Speaking at the recent Markus Evans oil and gas procurement and supply chain management conference in London, Thibaut deGroen outlined how Gasunie is working towards ‘sustainable’ procurement. The added value of procurement is its knowledge of the whole supply chain and production process. Clients’ engineers may specify output requirements, but procurement specifies input and throughput requirements. deGroen stressed the importance of seeing things from the seller’s viewpoint. For many of its suppliers, Gasunie represents under 5% of their business. Also half of its requirements present significant deviations from suppliers’ standard products. Gasunie is potentially an ‘unattractive’ client.
Sellers don’t like clients that tender most orders or those to whom only price counts. Some may fall into the nuisance category for the supplier. A lack of continuity and unsustainable procurement leads to less commitment from suppliers and eventually a drop in quality. This has been observed in out-of-spec materials and equipment failure during testing or even in the field.
Procurement can help change this situation by understanding and communicating changes to suppliers and by involvement in suppliers’ processes. This includes audits of a supplier’s quality system and checking that work is conformant. DeGroen advocated use of the Kraljic portfolio purchasing model which sees ‘purchasing as supply management.’
From the supplier side, Dirk Hoffmann (Siemens) suggested improving contract negotiations by avoiding traps in the negotiation chain. These often stem from ‘surprising’ clauses in non-disclosure agreements and in the ownership of intellectual property that derives from the work. This can be fixed by discussing and agreeing on principles and terms rather than starting with boilerplate legalese. The whole vendor, sub-vendor and sub-sub-vendors supply chain need to be considered early on.
Johnny Mikkelsen described how Dong Energy was going ‘lean’ on its operations in response to the falling oil price. Today, cost and efficiency improvements of up to 40% are required to give the North Sea a viable future. Dong is working on controlling costs by focusing on small scale projects and using a standard, modular approach to design, lump sum EPC contracts. More from Marcus Evans.
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