Our Insights

If You’re Small, Source Smart Globally

Bonfire Admin July 22, 2019

Unlike large energy conglomerates, smaller energy companies ought to take advantage of global sourcing in order to remain competitive in the markets. Unfortunately, many are still ill equipped to do so, owing to the complexities involved in cross-border buying. Nevertheless, there can be significant upside if it’s done right.

Smaller firms within energy markets may have the tendency to source domestically, which grants them access to cheaper equipment and an increase ease of managing suppliers due to closer proximity. However, they are simply not performing at the level of more mature organizations, who have the network and infrastructural capabilities to gain access to superior technologies from global suppliers, driving faster and better procurement.

So how can these small companies start sourcing on a more global level? 

The first thing would be to start defining their requirements, standards and specifications. This is to ensure more consistency with potential suppliers on pricing, product quality, operational functionality and that any of the products bought are fit for purpose. 

The next step would be to evaluate potential offshore suppliers. This could come in the form of a questionnaire, interview or site visit – appraising the supplier’s business capacity, financials, processes and performance. This procedure not only mitigates against any potential poor supplier performance, but also creates a list of ‘approved’ ones that the company can effectively trust to deliver.

Then comes the consideration on whether the company needs to open an office offshore or not. 

An offshore office site has the benefits of providing greater access to newer markets, local knowledge and lowered operational costs. However, it requires a huge upfront investment and is a more mid to long-term play, with some risks, where the potential rewards and positive ROIs can only be seen after years. An EPC provider to take over all overseas procurement activities may be the right way to go, if the focus is on shorter term wins. However, resources need to be allocated to vet and scrutinize them to get rid of any risks associated with opportunistic behaviors. So long as both options are properly weighted and evaluated, the smaller company will be able to make the right decision to more effectively drive their global sourcing efforts.

To summarise, there are several hurdles for small players to overcome when they’d like to source globally. If ineffectively done, it could potentially add unwanted costs, exposure and even failure of the business in a new market. However, with the proper due diligence and a sound process plan, it can be immensely successful, not just in terms of creating cost savings, but also creating a long lasting and robust global supply chain.