BP refining art of procurement intelligence

24
AUG
2009

Author: Amy Huntley - Categories: Procurement Intelligence

If there’s one word that has loomed large over the past 18 months it’s ‘risk’ – but while for some companies it’s a word that brings out boardrooms in a collective cold sweat, one of the world’s largest oil firms has used its market intelligence operation to stay one step ahead of the game.

Few companies have been left untouched by the global tsunami that has swept through (and, in some cases, swept away) both the developed and emerging markets. But, as Greg Dyer, the head of BP’s market intelligence unit, recently told the Procurement Intelligence Unit, BP’s analysis has enabled the company to weather the worst of the storm and emerge, if not unscathed, then certainly in better shape than most.

BP first set-up its market intelligence unit in August 2006 but the past two years have seen the company significantly increase its efforts in an area that is, by common consent, emerging as one of the key battlegrounds in the immediate aftermath of the credit crunch.

“It (BP’s market intelligence work) has enabled us to stay abreast of current conditions,” said Dyer. “Rather than being behind on our news information we’re actually ahead of the game in our current and future forecasts in the markets that we do business in.”

Fundamental to BP’s success has been its commodity analysis, both from a supply risk and cost perspective.

“We’ve played an active role in assessing risk on the availability of commodities and, of course, the cost risk of those commodities, especially when they were going up, which they were substantially until the fourth quarter of last year,” said Dyer.

“We were actively working with teams to try to understand where they may want to lock in, or not, on their agreements.”

And, at a time when inflationary concerns have been replaced by worries over the potential impact of deflationary markets, BP now finds itself in the enviable position of being able to take advantage of current conditions far more actively than had previously been the case. As well as being far better placed to tackle suppliers, which are, understandably, reluctant to drop prices.

“Suppliers don’t come to you when a decrease is needed, although they’re happy to come to you when they need an increase,” said Dyer. “We’re much more able to go to suppliers on an active basis, with fact-based information and challenge them on their costs.

“And when we get those increase requests coming in – which will inevitably happen -we’ll be much better placed to challenge those increases, and to be able to articulate what is an appropriate adjustment.”

And while BP’s market intelligence is having manifest benefits externally, closer to home it’s also making a massive difference to the standing of the company’s procurement operation.

“The credibility of our organisation has substantially improved within the leadership of our organisation and our stakeholders,” said Dyer. “We’re much more proactive in getting the market knowledge to demonstrate procurement’s role.”

All of which suggests that BP’s intelligent approach is mining a rich seam – and procurement, as well as the wider-business, is reaping the rewards.