With $5.2 billion in annual revenues, the privately held Mansfield Oil operates as a recognized leader in the downstream energy industry in the United States. Each year, this company delivers more than two billion gallons of petroleum products to commercial customers and government customers, such as United Parcel Service, the U.S. Army, and retail gas stations. In fact, these customers combined account for 30,000 different destinations or individual fuel sites that Mansfield has to replenish.

Some of the factors that account for Mansfield's success include a thorough understanding of the industry, a commitment to improvement, and an adaption to market changes. Building an agile technology environment, however, resides as the unpinning for all of the factors that enable the company to operate profitability with 5,000 employees, including less than 50 employees in IT. Doug Haugh, Mansfield's CIO, says ," Our technology helps us to do two things - think about the best physical logistics to minimize freight costs and maximize service levels for our customers, and to  operate against the world's deepest and one of the world's most volatile commodity markets."

Staying competitive in an industry weighed down by dependency on fossil fuel has propelled Mansfield to get a jumpstart in the renewable energy industry. In 2009, Mansfield acquired the $700 million C&N Companies, a renewable fuel marketer representing annually 500 million gallons of ethanol production and 150 million gallons of biodiesel production capacity. Haugh says the company's agile technology environment made it possible seamlessly to fold an acquisition's business operations into Mansfield's business processes, financial systems, and network infrastructure.

Enterpriseleadership.org recently sat down with Haugh to learn how Mansfield's technology environment can deliver much business value to an organization that needs to meet market challenges around the clock. Here is what he had to say:

EL. Can you briefly describe how your business operates and what role technology plays in it?

DH. Each day, we deliver transportation fuel, such as diesel fuel, for our commercial customers and government customers. We have a smaller component of industrial fuels and power generation fuels. In essence, we move fuel from point to point. The United States' fuel storage space today has about 1,300 bulk product terminals where barrels are stored as the refineries make them.

When it comes to technology, we use remote telemetry to monitor those inventory positions for our customers. Using a variety of decision support and automation systems around our supply chain management function, we can determine how we should react to the remote telemetry reading. For example, say you oversee a UPS site in the middle of Montana. You have 4,000 gallons in storage and use 600 gallons a day. Your facility is one day away from the nearest supply terminal. We have to factor in led time. Our decision support systems goes through that entire algorithm and figures out how much fuel you will need on, say, Friday.

Physical replenishment is something we routinely execute as part of our supply chain and logistic process. On the other hand, we need to keep a constant eye on the commodity market because it moves up and down every minute. We use technology to work against that commodity market on behalf of our customers and continually extract the best opportunities. We know they are going to need 100 loads of fuel in the next 72 hours. We are constantly looking at when is the best optimal time to make that purchase and deliver it to their locations in that market.

Our deals are very transparent. Unlike a commodities broker, we work within the commodities market on a trading basis to extract value for our customers by trading the best we can. We work very much on their behalf. While we deliver fuel in the traditional sense, our customers, however, hire us because we have the technology scale to optimize that supply chain for them. A nationwide company, such as UPS, does not have the energy procurement experts to maintain their own supply chain and logistics for fuel consumption and delivery. We provide the roomful of energy experts who know how to execute a customer's plan.

EL. Can you be specific about the types of customers you have?

DH. We have three main categories of customers. About 30 percent of our business comes from the federal government and state government. For example, we supply various fuels to close to 200 military bases across the country. We might supply fuel to a school district. Another 20 percent of our business includes the traditional retail business of supplying gas stations. We also design, construct, and operate gasoline stations with mini-markets. We do that for a couple of different grocery chains. The rest of our business comes from nationwide commercial customers, such as UPS, Ryder, FedEx, and Waste Management. If these companies do not get the fuel they need, they cannot operate.

EL. Can you describe your IT organization?

DH. We provide both infrastructure support and applications development. We develop and maintain our own ERP system and trading and logistics systems. Throughout our 50 years history, technology automation has been one of our main drivers. What we do is unique. Because there is not a wealth of software for what we do, we have had to build our own backoffice platform. We also developed our customer-facing solution in-house. In both cases, we have relied on external development partners.

EL. Can you describe some of the changes you are making to these systems?

DH. We are now taking all of our proprietary modules and transitioning them to very rich, graphical-based Web 2.0 applications based on the Flex architecture. It sits within a Sharepoint delivery framework. That technology directly touches our customers 1,000 of times a day. As a result, they have transparency into their entire supply chain. They can see all of their tanks remotely distributed across the country. They know how much fuel they have, and how fast they are using it. They can look at all of their invoices and bills of lading. This information helps them to determine, for example, if they need to run a report in order to book an accounting accrual for a delivery in transit, but not listed in the inventory. We have put all of our decision support systems online and presented them to our customers in our Web solution. We developed and deployed it, and we maintain it ourselves. We remotely monitor over 10,000 sites through remote telemetry nationwide. We support about 6,000 users. That translates to1000s of logins a day to that customer system.

EL. Can you explain the necessity for agility in moving into new markets? 

DH. Agility is important to us. We have to be fast and opportunistic. Our industry is changing at a faster pace than it ever has. We are a 53-year company that grew up in a 100-year old industry. Fossil fuel is on its way out. It will take a 20-year transition, if not longer. Within a decade, ethanol has captured a 10 percent market share. Nothing has ever done that in the past 100 years. Because we want to be a part of that, we acquired C&N, a $700 million company which produces a half billion gallons of renewable fuels annually. This strategic acquisition provides us an entry point into a growth business.

Biofuels and renewable fuels will continue to grow. On the other hand, if a company like C&N is going to be a leader, it needed our strengths in logistics, marketing, and distribution. C&N has been highly successfully in producing this type of fuel, but it had not done a good job of integrating that production efficiently into the existing supply chain. That is the key to cost competitiveness, overall efficiency, and ultimately to sustainability of that industry itself. We need to leverage what we know. To this end, we can take that ethanol and biodiesel business, and operate its logistics, distribution, and marketing within our traditional processes. We have already spent billions of dollars optimizing these processes.

EL. Are you saying that you are going to apply your existing business processes and technology to C&N?

DH. Yes. Like most processes, we go in and do a gap analysis of our practices to theirs. We compare those business processes, and we do a gap analysis against the technology capability we have. We determine what changes in business processes can permit the adoption of our current technology. Next, we look at what remains, and decide how to close the gap with development. That process is coming to conclusion now. We are finalizing the new capabilities that are necessary to accommodate the differences in the renewable fuel business versus the traditional business. There are more rail logistics in the renewable fuel space than in the petroleum space. Most of the petroleum products in the United States move via pipeline not rail car. Because it is a different mode of logistics, there are impacts to how transactions are handled and how forecasting occurs. These things occur all through the entire technology stack.

EL. Can you give me an example of how you plan to integrate C&N?

DH. It is going to be similar to a $1 billion acquisition we made in the spring of 2008. We completely took that business, lifted the master data, customer data, and transactional data; transformed it; and dropped it into our existing transaction platform and accounting system. We then executed the business plan.

When we do an integration project, we integrate that business into our business. We do not integrate the technology. We typically throw away what was there, and we operate that business on our core systems. This approach enables us to derive the ultimate efficiency we enjoy in the core business. Our reason for making an acquisition comes down to how well we can apply our strengths and technology capabilities to that business and run it more efficiently. We cannot accomplish this if we have to work with is there and just pipe in financial data to a combined balance sheet. That approach does not accomplish anything.

We get right at the core starting with the network all the way up through the applications stacks to the phones. We have put in our own network framework of technology which we gives us the network reliability, redundancy, and dynamic routing that we need to make many of our systems works. We work from there up. We bring their transactions and their actual processes on to our accounting and business systems. We then move on to our phone network. Their phones operate as extensions of the main office. If one entire fuel office goes down, those phones will immediately roll to their backup. A customer has never experienced an interruption.

EL. To what degree do you evaluate an acquisition's systems?

DH. If a specific system has given the acquisition a unique competitive advantage, well by all means, we will carefully evaluate that system.  Ultimately, our only decision comes down to whether or not we can derive enough unique business functionality from that system, and whether or not we can develop it within our core infrastructure. We never ask ourselves whether we should keep an acquisition's old systems.  If we did that, we would have a hodge podge of systems that could put a damper on our entire technology strategy. Our support and maintenance costs would increase. We would prefer not to invest our IT budget dollars on maintenance, but on new developments that can drive competitive.

EL. How do you arrive at the decisions to develop the technology you need? Does it start from the top or the bottom?

DH. It really is both. We have a feedback process. We have probably five suggestions a day from the floor. We operate in a very open trading environment. We do not have cubes any more. There is a ton of encouragement for a better, faster way to do something. We try to instill a culture where we have no boundaries. If multiple steps and system inefficiencies cut into your core business productivity, then our employees have a responsibility to table that issue and demand a solution. My staff has the job of continuously ranking these tasks and working through them. High priority items typically have the largest returns attached to them. We rank those by dollar value. For example, if we make that change, how many hours of labor do we eliminate, how much productivity do we pick up, and what is the financial implication of that?

EL. What is your governance process?

DH. Our technology team operates with executive sponsorship. We continually allocate a minimum of 25 percent of our development capacity to continual work against those new opportunities for productivity. The technology team is responsible for evaluating the business case, making the selection, executing the development, and deploying that back to the user group. Self-direction helps to inspire the technology team. On the other hand, senior management regularly inspects what the technology does and holds it accountable for its works.

Apart from that, we have a group of senior executives who look at the things beyond the horizon that will not bubble up from the existing business. In other words, as we engage in these new lines of business, such as biofuels, we need to have a different perspective. For example, we might say, 'What are my technology requirements going to be? What are the opportunities to deploy technology in a game changing fashion to become more competitive?'

This brings up the other part of the C&N acquisition. We are not only integrating and assimilating the core technology platform end to end, but at the same time, we are developing a completely new customer facing solution in our Sharepoint portal framework. This highly collaborative solution has joint forecasting and planning with our production plants transparently exposed to the customer. This a cutting-edge approach to supply chain optimization. No one in that industry has ever done that before. Until now, companies like C&N have communicated this information to customers via paper reports. Things, such as when did my rail car leave and when does it arrive, have not been reported in real time. This new technology development requires a different type of governance. My most important job right now focuses on looking over the horizon and seeing what is going to make a competitive difference, and how much we can be afford to spend on the business case to achieve bottom-line results for that competitive e differentiator.

EL. So how would you evaluate the effectiveness of a strategic technology investment?

DH. We look at technology two ways: We have to continue to drive efficiency in our operations. At the same time, we try to launch at least two new applications modules each year. It usually includes a new functionality that touches our customers directly. It is a revenue generator. We have revenue objectives for technology directly. They usually translate into a product or service such as a service fee, or an up-charge, or a discrete sale. We have customers that buy the services of our technology platform and not our commodity fuel. We still see this type of a relationship as a good entree to the customer, and we are happy to defray our investment costs with that.

Elizabeth M. Ferrarini is a technology writer from Boston, MA. Reach her at elizabethferrarini@yahoo.com.