Author: Srinivas R
The oil and gas industry often faces challenges around timely supply of materials, demand volatility, labor dynamics, commodity price volatility, and high costs. In an attempt to identify new ways for improved productivity and reduced expenses, oil and gas companies are constantly in need for timely insights on key suppliers, price movements, trade barriers, supply-demand scenario etc.,
Critical materials procured by Oil and Gas industry include Valves, Turbines and Compressors:
- Valves: Valves are critical components in oil and gas operations, used to control the flow of fluids and gases. Procurement of high-quality gas valves from reliable suppliers is a key challenge.
- Turbines: Turbines are used to generate power in oil and gas facilities. Procuring turbines that meet operational requirements is important.
- Compressors: Compressors are used to increase the pressure of gases in oil and gas processes. Ensuring a steady supply of compressors is a procurement priority.
In addition, there are also other key materials procured by the oil and gas industry which include:
- Pipes, fittings, and flanges to transport oil and gas
- Pumps to move fluids through the system
- Instrumentation and control equipment to monitor and regulate operations
- Specialty chemicals used in extraction, processing, and refining
Some of the key challenges in procuring these materials include volatile market conditions and commodity prices, complex global supply chains, and the need to ensure quality and regulatory compliance. Having access to rea-time credible insights on market changes, supplier health, commodity prices and industry best practices can help companies overcome these challenges.
Supply Chain Visibility
Supply chains in the oil and gas industry can be complex and opaque, making it difficult to track the origin of materials and ensure compliance with regulations. In a highly regulated market, it becomes vital to keep track of the supply chain of vendors and ensuring they comply to all the necessary regulatory needs. Implementing supply chain visibility tools and support on tracking supply chains along with real-time insights into supply chain operations, enabling better decision-making and compliance monitoring.
Corrosion and Erosion, Specific to Critical Categories such as Valves
Given the nature of operations in oil and gas industry, parts such as valves must withstand corrosive and erosive environments, which can lead to material deterioration and potential malfunctions. In addition, Valves must operate effectively under high pressure, ensuring proper seals and preventing hazardous blowouts. So, to ensure resistance to corrosion and erosion, companies need to choose manufacturers that are developing advanced materials that resist corrosion and erosion, ensuring the reliability of valves in harsh conditions and designs to withstand high pressures.
Safety is a High Concern in Oil and Gas Industry, the parts need to comply to these needs
Malfunctions in components such as Valves, Pumps can trigger gas leaks, fires, explosions, and environmental catastrophes, making safety a top priority. To overcome these challenges, companies should identify manufacturers who are incorporating safety features such as smart valve technology, remote monitoring, and predictive maintenance to ensure the dependability and fail-safe operation of gas valves. Assessment and keeping up with the latest market innovations is vital and would help in choosing the right vendors meeting the safety expectations.
How SpendEdge can help you?
Unclog your supply lines
Supply-side experts at SpendEdge work closely with clients, including in oil and gas procurement, to uncover potential disruptions and vulnerabilities in the supply network before they start to adversely affect production and delivery. Our supply chain track ‘n’ trace services are designed to provide clients with clear visibility of the supply network at a granular level, so they can control costs at a per-unit level while mitigating risks.
Ensure procurement risks show up on your radar
Our incisive procurement analysis, including in oil and gas procurement, is enabling client teams to develop the right backup plans to insulate the sourcing organization from various business risks. Our experts evaluate current and potential risks at a per-supplier level, so clients can take timely action to plug supply-side vulnerabilities and always ensure a smooth flow of goods and services. Our risk management tools put timely alerts at the fingertips of oil and gas procurement teams to help them improve the bounce-back capabilities of their supply networks.
Open new vistas for cost savings
Clients across industries are leveraging our cost analysis framework to uncover new cost-saving opportunities in oil and gas procurement that they thought never existed. For instance, businesses have succeeded in getting the most value from driller and refinery equipment purchases thanks to an improved understanding of supplier pricing and vendor engagement models.
How SpendEdge helped a leading oil and gas company conduct a detailed assessment of the valves market and engage with best-fit suppliers
Our client, a oil and gas company in the Middle East with operations across the GCC region relies on our deep-dive insights on several categories including direct material, chemicals, components and spares, indirect categories such as IT, HR, Facilities etc. The company boasts of operating sites across the GCC region.
The client wanted support on a specific use case that focused on valves market. They have been importing all materials from APAC, LATAM and other regions and felt they do not have enough visibility into cost drivers for most of their critical components. They were getting price escalations from different vendors and did not have a validation to check the credibility of the claims. Also, they felt that they have been working with vendors that lack innovation and wanted to identify the other vendors who could be considered that provide more innovative solutions.
Experts at SpendEdge conducted a detailed analysis of the market to assess the supply market for valves, understand the breakdown by regions, drivers and challenges for the supply market and market trends to develop a baseline for the assessment. Upon gaining the basic understanding, the team went deeper to analyse the supplier landscape by assessment of the operational and functional capabilities of the top valves suppliers, mapping of the types of valves they can deliver such as gate valves, ball valves, choke valves, globe valves, butterfly valves, safety relief valves, slam-shut valves, check valves etc., their experience in oil and gas industry, innovation capabilities etc., to recommend on the best-fit suppliers.
Our expertise with valves market came into picture for developing insights on their hypothesis costing. Our experts developed a deep-dive cost model of the valves suppliers to understand their spend on different elements such as raw material, logistics, labor and overheads. We also did an assessment of const drivers, TCO etc., and identified potential negotiation levers and cost saving opportunities. On top of it, we also did a complete assessment of pricing models and pricing structure to develop recommendations for the client.
Based on our analysis and recommendations, the client was able to develop a better pricing strategy and also identify and engage with more innovative vendors in the market. We did a complete assessment of best practices followed by peer group companies in valves and develop recommendations for our client. They were able to revamp their category strategy significantly based on our evidence based insights and recommendations.
Author’s Details
Srinivas R
Associate Vice President
