Turning carbon into clean energy for more than two decades, Denbury Inc. owns and operates the world’s largest CO2 pipeline network, with extensive experience managing CO2 transportation, injection, and monitoring.
Focused on the development of enhanced oil recovery (EOR) and carbon capture, utilization, and storage (CCUS) operations in the Rocky Mountain and Gulf Coast regions, Denbury—a Plano, Texas-based oil and natural gas producer since the early 1990s—is committed to carbon management.
Since 2012, the company has been active in CCUS through the injection and repurposing of captured CO2 emissions, and prioritizes utilization of CO2 in its EOR operations as well. Sustainability is central to Denbury’s business, and continuously innovating to meet the world’s energy needs is essential to its vision for industrial decarbonization.
As such, the company is in the midst of a transformation journey—one that recently took a high-profile step forward with last month’s announcement that ExxonMobil has entered into a definitive agreement to acquire the company, part of its plan to accelerate its low carbon solutions business and play a greater role in a sustainable energy transition.
A leader in CCUS, Denbury’s EOR operations prevent CO2 from polluting the atmosphere by recycling CO2 to produce carbon-negative Blue Oil. Its 1,300 miles of pipelines that transport CO2 represent key infrastructure that can be used to achieve ExxonMobil’s sustainability mission: net-zero emissions by 2050.
SAP Inventory Management and Supplier Relationships
Denbury’s transformation journey is also underway internally, as the company seeks to streamline operations and respond to pandemic supply chain issues. In recent years, Denbury has focused on standardizing processes, optimizing inventory, and improving business efficiencies.
Tracking and Managing Inventory and Supplies
First implementing a Computerized Maintenance Management System (CMMS) across its organization to track preventative maintenance in one multi-year initiative, Denbury overhauled its materials management processes (including reserving, receiving, kitting, and issuing goods, and conducting physical inventories), as part of its overarching plan to become a more resource-focused organization.
Hit hard by the pandemic, which sent oil prices in a downward spiral, Denbury filed for bankruptcy in 2020, motivating employees to look closely at internal operations. Two years after implementing MRP-based processes, an examination of purchasing processes revealed that Denbury’s procurement and materials management teams were still providing less-than stellar customer service to Denbury’s operations team.
“Although we mastered materials requirements planning (MRP) exceptions, we were still struggling to exceed our customers’ expectations,” said Justin Lester, Director of Supply Chain Management (SCM) and Enterprise Asset Management (EAM) at Denbury. “Our purchasing process was tedious, very labor-intensive, and time-consuming.”
Optimizing the Procurement Management Process
As Lester discussed at the ASUG Best Practices: SAP for Oil, Gas, & Energy conference in September 2023, focused training and knowledge capture was required to enhance the very little standard SAP procurement process knowledge that existed internally at the company. Denbury also runs SAP systems like SAP Enterprise Asset Management (EAM) and modules within SAP ERP Central Component (ECC) including SAP Plant Maintenance (PM) and SAP Materials Management (MM).
Together with Gary Brown, EAM Manager at Denbury—who oversees the company’s EAM Center of Excellence, Warehousing & Logistics, and Planning & Scheduling—Lester convened a single-day event to renew and refresh organizational knowledge. In less than two days, Denbury’s team strengthened its understanding of standard SAP procurement processes and learned how to effectively use the tools its team already had.
The result? Enhanced daily processes that prioritize and optimize Denbury’s procurement transactions—as well as cut its procurement cycle time by 50-60 percent.
Meeting Customer Demand While Identifying Cost Savings
“Once you put that stake into the ground to be best-in-class, people start holding your feet to the fire,” said Lester. “That’s what this has been about. With a skeleton crew, we've been able to successfully support operations across the organization.”
With their newly acquired knowledge of standard SAP procurement processes, Denbury’s procurement and materials management team has a new playbook, which helps them prioritize requisitions so that the goods needed for upcoming work are in hand and ready to go before they’re required.
For Brown, the success of Denbury’s mission—to turn carbon into clean energy—either required the organization to hire more people or more effectively leverage the standard solutions that the business already had access to. "We found a way that we could leverage the system and stay on top of things—to really just do more with less,” Brown said.
A concentrated effort on knowledge acquisition gave Denbury what many companies across all industries lack: a thorough, cross-departmental understanding of inventory and what tools are available for each area of the business. As a result of cleaned-up and intelligent processes, better-trained employees, and more effective use of the MRP system, Denbury’s inventory is newly available, visible, and reliable. In other words, said Lester, “the noise is removed.”
More specifically, associates can go into Denbury’s SAP systems and, within 30 seconds, identify all requisitions. From there, associates can cull requisitions that refer to order points and create a shortlist of requisitions related to scheduled work. If Denbury’s existing inventory is insufficient to cover upcoming work, the system cuts a new requisition. This helps Denbury meet deadlines and optimize inventory to improve lead times, ensuing the operation has what’s required to secure its operations in the event of a major failure.
Freeing Up Time With Editing Steps in the Procurement Process
Helping associates limit the time they spend performing manual tasks within this stage of the procurement process has allowed them to focus on more important work, according to Brown and Lester. “We’re making our customers happy, as we’ve had the parts when they’ve wanted the parts,” Brown said. "We've followed up with what we said we were going to do. We focus on high-priority work that’s active in the backlog.”
As a result of the training initiative, Denbury also implemented a category management structure that enables the company to group segments of procurement spend by specific categories. Strengthening procurement subject matter experts’ expertise, this structure is already easing the burden historically placed on field teams and planners. A category management structure that enables this level of specificity has enhanced and enabled strategic buys as well as optimized the division of labor at Denbury, said Lester.
“We can go to a supplier and say, ‘If we get all our electric motors from you, and we spend this amount of money annually, can you cut me a deal?’” Lester explained. “And we also can let the people who are skilled at getting oil out of the ground or moving CO2 down the pipeline do their jobs. Our associates don’t have to distract them, and we can worry about the terms, vendor agreements, payments, discounts, and pricing.”
“It's been a breath of fresh air for us to move to this category approach,” he said.
Benefits of Optimizing Inventory and Process Management
Other benefits realized by Denbury’s procurement and materials management teams since the training include:
- Process improvements
- Inventory optimization
- Better use of inventory and reduced dead stock
- Consistent use of MRP exceptions
- Standardization and consistency related to material IDs
- Better alignment with business units
Denbury’s core leadership team in procurement and materials management understands the value of focused training and knowledge transfer throughout its organization. These efforts have only strengthened the organization’s understanding of the need to embed SAP best practices and fit-to-standard guidelines in its processes. “A lot of other SAP customers use these solutions very effectively,” said Lester. “There was no need to reinvent the wheel.”
Instead, the leadership team focused on change management and empowering employees, understanding that transformation journeys are as people-led as much as they’re technology-powered. Training and more effective use of tools is all about building skillsets and expertise, about increasing employees’ intrinsic motivation as it relates to autonomy, mastery, and purpose, according to Lester, who cites Daniel Pink’s non-fiction book Drive: The Surprising Truth About What Motivates Us as an influence on his approach to employee engagement.
“You have to make it about the people,” added Brown. “The training was not just about working at Denbury; it will help build career paths and open all sorts of opportunities. It was about building knowledge. The work needs to work for both the company and the people.”
Understanding How Demand Forecasts Can Be Met and Exceeded
Denbury’s team went from missing demand windows to exceeding expectations almost overnight, but Lester and Brown believe enhancing purchasing processes and optimizing inventory came as a direct result of team members focusing their efforts on day-to-day improvements.
Without taking shortcuts, the team convened to piece together the process until “we had the right people, parts, and tools at the right place and time,” said Lester. When issues appear in their workflows, he added, team members are now equipped to measure exceptions and set targets to address them.
Ultimately, process improvement is more efficient and thus more sustainable. “The reason we run this playbook is because things can become very scalable very quickly,” Lester concluded.
No matter the work, he said, “We’re still going to block, we’re still going to tackle, and we’re still going to follow the same processes. We’re going to plan our work and work our plan. And when work needs to get done, the team can handle the business.”
To learn more about Denbury’s success story using standard SAP tools, download our exclusive ASUG and Skyllful case study to learn more.