A Close-up Look At The Procurement Operations At Oilfield Services Giant Key Energy Services
If you’ve been around onshore oil rigs in the Lower 48, you’re acquainted with the work of Key Energy Services (OTC:KEGX). What you may not be familiar with are the fascinating complexities of running a procurement and supply chain operation for a large field-based company.
For Key, supporting their 1,500-strong workforce – nearly all of whom are in-field – with the tools and supplies they depend on is an elaborate dance with seemingly ever-changing steps. The nation’s largest rig-based well servicing firm, Key Energy, serves 150 operating locations in all the active major petroleum basins in the continental U.S., leveraging proprietary technology that enables continuous improvement, cost reduction, and enhanced safety performance for their external and internal stakeholders.
We recently spoke with Kimberly Schormann-O’Neal, director of procurement and supply chain for the Houston-based enterprise, to get an inside view of this business unit and the unique approaches needed to support the nation’s largest onshore well service rig fleet.
Schormann-O’Neal leads a four-person team consisting of herself, an analyst, a Srlogistics and procurement manager, and a procurement manager who, serves as an IT implementation manager who ensures that technical systems sync effectively between Key andtheir supplier partners. Each manager also serves as a category specialist for several areas of spend.
Together, the team arranges every aspect of the supply chain, from finding the PPE needed on job sites to gas monitors, pipe lifters, and vehicle fuel, then working to get good prices on everything they procure.
At Key, operations drive purchasing, which is a necessity given the itinerant nature of the workforce, whose movement is coordinated by ops. “We don’t have standard routes,” she explained. Key serves their customers as events occur (and as their capital schedules permit), and that makes advanced planning tricky at times and impossible at others, so great care is required.”
“In procurement we drive value by putting smart programs in place, working with operations to present solutions and savings opportunities,” she pointed out, noting that interdepartmental collaboration is particularly close because the purchasing and supply chain team isn’t onsite. When presenting solutions to operations, the team asks them to troubleshoot them and explain why it has to work a certain way. “Then we can work with a supplier to make it work that way and ensure that a deal makes sense on both sides.”
Roughly 20% of Key’s operational field workforce has been with the company for more than 10 years, many have tenure beyond 25 years, and the same can be said for many of the companies in their supplier network. That consistency contributes to their ability to maintain symbiotic relationships with suppliers in the small towns and remote areas where they work.
“There’s no centrally managed supply chain strategy that can match the relationships that we have with local people,” she said. “That will never change because there will always be ‘middle of the night’ problems they help us solve.”
Of course, workers have abundant tools at their fingertips, but purchasing them isn’t necessarily straightforward. “A lot of our procurement is making sure our people have the right tool for the right use,” she noted. “It might not be the cheapest, but it’s definitely the one that’s going to be the most valuable and save money in the long run.”
At present, Schormann-O’Neal is implementing Key’s use of industrial vending machines through Fastenal and its FASTVend program. Portable vending has become a popular way to get products into the hands of their crews exactly when they’re needed and is also used to help supply chain pros understand how and when those items are used. She noted that vending works well for safety tools, small items such as Teflon tape, and other standard items.
With vending, she stressed, “We can get a better understanding of where a spend is going and what’s being used by the rig and by individual locations.” It’s also a time-saving strategy, eliminating the need to order supplies, travel to vendors, and keeping stock onsite. Usage reports will enable them to track productivity and gather predictive analytics. “We can do comparisons: This rig worked this many hours. Why is it going through so much more WD40 on this particular rig? Is there an issue we need to look at?”
There’s another pain point that most industrial procurement specialists have to deal with that can be ameliorated with the approach: too many part numbers and purchase orders. “It’s too much to ask our field admin to do a 700 line purchase order to define it down by a part number for Teflon tape,” she quipped.
Arranging crew lodging is another complexity that automation is simplifying. In addition to online booking, CLC Lodging gives Key the ability to view reservations, which comes in very handy when weather poses a danger. Administrative tasks such as collecting receipts are eliminated by the booking and direct pay process.
“Organizationally, we free up operational time, and as a result the operations team is able to spend more time providing exceptional service and focusing on safety enhancements,” she said. For instance, Key is implementing Motive vehicle monitoring as part of its all-encompassing safety mandate. The tech allows instant feedback, and scores drivers on their habits. The system benefits procurement initiatives, collecting data such as fuel usage, predictive maintenance, and sustainability efforts such as carbon footprint measurement.
Additionally, Key’s environmental team is working with procurement and supply chain to establish metrics for and data from suppliers to demonstrate the company’s supplier diversity. They have an incredibly diverse workforce as well.
“For us, quality is finding the right product. It changes constantly,” she said. “Safety is our obligation and our culture revolves around safety, employee satisfaction, employee growth, and exceptional client service.”
Ultimately, making deals that work for all parties involved is their goal. “That’s what I think sets my team apart from others,” Schormann-O’Neal said, noting that supply chain and procurement management theorists don’t always address “how to make it work on the back end for everyone involved.”
If there is one word to describe the Key procurement and supply chain team, it is practical. “I’m very glad that we can just go down the practical road and understand what our people in the field are dealing with,” she concluded. “We just try to make their life easier and better and get them what they need when they need it.”
Headquartered in Houston, Texas, Key Energy Services provides a wide array of leading edge energy production solutions and services. Through their highly trained and experienced crews, technical expertise, state-of-the-art data analytics, and fit for purpose equipment, they enable America’s E&P companies, from small independents to majors, get the most out of the life of their wells.
Using standardized processes, their objectives is to deliver efficient, high quality results. All this with one goal in mind: our customers’ long-term success.