How to Remove Blind Spots in Oil and Gas Procurement

The oil and gas industry is faced with a constant challenge to innovate to rise to the constant demands associated with procurement processes. With suppliers, stakeholders, and anchors involved in the process, failing to identify potential blind spots can affect the overall success of procurement activities. Procurement regulations are one of the many issues that the industry needs to tackle. As the demands for efficiency, accountability, and sustainability increase, addressing nagging issues as early as possible can produce long-term success.

Blind Spots in Oil and Gas Procurement Regulations 

The procurement process needs to have smooth functioning to ensure continuous operation. If there are inefficiencies, the procurement ecosystem will also suffer. Identifying blind spots creates a resilient procurement environment that can mitigate risks and provide a more transparent process. These are the common types of blind spots that can affect the oil and gas procurement process: 

1. Lack of Transparency in the Supply Chain

Procurement considers transparency as its cornerstone, and without visibility, there will be delays that can eventually cause bigger problems. Transparency allows the industry to make sound decisions, prevent risk exposure, and track the origin of materials. It is difficult to verify a supplier's sustainability when there is no transparent supply chain.

2. Inadequate Risk Assessment and Management

The oil and gas industry is exposed to various challenges, such as fluctuations and geopolitical issues. The lack of risk assessment and management will result in financial losses, disruptions, and even damage to reputation. Before the industry can implement risk management strategies, they need to identify and understand the risk.

3. Limited Supplier Diversity

Business sustainability is driven by supplier diversity. It is, in fact, the core element of risk mitigation. However, the industry struggles with limited supplier diversity because of the small pool of suppliers to rely on. If this situation does not change, there is a greater risk of creating vulnerabilities within the supply chain. When addressing this blind spot, it is important to seek a more inclusive supply chain.

4. Inefficient Data Management and Analysis

Any strategy that the oil and gas industry has put in place will not yield meaningful results unless they are based on market data. This is why industries that have inefficient data management and analysis are left in the cold because they are missing market opportunities and falling behind the competition. The absence of data management also leads to poor decision-making. Centralising procurement data and implementing advanced analytics tools will overcome these challenges.

5. Compliance Challenges

Compliance with procurement regulations is another vital component that the oil and gas industry cannot afford to miss. While non-compliance has legal implications, it can be addressed through continuous training for procurement professionals, regular compliance audits and a solid supply chain management system.

Strategies for Removing Blind Spots 

These proactive strategies can help oil and gas companies dig deeper into the problem and provide sure-fire solutions:  

Improving Risk Assessment and Management 

The first step to conducting a comprehensive risk assessment is understanding potential risks by evaluating economic, geopolitical, operational, and environmental risks. The assessment will serve as a foundation for creating effective risk management strategies.  

Once there are risk management strategies, the next step is to establish a framework that outlines contingency plans, mitigation strategies, and tools to use for continuous monitoring.  

For oil and gas companies relying on a limited number of suppliers, diversifying suppliers will help mitigate concentration risk. 

Promoting Supplier Diversity 

Diversity goals and benchmarks foster a diverse supplier base. When setting diversity goals, it should be aligned with the company’s objectives, which need to be reviewed regularly to monitor progress. For these goals to be realised, seeking and supporting diverse suppliers should be a top priority. When seeking diverse suppliers, consider engaging with minority-owned or underrepresented businesses. The strategy will involve supplier diversity initiatives, partnerships with diversity-focused organisations and outreach programs.   

Enhancing Data Management and Analysis 

Deriving valuable insights from procurement data is the product of an advanced analytics tool. Making informed decisions and enhancing overall efficiency can be improved with predictive analytics, data visualisation and machine learning.  When it comes to data-driven decision-making, procurement teams’ involvement in the execution and training programmes is vital to enhancing and empowering the capabilities of procurement professionals.  

Addressing Compliance Challenges 

Conducting regular audits and assessments of procurement regulations addresses compliance challenges by identifying areas of improvement. A well-structured compliance management system developed with monitoring mechanisms, policies, and procedures will help kickstart the process. The system must be adaptable to changes in procurement regulations and standards to achieve a high level of compliance. 

Best Practices  

Removing blind spots in oil and gas procurement is not a one-and-done process. It should be an ongoing process that requires a strong commitment:  

Review and refine procurement processes 

There can be other blind spots that companies have not yet addressed unless they conduct a regular assessment.   Gather their feedback and observations to evaluate the areas that need immediate attention.  

Promote a culture of transparency and accountability 

Developing transparency and accountability involves setting clear expectations, holding all suppliers and stakeholders accountable for their actions, and promoting open communication. In cultivating this culture, everyone must be actively involved in executing these practices.  

Training and development  

Systems to improve the overall procurement process should not be the only aspect that oil companies should invest their time, money, and effort in because people are the biggest asset that will dictate the outcome of these procurement strategies. Procurement professionals who are equipped with knowledge, tools and skills can navigate into oil and gas procurement with ease.  

What’s Next 

Eliminating blind spots requires multifaceted strategies with a proactive and collaborative approach. It involves the participation of all sectors to guarantee a successful future in procurement. In staying ahead of the curve, technology will play a crucial role in navigating the challenges of oil and gas procurement.

Make the journey to resolving uncertainties surrounding oil and gas companies with POINTRADE'S digital platform. Amplify your procurement strategy with a solution that targets key aspects of your business to ensure interoperability and operational efficiency regardless of the risks ahead.