A Letter From The Editor | Part 1 of 9
A Paradox of Purchasing in Oil and Gas
The Purchasing (and procurement) function demands interdepartmental collaboration and data sharing. There is no denying this business reality.
Business process, workflows, and technology supporting a team approach rely heavily upon manual workstreams. These manual processes are often redundant in nature, carried out by lone contributors?
This fundamental lack of functional and technological unity is ripe for a reinvention.
There exists a clear opportunity to reduce a myriad of ad-hoc, individually oriented activities, and to replace them with automated and fully integrated business processes and workflows.
A particularly thorny part of this paradox is that on the surface, purchasing seemingly works fine.
- Materials and equipment are ordered.
- Sending out a PO is a breeze, regardless if it’s in excel, delivered via email, or created via automated technology contained in an ERP or accounting system.
- PO’s are approved.
- The PO is sent to the vendor.
- Vendor ships on site.
- Everything is received.
- Work gets done.
Piece of cake, right?
Not really.
When you break down the details, the component parts that make up the PO itself, there exists large, yet hidden and costly gaps. These gaps cross the people, process, and technologies used in the field.
Why Approach O&G Purchasing From This Perspective?
Well, amidst the historic levels of volatility O&G is experiencing from a double black swan event, there is a renewed focus on the front-line.
- This repositioning and realigning of resources taking place acknowledges the power of people and the technology that supports them.
- In consideration of this reality, it seems only natural that we unearth the fundamental challenges in Purchasing from the perspective of the front-line, the people doing the work each day.
- From this view, we can best share the breadth of the challenges at hand across the purchasing ecosystem. We can illustrate the clear advantages that come from unifying the field with the back office.
It is through these individual stakeholder perspectives that the upside of a streamlined environment that leads to sustainable cost management becomes plainly evident.
In This Series We Will Highlight The Underlying Challenges in O&G Purchasing from 7 Different Perspectives
- Requestors
- Warehouse Management
- Buyers
- Approvers/Supervisors
- Vendors
- Accounting (AP)
- Receivers
We will share insights into why each is experiencing the unique challenges they face.
We will capture how approaching these problems from a modern perspective can democratize purchasing data and create a new operational standard that thrives within the underlying rhythm of all key players.
For Producers, in an urgent, cost containment environment, the times of “growth at all costs” has ended. As a result, the cumulative financial impact of these functional inefficiencies become worthy of an urgent and deeper look.
The Financial Implications Are Just the Beginning
By reshaping how the oil field operates in support of the purchasing process, massive business value is created across the board:
- For Personnel and teams, where job security, satisfaction, morale, and heightened safety must remain a priority.
- Departmentally, where a focus on accuracy, efficiency and optimized spending is more critical than ever.
- Organizationally, where purchasing (and procurement) becomes a value driver with standardization delivering bottom line cost impact.
Collectively, this impact on profitability and securing competitive distinction is profound and will play a large part in a producer’s path towards sustainability.
Regards,
Michael D’Iorio
TRUApp Energy LLC.
Editor, Modern Oil Field Management