Overview

The oil and gas industry has experienced distinctive procurement challenges over the past several years. In order to meet the high consumption rate, oil companies are constantly searching for greater value opportunities. Realities such as costly hydraulic fracturing (also known as ‘fracking’) methods and fluctuating gas prices have caused organisations to re-examine the importance of procurement for their bottom line.

Additional challenges include the large scope of oil & gas projects, the geographic isolation of the fields, and the high level of risk generated from the exploratory nature of drilling. Combined, these difficulties can result in purchasing problems such as lost data, poor quality suppliers, and unclear employee responsibilities.

This report will provide oil companies with recommendations for improving, and in some cases completely overhauling, their current procurement processes.

Challenges

Oil fields operate around the clock, and one company might encompass multiple time zones. This fact, combined with sub-optimal inventory management systems and complex organisational structures create an ideal scenario for chaos.

Lost data is a significant challenge for companies in the oil & gas industry. The procurement division is already a known target for corruption and bribery, and competition can lead to circumstances with a higher risk of fraud. Without established security measures, oil & gas companies become increasingly vulnerable to financial and reputational damage. Data can also be lost if a system is being used that doesn’t allow for permission controls. In this situation, uncertainty in regard to data access levels, order authorisations, payments, and general purchasing boundaries is widespread. Ultimately, this suppresses the success of the entire company, especially when such mishaps can’t be properly documented.

The oil & gas industry is further burdened by low-quality suppliers. This is the result of a lack of KPIs, insufficient evaluations for optimal supplier selection (or no evaluations at all), and missing information. Trust is an important component in establishing strong buyer-supplier relationships, however this cannot be achieved if objectives are unfocused and communication is muddled. This reality is detrimental to day-to-day operations.

There are a number of consequences for oil & gas companies when employees are unable to determine their specific role in the purchasing process. For example, inconsistencies in terms of product quality, production schedules, employee spending, and costs become the status quo, as no one is able to determine what needs to be purchased, when, and by whom. This is exacerbated by high-pressure situations that occur daily on oil fields. Additionally, an interdependence of activities means that one incorrect order can cause a cascade of repercussions.

In Brief

  • Procurement is a known target for corruption and bribery, especially for oil & gas companies.
  • Oil & gas companies battle for limited resources. A supplier’s trust cannot be achieved in this environment with poor communication.
  • More purchasing operations are becoming decentralised – this means employees must have specified roles, or risk being unable to determine what needs to be purchased, when, and by whom.
  • An interdependence of procurement activities can cause an incorrect order to have numerous consequences in an industry reliant on highly specified equipment and materials.

Solution

Challenges such as lost data, poor quality suppliers, and unclear employee responsibilities should be struggles of the past for oil and gas companies. Although many larger oil and gas companies may find it difficult to move away from legacy software, growing medium enterprises are able to implement new software almost immediately. This is good news, considering Tradogram integrates effortlessly with existing systems. Tradogram also understands the unpredictable nature of oil production, and the necessity of reliable purchasing software.

Lost data can be eliminated through the use of several features. Specifically, tools for comprehensive deliveries, automated POs, and permission controls. Combined, these functions ensure that the status of an order is known at every moment. Permission controls guarantee that only approved individuals will be handling sensitive information, thereby reducing the likelihood that confidential data will land in the wrong hands. Automated POs alert users when an order has been reviewed and accepted, greatly reducing gaps in time that might cause orders to slip through the cracks. At the end of every transaction, Tradogram creates a comprehensive report to serve as an overview of actions taken by both the buyer and the supplier. Finally, a delivery-tracking feature ensures your shipments appear when they’re expected. You can then complete a three-way match with the invoices you received from your orders.

With Tradogram, you can be confident that your suppliers are of excellent quality. This is accomplished through several methods, notably supplier evaluations and effective negotiations. Supplier evaluations allow buyers to rate vendors on a scale of three levels. This simplified approach means you can quickly determine which of your suppliers is best suited to the demands of your company. Once the ideal suppliers have been identified, proceed to negotiations: edit offers, convert offers to your preferred currency and UOM, make offer comparisons side-by-side to calculate your TCO, and much more. Create private sealed bids and collaborate with your suppliers on a whole new level.

Unclear employee responsibilities can cause confusion at critical moments on an oil field – items may be purchased unnecessarily or not at all, potentially creating dangerous and costly situations. Both managers and buyers can benefit from Tradogram’s enforceable order approval feature. This allows managers to properly oversee what their employees are attempting to purchase, reducing uncertainty concerning buyer roles. If desired, purchases over a certain value or in a certain category can be automatically marked as requiring a manager’s approval. Managers can even add notes to POs to keep buyers updated throughout all phases of a transaction.

Tradogram Understands Oil & Gas

Oil & gas companies benefit from implementing procurement software that is synchronised with the unique demands of an industry subject to a high level of risk, extreme locations, and frequent commodity price fluctuations. Challenges such as lost data, poor quality suppliers, and unclear employee responsibilities are mitigated with the implementation of Tradogram. A streamlined procurement process allows oil & gas companies to focus on their bottom line.

Tradogram’s competitive price is perfect for the oil and gas industry, where a large number of buyers have a hand in ordering of a wide variety of items. With Tradogram’s pricing, it’s very affordable for multiple users from one company to send requisitions – a monthly subscription fee will include all features. To further add to this ease of use, Tradogram can be accessed from any device and/or location with Internet capabilities. A proven solution for an industry that spans unique locations.