With Oil & Gas Labor and Materials Costs Soaring, Pressure on Supply Chain Executives to Better Manage Vendors Is Increasing – Real-Time Data Is the Solution
Reducing costs, while improving supplier efficiency and performance will always be at the top of the priority list for supply chain organizations. But reducing expenditure is difficult with the macro economic environment we are in. Labor uncertainties and raw materials inflation are resulting in Oil & Gas industry costs increasing significantly in 2023.
An analysis carried out by McKinsey & Company showed that prices in the industry could rise by 6% to 13% this year. The study concluded that “primary operation tasks” in particular (e.g. regular inspections and maintenance) are becoming more expensive as labor rates grow by around 9% a year. Materials costs are also on the rise with steel casings and tubing costs rising ~5% per year. This poses a major challenge for supply chain organizations when there is increased pressure on them to cut costs at a time when up to 45% of global oil production is unprofitable, according to some estimates.
McKinsey & Company said these volatile costs and labor and material supply uncertainties are jeopardizing oil and gas projects, adding that minimizing such risks would help companies in the sector cut costs by up to 15%. The burden is on supply chain organizations to reduce these risks by improving supply chain efficiency.
Investments in Real Time Spend Data Improve Performance
When improving supplier efficiency and performance is vital to organizational success, access to real time spend data is crucial. Real-time spend data enables supply chain organizations to develop an optimal supply strategy to deliver a more effective operations plan; maximize financial performance while mitigating exposure and risk; develop improved strategies for managing supplier performance; and create accurate forecasts that maintain adequate inventory and avoid operational downtime; and produce more accurate project cost estimates and schedules.
Using real-time spend data leads to substantial cost savings. Research by the Center for Economics & Business Research (CEBR) showed that real-time data can lead to: potential revenue increases of 28.1%; more efficient processes for 62% of businesses; a reduction in data anomalies; and revenue increases for 80% of firms.
The CEBR study, which surveyed 1,200 companies spanning six countries (including the US), also showed that the total potential revenue uplift when using real-time analytics across the regions and sectors surveyed was $2.6 trillion.
Access to Real Time Spend Data Tools is Limited
The benefits are clear but still the innovative solutions to provide this data are limited. Many supply chain executives do not have a clear understanding of their supply chain in the real time fashion that would support them to make the cost saving decisions needed. A study conducted by Deloitte showed that 65% of procurement leaders reported limited or no visibility into their entire supply chain.
The Workrise Platform Provides the Data Supply Chain Leaders Need
For organizations that leverage the Workrise Platform, real time spend data visibility is easy. The platform provides real-time data on what has been invoiced by a vendor at the region, category, vendor and project level to help stay in budget and this data is available in real time.
Free Up Time for Strategic Tasks
Using Workrise means supply chain executives spend less time optimizing the financial performance of projects, freeing them up to prioritize more strategic tasks.
At Workrise, we take the burden out of vendor management. For best in class supply chain solutions, lets chat.
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