17 October 2002 | David Arminas
Procurement's success in saving money at Shell meant it was now consulted on major acquisitions, Tony Collins, business process excellence manager at Shell International, told delegates.
The need to save $5 billion after oil prices collapsed in 1998 meant procurement had to move from a narrow buying function to a critical business activity.
Purchasing had to seek global leverage and improve its database on suppliers and buying.
"But we had a decentralised organisation and we were trying to put a centralised procurement strategy in place," Collins said.
E-procurement has been an enabler in these savings, "but only an enabler", Collins said.
He admitted that Shell's first attempt at e-procurement in early 2000 was unsuccessful because of a lack of data links to back-office systems.
However, an industry-wide exchange improved Shell's e-procurement, although transactional e-procurement has so far cost around $100 million and has yet to deliver returns.
But online bidding has saved more than $100 million.
Around $500,000 worth of contracts were bid in 2001 and in 2002 the same value was reached in the second quarter.
Although procurement has moved into a strategic role, Collins said Shell must now focus on people development, such as managing projects.