Before the oil and gas industry’s downturn, companies were enjoying good times: high prices for oil and gas were creating a stable environment for exploration, development and operations and companies were flourishing. Now all seems doom and gloom.
Today’s industry, quite frankly, is looking vulnerable, with companies worldwide facing both demand and supply side challenges. But your company doesn’t need to get burned on the supply side, especially if you source offshore. Here are some actions you can take right now:
1. Audit your current suppliers’ costs and consider new sources. Prices obtained six months ago may not be so competitive now. Suppliers are hungrier, as worldwide demand is causing production costs to drop, but cost-saving opportunities vary. Keep a sharp eye on existing suppliers and a lookout for new ones to boost your bottom line.
2. Monitor your suppliers’ financial health. Both domestic and offshore suppliers are facing tough times, with many closing down, although understandably they don’t have much incentive to keep you in the loop. While ‘credit checks’ aren’t so reliable in some countries, you can use third-party information gathering services to assess suppliers’ financial health and risk. These audits aren’t too expensive and can help you maintain continuity of service. Make sure you know when to start securing a second supply source before your primary supplier stops taking your calls.
3. Keep a close eye on quality. When times get tough, suppliers look to lower costs and maintain margins, which sometimes results in slips in quality of materials and workmanship. Stay on top of the game by increasing supplier surveillance.
4. Don’t treat your suppliers as enemies. Healthy relationships and open conversation foster opportunities for mutual gain. We’re all in this together, so don’t waste time threatening key suppliers or making unreasonable demands. Learn to negotiate better instead. Be forthright, but reasonable. You’ll earn your suppliers’ respect and appreciation, which ultimately will reduce costs, improve quality/efficiency and perhaps bring new business opportunities to light.
It’s more than possible to run your global sourcing activity smoothly – and profitably – even in these tough times.
1. Audit your current suppliers’ costs and consider new sources. Prices obtained six months ago may not be so competitive now. Suppliers are hungrier, as worldwide demand is causing production costs to drop, but cost-saving opportunities vary. Keep a sharp eye on existing suppliers and a lookout for new ones to boost your bottom line.
2. Monitor your suppliers’ financial health. Both domestic and offshore suppliers are facing tough times, with many closing down, although understandably they don’t have much incentive to keep you in the loop. While ‘credit checks’ aren’t so reliable in some countries, you can use third-party information gathering services to assess suppliers’ financial health and risk. These audits aren’t too expensive and can help you maintain continuity of service. Make sure you know when to start securing a second supply source before your primary supplier stops taking your calls.
3. Keep a close eye on quality. When times get tough, suppliers look to lower costs and maintain margins, which sometimes results in slips in quality of materials and workmanship. Stay on top of the game by increasing supplier surveillance.
4. Don’t treat your suppliers as enemies. Healthy relationships and open conversation foster opportunities for mutual gain. We’re all in this together, so don’t waste time threatening key suppliers or making unreasonable demands. Learn to negotiate better instead. Be forthright, but reasonable. You’ll earn your suppliers’ respect and appreciation, which ultimately will reduce costs, improve quality/efficiency and perhaps bring new business opportunities to light.
It’s more than possible to run your global sourcing activity smoothly – and profitably – even in these tough times.
