We understand that cost-cutting measures for companies in the oil and gas industry have grown in importance, as the oil price has taken a nose dive as has the demand for goods and services. As a result, procurement departments have been expected to reduce costs and strategic sourcing has proved invaluable to some forward-thinking companies. However, supply markets can offer only so much savings using traditional strategic sourcing methodologies.
Companies need to get more bang for their buck (measured by broader business outcomes), as opposed to just reducing expenditure. Harnessing supply-market power to create competitive advantage will be the new mission. Yet, due to job losses, few companies have the people or capabilities to make this happen.
The primary vehicle used for extracting value from the supply base has been based around the strategic sourcing methodologies pioneered in the 1980s and 1990s. It’s been used successfully to rationalise suppliers, aggregate buying power, drive down pricing and even improve supplier performance.
However, companies need to shift their attention towards innovation, globalisation and profitable growth. The implications for procurement managers, category managers and other staff become clear: expand the value objectives of categories beyond purchased cost reduction to provide broader support for strategic business objectives. Otherwise, the runway for savings will exhaust itself, taking procurement’s reason for having a seat at the table with it. The likelihood is that something will have to give. The industry has shed so many jobs that many companies will not have the current capability or capacity to implement the new way of working. The unknown factors are which companies are well prepared for this new environment and which will survive.
The primary vehicle used for extracting value from the supply base has been based around the strategic sourcing methodologies pioneered in the 1980s and 1990s. It’s been used successfully to rationalise suppliers, aggregate buying power, drive down pricing and even improve supplier performance.
However, companies need to shift their attention towards innovation, globalisation and profitable growth. The implications for procurement managers, category managers and other staff become clear: expand the value objectives of categories beyond purchased cost reduction to provide broader support for strategic business objectives. Otherwise, the runway for savings will exhaust itself, taking procurement’s reason for having a seat at the table with it. The likelihood is that something will have to give. The industry has shed so many jobs that many companies will not have the current capability or capacity to implement the new way of working. The unknown factors are which companies are well prepared for this new environment and which will survive.