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Part 1 - Supplier Performance Management

(SPM) Systems - Implementing Best


Practices and Processes to avoid Brick Walls
(Part 1 of 3)
Oct 1, 2015
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I thought I would take the opportunity to share my 16 years of


experience, best practices and lessons learned in designing,
developing, implementing, and rollout of SPM systems and
processes.
Although currently I am primarily engaged with designing and
Implementing SPM / SRM systems and process for the major Oil &
Gas Operators and their Suppliers, the key "Take Aways" are
relevant to all Industries. So even if you are not involved in the Oil &
Gas Industry I feel that this series of articles will be a very
worthwhile read.
In Part 1 will concentrate at high level on some of the "Brick
Walls" and"Rabbit Holes" that poorly planned SPM initiatives run
into from a system design and process perspective and share "Best
Practices" on how to avoid these. I will cover the first 8 and the
follow up post will cover more.

1. Global V Category Line Specific KPI's / Metrics / Domain Expertise


Its important you do not fall into the trap of thinking that a global
set of metrics will drive success. Standardizing on just a Global set
of KPI's will provide only limited opportunities for managing
performance improvement and you wont get the full buy in from the
Category Line managers that need Job or Service specific Metrics to
manage supplier performance. Yes do have a top down Global
perspective but the category line specific scorecards also need their
content driven from the bottom up. So in summary get the category
line metrics devised in addition to the Global Ones, Don't let the
time taken to reach agreement on Global KPis for SPM add years of
complexity and cost to your SPM initiative.
Your Category Line Managers or external Subject Matter Experts with
Domain Expertise in that Category are best placed to advise you on
appropriate KPIs and associated Targets.
2. Global v Regional & Category Line KPI Targets
Many of the rushed and poorly planned SPM initiatives are often IT
or vendor led, ie led by the system or solution provider that is
inflexible of taking into account the needs of Category Line
Managers at Regional level for differences in KPi targets by Category
Lines, and or Regional Targets. Two examples here are that I would
expand on include:
a) Inventory Availability Rate for category line Drill Bits in
Nigeria will have a lower target level of acceptability, say 75% or

above (Green Performance Zone) than say the same Inventory


Availability Rate in Gulf of Mexico where the expectations for this KPi
would be in the 95% level of Inventory Availability.
b) Drilling performance KPIs for say Days Per 10k, MTBF,
and Downhole Losses would have different acceptable rates
depending on geography, terrain, onshore v offshore etc. So its
important that we can also have target setting for differences in
these KPis acceptable targets at the regional, district, or field level
as performance levels will differ.
In summary if you include targets in global contracts you wont be
able to enforce them at regional or category line level. The Local
Category line Manager / Team is best placed to help you in setting
targets avoid this setback.

3. Supplier Engagement / Scorecard Data Availability


If you think you can simply rollout an SPM / SRM system without
involving your suppliers upfront you will hit one or both of these
issues.
a) Metrics that Matter
Simply rolling out a one sided scorecard that only looks at KPI
Metrics that focus on the suppliers performance on quantitative
measures will work in the short term but without 360degree metrics
the supplier will see it for what it is an SSS ( Shitty Stick Scorecard).

You need to work with the supplier to include other Metrics that also
help foster improvements in Supplier Relations such as tracking
Days Sales Outstanding (DSO) Value, Over due Invoices (Value and
Number) and also Innovation and Behavioral Metrics that help drive
and reward Innovation.
b) Scorecard Data Availability:
During the planning stage of your Initiative you should always share
draft versions of the relevant proposed scorecard with your suppliers
early on to ensure that they can provide the data that you require at
the right level. The last thing you want is to have metrics where
the data can be supplied by one Supplier but Not another. Or data
that can be supplied by one supplier in only 3 out of their 6 regions
but not all six as some of their regional systems don't have that
data. So have a think about data availability from your suppliers
before you include that question on your scorecard.
4. Scorecard Questions / Data Validation
It is also important that you can validate the data you collect so
don't fall into the trap of asking for, or accepting calculated values,
ie where the supplier puts in a percentage value for say On Time
Delivery example 98%. You need to track the components
(Number of Orders Delivered On Time / Number of Orders
Delivered ), and let the system work out the Percentage itself
otherwise you will struggle to validate the data, and what cant be
validated leads to the inability to question or action the values.

5. Rolled up Values - Data Drilldown Unavailable to Determine Root


Cause.
Often suppliers offer to give you rolled up numbers for say corporate
wide Total Recordable Incident Rate (TRIR) or TRIR at a
particular region. That will not suffice. While you should accept their
Corporate or Regional TRIR value, you still need the Value for TRIR at
the Local or Category Line level. One way to do this is to
gather Number of Recordable Incidents and Man Hours
Worked at the local well site, rig or base level for your operations
and compare it to Corporate or Regional Values, That will give you
the deviance from their corporate TRIR and all allow you to foster
discussions around improvement.
So make sure that your Scorecard questions are relevant to the
asset level that the work relates to. You need to be able to view the
data and manage supplier performance at the lowest level possible,
the asset (Well, Rig, Plant etc)

6. Data Integration / Hierarchy and Asset Datasource Integration


Last year I had the opportunity to work with one of our Operator
clients in integrating a range of existing data sources to populate
any Master Data associated with the SPM SYSTEM such as Hierarchy,
Wells Listing, Well Header data. This now means that as the
Operators Master Data files change, the SPM system is always upto
date (in sync). If an asset (Well, Rig, Refinery, Vessel, Aircraft, etc )

or even the Business Unit or operations Hierarchy change the


system is automatically updated. Even system assess rights by
integrating with Employee Listings and Single Sign on. Its also
possible to pre-populate scorecard data from existing data sources. I
am talking here about integration with systems like WellView,
OpenWells, SAP, DnB, RigView etc, where much of the data being
double keyed already exists.
Where possible integrate, especially if the volumes of data or their
change frequency are high otherwise manually updating these can
mean a full time job for a few extra people and adds cost,
complexity and risks of re-keying errors.
7. Scorecard Overload / Supplier Data Integration
One of the biggest challenges is often the time and effort that the
Supplier spend filling out scorecards. Often the supplier has such
data already in a structured data format in various systems or
databases they operate. The brick wall effect comes into play where
there are a lot of scorecards to be completed. Imagine a supplier
that works providing a service on hundreds of Onshore wells where
the average job lasts a few days. If this data is available in Well View
or Openwells you should have the feature that facilitates easily
importing such data into your SPM system, or better still a direct link
/ live feed. I've seen the huge advantages and cost savings that
brings in reducing supplier scorecard overload.

8. Hierarchy Variations & Flexibility


Often the complexity of different hierarchies is underestimated and
its only during rollout that you realize that the current hierarchy will
not work for different areas of the business. Your system needs to
be flexible enough to accommodate multiple Hierarchies. Examples
of Hierarchy include Organizational BU Hierarchy , ie BU, Region,
Asset, or BU region, City, or for Wells hierarchy BU, Regions,
Districts, Oil Fields, Well.
Example you cant gather Aviation data on a Wells Hierarchy
That said they should all rollup the tree to the Global Level. Think of
the Global top level common hierarchies as the Trunk , and
Hierarchies as branches of a tree, and the assets (wells, rigs,
pumping stations, helicopters ) as the leaves.
Another important consideration: While some hierarchies span only
3 levels deep others can span 7 or 10 levels. So be aware of that.
--------------------------------------I hope that the above list (although not exhaustive) will help you in
having success with your SPM initiative. I would also welcome any
feedback and constructive discussion you have on this post.
Look out for my Part 2 post in the weeks ahead where we will be
looking at more "Brick Walls" and "Best Practices" including:

SPM Data Visibility - Collaboration with your supplier

Dashboard and Report Sharing

Reporting Criteria - Asset Meta Data

Saved Reports / Cloning Reports

Automation / Scheduled Reports

The Importance of Setting and Monitoring, and Managing


Current versus Historic Targets and Bands

Setting Targets and Bands at Regional Level & Benchmark


Data

KPIs not always best managed in isolation of each other.


Part 2 is now available:
https://www.linkedin.com/pulse/part-2-supplier-performancemanagement-spm-systems-best-fullerton
Kind regards
Daryl
Looking forward to sharing more best practices soon.

Daryl Fullerton is the Oil & Gas Industry Principal for SRM / SPM at
Actian. He has 16 years experience in Supplier Performance
Management within the Oil & Gas Industry For the last 3 years he has
been responsible for the design and development specification of
Actian's SPM / SRM offerings. To ensure customer success he is also
responsible for providing guidance and consultancy on Scorecard and
KPI development for Actian's Global Oil & Gas Clients. Currently he is

working with a few of the Major Oil & Gas Operators in their migration
to / rollout of Actian's SPM system.
In 2015 Daryl was awarded the honor of "Supply Chain Pros to Know"
in recognition of the leading supply chain professionals and
experts worldwide.