year,Tosco had another major acquisition that of the Circle K convenience stores,headquartered in Phoenix, Arizona. The teams wanted to re-examine somerequirements and get additional funding, although the convenience storeswould largely continue to be run on their own system. The Circle K acquisition
expanded Tosco’s core business, and adjustme
nts had to be made to theCOMETS system. In 1996, as Donna expected, the cost overruns on theCOMETS project started to surface. Donna was approached with news that aparticular process was taking longer than expected, sometimes dramaticallylonger, and often doubling the initial price tag of the task. It was a complicatedprocess than the previous one.
ERP system in Tosco
In early 1980’s, Tosco was a small independent oil refiner with only three oil
refiners. They had an annual sales figure of around $ 3 million. They had twocommodity movements which were able to carry out the duties of the basicbilling, inventory control and accounting requirements. In 1980, Tosco bought

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