Sourcewater: The journey from industry marketplace to industry optimizer
Josh Adler is the Founder and CEO at Sourcewater, an online marketplace for the oil and gas industry that’s transforming the water supply chain in upstream operations.
Josh recently spoke at the annual Oil and Gas Supply Chain and Procurement Summit in Houston (held in partnership with ISM-Houston), presenting a unique case study on the importance of water management in supply chain performance. We interviewed Josh after the Summit to find out more about Sourcewater’s exciting journey, which you can check out in this four-piece insights series:
Visit Sourcewater for your free water data search.
Insights on supply chain optimization with PowerAdvocate
James Wagstaff, Vice President – Oil & Gas, PowerAdvocate
Jayme Mendal, Senior Director – Oil & Gas, PowerAdvocate
What trends in demand are you seeing from energy sector clients in terms of supply chain performance needs?
A key need we’re seeing from our clients is access to better data on which to base their decisions. For example, there are two broad categories of information that our clients are seeking.
The first would be much better and more accurate and reliable information on their own costs – so their internal data. It’s about answering questions at a very detailed level, what’s actually driving cost differences across their wells, across their suppliers, and across their areas of operation.
The second information need relates more to what’s happening in the market and how they’re performing relative to the market. This is more about answering questions like, “How is the market price for well stim or drilling fluids moving relative to our pricing?”
Our clients are trying to figure out how we can ensure that our pricing remains in line with what’s going on in the market – particularly as things begin to turn.
What are the challenges emerging as a result?
What we’re seeing routinely across the industry is a total focus on enterprise cost reduction. It’s not necessarily an emerging trend, but it’s really important by virtue of the fact that markets are difficult to manage. As commodity prices shift, companies need to be able to pivot spend dollars quickly and organize around a new focus, which, for today’s conversation, is really a cost-reduction one.
We’re hearing from the whole industry where can we save money? How can we be more competitive in the market? And what are some really creative ways to do that?
Traditionally it’s a role that category management and supply management focused on. Given the importance of cost management in today’s market, as well as the risk of losing some of that momentum because of the upturn, cost management is now comprehensively addressed all the way up to the CFO. Ultimately, everybody has to focus on this requirement.
How have your services improved commercial outcomes for clients in the oil and gas industry?
I’ll give two examples. The first one is with Spend Intelligence. We delivered a client spend data with vastly improved granularity and accuracy and tied it to their well information. The aim was to help them analyze the cost efficiency of their vendors in a new way.
For example, they took a look at wireline, which is a very high spend category. Historically what our client had done was compare vendors by price. One has a higher price; one has a lower price, and the company makes a decision based on that. The issue is that this approach often overlooks many hidden costs buried in how those different suppliers operate – non-productive time and so on.
We were able to shift the focus from price to total cost and began to analyze what the actual cost was that they paid to a vendor on a normalized unit of measure. In this case it was dollars per completed stage of wireline. The findings were pretty surprising. It turned out that the vendor that was previously perceived to be as the least expensive based on their price, was actually one of their highest cost vendors on a per stage basis when you looked at the actual total cost.
As a result, our client made a decision to begin shifting some of their business to another preferred vendor, and that’s expected to yield about three million dollars in annual savings across the business over the coming year. That’s a big win for the company.
The second example deals less with the way that a company looks at their internal data and internal costs, and more about pulling the external market information into their decision-making and negotiation processes.
There’s a client who used cost models and should-cost analysis. They’ve embedded this data and these tools in their process to validate proposed price increases by suppliers. For example, last month, one of its primary OCTG suppliers proposed a three-and-a-half or four percent price increase.
The company took that information, looked at the cost model, ran a should-cost analysis on it, and was able to demonstrate that, in fact, the fair market increase was half that much.
They presented that back to the supplier, which actually accepted this finding because it was rooted in data. In doing so, they avoided about 50 percent of the proposed price increase, which in that case is going to amount to about a million dollars over the next six to 12 months.
How has your own business model changed by engaging with clients?
I would just add one piece to that too. PowerAdvocate works exclusively with companies that operate in the energy industry. One thing we’ve found as a company is we really need to make sure we stay on top of the key trends as they’re occurring.
As an example, if we’re seeing that there’s a particular dislocation in a services market or in a materials market, we need to be able to quickly gather information and develop insight. We deliver that in real time so that our customers, who are on the frontlines negotiating, putting contracts in place, and executing projects, have that information readily available.
In terms of our service model, we are always thinking about how to help our customers move faster when they have, for example, a $100M initiative to drive down cost and need a roadmap and data immediately.
What’s the value of sponsoring the Oil and Gas Supply Chain and Procurement Conference?
We’ve always taken a very value-based approach serving our customers. It’s all about sharing best practices and data and information to help our clients improve. I think in an educational venue like this where you have a bunch of peers sharing best practices and learning from one another is a perfect place for us to insert ourselves into the dialogue and participate in it.
The value is in continuing to learn from and share valuable information with peers and clients in the industry. I think everyone’s focused on the same end goal, which is to drive and keep costs down in any market environment. This a valuable venue to work towards that.
I agree with everything Jayme mentioned. We just really value opportunities to help facilitate conversations around best practices and get customers in one place to share that experience. These educational-oriented events we think are really important.
Learn more at: COST INSIGHTS
How 6 oil & gas companies are enhancing supply chain performance
Supply chain and procurement have become crucial functions within oil and gas companies to manage costs and remain productive at the same time. And integrated supply chain management has paved the way for companies to become proactive and achieve that balance. But how do they create an integrated setup without increasing capital and operational expenditure?
At the same time, how can they enable an operating model of continuous improvement over the long-term to manage supply and demand?
Ahead of Oil and Gas Supply Chain and Procurement 2016, we explore how six companies are addressing key criteria to ensure the supply chain and procurement functions consistently support business objectives and deliver value to all stakeholders – from internal business units to suppliers and the end customer.
Read the short booklet: How 6 oil & gas companies are enhancing supply chain performance
You can learn more about the strategic setups of the following companies, including how they are reducing operational risk, cost, and increasing efficiency to meet customer expectations:
- Apache Corporation
- Port of Houston Authority
The strategy behind FMC Technologies’ Sourcing and Procurement Integrated Services
Ahead of the Oil and Gas Supply Chain and Procurement Summit in December, German Torres, Program Manager Leadership, and Supply Chain – Global, FMC Technologies, shares insight into how the organization’s sourcing and procurement function is designed to support business objectives in a proactive capacity.
German Torres, Program Manager Leadership and Supply Chain – Global, FMC Technologies
FMC Technologies SPIS – Sourcing and Procurement Integrated Services – is an organization covering all aspects of supply chain management including all businesses the company operates in: subsea products and projects, surface technologies, and subsea services.
The organization is designed to meet our customers’ requirements through optimal execution whilst ensuring key strategic objectives are met with outstanding supplier relationship management, category management, and best cost sourcing.
FMC Technologies has a very diversified supply chain including standardized products and engineer-to-order products as well as different degrees of customization.
To meet these challenges SPIS relies on a center-led organization where category teams work across all business units to maximize the benefits of a centrally orchestrated supply base; whilst regional teams command and execute daily operations.
Continue reading the full article here: THE STRATEGY BEHIND FMC TECHNOLOGIES’ SOURCING AND PROCUREMENT INTEGRATED SERVICES
You can learn more about:
- Using key performance indicators to balance safety, quality, and cost across the supply chain
- How quality engineers work closely with the supply base to improve processes and reduce costs
- Centralizing the Sourcing and Procurement Integrated Services (SPIS) in support of business objectives