"The commodity marketing business has become more complex than we had ever imagined. We needed to have the confidence that our systems were able to deliver and share accurate and timely information. We also needed to provide our key decision makers with flexible and realistic alternatives that allow them to make the right decisions faster than our competition." Patrick Loftus, President - Quadra Energy Trading
Background
Quadra Energy Trading, based in Calgary Alberta Canada, markets and trades in Natural Gas Liquids (NGL) products (propane, ethane, butane, ethanol, etc) throughout North America. In the years prior to 2000, Quadra had experienced explosive growth and profitability and was adding a new regional office, on average, every six months. Since then, however, Quadra faced a rapidly changing marketplace, the result of many external factors, exposed other internal factors that where eroding Quadra's ability to determine and manage profit margins.
The Problem
It was becoming increasingly clear to Quadra's senior management that overall changes were needed to maintain a significant market position. It was impossible to try and address the external market factors that affected Quadra's business; however, the internal issues could be addressed. If Quadra could concentrate on the internal factors, it would help them to be more nimble and cope with existing external factors and potentially be better positioned for future market changes.
The management team agreed that the problem was a result of:
- Lack of validated integration between the business system components specifically contract administration, risk management, logistics and inventory management, transportation, invoicing and accounting.
- Weakening business processes and controls created gaps for potentially costly and repetitive errors that eroded profit margins.
- Inability to quickly understand the company's cash flow and consolidated financial risk positions which, in turn, restricted the ability for traders to consider potentially riskier but more profitable deals.
- A reliance on relatively expensive industry experts to operate the business.
The Solution
The problem, it appears, was not unique to Quadra. Similar obstacles had been recognized and addressed previously by other participants in the industry. Initially, Mobil Canada and, a few years later, NovaGas invested in Marketing System development projects. NovaGas leveraged the experiences obtained from the Mobil project. Both are still being used today. That development experience resulted in a new and redesigned application with greater success.
The architect behind the internal solutions for NovaGas and Mobil were also the founders of PalmTree Business Solutions Inc. (PalmTree), who recognized the commercial need that existed for the mid-stream energy supply-chain. The ultimate product would provide reliable and flexible end-to-end operations optimization and decision making capabilities. It would also reduce paper handling through complete integration of all modules through to all the accounting deliverables necessary to complete the marketing lifecycle of a deal. The product would be delivered through the Internet in a format that was affordable easy to use and maintain.
In 2001 Quadra and PalmTree were introduced and a relationship was consummated that allowed Quadra to be a key customer and an energetic beta site for PalmTree. Quadra agreed to support product development and provide active feedback with the absolute understanding that, when it was ready for the market, the product would be licensed under an arms-length commercial delivery agreement like any other customer.
Four years later PalmTree BREEZE was completed. Now, from the moment any Quadra marketing deal is done, PalmTree BREEZE is used to manage all aspects of operations and accounting related to that deal.
Results & Benefits
The path to the finish line was not as smooth as expected for either Quadra or PalmTree. The technology crash of 2000 created funding challenges for PalmTree and Quadra had some business challenges of their own early in the relationship. Not once, however, did the vision change. The founders of PalmTree made heroic personal and financial commitments to their product dream and Quadra remained committed despite what looked like the end of a dream for both.
Today the benefits realized at Quadra have exceeded their expectations in many ways:
- Quadra has improved overall best practices which are now supported by PalmTree BREEZE.
- Operational errors have been reduced by approximately 60% percent.
- Quadra reduced dependency on veteran staff and was able to leverage their skills into more productive revenue generating tasks and as a result reduced overhead payroll costs by roughly 20 percent.
- The cost of maintaining Quadra's systems has dropped dramatically since it chose the ASP delivery option for PalmTree BREEZE.
- Quadra has achieved the benefits of having a commercial product, without the costs and baggage associated to a custom application.
- The multi-commodity capabilities within PalmTree BREEZE have allowed Quadra to expand into more diverse products without having to deal with issues such as converting units of measure and foreign currency exchange or managing inter-company transactions while still providing the design flexibility to address the many unique requirements of handling different products.
