Breaking Down Global Silos (Part 2): Lessons Learned from Conflict – Spend Matters

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Editors note: This is Part 2 of Jonas story about an ominously last-minute meeting with the Rio de Janeiro headquarters of his oil and gas company, right before an ERP launch. Missed Part 1? Read it here.

When Joo began his portion of the presentation, he introduced a new piece of technology for uploading new materials into the ERP, identifying duplicates and managing existing item parameters. They informed us that this initiative for reshaping the data which served the lifeblood of all onshore and offshore drilling operations had already begun in the back offices of a shared services center in suburban Rio and was naively set to complete before the end of the following summer.

Who will manage the definitions of replaceable maintenance parts? asked Tom, the MRO procurement manager. And does it comply with the existing Management of Change process [which only allowed leading engineers from within the operations to approve exchangeable parts]? Toms questions were met with vague answers and some blank stares.

Tom also asked how they can align MRO part substitutes when most of the assets were inherited from acquisitions that used manufacturers as diverse as Caterpillar, Hannon and Hitachi. Moreover, would two bearings with the same size and threading characteristic be deemed identical? What if they had slightly different heat tolerances?

These were critical details that had both operational and safety implications, yet Luizs confounded response confirmed that our 2013 global materials strategy had not considered the most basic functional requirements.

And how would this new global rationalization of materials work with our scheduled go-live for the new ERP? Months earlier, a data conversion and cutover strategy had been defined and approved. The work preparing conversion files in order to safely move records from the legacy system into the new ERP had been completed. Yet this further data cleansing exercise indeed may have thrown a wrench into our project plan, not to mention additional challenges integrating a new piece of unfamiliar technology. This could not have come at a worse time.

Luizs implementation strategy, which may have seemed feasible on its surface and in isolation from our diverse operations, could not work as simply as it was presented in a North American environment with substantially different safety and engineering protocols.

Ultimately, with unintended costs and delays, North American operations were able to approximate a solution that satisfied the stated global strategy, yet the additional costs were difficult to quantify as there was likely as much deterioration of trust between Rio and the U.S. as additional spend on headcount.

This familiar conflict that so often arises between siloed executive leadership and diverse regional divisions is entirely avoidable. I call to mind this particular spring day meeting because as executives of global enterprises set procurement and supply chain agendas for 2017, it is more critical than ever to rely not only on raw data that is accessible from arms length, but also operating knowledge and cultural understanding, both of which can only be ascertained through sustained engagement with the field. The former cannot substitute for the latter, particularly in light of increased global political volatility.

The year 2016 showed us how political events, market movements and social trends could be more easily mapped to emotional triggers than axioms ofbehavioral economics or underlying transactional data. In 2017, we are likely to see more of the same.

Luiz often asked why I thought American operations were always so resistant to change. It was clear from his implication and the growing friction between Houston and Rio that regional engagement was a shared responsibility. Our Houston-based team had to learn the importance of framing questions in cooperative language quickly, to avoid feeding the Rio-based stereotype of the reactionary American manager.

The absence of engagement and diplomacy between rival factions never ends well.

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Breaking Down Global Silos (Part 2): Lessons Learned from Conflict - Spend Matters