A Strategic Approach to Sourcing Process Automation at SABIC

27 April 2009

With its various acquisitions, SABIC now ranks among the top ten global chemical producers. In order to integrate the different parts of the company, create a common understanding, and share good practices, SABIC has formed centres of excellence in different domains, such as MES and APC, DCS and PLCs, valves, instruments, analysers, etc.

SABIC promotes regular communications between sourcing teams and their executive sponsors
SABIC promotes regular communications between sourcing teams and their executive sponsors

Bart Schaminée, who is responsible for global automation sourcing, pointed out that due to the size of SABIC's global automation expenses and the potential the technology offers for improvement, this is a strategic area for the company. Therefore, each global team has a technical and a sourcing team leader and a sponsor at the vice president level with regular communications between the teams and their executive sponsors.

Interactions with suppliers take place at all levels. In the annual executive-level meetings, strategies are aligned, KPIs are defined and monitored, corrective actions are taken, if required, and communicated to the project teams.

The quality of engineering has a major impact on expenses, including the cost of engineering changes that can multiply through interactions between domains, for example, between process automation, electrical, energy and production process equipment, domains. Therefore, centres of excellence are needed in those domains, with all stakeholders involved.

SABIC applies category management, combining sourcing know-how with technology and needs. This implies a focus on Net Present Value of the lifecycle of automation products and applications, reflecting both cost and value. SABIC considers that major gains are obtained through strategic board-level relationships, in contrast to "cost picking,"' which the company considers counterproductive, since making purchasing decisions based only on price ignores benefits, lifecycle costs, and tends to multiply the number of providers. The different parts of the company, each with their historic EPC providers, had accumulated over 1500 instrumentation providers!

Not all sourcing is strategic at SABIC. The company places strategic focus on the highly complex supply chain segment with high financial impact.

This determines what sourcing can be handled globally, and what requires local attention. Following an internal reorganisation, SABIC now outsources sourcing of simple, low-impact supply chains.

Beyond this well-defined strategy, SABIC has a detailed methodology for analysing the market and a risk- and opportunity-dependent total cost of ownership model. SABIC crosschecked ARC's market data with its own data and has a high opinion of the accuracy of the advisory body’s market studies. The process, from feasibility analysis to agreement, is executed using a tollgate process, with conditional go and no-go decision points, similar to project management methodologies used in concurrent engineering of discrete products.

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