Case Study

The Cost of Poor Material Classification Standards in an Oil and Gas Manufacturer

The Challenge

A large manufacturer of oil & gas struggled with a lack of visibility and control over the sourcing activities of their supply base. They were experiencing uncontrolled raw material costs, difficulty managing continuity of supply and an inability to leverage the broader purchasing volume of their suppliers because of inadequate supply chain data.

We determined that the company had no consistent material classification standards, preventing them from identifying common groupings of materials. The OEM had tried to build and leverage their own corpus of material data by hiring contractors to perform material take offs. These results were inconsistent, as many key material attributes were missed or mischaracterized.

The Solution

The OEM reached out to Supply Dynamics. As a first step, we performed Part Attribute Characterization, our proprietary process that captures the key attributes of an OEM’s parts and assemblies. This software and engineering driven process, PAC for short, allows for the characterization of materials according to a uniform structure and taxonomy and is Step One in restoring supply chain visibility to an OEM.

We began by arranging all their parts and components into hierarchical Bills of Materials, and documenting detailed attributes down to the component level. We characterized 1,000’s of parts and loaded this data into our supply chain visibility and analytics platform, SDX. In SDX, the common materials across multiple suppliers could be easily identified. This data became the basis for strategic supply chain action.

The Impact

SDX enabled our OEM customer to visualize aggregate demand for raw materials across their extended supply base. Visibility surfaced opportunities to leverage buying volume and drive cost savings. Having this data in a central platform also provided the opportunity for their part suppliers to log in, validate part attributes, update lead times and other frequently changing data. The OEM developed a corpus of structured data and a means to keep it up-to-date and accurate over time. They now had the supply chain visibility and control they were looking for. We characterized 1,000’s of parts and delivered visibility and control across their extended supply chain.

Platform Strategies In Distributed Manufacturing Supply Chains