Leadership Commitment to Strategic Suppliers Makes a Big Difference

I visited a Canadian oil and gas company this week, and participated in their first annual Supplier Day.  The forum was an opportunity to share insights on the oil and gas business in North America, communicate issues and challenges that exist, and create an opportunity to exchange ideas on how to address them.

The meeting was opened up by the CEO of the company, who shared his thoughts with the suppliers on some of the issues facing everyone in the oil and gas supply chain in Canada and the US.  He emphasized the changing nature of the industry – and the fact that “Today, we know there’s enough natural gas on the continent to last more than 150 years … knowledge that has given rise to the use, or some may say overuse, of phrases like “energy renaissance” and “energy independence” … and also to some of the most affordable natural gas prices we’ve seen in the past decade.”

He then emphasized how the changes in the industry would be impacting everyone along the supply chain, including the people in the room.  “This is happening because, simply put, over the past five or six years, we’ve seen what  is certainly the biggest change in my 25 years in the industry … a complete re-shifting of where gas is being produced.  What that means is that just as traditional sources of supply are in decline, sources that only a decade ago were uneconomical to recover are now in play, thanks to advancements in technologies such as horizontal drilling.  You’ve probably heard about the Marcellus and Utica shale plays in nearby Pennsylvania and Ohio. We’re also seeing growth from the U.S. midcontinent … Colorado, Wyoming, Kansas … as well the Gulf Coast and in B.C. At the same time, for us here in Ontario and points east, we’re seeing less gas making its way from Western Canada, which has traditionally been our largest source of supply.”

The final part of his discussion revolved around the impact of these changes on the company’s strategic plans for the future:  “So we’ve been focused on two things for the past few years. First, connecting into some of these new resource basins, so we continue to have good, diverse sources of supply coming in … and second, ensuring we have the right infrastructure in place here so we can move this gas to the communities that need it.”

Following his presentation, a group of VPs from Engineering, Operations, Sales, and Procurement all spoke at the conference.  This was a remarkable presence, with all but two or three of the senior executives from the company present at the meeting.  The next day, there was a series of breakout sessions to discuss a number of opportunities for improvement, including topics such as:

–       Communication disconnects between engineering and procurement

–       Lack of access to decision-makers

–       Lack of feedback on performance

–       Lack of feedback in cases when suppliers are not awarded a bid

–       Involved too late on major projects, too many surprises

–       Supplier ideas  for cost savings and innovation

–       Dealing with push-back from engineering on procurement involvement

These are issues that anyone who has worked in the oil and gas industry is all too familiar with, and not at all uncommon in most companies I’ve worked with.  But the point is that they were openly discussing the issues, and talking about solutions to deal with them.

The suppliers who walked away from this meeting left with an important message in their heads:  Senior management at this company cares about us, and knows who we are.  And that means that we are going to take them much more seriously as a customer of choice.