Current Market Challenges
With the recent collapse of crude oil prices and no significant recovery on the horizon, the energy industry faces a formidable challenge: how to cut costs sufficiently to continue to deliver the profits that shareholders demand, while minimizing operational and business risks.
The energy sector has seen the price of oil fall by around 60 percent since July 2014. The reaction of the industry has been characterized by wholesale redundancies and a scaling down of operations in certain regions.
Meeting the Challenge
A recent article published by leading consultancy PwC stated the energy industry now needs to `innovate to survive` in the face of the price drop. The article outlines the belief that this innovation should be spearheaded by `fresh strategies` that will ensure performance levels of operators do not drop.
It is clear that operators need to rise to this challenge but this should be done without compromising their performance and ability to compete in the future.
Operators should not simply view reducing spend as the long term answer to current market conditions. A reduction in spend brings no short or long term guarantee of competitiveness or success. Instead operators should work to maximize the value gained from existing suppliers and ensure contracts are delivering the benefits identified at sourcing.
The Role of Supplier Performance
Operators are naturally looking to the supply chain for cost efficiencies and to achieve higher value from the services delivered. Given that suppliers account for some 80% of operator spend and 90% of risk, the global supply chain, is the natural target for improvement.
It will forever be the case that you cannot truly manage performance if you do not measure it. Out-dated performance management scoring conducted on an ad-hoc basis does not provide the necessary transparency to implement corrective action.
Supplier Performance Management Program
A Supplier Performance Management (SPM) program will help your organization address this new and challenging phase by maximizing the value from your strategic suppliers.
A dedicated SPM program allows for closer scrutiny of supplier performance and the associated impact on operations. Utilizing strategic key performance indicators in high risk areas such as cost and safety can be monitored and managed. Visibility is vital for managing cost and reducing both risk and waste in the supply chain. An operator, now more than ever needs to be able to monitor and justify supplier spend, regardless of their strategic importance.
Delivering value beyond cost
The additional value from closely managing supplier performance extends far beyond simply cost. A dedicated Supplier Performance Management program can help operators work closer with their suppliers to drive innovation and reduce risk. Having suppliers aligned with your organizations corporate goals and strategy goes a long way to becoming the customer of choice; a significant advantage in the energy industry.
SPM helps an organization rank and benchmark suppliers across all tiers of their supply base allowing for more informed and strategic decision making.
60 Day Trial
60 day evaluation of Biznet’s Supplier Performance Management software solution.
For a limited time Biznet are offering an obligation-free sixty (60) day evaluation of their Supplier Performance Management (SPM) solution, BiznetP6.
Included in the evaluation are two (2) days engagement with one of our client services managers to help you get up and running, provide initial training or help you create those meaningful supplier KPIs.