"When the low-hanging fruit has been picked...", an article for the "Neft Rossii" magazine (issue 3, March 2017)

"When the low-hanging fruit has been picked..."

The article is dedicated to the current optimisation options available to the procurement function in the oil & gas industry.


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The 2014–2016 drop in oil prices, by over 75 percent, called for solid actions on the part of all functions in oil & gas and service companies, and the procurement function was one of the first ones to be affected. Buyers started cutting back sharply on amounts of purchased materials and equipment as well as the number of ongoing services and projects, and both suppliers and subcontractors working with oil & gas corporations around the world were forced to cut prices by 20–30 percent.

Thus, the "low-hanging fruit" has been picked, but demand for optimisation remains topical. What should the new optimisation focus be for materials and equipment and procurement teams at oil & gas companies? The authors suggest three possible areas: stock planning and management, the development and realisation of categorical strategies for specific materials & equipment, and logistics network optimisation, which can be efficient in the long term. Detailed recommendations on all these lines of action are given in the article.

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