Efficiency measures and cost control are both very hot topics in today’s oil and gas markets. Projects are being scrutinized harder and harder across all parts of the industry value chain. Weak participants are being forced out or acquired. The smart ones are adapting and will eventually cope even in a lower margin territory.
As Darwin postulated – it is not the strongest who will survive, but the most adaptable ones. It is time to adapt to the new realities.
From IFS’s point of view, it’s centered around being smart about your business. Make it easy for your organization to save costs, save time and be up to date with the correct information at all times. How can you be a truly efficient player if you don’t?
So how do you achieve efficient project and cost control in this new low margin regime?
According to IFS’s oil and gas specialist Aase Sundgot, the key is to tie together the whole project flow thus enabling measurement, forecasting and improvement on project cost performance.
The capability of reacting to changing market conditions and controlling costs is critical for every oil and gas company. Now more than ever!
Let’s look at some of the main elements of this exercise.
One of the greatest barriers to accurately capturing cost is the fact that many project-oriented companies are running various applications in different parts of their business. The complexity increases with global operations, as multiple divisions and locations are involved. All these factors affect oil and gas companies and their capability to keep track of planned, committed and actual costs.
Knowing the overriding challenges for oil and gas firms, what to do then? From my perspective, there are some key areas to address:
1. Take control of the execution phase
Some of the greatest benefits arise from the ability to standardize information, with a single source of data that can be accessed in real time.
Controlling the execution phase is essential, and this can only be fully done by eliminating data silos and lack of transparency. IFS Applications ties together all parts included in the execution phase of a project; engineering, procurement, maintenance, logistics, invoicing and so on. This gives you the ability to combine measurements of scope, schedule, and cost in a single integrated system with full traceability and visibility.
2. Ensure reliable forecasts for ongoing projects
Another great challenge for project-intensive companies is to keep track not only of historical costs in the general ledger, but also all costs incurred according to plan and progress, and to be able to provide reliable forecasts on both detailed and overall level for management.
By integrating the execution phase with the help of IFS Applications, with is built-in forecasting module, forecasting becomes easier and more accurate.
3. Automate intercompany and consolidation processes
Since intercompany transactions often are a significant part of the business, efficiently handling of the intercompany process is an additional key challenge.
By automating the process in IFS Applications you can gain an immediate positive effect on cash flow; as the processing can be reduced from months to days, you will be able to invoice external customers significantly faster.
Another important area to improve is the capability to reconcile intercompany postings and to handle consolidation in a global and changing environment.
For example, thanks to the flexibility offered by IFS Group Consolidations, any number of structures, currencies and ownerships can be handled in parallel, focusing especially on management consolidation. As an integrated part of IFS Applications, the solution will provide a common interface, full validation of all basic data and drill-down analysis to source companies.
Many difficulties associated with capturing cost depend on the fact that, for instance, the project management software isn’t a native part of the ERP system. Some companies also continue to rely on manual methodologies to manage schedule and cost data, thus jeopardizing visibility, reporting and ultimately decision-making capabilities.
Only an integrated system, focused on the oil and gas industry and with a proven track record, will provide the data quality, real time possibilities and visibility needed to realize full cost control both on project and company levels.