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BP offers Alaska supplier community a look at electronic future BP Exploration (Alaska), Alaska Supply Chain Integrators present
e-commerce workshop to broad-based supplier community Tom Hall PNA Contributing Writer
An e-commerce workshop jointly sponsored by BP Exploration (Alaska) Inc., the Alaska Support Industry Alliance and the Anchorage Chamber of Commerce outlined BP’s plan to take Alaska’s supplier community into the digital realm and broaden its Alaskan supplier base.
Highlights of the July 10 workshop included discussions of BP’s e-procurement strategy, e-business and service contracts, online bidding and a software suite — SmartCatalog — developed by Alaska Supply Chain Integrators.
BP has targeted implementation for a web-based procurement system by the end of this year that will, among other features, include an online bidding process.
It’s about time That’s what some in BP’s supplier community said when told of BP’s e-procurement plans. But BP’s procurement manager, Mike Cortez, told PNA in a June 27 interview that the delay couldn’t be helped.
“We’re kind of playing catch up because we’ve been focused so much in the last year on other issues,” he said.
Not anymore. With the ARCO merger complete and the single-operator agreement with Phillips Alaska Inc. about to be approved by the Alaska Department of Natural Resources, Cortez said that e-procurement should be ready to implement by year’s end.
For the supplier community the shift to a web-based system should prove to be inexpensive and uncomplicated. “All they need is a computer and an Internet connection because literally all they are going to be doing is linking into the web site of ASCI,” Cortez said. “That’s all it is — a portal to get into the purchasing process.”
Over-the-phone training is also available at the supplier’s convenience, and early training is recommended.
BP’s e-procurement strategy The single-operator agreement with Phillips drove BP’s expenditures in Alaska from an estimated $800 million to a projected $1.2 billion for the year 2000, and BP intends get the best value for its money.
To accomplish that goal, BP will take advantage of the economies and efficiencies of a web-based procurement system and stimulate competition by broadening the base of Alaskan suppliers.
“One thing we’re going to do with e-business is instead of just restricting ourselves to a 24-company network, we’re going to broaden it to all Alaskan suppliers,” Cortez said.
Online, competitive bidding should result in a reflection of true market prices and thus lead to savings on goods and services for BP. But suppliers can also benefit from the e-business model through increased sales.
Besides winning contracts for goods or services with BP, the e-procurement process will provide Alaskan suppliers the potential to reach third-party markets, including customers outside Alaska.
How valuable can new markets be? David Haas, BP Exploration’s supply management coordinator, said that although one e-procurement study showed sellers realizing comparatively modest gains of 10 percent to 15 percent, it also revealed that they averaged sales increases of 300 percent.
A sweet suite The web-based system should be faster, more streamlined and less manpower-intensive for both BP and the suppliers. “We’re going to have a link to all our BP desks both here in Anchorage and on the slope,” Cortez said.
He sees a speedier procurement process as the long-term benefit of going to a web-based system, which is called e-buying. Customers can select products from Alaska Supply Chain Integrators’ SmartCatalog software and place purchase orders directly with suppliers. If that sounds like shopping on Amazon.com, it’s no coincidence. The processes are quite similar and much faster than the phone and fax method because, said Cortez, “the piece of paper we handle today won’t go through so many folks.”
Alaska Supply Chain Integrators’ Scott Hawkins emphasized that rather than BP producing an in-house catalog, SmartCatalog would be supplier supported and maintained. An individual supplier would, for example, enter the goods he wants to sell and provide pricing information as well as product descriptions and other pertinent data. That same supplier would have enough access to the SmartCatalog system to update his portion of the catalog.
The customer therefore is likely to have more accurate information about product availability, quantity and delivery time for the needed goods.
The full suite of SmartCatalog software includes a variety of very handy support tools that benefit both the customer and the supplier. SmartTracker, for example, can provide the shipping status of a given product throughout the delivery process.
SmartAuction: eBay in reverse A distinctive feature of the e-procurement is an online bidding process called reverse auction. But before suppliers are allowed to participate in this process, they must be prequalified.
“One thing I’m going to make clear,” said Cortez, “is we’re not just opening up the barn to anybody who wants to play.” He pointed out that performance in areas like community involvement and health, safety and environmental protection are weighed in the evaluation process because “we certainly don’t want to be associated with companies that maybe don’t have the safety in standards and things of that nature.”
Approved suppliers that participate in reverse auctions compete for business by bidding online. Each participant can see all the bids but not the identity of his competitors and suppliers bid and rebid to win the business. Closing of bids is based on activity; i.e., as long as bids are submitted, the bidding remains open.
Suppliers should know that for a given auction, bidders log on and bid online at the same time on a specific day; they must be ready on bid day and only online bids will be accepted. And though suppliers would know beforehand, the lowest bid may not necessarily be the winning bid because factors other than just price may have to be considered.
It’s the global thing With activities spread out all over the world and an aggressive growth strategy, BP Amoco’s CEO Sir John Browne sees e-commerce as a very attractive and cost-efficient means to conduct company business. So by the end of this year, he has set a corporate goal to have 95 percent of procurement transactions completed in electronic format.
With Alaska’s operations spread out between Anchorage, the North Slope and the Kenai Peninsula, e-procurement makes a lot of sense. There will, however, be challenges.
At least one supplier who has a long lead time for orders from one of his principle manufacturers expressed concerns at the workshop about how to manage an inventory when he had no idea what BP’s annual needs would be.
Cortez acknowledged those concerns. “One of the biggest things that’s hard for us to forecast is our activity level,” he said. Supplier inventories went up and down with the “fits and starts” of BP’s activity, he said. “It’s just going to take more coordination,” he concluded.
The bottom line is: It’s going to happen.
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