To gain a competitive advantage within the oil and gas industry, Shell must leverage its overall buying power. We must also remain vigilant and nimble in a volatile economy in order to mitigate business risks and unlock business opportunities. And we must develop mutually beneficial relationships with suppliers, governments, technical partners and the various communities that neighbour its operations.
Shell’s Contracting and Procurement (C&P) organisation is responsible for nearly everything that Shell subsidiaries buy across the full scope of activities in the Upstream, Downstream and Projects & Technology Businesses. This currently amounts to over $60 billion in annual spend. C&P’s specialised knowledge helps Shell subsidiaries focus on what and how much should be bought and at what price. The priority is on getting the most value out of our purchases, not just the lowest cost.
By putting its global internal demand for goods and services into one contractual package on the external marketplace, Shell gains leverage in terms of safety, quality of goods and services, costs and technical innovation. The selection of preferred suppliers enables a far closer oversight of delivery and performance, better mechanisms for quality control and significantly lower prices. Such contract-management improvements, coupled with increasingly efficient operations and collaborative relationships with suppliers, saved more than $1 billion per year in 2010 and 2011.
The C&P organisation also analyses the market, enabling it to be forward-looking in its support of sourcing strategies. In addition, C&P has a key role in ensuring Shell seeks to work with contractors and suppliers who contribute to sustainable development and are economically, environmentally and socially responsible.