It’s bust time again. The bubble created by the oil and gas industry in the north east of Scotland has popped once more, only this time it’s different.
Those of us who have been in the industry for some time have seen it before; the oil price crashes and the whole industry goes into meltdown, fast. Projects are postponed or cancelled, drilling activities slashed, contractors’ pay cut, staff pay frozen, there are corporate re-organisations and a spate of redundancies. Then as the oil price recovers the activity tap is slowly turned on again and we all revert to where we were.
However, this time it’s different. Before the oil price reduced by more than half from a high of $115/per oil barrel (Bbl) to a low of $45/Bbl (currently in the mid 60s), the industry was already starting to go through a period of adjustment. This was primarily in response to Wood Review recommendations to ensure the long-term viability of the industry and a number of economic factors – for example, massive operating cost inflation especially between 2011 and 2013 when costs rose by a staggering 62 per cent.
We have already seen significant redundancies across the industry. From a procurement perspective, there are a worrying amount of practitioners looking for a new challenge. That said this is also where the transferable skill set we have could benefit other sectors, such as the construction industry.
This time the bust is forcing organisations and individuals to think differently, work more collaboratively, remove ‘gold-plated’ specifications and delve deeper into the economics of supply.
It is during times like these that the procurement profession can really show its worth by leading the efforts to reduce costs and maximise value from supply arrangements.
I know of one example where a supply function has been ring-fenced from any people cuts (albeit temporarily), so they can drive improvements. Sadly this is the exception.
However, as we reduce costs by the front door we need to be vigilant risk doesn’t creep in through the window.
We also need to be careful we don’t cut things that may prejudice our ability to support the upturn when it comes, and it will.
One such area is people development. Training is always one of the first things to be cut, but we need to ensure we keep the talent pipeline flowing.
We have worked hard as an industry to get a range of procurement and supply training schemes up and running, the CIPS syndicated corporate award scheme being one of these.
I believe the fact that the project element of this scheme delivers real return on investment to the participating organisation means we should continue to support it as much as possible.
The days of boom as we knew it are consigned to history, we are now praying for the very survival of the industry in the UK and to ensure this we must all work harder and smarter.
And we must seize the opportunity for the procurement and supply profession to stand up and lead from the front.
☛ Graeme Urquhart is business improvement (interim) at Talisman Sinopec Energy