Transcript Supply Chain Code of Practice

The New Oil and Gas Industry
Supply Chain Code of Practice
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Supply Chain Code of Practice
 Initially developed by a work group established by ILT / PILOT
under the Progressing Partnership banner (PPWG)
 The Supply Chain CoP is one of over 10 initiatives launched by
PILOT and outlines a set of best practice guidelines
 First adopted by the industry in 2002, signatories undertake to
work towards full compliance with the Code
 Signatories include major purchasers (operators and principal
contractors) and suppliers (providers of goods and services)
 The Code is endorsed by PILOT, the Industry Leadership Team
and the key Trade Associations
 In July 2005 the PPWG SCCOP Work Group was disbanded and
replaced with a new Supply Chain Steering Group which reports
directly to ILT / PILOT
SCCOP Industry Involvement
Major Purchasers and
Suppliers
PILOT
Operators
Industry Leadership Team
Supply Chain Steering Group (9)
Supply Chain Managers Network (50+)
Supply Chain Steering Group
ILT (Supplier & Operator)
2
DTI
1
Standard Contracts
1
FPAL
1
SCMN
2
UKOOA / LOGIC
1
Marketing / Communications
1
Supply Chain Managers Network
Work
Group
Work
Group
SCCOPWork
Group
Work
Group
Work
Group
Operators
30
Trade Associations
6
Major Contractors
10
Industry Groups
6
SCCOP Work Group
DELIVERY
Operators
2
Major Contractors
4
Industry Groups
3
The PILOT 2010 Vision
 To make the UKCS the safest place to work in the worldwide oil
and gas industry
 Production at 3bn BOE per day in 2010
 UKCS capital investment sustained at £3Bn per annum
 Prolonged self-sufficiency in Oil & Gas
 Supporting up to 100,000 more jobs than there otherwise would
have been by 2010
 A 50% increase in oil and gas exports by 2005
 £1 billion per annum additional revenue from new business
PILOT Initiatives
UK Norway
Cooperation
Wells Share
Initiative
Access to
Infrastructur
e CoP
Supply
Chain CoP
Decommissioning
Subsea
Effectiveness
Commercial
CoP
Stewardshi
p
The Fallow
Process
Step
Change in
Safety
Technology
Supply Chain
Efffectivenes
s
Workforce
Capacity &
Capability
Progressive
& Innovative
Licensing
Code of Practice Objectives
 Increased UKCS Supply Chain competitiveness through
improved efficiency and reduced waste
 Improve working practices, commercial behaviours and
purchaser / supplier relationships
 Regular and detailed forecasting of activity levels.
 Enhance and simplify the bidding process.
 Prompt payment.
 Active two-way relationship management.
Supply Chain Code of Practice
The original Code comprised 6 sections
1.
Commercial Stage - Forecast/Planning all activity up to the
point of tender
2.
Commercial Stage – Tendering all activity up to the point of
contract negotiations, including elimination of bidders
3.
Commercial Stage - Negotiation agreement of contract
terms
4.
Commercial Stage - Implementation and review through the
life of the contract and at the end of the contract
5.
Commercial Stage - Monitoring and Evaluation of Code
6.
Implementation and Adoption of the Code
… commitment received from 80+ Operators and Major Contractors
Supply Chain Code of Practice
Code of Practice for Suppliers was developed in 2003
Stage 1
Forecasting and Planning – To provide more
effective business cycle planning.
Stage 2
Tendering – To reduce the cost of bidding.
Stage 3
Negotiations – Cut waste and reduce unnecessary
paperwork.
Stage 4
Implementation and Review – Getting the job done
right.
Stage 5
Monitoring and Evaluation of the Code – Assuring
process is in place.
… commitment received from 300+ suppliers and contractors
The Code is endorsed by:
PILOT,
Leadership sign-ups
Team,
Chain
…For
it’sitIndustry
ahas
realsignificant
achievement
forSupply
thealready
Industry
…
latest
information
see
PILOT
Website
Steering Group, Supply Chain Management Network,
DTI,
EIC, FPAL, IMCA, OCA, UKOOA, WSCA
http://www.pilottaskforce.co.uk/
Supply Chain Code of Practice
 New clean and simple format
 Signed by CEO and Supply Chain Manager
 Simplified structure
PLAN
CONTRACT
PERFORM & PAY
 New features include
 Industry Model ITT’s
 “Fair” contracting principles
 “Value based” contracting
 More efficient Code implementation survey
 Drafting party represented all industry groups
Supply Chain Code of Practice
PLAN
CONTRACT
PERFORM & PAY
 Communication of forward plans to industry
 Provide support for Share Fairs
Structure/Format
140
120
100
80
60
40
20
0
Poor
Quite poor
Average
Good
Excellent
 FPAL purchaser profiles
 Suppliers to make use of information provided
Supply Chain Code of Practice
PLAN
CONTRACT
PERFORM & PAY
 Restricting bidders to FPAL registered
companies
 Eliminate duplication of data by using FPAL
 Providing debriefs
 Using standard contract forms
 Payment in 30 days
 Use of industry Model ITT’s
Supply Chain Code of Practice
THE OPPORTUNITY
 IADC analysis of Rig ITT’s undertaken
 Highly fragmented approaches evident
 Extensive duplication of FPAL data
 Patchy use of standard contracts
 ITT quality extremely variable
 Tender compilation slow and expensive
Supply Chain Code of Practice
THE SOLUTION
 Create a standard ITT structure
 Simple, logical organisation
 Easy buy-in
 Standard documents for those that want to
go further
 Aimed at ease of production
 A quality ITT
 A swift offer
 A trouble free evaluation
Supply Chain Code of Practice
Commercial
Sections
ITT
Index Sections
Tendering
instructions
Technical
Contractual
Guidelines
on
Sections
completion
Supply Chain Code of Practice
 Templates are clear, simple and pragmatic
 Focus is on principle not prescription
 Uses industry documents where they exist
 Nomenclature is standard
 Modular design gives flexibility
 Designed to allow substitution
Supply Chain Code of Practice
 ITT’s are Easier, Faster and Cheaper to issue
 Bids are Easier, Faster and Cheaper to return
 Simplifies the contracting process
 Code recommendations incorporated
 Creates a vehicle to introduce better practices
 Operators can decide their own scale and pace
of adoption
 Creates step out opportunities with Well
Services, Operational and Construction ITT’s
Supply Chain Code of Practice
 Model Rig ITT currently available on FPAL website, is
now in use and is easy to access …….
Supply Chain Code of Practice
 Model Rig ITT currently available on FPAL website
and now in use
 ITT drafting groups launching Model ITT’s in 2006
Well Services suite of Model ITT’s
Marine Construction Model ITT
Platform services, plant and
equipment Model ITT’s
Supply Chain Code of Practice
CODE OF PRACTICE SURVEY METHOD
 Easier method of surveying Code
3 additional elements
adherence
 Use of FPAL Type III feedback uses existing
industry scheme and little additional effort
 Input now verified
Supply Chain Code of Practice
CONTRACT
 Include
Some improvement from 2004 report
Majors generally higher rated than small companies
4
Not enough use of FPAL two way feedback
3
2
Client Company
Company R
Company X
Company W
Company L
Company O
Company J
Company K
Company Y
Company G
Company D
Company C
Company N
Company Q
Company A
Company B
Company H
0
Company E
1
Company I
receive FPAL
performance
feedback via
Type 1 and Type
3 mechanisms
5
Company M
 Provide and
KPI and Review Mechanism for Contracts >$1mm
Performance Evaluation
(0 Poor - 5 Excellent)
performance
Indicators in all
significant
contracts
PERFORM & PAY
Assessment of Client Compliance with Supply Chain CoP
Company F
PLAN
June 2005
Supply Chain Code of Practice
CONTRACT
 Submit complete
and valid
invoices
3
2
Continued improvement although, overall, still not
close to 30 day target
4
3
2
1
WSCA Member
Client Company
Company X
WSCA Co H
Company W
Company J
Company D
Company
WSCA A
Co J
Company S
WSCA Co
Company
G B
Company K
WSCA Co E
Company O
Company Q
WSCA Co K
Company B
Company M
WSCA Co G
Company H
Company C
Company E
Company
F C
WSCA Co
Company N
WSCA Co
Company
L F
Company Y
0
WSCA Co I
0
1
Company I
payment policy
for own
suppliers
4
5
Company R
 Adopt a prompt
5
Performance Evaluation
invoices within
30 days
Invoicing
Quality
Payment
<30 Days
Performance
Evaluation
(0 Poor - 5 Excellent)
(0 Poor - 5 Excellent)
 Pay all valid
PERFORM & PAY
Assessment
of Client
Compliance
with
Supply
Chain
Assessment
of WSCA Member
(as Supplier)
Compliance
with
Supply Chain
CoPCoP
WSCA Co D
PLAN
June 2005
June 2005
Supply Chain Code of Practice
PLAN
CONTRACT
PERFORM & PAY
Why does the Code of Practice matter to Contractors?
WSCA 2005 Report
Gross Revenue ($Bn)
2
1.8
1.6
1.4
1.2
1
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
(est)
Revenue increasing
Profitability decreasing
The Industry still cannot afford non-value adding costs in Supply Chain
Management processes
Supply Chain Code of Practice
Code covers
……in
work
excess
on sign-ups
of 80% ofcontinues
UKCS expenditure
(on an operated reserve basis)