The Ghanaian oil and gas industry, though very young, has witnessed substantial growth in recent years, especially after the discovery of oil in commercial quantities in the Jubilee fields about 16 years ago.
This exponential growth in the oil and gas sector of Ghana’s economy has set the right tone, necessitating the establishment of an effective supply chain management system to champion its agenda.
With a production capacity of over 177 thousand barrels per day procured for marketing by Oil Marketing Companies in Ghana, we cannot underestimate the role supply chain management, as well as procurement and logistics, play in this fairly new industry.
With a clear focus on exploring the planning and sourcing aspects involved in creating a strategic supply chain management system tailored to the specific needs of Ghana’s oil and gas sector, this article seeks to delve deep into how we can harness the opportunities of planning and sourcing.
The article also aims to examine key considerations as well as recommended homegrown and result-oriented strategies for companies operating in this ecosystem and finally to provide a comprehensive understanding of how such a system can be developed and utilized.
Supply chain management?
The Terminology Committee of the European Standards Authority has recommended the following definition of a Supply Chain: “A sequence of events that creates the value of a specific good”. This sequence may include conversion, assembling and/or disassembling, movement, and placement.
The process and activities involved in making something more valuable can be said to be what is meant by supply chain management. It also concerns itself with the creation of value, thus making something better than it was in its raw state or transitioning the importance that is associated with a particular item into a more properly valued item.
This is the simple understanding of supply chain management. But it doesn’t end there. Supply chain management goes way beyond value addition and creation.
In appreciating the importance of supply chain management and its relevance to the energy, specifically the oil and gas industry in Ghana, it is also necessary to underline that there are key activities that spearhead the operations of supply chain management.
These activities include:
Plan: Product introduction and business development
Source: Materials and components procurement
Make: Manufacturing, assembly
Deliver: Distribution, logistics sales, and sales services
Our focus, however, is on the first two, planning and sourcing. Organizations operating in the oil and gas industry must realize that the development of a strategic supply chain management system begins with thorough planning. We say the bus stops with planning. The planning process of the supply chain involves identifying a clear goal and objective for the organization’s supply chain system, as well as conducting a thorough analysis of the industry landscape, in this case, oil and gas, and understanding the unique challenges faced by the Ghanaian oil and gas sector.
Planning and setting the right objectives
Getting a correct, attainable, and realistic supply chain management plan is pivoted on how ‘SMART’ the objectives are. The mere fact that most of these organizations usually have vague or not too-specific supply chain objectives can be a good ingredient for the breakdown of their supply chain management system or, even more bizarre, make it easy for them to blame consultants handling their operations for the failure.
Ideally, companies must define their supply chain objectives, which may include but are not limited to reducing operational costs, improving resource allocation for their products and services, taking steps to ensure timely deliveries, or even more generic goals, such as enhancing overall operational efficiency and performance.
In the setting of these objectives, they must be done in connection with the short- and long-term plans of the organization and, more importantly, must be done strategically. And lest I forget, industry-specific objectives are vital. One common mistake that most organizations are guilty of is the wholesale adoption of ideas without specification and localization, as stipulated by the Local Content Legislation LI 2204. With the direction and assistance of the right industry consultants, organizations can avoid these common mistakes and develop more fitting objectives and take ownership of them.
Next, the lack of availability of a more in-depth analysis of the Ghanaian oil and gas industry and failure to understand the sector’s dynamics, competitive landscape, and regulatory framework can be a great hindrance and roadblock to the successful implementation of a supply chain management plan.
Most of the time, organizations lack the requisite data to make the right and achievable supply chain decisions. Some new organizations, with the fear of incurring extra costs, avoid the use of consultants in achieving this, forgetting that it actually costs more not to have the right data, information, and expert advice to make a decision. It is also necessary to reiterate that the right supply chain planning can help reduce costs associated with several processes, which include purchasing, production, inventory management, and even logistics.
This exercise to obtain industry-specific analysis should involve gathering data on supply and demand patterns in the locality and region, identifying potential bottlenecks, and evaluating the performance of existing supply chain practices. It is only by doing so that we can make the right decisions for the development of our organizations. This data will help companies identify areas for improvement where they can build upon existing structures and perform at a very optimal level.
Sourcing right
The second phase of implementing a world-class, successful supply chain management system is preempted by doing the right sourcing. Sourcing forms a very crucial part of supply chain management. By sourcing, we are talking about the selection, evaluation, and management of suppliers with the capacity to deliver on time based on price and availability.
As a very important part of the supply chain, institutions must be strategic about their sourcing policies, styles, and even how they access their suppliers and manage their contracts for optimal performance and delivery.
Drafting and implementing an effective sourcing strategy that is contextualized into the industry and region is significant to ensuring a more resilient, robust, and efficient supply chain system not only for the Ghanaian oil and gas industry but globally.
The strategic sourcing process is preempted by two key considerations: supplier selection and supplier relationship management.
Before the process of selecting suppliers, companies must assess some key factors before making the final decision. These factors include but are not limited to reliability, quality standards, pricing structures, availability of products or services, capacity to deliver, and geographical proximity.
With many upstream and downstream activities happening around the Western Region, it is only right to assume that the presence of your supplier in that particular vicinity would not only support the local economy but also save on logistics costs and time.
Standards
These standards, when duly followed, help organizations meet the specific needs and standards of the oil and gas industry while attaining incident-free operations and excellence in their supply chain management. Many times, companies are eager to get suppliers for the execution of various projects but fall short in the management of supplier relationships and their contract management as well or even vice versa.
Supplier relationship management entails a lot and can be too much for organizations to handle; it tends to make organizations drift from their core mandate and can be very problematic. This is why many organizations outsource their supply contract management as well as execution to experts and consultancy firms. Even though Ghanaian firms are gradually appreciating this, there is a need to come to the realization that the organization cannot do everything.
The nurturing of strong and collaborative partnerships with suppliers, ensuring clear communication channels, and implementing effective performance monitoring systems are best executed by supply chain management professionals. When these activities are properly coordinated and handled, it provides room for enhanced coordination, increased transparency, and improved overall supply chain performance in an organization.
It is evident that the creation of a value-laden supply chain management for organisation planning in Ghana’s oil and gas industry requires meticulous and strategic planning and sourcing. With the direction of clear and attainable objectives that can be used in getting good company benchmarks, it will always be a win for organizations that handle their planning and sourcing right.
Ultimately, sourcing right and planning correctly will contribute to increased operational efficiency, reduced operational and organization costs, the improved service delivery of oil and gas companies, and a competitive advantage in Ghana’s fast-growing oil and gas sector.
The writer is Senior Managing Partner, Fitzgerald-Bassey Consultancy Limited.
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