Summary In the contemporary business environment, digital procurement is becoming increasingly popular and sought after by businesses around the world. The relationships …
How consultants can revolutionise procurement in oil and gas businesses
Transform your procurement processes with expert guidance from digital transformation consultants.
Why is procurement a strategic function in oil and gas?
Procurement is a strategic function in the oil and gas sector due to its critical role in managing costs, ensuring timely delivery, and maintaining supply chain efficiency. With crude oil procurement projected to grow at a CAGR of 3.56% and natural gas utilities at 7.28% from 2023 to 2027, the industry faces rising prices and moderate supplier bargaining power.
Effective procurement strategies are essential to navigate these challenges, optimise spending, and ensure uninterrupted operations—making it a vital component in the overall success of oil and gas companies.
How do consultants enhance procurement in oil and gas?
Strategic insight
Consultants bring industry-specific expertise to the table, enabling oil and gas companies to develop tailored digital procurement strategies that align with sector-specific challenges. By leveraging their understanding of market dynamics and technological advancements, they craft strategies that not only streamline procurement processes but also position companies to capitalise on emerging trends. 55% of companies plan to increase investments in supply chain management technologies, with 42% set to invest over $10 million, reflecting a strong commitment to digital transformation.
Cost reduction
In the oil and gas sector, where purchased services and products can account for more than 50% of total costs, even minor cost reductions can lead to substantial profit increases. Procurement consultants play a critical role in identifying these opportunities by streamlining procurement processes, introducing automation, and optimising supply chain operations. According to research, reducing purchase costs by just 5% can significantly improve margins, underlining the importance of strategic procurement management in an industry where cost efficiency directly impacts profitability.
Risk mitigation
Consultants enhance procurement in oil and gas by ensuring that digital procurement systems are secure, compliant, and capable of mitigating risks. They utilise advanced risk management technologies and solutions to provide actionable insights, enabling better decision-making across the procurement process. With 57% of companies reporting improved decision-making due to these risk insights, consultants help safeguard operations against potential disruptions, ensuring that procurement management strategies are resilient and align with both regulatory standards and best practices.
Enhanced supplier management
Effective supplier management is critical in the oil and gas industry, where supply chain disruptions can have far-reaching consequences. Consultants help facilitate better collaboration and communication with suppliers, fostering relationships that lead to improved resource utilisation, supply flexibility, and environmental benefits. Enhanced collaboration across the value chain can result in greenhouse gas emission reductions of 10% to 25%, highlighting the role of consultants in driving sustainability and operational efficiency within the sector’s complex supply networks.
What steps can businesses take to future-proof procurement in oil and gas?
Supply chain disruptions in the oil and gas industry could account for more than 20% of the industry’s CAPEX growth plans at risk this year, which is why businesses must proactively future-proof their procurement strategies.
Diversify the supplier base
Reducing reliance on a single supplier or region by diversifying the supplier base can mitigate the risks of supply chain disruptions. This approach ensures continuity even if one supply source is compromised, safeguarding CAPEX growth plans.
Invest in digital procurement technologies
Adopting digital procurement tools like blockchain and predictive data analytics can enhance visibility, streamline processes, and provide real-time insights. These technologies help anticipate disruptions and make informed decisions quickly.
Strengthen supplier relationships
Collaborative relationships with suppliers can lead to better communication, increased flexibility, and mutual trust. This collaboration is crucial in times of disruption, enabling the resolution of issues and ensuring a steady supply chain.
Implement risk management strategies
Proactively identifying and addressing potential risks through comprehensive risk management strategies is essential. This includes conducting regular risk assessments, scenario planning, and incorporating risk insights into procurement decisions.
Focus on sustainability
Integrating sustainability into procurement not only addresses environmental concerns but ensures long-term viability. Sustainable procurement attracts potential investors, improves compliance, and reduces risks, making the business more resilient.
Enhance workforce skills
Continuous training and upskilling of teams in technologies, data analysis, and strategic sourcing can equip them to handle future hurdles. An agile and knowledgeable team can quickly adapt to changing conditions and implement innovative solutions.
By taking these steps, businesses in the oil and gas sector can better manage the uncertainties of supply chain disruptions, protect their capital investment plans, and ensure sustainable growth.
Create an impact in your procurement processes with Kronos Group
Elevate your procurement processes with Kronos Group. Our procurement consulting services empower your organisation to optimise sourcing, drive cost efficiency, and enhance supplier relationships through tailored strategies and innovative solutions.
By leveraging data-driven insights and cutting-edge technology, we help you mitigate risks, improve decision-making, and achieve sustainable growth. Partner with Kronos Group to transform procurement into a strategic advantage that delivers measurable impact across your entire supply chain. Unlock your procurement potential with us.
Kronos Group’s expertise can elevate your procurement chain management processes to new heights
Elevate your procurement processes with the specialised expertise of Kronos Group’s procurement consulting services. Our team combines deep industry insights with innovative strategies to optimise your supply chain, driving efficiency, value creation, and ethical decision-making. Partner with Kronos Group’s procurement consulting to transform your procurement function and achieve lasting success.
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FAQ
Procurement in the oil and gas industry plays a critical role in sourcing, acquiring, and managing the materials, services, and equipment necessary for operations. It ensures cost efficiency, compliance, and the timely delivery of essential resources, while also mitigating risks associated with supply chain disruptions.
The main categories of procurement in the oil and gas industry include direct procurement, indirect procurement, capital procurement, and operational procurement.
Oil and gas companies should consider the consultant’s industry expertise, track record in managing large-scale projects, understanding of regulatory compliance, ability to drive cost efficiencies, and proficiency in leveraging digital procurement technologies. Strong communication skills and a collaborative approach are also crucial for a successful partnership.
