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Collaboration, Culture Key to Supply Chain Optimization

After more than a year of calls from operators to cut costs, no one would begrudge companies in the oilfield for thinking that cost reduction is nothing more than a one-way street.

Attendees at PESA’s 2016 Supply Chain Management Seminar heard from a variety of speakers, including the supply chain leadership of Hess and Apache, that operators, drillers, and service and supply companies must work together to achieve meaningful and lasting cost reductions that benefit everyone.

Evelyn MacLean, Vice President, Global Supply Chain at Hess started the morning off with a key question, and an important answer that would set the tone for the seminar: “How do we lower costs within the industry?  My passionate view is that we can do it together.”

MacLean went on to highlight the work that Hess has done to integrate lean principles into its business.  A key part of these efforts has been expanding collaboration with suppliers.

Apache’s Mark Hood carried that collaboration theme forward, while also highlighting his company’s efforts to increase centralization.

In some cases Apache has moved to vertically integrate activities, such as sourcing of more than 55,000 truckloads of frac sand, back into the company.  However, Apache is “taking a holistic approach” and working with partners to realign its cost structure.

Hood closed his presentation with the message that “a dollar in sustainable cuts is work more than a dollar in price concessions.”

The second half of the Seminar focused more on how to make the cost savings sustainable in a way that benefits service and supply companies just as equally as operators and drillers.

Dave Pursell, Managing Director and Head of Macro Research from Tudor, Pickering, Holt & Co. provided an economic overview of the marketplace.  By highlighting historical and recent trends in oil and gas prices, Pursell touched on the need for the industry hang onto cost savings when oil prices go up.

Pulling everything together, and offering some thoughts on how companies can retain those savings, was Dr. Barry Lawrence Coordinator of the Industrial Distribution Program at Texas A&M University.

Dr. Lawrence told attendees that the current marketplace is an opportunity to significantly reduce costs for the long-term if the industry works together to capitalize.  Referring to reactions across the marketplace to past price drops, Lawrence challenged the audience: “Is [sustaining cost reduction] really going to happen this time?”

Based on his work with other industries, Dr. Lawrence pointed out that the key problem facing the industry is cultural and convincing people that these reductions need to stick for the health of the entire industry but especially for the health of service and supply companies.

Lawrence closed his presentation by highlighting the game-changing nature of transparent data and information, calling it a “wildcard” that could have a real impact since individual companies see each others needs as they work collaboratively.

Following the event, PESA sent out a survey to attendees, with a strong majority of respondents finding great value in the speakers and the Seminar as a whole.  Below are a few responses to the survey:

“This was a great seminar that gave us valuable information that will only help our supply chain group only get better!”

“Great combination of academic and non-academic insight. I’m a young professional and this really hit home with me.”

The slides from the Seminar are available online at https://pesa.org/archives/2016-supply-chain-seminar/.  The Supply Chain Committee is planning additional activities for 2016; if you are interested in getting involved, please contact Ryan Bowley at rbowley@pesa.org.