Materials Management: Who owns it and who benefits from it? 

Materials Management is an important activity in any asset heavy industry in general and in the Oil & Gas industry in particular. Materials not only contribute to the direct cost of operating any facility but they also contribute to efficiency and cost of maintenance, plant uptime and cashflows of the organization. Depending on the particular organization's structure, materials management is a responsibility of either supply chain management team and/or the procurement team. While the entire organization suffers on account of poor materials management, the impact is seen immediately in production and operation & maintenance. Poor materials management also negatively affects the productivity of the actual user on the shop floor who depends on a particular item.

An increasing number of studies are pointing out the impact of better materials management on the overall safety and profitability of the facilities. For instance, this research highlights  that there was substantial increase in the company's profitability as a result of efficient management of materials, which was achieved by efficient coordination and full accountability for quality, delivery and cost by the materials related department, improved inventory management system, good relationship with vendors, and state-of-the-art facilities.

Strategic Importance of Materials Management

While materials management is considered to be a day-to-day routine activity, materials management in general has a great strategic importance beyond that. Here are a few ways in which materials management can have a long term impact on any Oil & Gas plant:

‍

• Decide and prioritize data that needs to be captured - Materials management begins when the facility is being conceptualized. Adhering to timeline and commissioning the plant on pre-decided date is important. Many times, in all the rush and other high-priority activities, not enough thought is given to deciding what data should be captured and how it should be prioritized. It is possible that some critical spares are missed in the process or unnecessary spares or spares of secondary importance get prioritized. Such errors can either delay the commissioning of the plant or lead to setbacks and prolonged breakdowns after the plant is commissioned.
• Warehousing and inventory management - Day-to-day warehousing and inventory management practices play a big role in materials management. If the spares data is not built correctly in the first place, those errors will reflect in everyday management. The way materials data is built will also affect inventory management and associated costs. Item naming, buying descriptions, determining correct stock levels, maintaining right quantities, storing at right location, monitoring usability and condition of items - there are a large number of related activities which affect O&M costs and production of the facilities.
• ERP/CMMS - As digital transformation becomes more of a norm than aspiration, usage of ERP and CMMS have gained a long-term strategic importance. Selecting right software, keeping it updated with information in the right format, periodic checks and verifications to assess data reliability and integrity is very important.
• Procurement - Correct materials descriptions, vendor information, lead times, costs, terms of payment and credit etc. 

‍

Consequences of the Lack of Dedicated Expertise? 

‍

• Capturing correct materials data- When spares data is built during the startup, it is important to determine which spares should be cataloged. Often, lack of bandwidth and expertise results in either important spares not getting captured or capturing unnecessary information. It is equally important to determine which details are captured for item. Not capturing enough details leads to difficulty in material identification and procuring them. Lack of expertise also leads to errors in data creation which are very difficult to spot and rectify later.

‍

• Warehousing and inventory management - Materials management depends heavily on materials data as well as materials handling practices; both of them need dedicated expertise. As we have seen earlier, without expertise, errors will creep into the materials data. Decisions made based no this data will be costly and inefficient. Even if data is built properly, it will tend to deviate and will need periodic cleansing. On the other hand, poor material handling practices will lead to issues like non-moving items, stock outages, over carrying etc.

• ERP/CMMS - Ultimately, materials data and the spares are consumed for the day-to-day operation and maintenance of the plant. The data captured will be used by the ERP/CMMS is to issue work orders. ERP/CMMS data is also used to forecast expenses and to find and address vulnerabilities. Choosing a suitable ERP/CMMS, creating and uploading data into it in the correct format and keeping that data updated required dedicated focus and expertise. During our experience, we have observed work orders being issued for non-existent assets and vendors getting paid for the same. Rectifying such errors can unpack substantial savings.

• Procurement - Procurement team is totally dependant on item buying descriptions to order correct spares. Inaccurate data will lead to procurement delays, ordering incorrect materials, rushed buying, buying at higher cost etc.

‍

The Value Added by the Materials Management Experts

‍

• Knowledge - Materials management experts have the necessary knowledge of standards, syntax, procedures and processes, etc. They can anticipate the possible usage of data so that it is built correctly. 
• Tools: Using the right tool to build materials data saves time and ensures data reliability and governance. 
• Periodic checks - Dedicated experts can carry out periodic activities like physical verification, gap analysis, keeping an eye on key numbers and intervene when something abnormal is observed. This ensures that the issues are resolved before they are escalated.
• Efficiency -  Speed is of essence, especially during the start-up phase. Even during the ongoing operation or expansion, being agile has its own rewards. Only seasoned professionals can deliver the expected quality at a high speed. 
• Governance - As data gets used by an increasing number of stakeholders and gets created at multiple places, governance is going to play a key role in ensuring the integrity, reliability, security and overall usability of the data. External expertise can help you implement the most accepted governance protocols and processes.

‍

‍