The
business of finding, extracting, processing and selling oil has its own unique
set of complexities. While oil companies
have been witnessing major (positive) changes in their revenues and cashflows,
balancing geo-political complexities in the industry, global economic plays and
internal company dynamics is an increasingly challenging landscape to navigate.
Global
reserves of oil are yet to run out ; however, the current supplies are
difficult to access and challenging to extract profitably. Newer upstream
resources are becoming tougher to access, exploration and resource development
costs are on the upswing, oil prices are witnessing volatile fluctuations and
alternative energy sources pose a formidable source of competition., Against
this backdrop, a focus on the supply
chain is all the more necessary to streamline operations and generate increased
value – the all important ROCE.
Organically and inorganically, oil
companies are growing larger primarily because larger, stronger entities are
better equipped to lower the operating costs and to absorb the risk associated
with the long term nature of ventures in the oil industry. Traditionally, oil
companies have accorded their supply chain the appropriate degree of
importance, by viewing it as a strategic component of their business. However,
significant opportunities for improvement continually present themselves at
various phases of the life cycle. This applies across the large family of
contractors, sub contractors and suppliers catering to the oil & gas majors
at various stages of exploration, production, transport, refining and distribution.
Relationship
management – expertise in the industry is nurtured over long term projects
however, relationships tend to be project based. Increased collaboration and
focus on establishing long term relationships can cascade efficiencies in
procurement and response time across the supply chain. The industry can also
borrow from the experience of other sectors in soliciting suggestions for
improvement from customers, partners and employees to identify core areas for
driving improvement initiatives.
Planning and
Forecasting – traditionally, the industry has focused on planning and
forecasting for projects or initiatives that involve large capital outlays and
have long lead times. Extending these energies towards planning for relatively
short term or ‘immediate’ requirements can result in eliminations of premium
for materials and freight costs by providing greater visibility into requirements,
which can also be communicated to vendors.
Performance
Management : developing, establishing and tracking KPIs can provided greater
insights into required improvements on the ‘weaker links’ across the supply
chain and help prioritize resource allocation. O & G companies often find
themselves grappling with a lack of standardization of processes and systems at
their various projects and find it challenging to design and deploy centralized
improvement initiatives.
Inventory
management – companies maintain inventory of critical equipment parts, often in
excess, in order to avoid schedule disruptions from non availability of
important parts. It is not unusual to
encounter high rates of over-ordering in this sector. By emulating the
practices adopted by other sectors – industrial and automotive - investments
towards exploration of opportunities to reduce inventory levels and streamline
ordering processes could bring about significant changes in inventory
management and impact working capital management extensively.
Aqua MCG can
participate across functions in an O&G ecosystem and contribute
significant value addition through a bouquet of offerings spanning consulting
to implementation
- Strategy Consulting
- Operations and Performance improvement
- Project Planning and Management
- Organization Development