BP warning on low-cost sourcing

30 November 2005
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30 November 2005

Better financial news
posted 11:27am 25/11/05

Christina De Luca, chief procurement officer of BP's refining and marketing division, said she was concerned about the threat of disruption to long and complex supply chains.

"Phenomenal progress" had been made in cutting costs through sourcing from countries such as China, she said, but there was a danger that the "inevitable risk" was not always transparent to the rest of the company.

"I worry that the risks in some of our activities may be outweighing the benefits," De Luca told delegates at the ProcureCon event in Brussels last week. "As a procurement community we need to face up to the issue of risk in a very tight supply market."

Security of supply - rather than cost - was currently "the reason for procurement" in some of BP's businesses, because of high demand for key commodities and the pressure to keep production running.

De Luca, who is responsible for $20 billion in annual spend, admitted that LCCS was "not a big area for us; we are slow in this game", but said the US hurricanes Katrina and Rita had showed just how expensive disruption could be.

Forty per cent of BP's global capacity in its chemicals business had been knocked out for six months as a result of the damage wreaked by the natural disasters, she said.


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