Developing a strategic supply chain management system in Ghana’s oil and gas industry [Article]

The Ghanaian oil and gas industry though a very young one, has witnessed substantial growth in recent years, most especially after the discovery of oil in commercial quantities in the Jubilee fields about 16 year ago, this exponential growth in the oil and gas sector of Ghana’s economy has set the right tone, necessitating the establishment of an effective supply chain management system to champion its agenda.

With a production capacity of over 177 thousand barrels per day procured for marketing by Oil Marketing Companies in Ghana, we cannot underestimate the role supply chain management as well as procurement and logistics play in this fairly new industry.

With a clear focus on exploring the planning and sourcing aspects involved in creating a strategic supply chain management system that is deliberately tailored to the specific needs of Ghana’s oil and gas sector, this article seeks to dive deep into how we can harness the opportunities of planning and sourcing. The articles also seek to examine key considerations as well as recommended home-grown and result-oriented strategies for companies playing in this ecosystem and finally to provide a comprehensive understanding of how such a system can be developed and utilized.

What is supply chain management?

The Terminology Committee of the European Standards Authority has recommended the following definition of a Supply Chain: “A sequence of events which creates the value of a specific good. This sequence may include conversion, assembling and/or disassembling, movement and placement.

The process and activities involved in making something more valuable can be said to be what is meant by supply chain management. It also concerns itself with the creation of value, thus making something better than it was in its raw state or transitioning the importance that is associated with a particular item into a more properly valued item, can be said to be the simple understanding of supply chain management. But it doesn’t end there. Supply chain management goes way beyond value addition and creation.

In appreciating the importance of supply chain management and its importance to the energy and specifically oil and gas industry in Ghana, It is also necessary to underpin that there are key activities that spearhead the operations of supply chain management

These activities include:

• Plan: Product introduction and business development
• Source: Materials and components procurement
• Make: Manufacturing, assembly
• Deliver: Distribution and logistics sales and sales services

Our focus, however, is on the first two, thus planning and sourcing. Organizations playing in the oil and gas industry must realize that the development of a strategic supply chain management system begins with thorough planning. We say the bus stops with planning.  The planning process of the supply chain comes with the identification of a clear goal and objective of the supply chain system of the organization, as well as doing a thorough analysis of the industry landscape in this case oil and gas and understanding the unique challenges that are peculiar faced by the Ghanaian oil and gas sector.

Planning and setting the right objectives  Supply Chain Management :

Getting a correct, attainable and realistic supply chain management plan is pivoted on how SMART the objectives are the mere fact that  most of these organizations usually have vague or not too-specific supply chain objectives can be a good ingredient for the breakdown of their supply chain management system, or even more bizarre make it easy for them to blame consultants handling their operations for the failure.

Ideally, companies must define their supply chain objectives, which may include but are not limited to reducing operational costs, improving resource allocation for their products and services, taking steps to ensure timely deliveries, or even more generic, enhancing overall operational efficiency and performance.  In the setting of these objectives, they must be done in connection with the short- and long-term plan of the organization and more importantly, must be done strategically and lest I forget industry-specific, there is no one side fit all approach.  One common mistake that most organizations are guilty of, is the wholesaling of ideas without specification and localization as stipulated by the Local Content Legislation LI 2204. With the direction and help of the right industry consultants, organizations can avoid these common mistakes and develop a more befitting objective and own them.

Next, the lack of the availability of a more in-depth analysis of the Ghanaian oil and gas industry and failure to understand the sector’s dynamics, competitive landscape, and regulatory framework can be a great hindrance and roadblock to a successful implementation of a supply chain management plan. Most of the time, organizations lack the requisite data to make the right and achievable supply chain decisions, most new organizations with the fear of incurring extra costs avoid the use of consultants in achieving this, forgetting that it actually costs more not to have the right data, information and expert advice to make a decision.

It is also necessary to reecho that the right supply chain planning can help reduce costs associated with several processes, which  include purchasing, production, inventory management and even logistics.

This exercise to get industry specific analysis should involve gathering data on supply and demand patterns in the locality and region, identifying potential bottlenecks, and evaluating the performance of existing supply chain practices, it is only by doing so, that we can make the right decisions to the development of our organizations. This data will help companies identify areas for improvement where they can build upon existing structures  and perform at a very optimal level.

Sourcing Right – The Sourcing Strategies for the Ghanaian Oil and Gas Industry:

The second phase of implementing a world-class successful supply chain management system is pre-empted by doing the right sourcing. Sourcing forms a very crucial part of supply chain management.

By sourcing, we are talking about the selection, evaluation, and management of suppliers with the capacity to deliver on time based on price and availability. As a very important part of the supply chain, institutions must be strategic about their sourcing policies and styles and even how to access their suppliers and manage their contracts for optimal performance and delivery.

Drafting and implementing an effective sourcing strategy that is contextualized into the industry and region is significant to ensuring a more resilient, robust and efficient supply chain system not only Ghanaian oil and gas industry but globally.

The strategic sourcing process is pre-empted by two key considerations that are supplier selection and supplier relationship management.

Before the process of selecting suppliers, companies must assess some key factors before proceeding to make the final decision, they include but are not limited to reliability, quality standards, pricing structures, availability of product or service, capacity to deliver and geographical proximity. With many upstream and downstream activities happening around the Western Region, it is only right to assume that the presence of your supplier in that particular vicinity would not only support the local economy but also save the * cost of logistics and time.

These standards, when duly followed, help organizations meet the specific needs and standards of the oil and gas industry while attaining incident-free operations and excellence in their supply chain management.

Many a time, companies are eager to get suppliers for the execution of various projects but fall short in the management of supplier relationships and their contract management as well or even vice versa. Supplier relationship management entails a lot and can be too much for organizations to handle, it even tends to make organizations drift from their core mandate and can be very problematic, this is why many organizations outsource their supply contract management as well as execution to experts and consultancy firms. Even though Ghanaian firms are gradually appreciating this, there is a need to come to the realization that the organization cannot do everything. The nurturing of strong and collaborative partnerships with suppliers, ensuring clear communication channels, and implementing effective performance monitoring systems are best executed by supply chain management professionals. When these activities are properly coordinated and handled it gives room for enhanced coordination, increased transparency, and improved overall supply chain performance in an organization.

Conclusion:

It is evident that the creation of a value-laden supply chain management for organization planning in Ghana’s oil and gas industry requires meticulous and strategic planning and sourcing.

With the direction of clear and attainable objectives that can be used in getting good company benchmarks it will always be a win for organizations that handle their planning and sourcing right.

Ultimately, sourcing right and planning correctly will contribute to increased operational efficiency, reduced operational and organization costs, the improved service delivery of oil and gas companies, and a competitive advantage in Ghana’s fast-growing oil and gas sector.

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