Smart Procurement
Smart Procurement
I represent a company that has been professionally providing oil & gas companies with valves and fittings for more than 13 years. We have proved ourselves to be quality champion. Improvement of pipeline systems is our mission. You should not save on quality, but today’s situation is quite opposite.
A world financial crisis has just begun revealing numerous problems, hazards and risks. That is why it is necessary to think about meaning of such words as economy and efficiency.
I believe you will agree that any job if done properly will bring profit and serve as a good foundation for company’s successful development.
I think many people will share simple approach of a good businessman choosing materials to build a house, for example. He will surely compare products and prices but will choose high-quality materials so that his house stays for hundred years and will not overpay a dollar.
This is just a simple example. The question is how well procurement process is organized in oil &gas companies.
We should admit that most managers perfectly understand how important it is to find right balance between quality and savings in procurement system. However, complicated tender procedures very often become an obstacle for professional supplier or a plant with good reputation to get business. Wrong punctuation mark and your tender package is in the bin.
Everybody knows that price is a key factor in tender. The company offering lower price has more chances to win the tender, though quality of their products may not be satisfying.
As a result, customers receive the products not corresponding to the technical data given in the technical passport let alone high quality standards.
I would like to give just one example from oil & gas companies’ statistics:
60% of shut-downs and 50% of technological pipelines down-times happen due to the failure of valves and fittings or inadequate products that do not meet customer requirements. However, the value of valves and fittings in technological complex makes only 7% of its total cost. Just think about it, the cost of fittings and costs to manage consequences of failures can not be compared at all!
Another disappointing example from our company’s experience:
For 5 recent years more than 25 000 flanged valves and thousand other products (in frame of incoming inspection program) have been inspected in our test bench laboratory.
I would like to notice, that our laboratory is equipped with unique certified test benches that allow providing near-real conditions of operating pipeline and getting high accuracy measurements.
The results are as follows: More than 80% of valves do not correspond to claimed leak tightness class, 15% - scrap. 77% of flanged valves with leak tightness given in technical passport as “A”, in fact, correspond only to “C” class, 30% - “B” class, 11% - “D” class, other – scraped items. (Note: GOST 9544-05)
Scraped items included: improper leak tightness (more than 2D) and major defects. Test reports were done for each valve. Necessary actions were taken as well.
Leak tightness of the most tested valves after five open-close operation exceeded 2D (GOST 9544-05).
Think about it, dear Customers. Bad quality of products results in significant expenses, losses and risks, if we fail to create scrap barrier in time… before the products are in a truck going to your production facilities.
There are several ways to achieve this:
· Plants, that are not able to provide required quality of products should not participate in tenders.
· More rigid quality control at the manufacturing plants.
· Involving specialized organizations, having required incoming inspection technology, up-to-date test equipment, qualified personnel and adequate financial support (though, there are just few such companies in Russia, unfortunately).
The effect is greater when all possible ways are used. However, manufacturing plants usually admit their fault unwillingly. Customers, in their turn accept such situation and use their own resources and bear extra costs, involving their own technical specialists. Did anyone estimate theses expenses?
What we think we need is independent expert – highly professional supplier, able to work with complex assortment orders and meet customers’ requirements. The supplier should defend Customer’s interests on the one hand, and require high quality of the products from manufacturing plants, on the other hand. This will help manufacturing plants become more competitive at the market.
To solve all the issues, mentioned above our Company developed a program, that was introduced at Chief Mechanical Engineers Council of Russian and CIS oil processing facilities in 2007 and is considered as quite perspective and promising. The program is still being improved and even implemented in some oil processing facilities.
Obligatory incoming inspection program made it possible to provide oil & gas companies with valves and fittings in the amount of 1, 5 billion RUR with decreased number of customer claims.
This is a great achievement for us and our customers most of which are oil& gas and energy companies. I would like to turn to the customers and manufacturers of oil and gas equipment with the following:
Let’s think differently, while it is not too late.
Manufacturing plants should be more responsible for quality of manufactured products, provide reliable data in technical passports as well as monitor customers’ comments and recommendations. I think it can be organized by plant’s dealers and distributors. We should struggle with resellers, “gray” companies that just dramatize the situation, not bringing any savings, quality or logistics value.
Customers should be more particular in choosing manufactures and suppliers. The choice should be made on the base of professionalism, resources and capabilities. Price should not be the key factor. There should be a certain number of highly-professional suppliers to develop long-term cooperation.
We are open for any suggestions on supply system development and providing your companies with necessary equipment.
I am sure that smart managers will consider us as a reliable partner and we in our turn will do our best to be the most helpful.
