In starting the new year, many owner companies are renewing their focus on safety, making it a priority to keep both workers and the surrounding community safe from the potential threats of COVID- 19 to operations. Jay Brown, procurement director at Flint Hills Resources, said his company has had to change all work and maintenance practices, team structures and engineer controls to mitigate spread of the virus and be a "good neighbor."
"It's really a struggle, so we're focused on innovation -- the way we execute projects -- transforming the way we execute work within the plant and the reevaluation of all our capital projects portfolios in light of all these new challenges," he explained.
John Rutledge, director of procurement capital/services at BASF Corp., also acknowledged that his company has done the same: "Most people are not working at the site if they can avoid it, and people that are coming onto the sites are very restricted and limited ⦠Work practices have definitely changed. We're much more cognizant of that. [COVID-19] has affected how we operate for sure."
Brown and Rutledge both spoke as expert panelists during the virtual Industrial Procurement Forum's owners panel, sponsored by BIC Alliance and the Economic Alliance Houston Port Region. Joining them on the panel were Atul Patel, capital investment procurement lead at Covestro; Christopher Hokanson, services manager at Kinder Morgan; and Trelina Nauling, indirect supply manager at Lubrizol Corp.
Hokanson explained that the pandemic initially caused major global supply chain disruptions.
"Our main suppliers were constricted, so we had to develop secondary, tertiary [sources] and beyond in order to keep our folks who needed to be inside the facilities working," he said. "For a good while there, it was very constrained, but it wasn't for a lack of trying to develop new sources and trying to find material."
Kinder Morgan was able to work through the situation and developed new supply lines. Hokanson said the company is confident it's well prepared as the virus rates enter into a possible resurgence in 2021. Brown agreed about the previous constraints, and added that Flint Hills Resources is concerned that supplies will again be constrained in the near future as companies begin to execute projects that were previously put on hold due to the pandemic. Owner companies have been reevaluating the economics of maintenance projects to decide the best time to perform them.
"We're big capital-intensive businesses, and we can only forego some of these major maintenance projects for a certain amount of time before it becomes untenable to run our businesses, so that's something that is a reality out there, and hopefully it's not a cliff," he said.
Patel noted that virtually every business in the industry was affected, meaning many projects that were already planned needed to be adjusted.
"Everyone had registered some sort of risk," Patel explained. "We went back to our books to sit down with our vendors ⦠A lot of analytics went into it to understand where we could get exposed."
Vetting suppliers
As managers in procurement, the panelists discussed varying metrics and methods for each of their companies. For suppliers to work with the company, they must either meet a standard of safety metrics or be evaluated through a third party. Rutledge explained how BASF conducts its process, emphasizing that aside from an excellent safety program, a supplier would need to be cost-competitive to be considered.
"We employ a third party called Avetta," he said. "They capture the information on our behalf. The [supplier] would flag either green, amber or red. Green or amber are OK; you can come onto the site. Red is not so good. The chances of getting onto our site are not high."
Rutledge went on to explain there are five areas BASF takes into consideration when hiring a supplier or contractor: a good safety program, competitive pricing, diversity and inclusion, creativity and innovation.
"We're a global company; we have many options [for] where we can invest," he said. "The U.S. is the most expensive place in the world for us to invest, so we do have to attract investment with competitive pricing. We have to deliver our projects on time and on or under budget. It's absolutely critical for us to demonstrate that."
Hokanson noted that the grade or metrics for each owner company will vary, so a supplier would have to meet different standards at each company.
"Key metrics like total recordable injury rates and experienced modifications are going to play a key role," he added. Being DOT- and OQ-qualified are other aspects owner companies might take into consideration.
Three of the five panelists' companies use ISNetworld® to vet potential suppliers. BASF uses Avetta for vetting in addition to its specific company standards, and Covestro is a participant in the industry-wide initiative "Together for Sustainability" that addresses supply- chain sustainability.
Thomas Brinsko of BIC Alliance moderated the discussion.
