Article

The time for radical change is now

The UKCS Upstream Supply Chain Collaboration Survey

Supply chain collaboration can be a powerful tool to manage costs, improve efficiency and achieve a variety of strategic aims.

A sea of possibilities

Transforming supply chain collaboration across the UK Continental Shelf

Published, October 2017, Deloitte Insights

In the lead up to the release of our 2017 UKCS Upstream Supply Chain Collaboration Survey, we have taken an in-depth look back at the opportunities and challenges the industry were facing in 2016 around collaboration between suppliers and operators. Our article examines industry behaviours and barriers towards collaboration and the acute need for sharing mutual interest, resources and knowledge to manage costs in the low oil price environment. Our transformation framework provides a four-step action plan and examples on how to implement, track and measure collaboration effectively.

Our 2016 report is the second edition of the UKCS Upstream Supply Chain Collaboration Survey, in partnership with Oil and Gas UK.

Our report looks at how behaviours towards supply chain collaboration have changed in the tough operating environment since 2015 and investigate how operators and suppliers work together more effectively, to build a long-term future in the UKCS.

 

A step in the right direction

The results show some welcome improvements compared with the first edition a year ago: participants appear to collaborate more, their relationships with their suppliers or customers seem to have improved and nearly everyone considers collaboration crucial to doing business in the future.

Is a willingness to change enough?

Clearly, there has been a positive change in the industry since last year. But, despite the radically different operating environment a year ago, when oil prices were expected to be above $60 per barrel by now, has the industry really made a transformational change

Despite more talk and awareness of supply chain collaboration in the industry, company behaviours towards collaboration hardly seem to have changed in the past year. While the main reason to collaborate is cost reduction, half of respondents do not believe that the majority of their collaborative efforts were successful. Collaboration still mainly happens where trusted relationships exists.

But with no oil price recovery in sight, cost pressures will still remain. Therefore there is an urgent need now for companies to take more radical steps to change the way they collaborate to ensure the sustainability and longevity of their business.


How can we learn from the Netherlands?

Dutch operators primarily collaborate to optimise skills and capabilities, and they are also more willing to learn from suppliers than UK operators. Reducing cost and sharing risks with suppliers are not seen as the main drivers of collaboration in the Netherlands.

While there is no perfect way of doing business, and collaboration is merely a tool to achieve objectives. It works for some but not for others. Dutch businesses are more efficient, costs are lower and collaboration scores are higher. There could be a strong correlation between these three factors. 

The framework for radical change

But how can businesses make the radical changes required? For more explanation view our short video:

Our Framework contains four components which are essential to creating effective, impactful and successful collaboration in the UKCS:

  1. Leadership: Drastic improvement needs strong leadership support to challenge existing structures, processes and the status quo
  2. Goals: Collaboration has to be focused and purposeful. Pick a small number of projects that can have a disproportionate effect on your business performance
  3. Alignment: Your and your partner’s business operations, process and systems need to be aligned to create structures around the goal and sustain collaboration
  4. Results: Set specific KPIs and measure the results, then feedback, improve and repeat.
 
 
 
 
The UKCS Upstream Supply Chain Collaboration Survey was conducted in Partnership with OIL & GAS UK
In the current environment becoming more collaborative is critical to survival.
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