Building relationships

The prevailing atmosphere in the oil and gas industry throughout the past decade has been one of consolidation. Mergers, acquisitions and downsizing have caused many companies to rethink their businesses. As oil and gas companies have looked to reduce their own overhead, they have sought to redefine their supplier relationships with key vendors, forming alliances that can help them increase their competitive position and optimise the performance of their equipment during its entire life cycle. In this manner, these companies structure agreements creating an environment where suppliers can add value to the supply chain beyond the routine equipment purchases.

During the past five years, as a result of escalating energy prices, the demand for engineered-to-order equipment for the oil and gas industry has increased significantly. Consequently, the ripple effect has been felt up and down the supply chain. In many cases, lead times for raw materials have been lengthened, shop load capacities have been strained, and prices have increased.

These events have led many companies away from the “three bids and buy” mentality when buying capital equipment. Now, more than ever, companies in the oil and gas sector are looking for equipment suppliers such as Dresser-Rand with the depth of resources and experience to offer comprehensive solutions. By strengthening their relationships with these suppliers – and implementing strategic sourcing agreements – these companies are able to reduce their costs and lead times. Properly formulated, these agreements encourage greater collaborative engineering practices earlier in their projects, standardizing terms and specifications, thereby further reducing planning cycle times.

Advanced design capabilities such as computational fluid dynamics, as well as sophisticated manufacturing tools, have made it possible for some equipment manufacturers to dramatically improve the efficiency of rotating equipment. Modular designs and standardization of components have greatly increased the serviceability of equipment, making it possible to be more productive while reducing maintenance downtime and the complications of unplanned outages.

But, it’s not enough to develop superior technology. Efficiency and performance of the equipment is only one part of the formula for long-term success. Ultimately, the efficiency and performance of the company, combined with the strength of the client/supplier relationship, will determine the real value.

With careful planning, and with the right process already in place, an effective alliance agreement can be fashioned that is unique to each client relationship, with a thorough understanding of their singular challenges and requirements. From the supplier standpoint, this requires an ongoing commitment to process innovation. It is a never-ending challenge at Dresser-Rand to develop and refine the most advanced business practices, including training, order entry and supply chain management tools, product configurators, design tools, client interface capabilities, manufacturing processes, and much more.

The result is cycle time reduction in all phases of specifying, ordering, and supplying equipment, without sacrificing quality of product or service. The faster the cycle time from when the orders are received to equipment start-up, the faster the clients can begin producing product and increasing their profitability. Many clients in the oil and gas industry recognize this by offering incentives for early delivery. Dresser-Rand’s processes position the company to reduce the total project schedule.

The other component of long-term value in the supplier relationship is service. The oil and gas industry is global, and equipment operators rely on a readily available, highly skilled service workforce. In an industry in which millions of dollars can be lost every day that production is interrupted, service centers and technicians must be located close to client operations. These centers must possess the skill sets and tools necessary to support the client requirements, essentially on a standby basis.

Client/supplier roles in the oil and gas industries are evolving. The trend is toward developing an intense focus on relationship building, as well as delivering a clear value proposition. No longer is the emphasis solely on the first cost of equipment. Alliance strategies, total installed cost, life-cycle costs, and reliability are the new benchmarks. The companies that are most successful in these areas will be more competitive in their respective markets, and will ensure their long-term profitability.