Unlocking Efficiency: The Complete Guide to Streamlining Contractor Management in the Oil & Gas Industry
Streamlining Contractor Management in the Oil & Gas Industry: A Unified Approach to Efficiency and Cost Savings
It is no secret that contractors are a crucial part of the Oil & Gas industry’s workforce.
The constant demand for varying skilled workers across a wide array of projects and locations has this industry regularly tapping into the contractor workforce at levels that are significantly higher than most other industries.
In fact, research provided in the Wall Street Journal found that contractors can outnumber employees by as much as a 2:1 ratio!
Understanding the Contractor Workforce in Oil & Gas
With contractors making up such a large portion of the Oil & Gas industry, it is no wonder that companies in this space are spending a great deal of time, money, and resources to better understand the complete contractor picture on how they engage and manage their contractor workforce.
Having a more complete picture could not only lead to potential cost savings for various stakeholders, it can also lead to improved relationship management with crucial contract suppliers. While the pursuit of a complete contractor picture is a good one, Oil & Gas companies often find themselves frustrated as the various pieces of the puzzle seem in themselves too big or too unique to piece together across various stakeholders.
What is the major contributor to this exasperating challenge, and how can Oil & Gas companies begin to work towards a complete contractor picture?
Oil & Gas companies are some of the most highly engaged with contractors given the nature of the business. Each division of work varies so greatly from the others with constant changes in projects and scope, maintenance, and necessary supplier relationships which makes the work environment extraordinarily difficult to unify in a cohesive manner.
Enter in the army of specialized purpose-built software that cater to each division’s unique goals and needs! A simple Google search will return articles replete with references to ‘software ecosystems’ and the importance of purpose-built software being able to join to a larger network of solutions.
Good ol’ highly customized integrations are the savior in this model! Now, that is not to say that that I don’t recognize this is the direction technology is moving for asset-intensive industries. After all, there is not a single solution on the market that can do it all for the various Oil & Gas stakeholders.
The work is simply too different and the needs across stakeholders are vastly different. We recognize this and understand why the technology is moving towards promoting software ecosystems – but that doesn’t necessarily mean we fully agree with the trend, at least in the way it is being approached.
So, with that said, here is the quick and dirty opinion of this blog post author: acquiring the right software solution to act as the source-of-truth for the largest majority of your company’s stakeholders and sit at the center of your software ecosystem is the better way to approach gaining a more complete contractor picture. Instead of having each stakeholder in the various divisions acquire purpose-built software and trying to force them together with costly and complex integrations, the best practice is to first look at what the core of your software ecosystem for contractors should be.
We are unfortunately not here to say that customized integrations are avoidable – but we are here to say there is a better way! Let’s look at a quick example to make the case for this opinion.
Challenges in Managing Contractors in Oil & Gas
Oil & Gas Company A is a multi-million-dollar company with a couple thousand employees across 4 continents. The organizational makeup of Company A has separate divisions with stakeholders for maintenance, construction, capital projects, sourcing, procurement, IT, and several more. Each of these divisions interacts with contractors on a daily basis, several of which are even made up primarily of nested contractors. Company A has the below software landscape to manage contractors:
- Maintenance – Software specifically catering to maintenance order creation, management, and invoicing is in place. Contractors are expected to submit their bids and manage their maintenance work in this solution. Invoicing is done via excel, and payment is manually completed by a different division.
- Construction – Construction project management software is in place to manage bids, equipment rentals, and contracted milestones and deliverables. Project management and scheduling is also done via the software. Invoicing is done via excel and payment is tracked through the software.
- Capital Projects – A project management software was acquired to better manage the complex (and often changing) milestones, deliverables, and budgeting. Suppliers are expected to keep their deliverables and milestone progress updated in this software. Suppliers that also provide construction services to the other division are expected to use both software and submit separate invoices. Payments are tracked in both solutions.
- Sourcing – Contract lifecycle management solution is acquired and integrated into Procurement’s ERP. High-level contract data is integrated to several of the other software solutions. New suppliers, evergreen suppliers, and repeat suppliers are expected to work with Sourcing for contract completion and management, and certain types of bids.
- Procurement – An ERP software suite is in place to manage high-level contract data, material purchases, POs, invoicing, and payment. Procurement also utilizes the Contract Lifecycle Management solution in annual discussions with suppliers on their performance and contract renewals.
- HR – Vendor management software (VMS) is in use and integrating into the ERP to manage contingent and high-volume workers. There are talks of integrating some of the suppliers into the Contract Lifecycle Management solution, but that project has not launched yet.
Notice how each group listed above has a separate software to manage their division’s unique contractor management and relationship goals. Is there anything inherently wrong with this? Of course not. Is this creating a cohesive “ecosystem” where all of the above stakeholders are achieving the goal of knowledge and getting the complete picture of what is happening in their contractor engagements?
Part of this may be the result of the above listed goal not actually belonging to each of the above stakeholder groups. While each can certainly benefit from a complete contractor picture – think about the cost savings, quality improvements, and reduction in risk from using tried and true contractors across divisional projects – the driving force behind the goal of gaining a complete picture is most often coming from Procurement and Sourcing stakeholders and flowing outward to other stakeholders that may or may not see the benefit of this goal.
For this post, let’s assume that a majority of the stakeholders agree on the importance of having a complete contractor picture (If they don’t, see our upcoming eBook for the benefits of having a complete contractor picture across all divisions!). The above example is for a fictional company, but in our experience, this is most often the structure we encounter when we engage with the Oil & Gas industry. In and of itself this is not a bad practice, and ecosystems can be beneficial, but the problem comes in when every separate stakeholder sees their software as the ‘Source of Truth’ for their piece of the contractor management puzzle and then operate in data silos.
With 6+ sources of truth managing contractors, there are bound to be complications with getting all the data to fit together for a complete picture. First of all, the data collected across 6 separate systems is bound to be different. Without a singular source of truth to point the data to there isn’t any easy way to align all the data cohesively unless you happen to like massive cost-draining headaches and underwhelming results.
Simply put – even the companies that have aligned stakeholder goals for a comprehensive contractor picture are often unintentionally building software silos while conversely shooting off more emails, scheduling more meetings, and putting more manpower and money into fitting the pieces together of contractor puzzles that don’t even have the same picture. Sound exhausting?
So, let’s get to the practical approach for Oil & Gas companies to take in unifying a diverse set of stakeholders with diverse goals in the pursuit of a complete contractor management picture. Unless you are part of a new-to-the-market Oil & Gas company, chances are pretty good that you already have several software solutions in place across different stakeholder divisions.
Your first step will be to look at all the software tools in place to see if there is a software in use that can act as a singular source of truth. Some things to look for in your ‘core’ contractor source-of-truth software should be:
- Ability to intake most of your major contractor data points, such as bids, contract numbers, tenure, project/assignment data, milestone/time/deliverable data, maintenance order/PO data, supplier/contractor data, etc. without a massive overhaul of the software.
- Ability to support multiple integrations without the need for a massive back-end support team to shoulder manual tables for an unforeseeable amount of time.
- Adaptability, partnership, and openness to customization requests by the software provider (few things are worse than trying to undertake a project with a software provider that is inflexible in how their software functions. One size does not fit all.).
- Most importantly – An ability to digitally perform most of your core contractor business processes.
If you are not able to find the above with your current software solutions, it may be time to consider acquiring a Contractor Management Software to act as the core to your contractor software ecosystem. While you can still choose to use one of the software solutions currently in the ecosystem, you may be missing out on huge opportunities in the following areas:
- Simplification of your software ecosystem by reducing complex integration needs
- Cost savings through the reduction of redundant software solutions
- Reduced administration for you and your suppliers
- Stronger ability to unify data across systems with centralization in a system that is already built to collect what is needed for a more complete contractor picture
To make the data align outside of a Contractor Management Software at the core, there will likely either need to be major overhauls in the systems to align the data points, or complicated custom integrations will need to be set up to convert similar data points. In addition to this, the ability to save costs on software and processes is essentially cut off. In fact, the second option likely means increased manpower with a back-end team upkeeping complex data tables to keep the integrations working.
It is for these reasons that we recommend considering a Contractor Management Software to act as the core of your software ecosystem. Choosing to go this route can lead to the above bullet points of benefits while better removing the silos between various stakeholders. Another thing to consider is the fact that contractors often outnumber employees in Oil & Gas companies.
You may be thinking our recommendation is simply to add another purpose-built software solution into the mix of software, and this is true, but we make this recommendation based on the sheer volume of contractors being engaged.
Given that this is such a large piece of an Oil & Gas company’s business, we see the best practice to be owning a core system that helps your ecosystem run efficiently.
Contractor Management Software solutions are purpose-built, but they are purpose-built for management in a very complex demographic of the workforce and can act as a stronger core than other solutions.
For over 20 years, NHD has been providing an intelligent, all-in-one solution that bridges the gap between your company and your external workforce in the full source-to-pay cycle.
Discover how our software is transforming contractor management. Contact us today.
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