Supply Chain Leaders Are Under Immense Pressure to Get More Efficient
Many organizations’ supply chains have grown to such an extent that they are ungovernable. With the complexity of vendor networks, many organizations don’t have visibility into which vendors they use and the quality of the output. Supply chain managers are constantly at risk of engaging with vendors that are unreliable or unable to provide products or services to the required specification.
This problem is exacerbated in Oil and Gas given the massive amount of vendors operators engage with. Oil and Gas operators will work with more than 150,000 vendors - more than double the number of vendors of other companies of the same market cap.
Lack of Cross-Functional Internal Procurement Visibility Costs Millions
Oil & Gas companies have spent millions of dollars per year unnecessarily due to ineffective vendor management. This can be driven by internal disconnects and lack of visibility between teams which is all too common in large O&G companies.
At least one study of a super major revealed that their downstream supply chain team – which was negotiating contracts with, and sourcing products from, a well-known international conglomerate for thousands of gas stations – was operating completely independently from the upstream procurement team. The result was that the upstream procurement team was negotiating contracts and sourcing products from the same conglomerate separately and leaving millions of dollars of savings on the table.
The problem was that, like many companies, this supermajor simply did not have a total understanding, or overview, of their global supplier relationships. This meant that vendor management teams were storing and managing vendor information in multiple siloed systems – making it impossible to get access to a single, reliable view of all their vendors and the products and services they supplied.
Lack of Vendor Data Can Impede Strategic Projects
It can take months to onboard new vendors. Oil & gas projects require immense safety and compliance vetting, huge insurance policies, and the MSA and onboarding process is complex. Understanding which vendors are already on a company's vendor list, what services they offer, the quality of their delivery and their pricing makes getting things done much faster. Supply chain leaders are in a unique position to support their companies to identify the existing vendors in their vendor lists that can get strategic projects moving. However, a lack of vendor data and visibility is a hindering factor.
Supply Chain Leaders Are Positioned to Drive the Highest Levels of Strategy
The sector faces unprecedented challenges as the world emerges from the Covid-19 pandemic including producing at a lower cost to remain competitive, reducing unplanned site shutdowns, and an unpredictable economic and political environment. Executives will be building strategies that enable them to lower costs and also grow revenue as quickly as possible.
To grow, massive changes will need to be made to the way in which the whole world produces and consumes energy. Consequently, given the scale of the structural reform that the global energy industry requires, it will be incumbent on the major Oil & Gas companies to deliver these changes as they are the organizations with the greatest experience of, and expertise in, world energy markets. While the Oil & Gas sector certainly faces one of the most challenging periods in its history, it also creates a tremendous growth opportunity. Global leaders are united in their view that the energy transition will represent one of the most significant industrial transformations in history. There is also a widespread understanding that the industries that develop and manufacture the technology that forms the foundations of the future economy will have the greatest competitive edge.
To contain costs, oil & gas companies will need to find the best path to diversification that leverages their existing capabilities and relationships. Supply chain leaders are in a unique position to help with both of these things.
Better leveraging existing vendor lists will limit costs as the more vendors on a vendor list, the less efficient and more expensive the supply chain becomes. The ability to understand the services available on an existing vendor and how those existing vendors can support expansion into other industries and services will speed the path to growth but it also enables cost containment and reduction.
Supply chain and procurement leaders can drive the highest level of strategic outcomes through better systems that make these things possible all in a single place. Ultimately the benefit of managing vendors via a single system is visibility. This facilitates a more effective flow of information about vendors, as well as the development of stronger, more productive vendor relationships and ultimately, money saved.
Oil & Gas operators can maximize the amount of capital they are able to invest in strategic projects by leveraging their supply chain leaders to remove unnecessary costs.
Innovative Solutions to Support Supply Chain Leaders Are the Key to Unlocking Strategic Cost Containment and Growth
According to some data sources, high-quality vendor management can achieve time savings of 40% or more. Partnerships with industry innovators like Workrise can significantly increase effectiveness of vendor management processes driving the growth and cost containment needed. Workrise partners are seeing an average vendor onboarding time that is over six times faster than the industry average, as well as an up to 35% reduction in vendor management costs when compared to their existing in-house processes.
Get in touch to find out more about how Workrise can:
- Provide visibility into the vendors on your vendor list in a single, easy to query platform
- Provide spend visibility at project, vendor and category level
- Provide a streamlined, consistent invoices, reducing the number of vendors that need to be dealt with directly
- Enable organization-wide compliance with vendor qualification criteria
- Enable operations to more efficiently source new, compliant vendors
- Enable operations to manage their vendor list within supply chain parameters
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