Said Al Alawi interview – Collaboration with the business is a category management strategic priority at PDO

Category management has been a top priority over the past four years for exploration and production company, Petroleum Development Oman (PDO).

While the value of a category management approach was well recognised, it was collaboration with the business that was found to be a challenge, since the Contracting and Procurement (C&P) team had tended to work in a silo.

What triggered a change in perception and operation was when PDO senior management recognised C&P’s ability to contribute to short-term profitability during the dual shock of Covid-19 and the oil price collapse in 2020.

Near-term sustainability and an integrated supply chain transformed the business

“At the onset of the pandemic,” Alawi explained, “the C&P team developed two programmes to support the business:

Programme one was focused on near-term sustainability using price, demand and specification value levers. Significant cost reductions were achieved, providing momentum for further change and improvement.

Programme two concentrated on developing an integrated supply chain by looking at the end-to-end way in which 700 to 800 individual contracts were being managed. These deals were optimised to deliver specific services, but there was an opportunity to aggregate and leverage demand, both across suppliers and within related services.” The C&P team proposed the two programmes to the executive team, with the proviso that success would be dependent on securing their visible support. “A note was quickly issued from top executives outlining the programmes. A critical aspect was that they assigned category portfolios and categories to specific business directors. This created a matrix of responsibilities, with each category owned by a business director and C&P leader,” he said.

“The organisation was facing big challenges and was ready to do whatever it took to overcome them. Rules and boundaries were developed so that the joint teams became empowered, and this became a ‘game changer’ for C&P.”

Communications were issued to business stakeholders at different levels within the organisation. These challenged them with the questions: ‘what can you do?’ and ‘how can you help?’

All spend was reviewed and improvement opportunities were identified. A programme review was held weekly to prioritise which opportunities to pursue, and this approach delivered a high volume of savings.

Building on the new perception of C&P

An Integrated Supply Chain approach was developed to leverage and extend the benefits secured during the crunch period. This has six levers, one of which is category management.
“Category management is now hardwired into the organisational way of working,” continued Alawi. “C&P leadership team is involved in the five-year strategic planning cycles which are updated on an annual basis across the category portfolio. With early and regular involvement, C&P now has greater influence and ability to maximise value from supplier spend.” Previously, they were only involved when requirements had already been defined by the business.

“The C&P team are being upskilled to build category management competencies so they are ‘at par’ with the technical team. The target outcome is to migrate the 60-strong team from a contract management focus to a category management focus. The change has energised the team who are now much more comfortable to lead category teams and provide constructive challenge to the technical team. The perception has changed so that C&P is now perceived as focusing on overall value, not just cost.

“The joint efforts of the C&P and leadership teams have meant new controls have been introduced to channel demand, prevent fragmentation of spend and encourage the business to become much better planners,” he said. “And a number of strategic metrics have been introduced, including spend covered by a category strategy, and value delivery from each category being managed. We have targeted savings of 7% and this is owned as an objective by the business stakeholder responsible for that category portfolio, rather than C&P. Category results are now reported to the Managing Director of the business.”

C&P leadership has found it very rewarding to see how the team has adapted and delivered a step-change in value from supplier spend. There is now complete buy-in to category management not only from the C&P function but essentially from the business.