Development of SCM target operating model for large greenfield projects

Project objective: To form SCM target model for large greenfield projects being implemented in BU "Exploration & Production", with a particular impact on infrastructure projects stages, including organizational structure optimization, business processes, procedures and practices in a field of SCM, figuring on the best local and worldwide examples. 

Project background:

  • Success of industrial megaprojects directly depends on effectiveness of supplier/contractor,
    principle ‘70-80-90’ shows this dependence: 70% of staff, who works on  – is staff of
    contactors; 80% of total cost of the project are in a field of supply/procurement; 90% of incidents in a
    field of HSE are related with contractors` staff.
    • Realization of potential in a field of SCM can grant improvement of project performance indicators (NPV, critical path, PI).
    • Generic SCM operating model (which is typical to procurement of brownfields) needs adaptation in order to correspond to targets of megaprojects.

Completed work:

  • Analysis of organizational structure, processes and practices in a field of SCM for megaprojects was done.
  • Experience of SCM practices for megaprojects at top international and Russian oil & gas companies was collected and well structured.
  • Target operating model of megaproject SCM system, based on Stage-Gate concept, was developed (also for joint ventures structures of megaprojects).
  • Key performance indicators (KPI) for participants of megaprojects SCM system were developed.
  • Target organizational structure of megaprojects SCM system - for all levels of corporate management - and based on Stage-Gate concept was developed.
  • Recommendations on transition to target model including timing of realization, accountable divisions and identification of “quick wins” were developed.

Case study:

In a result of diagnostic some special features of current SCM operating model for megaprojects that require further development were found:

  • Absence of SCM strategy for megaprojects that takes into account different project stages
  • Absence of flexibility of processes and procedures needed for megaprojects realization (including timing, staging, project schedule)
  • Inefficient interaction between different levels of corporate management in the field of SCM
  • Absence of SCM mechanics, tooling and guiding principles in joint ventures.

Best practices analysis also helped us to formulate, prove and instigate the main improvement directions:

  • Procurement for the needs of megaprojects performs in accordance with stage-gate concept and quality criteria. Forming-up of the integrator process “SCM for megaproject” for each project stage
  • Availability of complex SCM strategy and integrated plan of procurement/supply for megaproject
  • Flexibility - when it comes to distribution of authority and responsibility - between
    levels of corporate management in a field of SCM
  • Detachment of a special unit / designated person who is responsible for the SCM process for megaproject needs (both products and services) with appropriate authority in the corporate structure
  • Availability of collegiate conciliative body, which provides time-efficient alignment of interests of different stakeholders involved in SCM process for megaproject needs
  • Availability of single methodology of SCM for megaproject, developed on a global level with project specifics taken into account.
  • and so on.

Values from the project implementation:

Adaptation of SCM operating model to the aims of megaprojects in order to assure the reliability of procurement in accordance with project needs (both for products and services), accomplishment of megaproject' s business case (from the SCM function): potential reduction of timing and improvement of cost indicators of megaproject.

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