Customer of choice It would be easy for a company with Chevron’s size, scale, and brand recognition to fall into the trap of assuming it is a customer of choice for suppliers. But that’s not its approach. “Our new framework emphasises the need for open communication and dialogue with suppliers and to work with them, so we understand our position and opportunities to form
Open to ideas According to Edwards, the oil and gas sector has developed robust solutions to address its challenges, which in some cases are complex and result in high cost. He points out though, that as the industry evolves, working with suppliers on their ideas for suitable, safe, and reliable solutions is the new norm. “The aim is to reduce costs for ourselves and our industry while enabling our
“The emphasis on long-term relationships often allows suppliers to invest more confidently and enables us to secure expert technology products and materials together,” says Edwards. He says the team will work with suppliers to remove the complexity that will benefit them in the good and bad times. Closer relationships will also lead to greater insight into the market. “Strong relationships encourage open and transparent communication,” says Hopkins. “That will allow us to lean in and solidify long-term pricing and strategies ahead of time.” Tighter supplier relationships will provide Chevron with “another set of eyes, ears, and boots on the ground,” he adds. “It strengthens our security of supply and gives us a better line of sight to get in the queue for materials or get ahead to manage costs.” Change afoot As part of this shift of focus on supplier management, the team has refreshed its approach. This update emphasises its philosophy that supplier management is a critical means of generating value and boosting resilience. “Any organisation that’s been doing something for a long time, risks becoming too comfortable and repetitious, which could lead to the inability to evolve effectively,” says Edwards. The recent relationship with State of Flux allows Chevron’s P/SCM function to update its approach and put new tools in the hands of its practitioners. “We wanted to emphasise the value we can drive through supplier management to stakeholders and our Procurement/Supply Chain Management community,” says Edwards. The new framework, being launched, provides a playbook to all users. It also includes information, tools and templates, processes, and standard practices to help execute jobs consistently while allowing the flexibility to apply components as needed. “Different business units have different requirements from supplier management at any time,” says Edwards. “There’s enough flexibility in this guide to enable them to apply it in a fit-for-purpose manner. For instance, one relationship may need stronger governance, while another may need a greater focus on performance management.” It also helps to bring consistency to the process of segmenting Chevron’s extensive supply base, offering guidance on which aspects of supplier
relationships,” says Hopkins. Edwards says that the teams
suppliers to be successful.” He says the changing pace of
developing the category strategies who carry out due diligence on the market have a good understanding of the relative importance of Chevron. These strategies provide essential data points when the company is evaluating potential suppliers. “It’s always nice to be a customer of choice, but we don’t go into those relationships assuming that’s the case,” says Edwards. “Other companies may spend much more with those suppliers. Our goal, therefore, is to build relationships.”
technology and the supply base means procurement experts must be open to change. “No matter how long you’ve been doing supplier management, you must continue to review how you’re doing it in the current market.” Hopkins concludes: “The more we can proactively look at other ways to deliver value and partner with our supplier base, we increase our opportunities to succeed together.” Images reproduced with permission of Chevron Corporation
“Supplier management is a key enabler of value”
management should be applied to each supplier based on specific attributes. It also ensures that those suppliers receive the same coordinated approach from across the business once identified. Segmentation accounts for the relative importance of the particular product service line and the characteristics of the supplier. It also helps to identify which vendors it needs to partner with on an elevated level. It distinguishes between those vendors with whom it wishes to have an enterprise-level relationship and those where relationships can be managed locally with greater flexibility. As well as taking a new look at its approach to segmentation, Chevron is investing in State of Flux’s SupplierBase platform to help manage supplier relationships. It will begin with modules to help support performance and collaboration. Like many businesses, it has previously relied upon email, Excel, and manual procedures to track performance. Now, Chevron is relying on digital technology to boost efficiency and effectiveness.
OPINION SNAPSHOT: RESILIENCE
“Multiple industries have taken for granted the fact that materials, equipment, and services will be available. They’ve focused more on cost than surety of supply. Events of the past two years have brought to the fore the importance of supply assurance.”
Matthew Edwards, Chevron Manager Category Management Center of Excellence
Justin Hopkins, Advisor, Category Management Center of Excellence
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