Aibel

Source: Exec Digital UK

Date :05/12/2007 16:26:18

Aibel is looking to build its brand internationally. ExecUK discovers how this might affect the company’s supply chain

Written by Ian Armitage and produced by Mark Skillicorn

Aibel is a leading provider of services, products and technologies to the global upstream oil & gas industry. With a dedication to meeting customers’ needs, which is matched only by its commitment to integrity, safety and environmental sustainability, Aibel has established a reputation for innovation, flexibility and operational efficiency.

Currently under the tenure of Ferd Private Equity Fund, Aibel has been through many major changes related to ownership and is now taking positive steps to focus its operations and forge a brighter future. In order to understand how though, one must first understand the company’s origins: “Aibel originated from the ABB Oil and Gas Division which was divested by ABB in 2004,” explains Aibel’s head of supply chain management (SCM), Ian Malcolmson.

“The deal was completed on the 12th July 2004 when Vetco International Ltd., a company formed by a private equity syndicate comprising Candover, JPMorgan Partners and 3i, formally completed the acquisition of ABB Offshore Systems and ABB Vetco Gray from ABB. Vetco International subsequently sold the Vetco Gray (subsea) part of the business to GE in February 2007, and later sold Aibel to Ferd Private Equity Fund II on the 29th June this year. So it is fair to say that we have seen many major changes related to ownership.”

Being part of the smallest operation in a large group, as it was with Vetco International, meant that Aibel could not focus in the same way as it does with Ferd. According to Malcolmson, this has been extremely positive for the company and everyone is excited by the opportunities which exist within Aibel. “We operate in a market with high growth, driven by the strong demand for energy and increased levels of outsourcing,” he says. “This provides Aibel with growth opportunities, both organically and through selected acquisition.”

Solid business model

Aibel has a solid business model based on long term contracts and customer relationships, by always being reliable, and by providing services and technologies which enhance customer value. This represents a solid starting point for further development. Aibel also has a strong organisation with competent and highly qualified personnel, built on a strong corporate culture and values.

“We will seek to build on this by focusing on retaining, developing and recruiting highly qualified employees, by having high standards for HSE and by having ‘we care’ as a core value,” continues Malcolmson. “Building Aibel as a brand both internally and externally will also be important in this respect.”

The role of VP of Supply Chain gives Malcolmson global responsibility for supply chain and logistics. Presently this means implementing corporate governance controls worldwide whilst developing the supply chain groups competence and tools.

“Our SCM goal is to move from transactional to transformational, balancing global and local agreements,” says Malcolmson. “Few supply markets in our industry are global. We do not intend to centralise everything. A considered approach to geographical aggregation is required.”

Aibel also hopes to extend the reach of SCM scope across total addressable spend, operating in cross-functional teams with process owners, while spending more time on supplier relationships management and developing suppliers through benchmarking.

SCM makes the difference

Although the end products may differ, a company’s approach to SCM can be a key differentiator regardless of whether replica football shirts or engineering services are being sold. Taking up this point, Malcolmson adds: “Many aspects of SCM are fundamental to success and apply whatever the industry. Cross functional team collaboration is one.

SCM success is basically never achieved by the supply chain individuals alone, only when they engage and motivate others such as marketing, planning and production groups; only when working towards a common goal is true success achieved. Management of master data is another - ensuring that your product master data is uniform and controlled is essential.

However, the most difficult part of SCM is the management of change; getting people to consider and accept changes to the way they work is the first step in improving the way they work, but it is very difficult.”

Through its strong focus on SCM, Aibel aims to differentiate itself from its competitors. According to Malcolmson, Aibel is currently implementing considerable changes to its internal control routines, as well as planning system enhancements to support electronic approval of purchase orders. All of which will aid differentiation: “I think we are going through a transition at the moment.

That is fair to say. We are going from a company that is fairly decentralised and has grown up through acquisition and individual project groups and business units to one which is focusing heavily on corporate governance. This is in preparation for international expansion. These changes will make us a better company,” he says. Aibel has implemented 22 major internal control directives this year related to its supply chain, radically transforming internal controls.

The management of change

One of the most difficult parts of SCM is the management of change. Getting organisations to go through and accept cultural changes relating to how they work is very difficult, requiring total commitment and dedication: “We have a strong focus on SCM, but the key to its success is acceptance,” continues Malcolmson. “We are one of the few companies in the oil and gas sector that has managed to get supply chain into the boardroom – that level of acceptance has transformed the way we work. The average procurement spend is already around 68 percent of our revenues, and as the industry continues to grow the focus on SCM will become increasingly important.”

At present, 80 percent of Aibel’s revenues are Norwegian industry-driven and that is something it is trying to change. Building on the good reputation it has in Norway, the company will use that to support international expansion into new markets. “Our market is primarily Norway and it is mainly maintenance and modification on the existing offshore facilities,” says Malcolmson. “That is something we are trying to change, and SCM will play a major role in determining what we can and can’t do.”

Because of its ownership, Aibel as a brand has not been heavily marketed in recent years. “That is due to the situation with us being for sale and owned by equity groups,” explains Malcolmson. “That has changed now – we will market Aibel much more heavily in future. It will be a brand name you are going to see more often.” With pioneering products such as the Vessel Internal Electrostatic Coalescer (VIEC), which can be installed inside existing first or second stage separators, enhancing the speed and efficiency of the separation process, who can argue with him?