Item Mismanagement: Sin #3 of the 10 Deadliest Sins of Oilfield Service Companies
They say everything’s bigger in Texas. You might observe the same about the North American oilfield services industry. From its equipment to its production figures to its economic impact, the numbers in the industry tend to be huge.
According to Jory Lamb, President and CEO of VistaVu Solutions, the industry does a good job looking after its big-ticket items. In his experience, however, smaller items and miscellaneous materials don’t always get the same attention.
“When you’re dealing with multi-million-dollar pieces of equipment, it might not seem important to manage items like hand tools or compressors,” says Lamb. “Oilfield service companies make their revenue with the big equipment, but how they manage the smaller items directly impacts their profitability.”
Lamb tells the story of a welding company he worked with some years ago. This company went through tools, such as impact hammers and torque wrenches, like they were going out of style. In addition to the tools that broke or wore out, this company constantly lost tools or left them behind on job sites. Over a two-year period, this company wrote off $300,000 in tools.
Some companies may feel, that’s just how it is in the oilfield services industry. They might shrug-off such losses as simply a cost of doing business. Lamb urges companies to dig into their own numbers and challenge these assumptions.
“It’s a balancing act,” says Lamb. “For every dollar in inventory you carry, it costs you 29 cents per year in extra costs. On the other hand, when you don’t have the right tools on hand when they’re needed, it hurts efficiency and reflects badly on the company.”
Not all companies are fatalistic about their small-item write-offs. They make it a policy to keep track of everything and use software like SAP Business One and FieldVu to make it happen.
One of these companies is Industrial Battery Products (IBP) of St. Louis, Missouri, a VistaVu customer. Gene Klein, IBP’s Vice-President of Finance, recently joined Jory Lamb in one of VistaVu’s recent live webinars. They talked about how IBP manages its smaller items using SAP Business One, and how this attention to detail pays off in dollars and cents. To see the recorded webcast, click here.
