The Challenge
A mature tier-2 National Oil Company (NOC), with upstream and downstream operations, including a complex refinery, needed to streamline its processes, reduce costs, and build capacity ahead. These upgrades were necessary to position it for a potential IPO and the ability to attract and raise international financing for aggressive growth. Meanwhile, an Ernst and Young external audit had identified its supply chain management as a major source of weakness requiring urgent attention.
The SCM organization was notoriously inefficient and ineffective, fragmented, lacked professionalism, and with limited visibility across the enabling supply chain network. Third party costs were rising uncontrollably, and lead times for goods and services were unreliable with negative impacts on business delivery, particularly refining operations. The supply chain was also a major health, safety, environment, and quality threat to the organization.
Our Goal
To deliver transformative end-state supply chain management for the enterprise based on world class strategies, systems, processes and people.
Our Approach
We developed a Supply Chain Transformation strategy underpinned by a 5-year plan with six pillars as follows:
- Health, Safety, Environment and Quality (HSEQ);
- People and Organization;
- Value Delivery;
- Functional Excellence;
- Compliance and Assurance; and
- Enablers.
Each pillar was detailed out in three reinforcing and overlapping implementation waves: immediate (within 12 months); short term (>12mths to 36 months); and long term (>36 months). A program office was inaugurated with a detailed Change Management Plan, Key Performance Indicators (KPIs), and a Performance Management Dashboard. The Change Management Plan was championed by the Managing Director, sponsored by the Finance Director, and steered by a Committee of Senior Business Leaders, and with fortnightly progress reporting to the Board of Directors.
Results after 12 Months
- A signed off SCM strategy and implementation plan, with Board buy-in
- Development and deployment of an SCM Governance Model
- Selection, training and onboarding of Contract Board members from the Leadership Team
- A New Operating Model for a centralized SCM function, rationalized staff types (from 4 to 2), reduced headcount (by 25%), and reduced SCM function cost (by 20%)
- Consolidation, standardization and reduction of inventory (17% by value; 26% by line items)
- Reduction of transaction volume (Number of Purchase Orders) by 37%, increase in the average value of transactions by 25% (principally through the simplification of procurement via a Procurement Card), and reduction of transaction cost by 22%
- Third party spend savings for major categories from a negative position to 12%
- Implementation of staff development plans, enrollment of staff in SCM continuing professional development (CPD), and training of 20 staff in Strategic Sourcing