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Petrobras SCORs with Transformation

To streamline its maintenance parts inventory, the Brazilian oil and gas giant launched a transformation project utilizing SCOR. The result: The avoidance of $786 million in inventory purchases in only 18 months.

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This is an excerpt of the original article. It was written for the May-June 2023 edition of Supply Chain Management Review. The full article is available to current subscribers.

May-June 2023

If you were dropped onto this planet and landed at McCormick Place in the heart of Chicago in the middle of March, you would probably conclude that planet Earth had been overrun by robots. Everywhere you turned on the ProMat conference floor, there was a robot lifting something, putting something away, or carrying something to another location. But, despite a conference hall overrun by technology, the on-the-ground reality is a bit different. Not so long ago, commercial real estate firm Prologis estimated the number of facilities with any type of automation at about 10%. But that is changing—quickly. A recent report from JLL found that one-in-two…
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Managing spare parts inventory is a balancing act. In asset-heavy industries, uptime is essential to profitable operations. That’s true whether you’re operating a manufacturing line, mining equipment or an oil and gas drilling rig and refinery. Given the choice between too little and too much inventory, many organizations opt for lots of just-in-case parts and materials on the shelf. The view is that the investment in extra inventory is less than the cost of shutting down operations for the lack of a part.

There are other common complicating factors that are familiar to almost anyone responsible for MRO inventory. For one, buying authority is often decentralized across individuals or teams such as the engineering team, the team responsible for scheduling maintenance and new construction projects, or the procurement and/or inventory management team; one hand doesn’t always know what the other hand is buying. For another, overstocks may end up in the landfill if they exceed their expiration date or become obsolete as older equipment is phased out, overhauled or replaced. That’s not just costly, but it has an impact on
sustainability for organizations focusing on ESG.

Those were some of the conditions that confronted Petrobras in 2019. “At that time, we had two problems,” recalls Paulo Henrique Furtado, the inventory manager at the Brazilian energy company. “We had high inventory levels and high levels of surplus inventory. At the same time, we had low customer satisfaction levels because the people within our organization who used spare parts and materials couldn’t always get them when they needed them.

The combination of low customer satisfaction levels and high inventory levels caught the attention of the board of directors. That year, the board directed the supply chain team to seek a benchmark to measure, and then improve, Petrobras’ supply chain performance. In response, one of the world’s largest oil and gas companies launched a transformation project that even today continues to improve its customer service levels and create new inventory management practices that could impact the bottom line. To make that happen, the supply chain organization utilized the Association for Supply Chain Management’s Supply Chain Operations Reference model, or SCOR.

Among the results to date: A 25% reduction in the inventory days of supply from 2019 to 2021; a 40% reduction in active SKU codes; and the avoidance of nearly $800 million in unnecessary inventory purchases. In addition, Petrobras is using transformation to upskill the supply chain team by mapping requirements for each supply chain function, measure the skills gap of each employee, and then create an action plan with specific trainings to fill those gaps. A pilot program in the inventory management department delivered a 32% skills improvement among team members.

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From the May-June 2023 edition of Supply Chain Management Review.

May-June 2023

If you were dropped onto this planet and landed at McCormick Place in the heart of Chicago in the middle of March, you would probably conclude that planet Earth had been overrun by robots. Everywhere you turned on the…
Browse this issue archive.
Access your online digital edition.
Download a PDF file of the May-June 2023 issue.

Managing spare parts inventory is a balancing act. In asset-heavy industries, uptime is essential to profitable operations. That’s true whether you’re operating a manufacturing line, mining equipment or an oil and gas drilling rig and refinery. Given the choice between too little and too much inventory, many organizations opt for lots of just-in-case parts and materials on the shelf. The view is that the investment in extra inventory is less than the cost of shutting down operations for the lack of a part.

There are other common complicating factors that are familiar to almost anyone responsible for MRO inventory. For one, buying authority is often decentralized across individuals or teams such as the engineering team, the team responsible for scheduling maintenance and new construction projects, or the procurement and/or inventory management team; one hand doesn’t always know what the other hand is buying. For another, overstocks may end up in the landfill if they exceed their expiration date or become obsolete as older equipment is phased out, overhauled or replaced. That’s not just costly, but it has an impact on
sustainability for organizations focusing on ESG.

Those were some of the conditions that confronted Petrobras in 2019. “At that time, we had two problems,” recalls Paulo Henrique Furtado, the inventory manager at the Brazilian energy company. “We had high inventory levels and high levels of surplus inventory. At the same time, we had low customer satisfaction levels because the people within our organization who used spare parts and materials couldn’t always get them when they needed them.

The combination of low customer satisfaction levels and high inventory levels caught the attention of the board of directors. That year, the board directed the supply chain team to seek a benchmark to measure, and then improve, Petrobras’ supply chain performance. In response, one of the world’s largest oil and gas companies launched a transformation project that even today continues to improve its customer service levels and create new inventory management practices that could impact the bottom line. To make that happen, the supply chain organization utilized the Association for Supply Chain Management’s Supply Chain Operations Reference model, or SCOR.

Among the results to date: A 25% reduction in the inventory days of supply from 2019 to 2021; a 40% reduction in active SKU codes; and the avoidance of nearly $800 million in unnecessary inventory purchases. In addition, Petrobras is using transformation to upskill the supply chain team by mapping requirements for each supply chain function, measure the skills gap of each employee, and then create an action plan with specific trainings to fill those gaps. A pilot program in the inventory management department delivered a 32% skills improvement among team members.

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About the Author

Bob Trebilcock, MMH Executive Editor and SCMR contributor
Bob Trebilcock's Bio Photo

Bob Trebilcock is the editorial director for Modern Materials Handling and an editorial advisor to Supply Chain Management Review. He has covered materials handling, technology, logistics, and supply chain topics for nearly 40 years. He is a graduate of Bowling Green State University. He lives in Chicago and can be reached at 603-852-8976.

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