IIAPS roundtable – evaluation processes in the oil and gas sector

At the International Institute for Advanced Purchasing and Supply (IIAPS) roundtable earlier this month, Norman McLellan of Oil and Gas UK led a session entitled "evaluation processes for suppler selection in the upstream oil and gas sector".  (Oil and Gas UK are an industry body that enable key sector supply chain stakeholders to come together to respond to industry challenges).

Please don't stop reading just because you're not in that sector; there were points to consider, we’d suggest, for procurement professionals in many industries.

The session featured the benefits of using an industry collaborative supplier information system, FPAL, which is ‘powered by Achilles’ as they put it.  FPAL is a database of supplier information, that enables purchasers to identify and select potential suppliers.  It also provides a means for suppliers to express interest in supply opportunities, communicated by the buying firms. It saves time and effort for both sides in terms of reducing the need for multiple pre-qualification processes  - whether it is completing PQQs (suppliers) or developing and assessing responses (buy-side).

There's a basic registration for suppliers and a more advanced option, which gets into more detail on capability, environmental and health & safety issues etc.

Many of us will have seen such tools before. Where this gets really interesting though is the additional capability around performance. Buyers can record the performance of suppliers, which builds into a useful record, and encourages continuous improvement. And suppliers can also rate the buyers on a range of issues, such as how good the specification was - now there's an idea that has some interesting ramifications!

The particular issue that triggered debate was around competitive advantage. Are the oil and gas firms sacrificing it by using a common system? There were several schools of thought.

1. You might sacrifice some competitive advantage, but a fairly limited amount. But is gathering and managing supplier information something you really want to compete on? And as the economies of scale for Achilles to run this process across many firms are considerable, one firm would have to spend a whole load of cash to ‘compete’ with even a basic FPAL service.

2. Oil and gas firms don't "compete" in the traditional manner - or at least where they do, perhaps around exploration, it is not something that is jeopardised in any way by using FPAL.

3. The competitive advantage comes in how you use the FPAL data, how you run your tenders (FPAL is generally used at PQQ, not tender stage) and how you manage your suppliers, rather than from supplier information and verification.

There's some truth in all of these - the overall conclusion being this does look like a sensible process for this industry.   And the IIAPS debate then moved on to which other industries might use something similar? Delegates felt that some sectors - or supply markets within sectors - were just too sensitive for such collaboration - but that there are probably plenty of other industries that could usefully use something like this.

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