Enhancing Commercial Excellence, Inventory Optimization, and Infrastructure Improvement

Industry

Oil and Gas

Challenge

A leading oil and gas company grappled with supply chain challenges stemming from inefficient processes, excess inventory, and the lack of proper vendor management. These left them vulnerable to market disruptions, precluded substantial cost reductions, and limited their ability to secure optimal contracts.

Services

Supply Chain Optimization

ALLSERV's mission was to conduct a comprehensive assessment of the supply chain and identify areas for improvement.

ALLSERV leveraged its proven track record of success and extensive knowledge and expertise in the oil and gas industry to help the customer. ALLSERV focused the assessment on three main areas: Foundational, Operational, and Organizational.

Foundational:

Process Integration
Technology Alignment
Metrics-Driven Operations
ROI-Centric Focus

Operational:

Commercial Excellence
Critical Spare Strategy
Proactive Logistics

Organizational:

Skills Enhancement
Alignment to Key Processes
"North Star" Focus

Assessment Areas

Benchmarking the customer’s current practices against industry standards, ALLSERV was able to efficiently identify their pain points and assessed their efficiencies in procurement, inventory, logistics, and warehouse management.

Procurement | Organization, stakeholder engagement, risk management, strategic sourcing, technology, procure-to-pay process, performance management

Inventory | Culture, accountability, metrics, warehouse and spare parts management, policy and procedures, materials processing, inventory management and review, inventory classification

Logistics | Communication, stakeholder management, risk assessment and compliance, performance management, technology, planning

Warehouse Management | Compliance, warehouse administration, safety, procurement, logistics, inventory data quality

By evaluating these areas, ALLSERV identified opportunities to improve decision-making and strategic initiatives, enhancing the customer’s overall supply chain performance.

Findings

Process Inefficiency

Technology Complexity: The use of multiple technologies for procure-to-pay processes created unnecessary complexity and was time-consuming for users who had to manage multiple applications.
Manual Procurement: Strategic procurement remained a manual process due to inconsistent master data across various materials.

Inventory Management

Stagnant Stock: 35% of inventory had not been issued or used in over five years.

Vendor Management

Contract Coverage: Only 7% of active SKUs were covered by a pricing contract.
Top Vendor Contracts: Only 3 out of the top 30 vendors had active contracts in place.
Strategic Sourcing Gaps: Vendor engagement was fragmented, and there was a noticeable lack of strategic sourcing.
Failed Implementations: While eSettlement and vendor portal programs were discussed, they were never actually implemented.
Roster Growth: The vendor roster increased by 17% since 2020.
Category Management Decline: Active category management dropped significantly from 15 categories down to just one.

Cost Management

Opportunity Cost: The estimated opportunity cost was nearly $8 million over the previous 12 months.
Missed Discounts: Over $1 million in savings was missed because of a lack of term discounts with top suppliers.

Opportunities Identified

The supply chain assessment identified a total of $25 million in annual savings opportunities. These opportunities are broken down into three primary strategic pillars:

1. Commercial Excellence

This area represents the largest gap in the current state, where fragmented vendor management is leaking capital.

Contract Optimization: Establish formal pricing contracts for the 93% of active SKUs that currently have no coverage.
Vendor Consolidation: Reverse the 17% roster growth seen since 2020 by consolidating spend toward top-tier suppliers.
Strategic Sourcing: Re-implement active category management (moving back from 1 category to the original 15) to leverage volume and specialized expertise.
Captured Discounts: Recover over $1 million in missed savings by negotiating and utilizing standard term discounts with the top 30 vendors.

2. Inventory Optimization

This pillar focuses on cleaning up the "stagnant" capital tied up in warehouses.

Liquidation of Dead Stock: Address the 35% of inventory that hasn't moved in five years through sales, transfers, or write-offs to reduce carrying costs.
Master Data Enrichment: Standardize material data to enable automated procurement and prevent the accidental purchase of "duplicate" parts already in stock.
Visibility Improvements: Use consistent data to create a single "source of truth" across all locations, preventing the $8 million in opportunity costs lost to stockouts or emergency orders.

3. Infrastructure & Technology Improvement

This focuses on "sealing the leaks" in the process through better tools.

Process Automation: Simplify the procure-to-pay cycle by moving away from multiple manual applications into a streamlined, integrated system.
Digital Transformation: Execute the previously "failed" implementations of the eSettlement and vendor portals to reduce manual administrative overhead.
Warehouse Standardization: Eliminate redundant or unsecured locations (similar to the 54% reduction seen in the jack-up rig case study) to lower the total physical footprint.