sclinx incorporated - april 2015

About SCLinx

April 2015

Gary Flaharty Noman Waheed

About SCLinx

SCLinx is a management consulting firm specializing in executive supply chain coaching for oilfield services companies

Target clients and engagement decision makers include:

•  the executives to whom the supply chain reports

•  the top supply chain executives in a firm, and

•  the senior members of the supply chain team

Target engagements include:

• coaching engagement

- initial assessment: in-depth analysis of the company, its supply chain, and its challenges resulting in the development of a strategic roadmap

- ongoing monthly coaching

• project-specific engagement

- specific deliverable as specified in a negotiated statement of work

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www.supplychainlinx.com 2

Our Approach

Supply chains must be customer-anchored to deliver competitive advantage

• we believe oilfield supply chains can deliver competitive advantage to products and services companies only when their goals are anchored in the customer’s requirements

Planning and repeatable execution are key

• we believe competitive advantage is achieved by pursuing excellence in planning, repeatable execution, and by anchoring the supply chain in the customer’s needs

• planning and execution improvement must focus on the links in the value chain

-  if the links are tightened, we can reduce inventory, lower costs and shrink lead times

-  if the links in the value chain are loose, we must compensate with wasteful inventory investment, higher costs, and extended lead times

Coaching builds sustainable improvement

• our approach is to coach supply chain leaders and their teams to create agile oilfield service supply chains that deliver products and services as promised to the customer

• coaching builds skills in the executive and the team


Anchoring in the Customer

Customer-application - a group of customers with similar buying behavior participating in an application with similar requirements.

• Majors and NOCs in the deepwater •  Independents in US shale plays • Pemex offshore

Service company success in a given customer-application is driven by critical success factors

• Cost • Lead time

Supply chain strategic goals must focus on •  Imperatives •  Internal goals • External goals


product line

Customer-Anchored S&OP

Traditional S&OP often fails to attract top management

• Demand planned by geography and product-line; customer-application detail is lost

• Resource planning performed by plant (and by vendor)

• S&OP meeting organized around product lines

Customer-Anchored S&OP: • Demand planning initiated by

customer-application by geography

• Resource planning performed by plant and by vendor

• S&OP meeting organized around customer-applications


geography

customer-application

We Wrote the Book

Section I Introducing the Customer-Anchored Supply Chain Chapter 1 Customer-Anchored Supply Chains

Section II Planning

Chapter 2 Sales & Operations Planning Chapter 3 Demand Management - Demand Planning Chapter 4 Inventory Planning Chapter 5 Resource Planning Chapter 6 Performance Monitoring Chapter 7 The Monthly Executive S&OP Meeting

Section III Execution

Chapter 8 Planning and Execution Strategies Chapter 9 Demand Management Order Management and

Order Promising Chapter 10 Materials Management The Master Schedule Chapter 11 Materials Management Materials Requirements

Planning (MRP) Chapter 12 Execution

Section IV Advanced Topics

Chapter 13 Dealing with Complexity and Variation Configure-to-Order (CTO)

Chapter 14 Capital Planning and Spares Planning Chapter 15 Competency Management


Customer-

Anchored

Supply

Chains

an executive’s guide to

building competitive

advantage in the

oil patch

Gary Flaharty

Noman Waheed

Why Engage SCLinx?

Balance sheet improvement

•  too much inventory, too much debt

- free up capital / de-lever

- improve economic value added, improve return of shareholder’s equity and debt

Service level improvement

•  lead time reliability

•  lead time reduction

Cost improvement

• operational efficiency

Customer-anchored business planning

• developing a unified go-to-business game plan supporting the customer


New market realities

• North America market over-supplied unconventional gas and oil

• service companies slashing staff

• oil companies looking for price concessions

• both must look at the underlying processes

Strategy focus

•  tactical imperatives squeezing time available for strategic thinking

• SCLinx helps executives leverage limited time for strategic thinking

• another set of experienced eyes

Coaching-oriented model

improving economic returns on investment

SCLinx Capabilities


our toolkit and experience

Supply chain executive and team coaching

Enterprise Resource Planning implementation

Sales and Operations Planning

Demand planning

Resource planning

Materials Requirements Planning

Master Production Scheduling

Spare parts planning

Inventory planning and optimization

Statistical forecasting

Supply chain operational efficiency

Competency assessment and training

Operating models and organizational designs

Supply chain simulation (Linx)

When the engagement requires additional resources SCLinx will assist the client with engaging a fit-for-purpose source of additional resources

The Annual Assessment


Elements of the annual assessment • strategy -  imperatives, external, and internal

• processes - sales and operations planning, order management

and commitment, inventory planning, materials management, master scheduling and execution, spare parts planning

• people & culture - standard work & competency management - skills assessment - RACI development

•  technology -  IT infrastructure assessment - advanced planning systems

Gap assessment, priorities and road map Benefits case Balanced scorecard

The Assessment


Detail

Strategic

• Strategic – (do the employees understand the company’s strategy?)

• Does everyone understand the critical success factors of the company?

• How is the communications between the field operations and supply chain operations?

• Do we know what the customer’s needs are?

• Do you understand the what makes the customer’s customer successful?

• Do you understand what your role is in the broader energy supply chain?

Sales & Operations Planning

•  Is there a core S&OP planning process for the company?

•  If so, who participates in the S&OP meeting?

• How is the data collected for the S&OP meeting?

• How often is the S&OP meeting conducted?

•  Is there an action log documented during the S&OP meeting?

The Assessment


Detail

Demand Planning

• What is the demand planning methodology?

• Can the demand plan translated in a language that can be understood by the resource planning team?

• Are there other plans other than S&OP plan?

•  Is demand forecast and it’s bias measured?

•  Is there a supporting technology to generate demand plan or is the organization planning with spreadsheet?

•  Is the demand planning process documented in standard work and adhered to?

Inventory Planning

•  Is the inventory pegged to the customer?

•  Is the inventory considered by the company as capital investment or “free”?

• Do we intentionally build inventory for seasonality is it just in case?

• How is the inventory build: “tribal knowledge” or “calculated”?

The Assessment


Detail

Inventory Planning continued…

• How is the inventory performance measured and how is optimal inventory incented?

• What are the company’s strategies to reduce inventory?

• Does the company know how much inventory it should carry?

Resource Planning

• What are the critical resources (human, machine, materials etc.) for the company?

•  Is the demand fulfilled by the resources available by the company and the strategic suppliers?

• Do the sales force understand the capacity constraints of the resource planning?

• Does the company understand the vendor capacities?

• Does the company employ “demand shaping” strategies to close the gap between demand and supply?

•  Is there an understanding between the field operations and supply chain the the resource plan is realistic?

Implementation Roadmap


Phased Roadmap

Business Analysis & Benchmarking

4 to 6 weeks

Process development & Rollout Planning

8 To 10 weeks

Pilot

12 to 16 weeks Scale

Diagnose Design Deploy

Mobilize

Plan Phase I Phase II

•  Understand the as-is process via documentation and interviews.

•  Rate as-is process with SCLinx Common, Progressive, and world class benchmarks

•  Using the agreed hypothesis, create a opportunity assessment summary deck for the leadership team

•  Compute KPIs for root cause analysis

•  Form hypothesis based on the KPI results

•  Test hypothesis with S&OP Team

•  Iterate until root case is identified.

Qualitative Analysis

Root Cause Analysis

Leadership Feedback Pre-Work

•  Build the extended team •  Communicate

objectives of the project to leadership and extended team

•  Obtain S&OP KPI data •  Prepare an introductory

communications package

Activities:

Deliverables: •  List of key stake holders and their contact information

•  Communications Deck

•  Series of hypothesis to test further with data

•  Series of questions for any follow up interviews

•  Prioritized list of gaps supported by data analysis and interviews.

•  As-is state documented

•  Opportunity assessment summary

•  Commitment from Leadership to support and pursue change.

Linx Supply Chain Simulation Game

Linx is a supply chain simulation game designed to illustrate certain supply chain principles

Linx supply chain simulation performs like a real supply chain and, it breaks down like a real supply chain

• SCLinx facilitators coach participants to apply new concepts and make connections between how the simulation breaks down and what happens in real life

•  the problems and solutions proposed in the game parallel real life situations and solutions to supply chain challenges in oilfield service supply chains

Linx is most effective when the client firm’s participants represent a wide variety of operational and supply chain roles Linx is customized to the client firm’s processes to closely model what the firm sells and the nuances of its operations and supply chain

Linx illustrates management principle critical to the success of the firm

A Linx engagement includes customization of the Linx simulations game to the client’s firm and operating model


The Case for Strategic Change

Unconventional gas-directed drilling in the 6th year of decline

Unconventional oil-directed drilling in the first leg of decline

US oil production increasing (O 1.1-1.2 mbd last 3 years)

• US shale supplied 100% of the world’s incremental need over the last 3 years

• US oil production continues to increase (2 year lag)

•  inventory of drilled and not fracked growing

Saudi’s cutting development budget by 25%

• Oil-directed drilling will remain depressed absent a swing producer

Rig count suggests only 400-600 rigs needed to offset declines!

The old playbook is … old

• Cutting people and vendor prices to protect margins and lower F&D costs will not work for this structural change

• Supply chain executives need to think strategic while corporate screams for immediate results.


Gary Flaharty


Managing Partner

Gary Flaharty is a founder and a managing partner at SCLinx Incorporated. Prior to starting SCLinx in 2014, he worked at Baker Hughes Incorporated for thirty-three years including three years as vice president, materials and 15 years as vice president, investor relations.

As an executive with diverse experience both as an investor relations officer and as a supply chain executive, Gary creates value when he empowers diverse teams to collaborate to solve a business challenge and deliver results. He charters teams with the right mix of skilled professionals, clear objectives, and the right processes, tools and data to succeed at simplifying the problem at hand and making the very complex comprehensible and manageable.

Gary holds bachelors degrees in Computer Science and Mathematics and MBA in Operations Management and Management Information Systems from the University of Houston. He lives in Houston with his wife Kim. They have one son, Sean, a 2014 graduate of Auburn University. In his free time Gary enjoys University of Houston sports, Auburn football, serving at Bellaire United Methodist Church and enjoys photography. Gary is also a director of the Texas Southern University Wesley Foundation and former president of Westbury Little League.

Noman Waheed


Managing Partner

Noman Waheed is a founder and a managing partner at SCLinx Incorporated. Prior to starting SCLinx in 2014, he worked as a strategy consultant at Accenture for twenty years and notable is his two years as a vice president, sales and operations planning at Baker Hughes where he redesigned the planning organization with new processes, supporting technology and organization. Mr. Waheed has extensive experience transforming Fortune 100 companies' supply chains. He has worked in multiple industry verticals but his passion has always been the energy sector.

Noman's greatest strengths are his knowledge of supply chain and it's application in the oil field services. He is creative, driven and sought out for his thought leadership. He thrives on challenges, particularly those that expand the company's reach. His most recent accomplishment involved creating sales & operations strategy for Baker Hughes where demand and supply was balanced across all product lines globally.

Noman holds a bachelors degree in Electrical Engineering and masters degree in Electrical Engineering and Computer Science from University of Illinois. He lives in Houston and in his free time, Noman likes climbing mountains, long distance bicycle riding and motorcycle touring.


Contact Information

Gary FlahartyManaging Partner – Energy

SCLinx IncorporatedP.O. Box 1491Houston, Texas 77042 Cell: 832.993.7743Email: [email protected]

Customer-Anchored Supply Chains

Noman WaheedManaging Partner – Energy

SCLinx IncorporatedP.O. Box 1491Bellaire, Texas 77402 Cell: 312.375.8708Email: [email protected]

Customer-Anchored Supply Chains