Changing Skills in Supply Chain Management

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Changing Skills in Supply Chain Management
Buyer-Seller Forum March 16, 2005
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Agenda

• Suncor Regional Growth
• Changing Supply Chain Activities
• Challenges

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Suncor Regional Growth
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Suncor Energy at a Glance

• Integrated energy company - upstream, refining,
  pipelines marketing and wind power
• Market capitalization 18 billion (US14 billion)
• Original and single largest investor in the
  Athabasca oil sands
• Production capacity of more than 270,000 BOE/day
• More than 4,000 employees

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(No Transcript)
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Oil Sands Production
Thousands of barrels per day
Production capacity targets
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Suncor Oil Sands Growth Plans
What
When
Production
Firebag Stage 1
2003
260,000 bpd
MVU
2005
Firebag Stage 2
2007
330,000 bpd
MCU
Voyageur
2010 to 2012
500,000 to
550,000 bpd
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Suncors Approach to Major Projects
Suncor approach
Typical approach

• Experienced team managing a staged program of
  projects
• Suncor fills most critical roles
• Team of several thousand built slowly and
  maintained
• Established systems and processes in place,
  improving project by project

• Mega-project led by senior owner with little
  mega-project experience
• Owner fills just a few high level roles
• Team rapidly built from zero to several thousand
  take what is available
• New systems, processes learning curve is steep

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Sustainable Development

• Supplying energy in a manner that meets the
  environmental, economic and social expectations
  of stakeholders
• Increasing shareholdervalue over the long-term
• Think broadly and takea long-term view of
  ourbusiness risks andopportunities

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Life Cycle Value Assessment

• Takes a long-term view
• Considers environmental, social and economic
  impacts early on
• Training provided by Pembina Institute

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Changing Supply Chain Activities
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• Supply Chain Activities are Changing

Traditional procurement vs. Strategic SCM

• Adversarial relationship with suppliers
• Multiple sources
• Item-based purchasing/ inventory policies
• Churning of the supplier base/bid mentality

Long-term mutually beneficial supplier
relationships Single source Commodity-based
purchasing/inventory policies Long-term contract
(quality and fair price)
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• Supply Chain Activities are Changing

Traditional procurement vs. Strategic SCM

• Just in case purchasing (build inventory)
• Large batch purchases and monthly deliveries
• Pay upon match of invoice, PO and receiving
  report
• Focus on lowest cost of commodity

Just in time purchasing (minimize
inventory) Small batch deliveries tied to large
batch purchases, focused on manufacturing
timelines Electronic payment upon receipt of
goods Focus on lowest total cost of ownership
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Supply Chain Management
Traditional Purchasing
Strategic Sourcing
Supply Chain Management

• Doing deals
• Focusing on price and delivery
• Jobbers parts supply
• (3 bids a buy)

• Fewer vendors
• Supplier Of Choice (SOC)
• Desktop requisitioning

Application of Information Technology
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The Next PhaseValues Based Business Integration

• Suppliers with common culture and values
• Suppliers with ability to deliver value across
  projects
• Team focus on the end product work backwards
• Suppliers integrating in process early

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Involvement Makes a Difference
Opportunity for Engineering, SCM, Suppliers to
influence costs sustainability
High
Cost of Design Changes
Opportunity to Affect Change
Low
Concept
DBM
Start
Construction
EDS
L
S
Distance from Project Commencement
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Mill Options Decrease as Time Decreases for
Commodities
MI LL OPT IONS
of suppliers available in market
Costs increase as options decrease
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Challenges
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• The team that gets the best results is not always
  the team with the most brilliant minds, but
  rather the team that can best coordinate the
  brains and talents of their members

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Conclusion

• The requirement for traditional purchasing skills
  is decreasing as the supply chain gains
  importance.
• Facilitation, relationship management, continuous
  improvement skills are hard to find.
• Traditional development from clerical or
  warehouse positions does not equip staff for new
  environment.
• 3 bids and a buy has limited application
• Effective training is limited, with most focused
  on transactional skills.
• The management of the supply chain becomes more
  strategic to the organization more complex.