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Advancing the Middle East’s oil and gas industry through digital procurement

Apr 30, 2018
4 min read
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By: Dan Quinn, senior vice president at JAGGAER MENA / Tejari

It is no secret that the regional oil and gas sector has been reaping the rewards of technology investments for a number of years, and this is not about to change anytime soon. This is of particular importance to the procurement function.

According to Deloitte, more than 60 per cent of procurement leaders globally predict that supplier management, sourcing and operational buying, and business planning and strategy development will undergo the biggest changes due to digital technology over the next five years. Digital supply networks are evolving, connecting all parts of the supply chain, and insight-driven organisations are applying advanced analytical capabilities to enhance performance.

This digital transformation is making it easier than ever before for a procurement function to effectively play a significant role in optimising business and its supply chain, while delivering cost savings. It reduces strategic sourcing costs and cycle times by 30 per cent and reduces data-collection errors, leading to cost savings.

So, what exactly does this mean for the oil and gas industry?

Even before the downturn in oil and gas prices, leading organisations in the region’s oil, gas, petrochemicals and manufacturing sectors were starting to see the benefits in investing in procurement technology.

This digital technology enabled them to streamline their procurement operations and projects to deliver significant value.

When times are difficult, take the oil price downturn for example, oil and gas organisations find themselves in a position where they must achieve more with less resources. To have a chance of achieving this, more and more organisations must take advantage of the exponential growth in digital and turn to procurement technology. This is to be able to effectively identify sources of potential value through advanced analytics, unlock it through sourcing and negotiation tools and retain it in the business through effective contract, performance and risk management.

The supplier community should also be treated as a strategic asset to be cultivated and turned into a competitive advantage so should be at the heart of all great procurement strategies. The best suppliers are often the source of your mission success and your greatest source of innovation and value potential. But some can also be a great source of risk and profit leakage if their performance trends are not systematically monitored, risk managed and the poor performers either formally developed or managed out.

Advanced supplier value management allows you to raise your supplier communities’ capabilities and performance and unlock greater sources of value together while reducing risk. For example, driving organisational excellence or safety initiatives down the supply chain has a multiplier effect along the whole industry supply chain. This then starts to raise the capabilities of the local suppliers which in turn means that GCC suppliers are better able to compete on a world stage.

And how does this all help the Middle East region? According to a report by BP, the Middle East remains the world’s largest oil exporting region, and the second largest gas producing region. Therefore, it is crucial that opportunities to unlock value and boost productivity are identified throughout the entire supply chain – technology has the power to do this. This productivity is at the core of regional economic growth.

Technologies enable businesses to do a lot more with less. If technology is at the heart of productivity, then the procurement function are the lungs of it. Procurement manages the acquisition of assets and the management of the supply chain in meeting their mission requirements.

Due to this, there has been a great deal of innovation in procurement technologies that drive value in both public and private sectors. In particular, these digital innovations increase transparency and productivity while engaging healthy competition.

The region’s fortunes for many years have been in lockstep with the markets for oil and gas. With sustained lower prices, oil and gas organisations are obliged to find new ways to unlock true value – this is where digital procurement comes in. With this added value, it can be said that procurement technology is without a doubt an enabler of continued growth for the Middle East and for the oil and gas industry.