How to optimize efficiency in procuremnt process in the Oil & Gas Industry?

Oil and gas companies are always on the lookout for ways to improve operational efficiency and reduce expenditures. This is true regardless of fluctuations in oil prices. Oil and gas procurement strategies and best practices can play a pivotal role in achieving greater operational and financial efficiency.

Our goal with this blog is to establish a basic understanding of procurement process optimization as it relates to oil and gas companies. At the same time, we want to raise awareness of procurement both as a bottom-line strategy and as a potential source of competitive advantage for operators.

Generally speaking, procurement process optimization addresses multiple needs. When executed with planning and forethought, it can establish better demand management, better supply management, better supplier relationships, and better overall risk management. Ultimately, it ensures a complete and accurate picture of spending.

Oil and Gas Procurement Processes

The key business drivers of procurement optimization are cost and risk reduction—via standardization of processes; profit growth through cost savings; and better management of existing inventories.

While these drivers are arguably applicable to all industries, oil and gas procurement processes are decidedly different from other industries. For one, the difference is manifested in the uniqueness of our industry’s tangible assets (rigs, wells, pipelines, separators, etc.). For another, it is also evident in the industry’s intangible assets (business practices, processes, organizational structure).

In fact, the oil and gas industry’s unique organizational characteristics directly affects the design of procurement processes and the deployment of asset management systems.

In some oil and gas companies, a dysfunctional relationship exists among core operational units—between operations, supply chain, accounting, and information technology. This latent dysfunction is evident in common organizational disorders: poor communication between departments; a lack of data sharing across departments; the absence of policies, controls, and standardized business processes; and the absence of utilization and integration of technology.

Not surprisingly, these symptoms can have a direct negative impact on the effectiveness of the procurement function.

Best Practices in Process Optimization

To solve the unique challenges of hydrocarbon supply chain management, oil and gas companies should take an integrated approach that focuses on three key components:

• Processes – Having defined procurement processes and controls in place to guarantee optimal execution and accountability throughout the enterprise.
• Data – Ensuring data is high-quality, consistent, and flows seamlessly among departments and processes without bottlenecks or gaps.
• Technology – Deploying procurement systems to enable enterprise asset tracking; equipment tracking; and integration of cost, budget, and price data.

For the purposes of oil and gas supply chain best practices, process and data may be viewed as distinct components. In actuality, however, process and data are two sides of the same coin. They are in fact inextricably linked. What’s more, process and data also encompass people and culture (arguably the most critical elements in solution development).

The founder of RONEsoft, Ator Tetenta has worked in various positions and capacities ranging from Operations Engineer with IOCs and NOCs to Global Management of Multinational Oil Service Companies, he's developed an in-depth knowledge and appreciation for the flaws in the industries procurement processes. That has been his motivation for creating xChecker, a fully automated RFP platform ideal for mid-tier Oil and Gas companies. We hope you enjoyed the article and if your curious about RFP automation, reach out to Ator chat today at [email protected]