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Procurement post COVID-19: A new reality for national energy companies

COVID-19 has significantly impacted the global energy industry. Responses from 2020 BCG National Energy Operator survey indicate that the most common response to the crisis has been to “defend and protect” the supply chains by ensuring availability of materials. Very few have pursued bolder, more structural cost-reduction measures.

Looking forward, we expect most suppliers to the energy industry to experience over 20% cost deflation over the next 6 to 12 months; largely due to falling commodity prices, salary reductions, oversupply due to capex cuts and efficiency measures. Therefore, it is important for companies to convert such cost deflation into price reductions.

Furthermore, emerging from the crisis successfully requires careful re-design of the supply footprint and re-building of supply capabilities. Most national energy company supply chains will require a complete overhaul to win in this “new reality”. Advanced levels of digitization, improved supply risk management, deeper category intelligence, and closer collaborations with suppliers are examples of areas that warrant immediate attention.