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February 29, 2016
Driving down costs takes communication and collaboration
By: Pierre Mawet

Driving down costs in the supply chain requires highly productive collaboration. Well-defined processes and communication channels, however, are frequently lacking. In many oil and gas companies, gaps are common between procurement policies and what actually happens in the field.

Someone needing supplies for wells in West Texas or North Dakota might be acting independently for a variety of reasons. He or she might not have been made aware of preferred vendors, or might not have been able to track down the required information fast enough, or might disagree with the choices of vendors for materials or transportation. People in the field may lack background information on why certain vendors were selected and what the new procedures are for ordering supplies and services. Conversely, a supply chain employee may lack knowledge of what’s going on in the field.

There is always likely to be a battle between centralized vs. decentralized decision-making. The best operating model for supply chains is one that strikes a balance between the two to reduce costs yet maintain high levels of service.

Companies that have grown through acquisition tend to be hobbled with complex supply chain and procurement activities that have never been integrated. Ideally, the goal is to integrate supply chain processes from end to end, with a central supply chain group with clearly defined processes, roles and responsibilities.

Procurement processes need to be clearly mapped step by step to eliminate ambiguity and confusion. Companies need to explain how each person’s actions affect others down the line, and contributes to greater effectiveness and company profitability.

A few examples of critical functions to manage in a consolidated manner include sourcing and category management, inventory and activity planning, transactional procurement for lower complexity and higher risk transactions. Centralized sourcing and category management are critical to maximize value across the enterprise while managing supplier and compliance risk.

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