With both management and shareholders emphasizing profitability in today’s commodity environment, strong cost reduction strategies are a vital part of an operator’s overall strategy. Many E&P companies can still find additional cost-saving opportunities in the oil & gas supply chain. But E&Ps often focus their cost-cutting efforts on other areas outside of their procurement process like preventative maintenance, engineering advances, safety, downtime reduction, and scaling operations.
This is because supply chain organizations could not easily access the granular and historic spend data needed to conduct spend analysis and uncover cost-saving opportunities. Several factors contribute to this complex problem including the sheer volume of data, disparate data types, and lack of IT support to retrieve and export the data. Even with the ability to extract invoice data, conducting spend analysis in Excel is very time-consuming. Supply chain managers must make quick decisions with little information, due to this lack of resources.
Introducing OpenInsights for Operators
To solve these challenges, Enverus created OpenInsights for Operators—an innovative software solution that leverages OpenInvoice data to provide valuable insights for your supply chain organization. The solution tackles a myriad of problems, from analyzing high-level spend trends by vendor and category, to understanding unit costs across your vendor portfolio. OpenInsights facilitates strategically sourcing goods and services and maximizing operational efficiencies in these tough market conditions, thus helping your organization achieve its cost reduction goals.
How did we do it?
Categorization and attribution are the two integral parts of the value provided by OpenInsights. With close to $200 billion of annual oil & gas spend flowing through the OpenInvoice network annually, Enverus recognized our unique ability to leverage this data. Investing heavily in machine learning techniques, our army of analysts categorized and attributed hundreds of millions of line items.
Before OpenInsights, operators used accounting-based approaches to attempt to answer spend operation questions.
Such questions include:
- How much is my facilities team spending on valves?
- What is my year over year spend on roustabout crews in the Permian Basin?
- Who are my top suppliers of OCTG across the Southern Region?
To answer these questions required incredibly heavy lifts to pull data together and parse out specific category-level spend from a dataset that contains large amounts of information not relevant to the question at hand.
Now, with OpenInsights, a supply chain professional can simply filter to valves, labor, or OCTG and instantly have all irrelevant spend information removed. They can study the historical spend trends by time, by supplier, or by region. What used to take weeks—and a back and forth exchange with IT—now takes minutes, with no need for technical support.
Attribution is the second value component of OpenInsights. In developing OpenInsights, we interviewed dozens of supply chain organizations and discovered that unit price analysis is incredibly difficult and time-consuming and, when completed, is often of questionable accuracy and scalability. To solve this complex issue, Enverus analysts developed relevant attributes by category. Each line item is tagged with characteristics, providing the ability to run a unit price analysis.
Now you can answer questions like:
- How are steel prices impacting my 5.5” intermediate casing costs per foot?
- How will Permian roustabout cost fluctuations affect my overall well costs?
- What impact has a shift to 100 mesh sand had on my completion costs?
Each of these questions requires you to use filterable attributes to drill down to the exact good or service desired. OpenInsights software allows you to conduct this analysis in minutes.
How is OpenInsights different?
It’s not enough for Enverus to create new products; we strive to create new products that solve customers’ biggest challenges and provide a unique value to the market. For example, because we built the OpenInsights software within the OpenInvoice platform, our users do not have to reach out to their IT teams for support. We were able to do this because Enverus operates the infrastructure that runs the network. As such, we can update this massive dataset every month. And because this data runs through the Enverus ecosystem, we can tie it to the gamut of Enverus Upstream datasets such as well locations, rig specifications, and chemical data to create value not seen elsewhere in the market.
How much savings can you potentially experience with OpenInsights?
In one of our pilot projects, our customer wanted to focus on their specific issue of being unable to uncover meaningful savings opportunities in their smaller, less visible items like ball valves. The customer used OpenInsights to quickly compare pricing of a very specific floating ball valve and identified a more cost-effective supplier. The cost-saving per valve was $72. For the customer’s average annual volume of 20,523 valves, the savings totaled $1.5 million!
With OpenInsights, you can also:
- Improve project planning by gaining insight into historical pricing information to understand and forecast market bids’ cost
- Decrease your direct costs by leveraging spend tools and datasets for vendor consolidation decisions that allow you to reduce marked-up prices
- Strengthen your negotiation position by gaining visibility into what goods and services cost across your vendor portfolio to identify primary suppliers and negotiate better terms
- Mitigate risks by better managing inventory to prepare for unforeseen spend events and to reduce buyout percentage
In the initial launch, categories of goods available include proppant, fuel, pipes, valves, and fittings. Enverus will release more categories throughout 2020 and 2021. Operators can choose which categories they want to access.
With steep price drops and the decline in oil demand due to the pandemic, operators must look inside their organizations for new ways to save money and operate efficiently. With OpenInsights, energy supply chain teams gain detailed understanding of their spend data, increasing efficiency and cost control, creating predictability and stability in the volatile and capital-intensive shale industry.