Commercial Innovation in US Oilfield:Buyers and Sellers Both Win by Embracing e-Commerce

By Jerome Ferreira, Philippe Teijeira, Alex Tapper, and Chad Harkness

The next revolution inoil and gas has begun.Trends surrounding the implementation of e-Commerce into business-to-business

(B2B) markets are all pointing in one direction – a direction that stands to change the

way companies buy from and sell to each other for the better. To start, B2B e-Commerce

is predicted to total 1.2 trillion United States (US) dollars by 2021, making up

approximately 13.1 percent of B2B sales in total. 1 Not to mention that B2B buyers,

themselves, are rapidly evolving; as of a few years ago, approximately half of B2B buyers

are Millennials. 2 These digital natives have been raised by one-click checkouts and

voice-enabled software; they come with expectations and habits that traditional manu-

facturers continue to learn from.

But, when it comes to the oil and gas industry, we have not seen the same trend towards

B2B e-Commerce as big questions continue to hinder progress. How can largescale,

industrial products (many of which come with hefty price tags) be purchased online?

How can end-to-end service sales be completed digitally? And what are the actual

benefits for both buyers and sellers of making such a transformational shift?

For many years (too many, perhaps), technological investment in the oilfield has focused

uniquely on the products and services used rather than the ways in which buyers

connect to them. Rarely have visionary eyes turned towards the business environment

within the industry, the ways in which customers and suppliers work together. However,

given the right combination of content (e.g., product specifications, supplier details),

front-end tools, and an underlying intelligence structure, a lot can be done to democra-

tize and expand oilfield transactions.

1 Hoar, Andy. “US B2B eCommerce Will Hit $1.2 Trillion By 2021.” Landscape: The B2B eCommerce Playbook. Forrester

Research, 2017. https://www.forrester.com/report/US+B2B+eCommerce+Will+Hit+12+Trillion+By+2021/-/E-RES136173.2 Hilal, Pashmeena and Kelsey Snyder. “The Changing Face of B2B Marketing.” Think with Google, 2015.

https://www.thinkwithgoogle.com/consumer-insights/the-changing-face-b2b-marketing/.

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Commercial innovation such as this ensures that the oil and gas industry’s ultimate,

collective product – the cheap energy that drives civilization’s progress – maintains its

competitive place in the global energy mix. Indeed, a drive towards complete efficiency

in every facet of the value chain will keep energy from hydrocarbons viable in the long

run. And reducing the waste created throughout the buying and selling process is a key

aspect of this.

Look no further than the oilfield service industry’s financial statements and the essential

need for a purchasing reinvention is evident: Over the past three years, the top three

oilfield service companies have written off a combined 2.5 billion US dollars in inventory,

indicating that their traditional commercial models come with much waste. This cost, one

way or another, finds its way back into the supply chain, hurting both buyers and sellers.

Consignment, for example, is one practice that decreases total efficiency. Instead of

adopting a “just in time with just the correct amount” mentality, products are left at

well sites across the US with no firm usage commitment. While not perishable in na-

ture, these products become obsolete or damaged if not used in a timely manner, and

substantial costs are incurred from the inventory tracking, distribution, and redistribu-

tion done by field operations and sales teams.

Speaking of field operations and salesforce, it is often not economical or practical for

sellers to try to cover their entire opportunity areas. Their potential customers – and,

sometimes, even current ones – can, therefore, find themselves unable to access the

technology and assistance that would allow them to maximize their assets and produc-

Yesterday’s Obstacles.

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tivity. Be that as it may, the original equipment manufacturer’s (OEM’s) customer base

also tends to be mature enough to know what it wants in terms of products and ser-

vices. Which begs the question: Are humans complicating the buying process by being

in the middle?

Today’s oilfield buyers (from procurement to operations) are asked to jump through

various hoops and intermediaries to find out something as basic as product availability,

lead times, or price. These requests can take days to answer, regardless of whether the

prospective buyer is truly looking to buy or simply building out preliminary approxima-

tions for specific projects (which accounts for approximately 20 percent of inquiries).

The question of cost is particularly important to note because, to this day, price trans-

parency has been missing from the oilfield industry. The cost of a product has never sat

next to its value statement. An abundance of brochures exist, all of them full of infor-

mation regarding the products that they feature, but none address the question of cost.

Lastly, once a purchase is made, it is not an easy task to make the same purchase again

in a few weeks, months, or even years. A buyer’s historical data is often scattered

across various platforms, desktops, and notebooks – making repeatability one of the

most important tasks automatized by an e-Commerce platform.

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A PRODUCT’S COST HAS NEVER SATNEXT TO ITS VALUE STATEMENT.

Many of the benefits of integrating an e-Commerce platform revolve around costs –

both for the buyer and the seller. It first begins with the immediacy factor of having

product and service prices readily available online. Buyers’ workflows can move much

quicker when it comes to decision-making. The removal of an intermediary not only

simplifies the buyer’s life, but it also allows the OEM to be more cost efficient – and,

subsequently, offer a better price. The Oilfield Marketplace, an e-Commerce platform

built by Hexacom, is a great example of this.3 Its placement of prices adjacent to value

statements removes the need for negotiation and challenges the market, as a whole, to

offer competitive pricing on products across brands.

Other key features of The Oilfield Marketplace draw attention to several additional

opportunities stemming from commercial innovation in this space – opportunities such

as efficiency, accessibility, fulfillment, and standardization.

The strongest motive behind an e-Commerce platform’s ability to grow effi-

ciency is that it frees up both the buyer’s and seller’s capacity. Many orders

require only the communication of specifications, prices, and delivery times

– all of which can be done without the intervention of a dedicated salesper-

son. With this, an OEM’s salesforce can then spend its time focusing on value

transactions rather than commodity transactions; they can engage more with

current and prospective customers whose problems cannot be solved with

the mere click of a few buttons.

Today’s Opportunities.

EFFICIENCY

3 The Oilfield Marketplace by Hexacom. www.theofmp.com.

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Further efficiencies are revealed post-purchase. The first revolves around lia-

bility. Relationships and interactions with all suppliers are streamlined, thereby

ensuring that errors are easier to identify and rectify, should they occur. The

second focuses on data. Where previously they were unaware of what hap-

pened to their products after being delivered to distributors, OEMs are now

in control of the data stemming from purchase details such as buyer, price,

delivery, and (in the future) satisfaction. They also have a holistic view across

multiple business units, which is a big bonus considering the unlikelihood that

each salesperson can keep up with a constantly evolving, complex product and

service portfolio.

The Oilfield Marketplace, for example, goes beyond a basic product catalog

by offering a simple way to request services, as well. Users can answer a few

questions and see their requests sent directly to those able to propel their in-

quiries further. For engineers, this is a radical improvement. Calls are reserved

for highly technical items, while other (smaller) solicitations are documented

and taken care of quickly. This is especially advantageous for OEM managers

who can now use those service requests to plan project demand further ahead

(across months instead of hours).

Online markets foster democratization, a long-awaited development in the oil

and gas industry. An e-Commerce platform (by nature) is open to any and all

organizations with varying levels of buying power; therefore, smaller buyers

are now able to access higher-quality products and services online. Mean-

while, buyers with larger spends and those customers with more advanced

requests benefit from better service, as well, as the resulting efficiencies de-

scribed earlier lead to more targeted salesforce deployment. At the end of the

day, both older and younger buyer generations profit from the convenience of

purchasing products and services in a frictionless manner – and can dedicate

their relationship-based efforts to collaborating on (and solving) more compli-

cated challenges.

ACCESSIBILITY

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Online purchasing presents that kind of seamless experience and, regardless

of product or service, should be treated similar to that done in one’s personal

life. The easiest example in the context of the oilfield industry is purchase his-

tory: many of the products and services being sold are purchased again some-

time in the near future. This is because it is quite difficult to convince a buyer

to change the products and services that they have grown to depend on and

trust. Due to the popularity of omnipresent platforms such as Amazon, simpli-

fied ordering is table stakes.

This combination of customer enablement and user experience leads to one of

the most important factors in B2B success: recommendations. Referrals and

word of mouth account for 63 percent of new business acquisition for B2B

organizations and, with something as intuitive and painless as an online plat-

form, it does not get much easier than forwarding a link to a product, service,

or the e-Commerce site, in general.4

4 Genson, Rachael. “The B2B Ecommerce Trends Report: Millennial Buyers, Payment Options and a Maturing Market.”

BigCommerce, 2018. https://www.bigcommerce.com/blog/b2b-ecommerce-trends/.

AN ONLINE MARKET SPELLS DEMOCRATIZATION.

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FULFILLMENT

Today’s fulfillment process is chaotic and inefficient, to say the least. The av-

erage US well site endures a steady stream of delivery trucks, sales folks, and

operational people from different companies and points of origin, and with

different priority levels. Imagine a future in which orders placed via a holis-

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tic products and services platform (such as The Oilfield Marketplace) can be

planned and handled by a single, daily well site shipment. Envision how deliv-

ery trucks would be able to service clusters of adjacent rigs instead of driving

hundreds of miles each day, crisscrossing basins. The industry may seem far

from this, but visibility over multi-OEM shipment patterns will uncover op-

portunities for fulfillment optimization and draw out further innovation and

investment.

Customers need not wait for the future to see advantages. Knowing exactly

when deliveries will arrive, what is en route and in what quantity, and

purchase history are all advantages immediately enabled by e-Commerce.

Repeat purchases will be facilitated and, possibly, even automated by the

marketplace. After all, if your operation is drilling and completing standardized

wells on a 15-day schedule, then there is no need to recreate the ordering

process each time. Advanced e-Commerce engines powered by the right tech-

nology can enable this process seamlessly.

Orderly demand and fulfillment will subsequently allow OEMs to reconsider

their inventory approach. Sitting on inventory is painful for the industry. The

promise of repeat purchases, along with the overall buying trends across a cer-

tain period of time (say monthly or quarterly), can help sellers optimize their

inventory in an agile and consistent way – ebbing and flowing as their con-

sumer market does. In other words, a digital channel like The Oilfield Market-

place is much more organized than a field sales channel because it can better

predict consumer behavior and prepare OEMs to fulfill those needs.

From the outset, the fulfillment proposition brought about by e-Commerce –

along with its promise of even larger gains in the future – is very compelling

for both buyers and sellers alike. As described, the transparency, visibility,

simplification, and predictability offered by an online marketplace is critical for

our industry’s continued competitiveness.

The last benefit to mention is that of standardization. The oilfield industry has

a history of struggling with this – with the thousands of different versions of

the same product being a clear testament. What a centralized, open digital

marketplace does is push buyers and OEMs towards some kind of consensus

when it comes to their offerings, which is ultimately good for everyone given

the resulting cost reduction and higher efficiency. At the end of the day, this

can only help the oil and gas industry evolve and maintain its competitive po-

sition in the energy mix of the future.

STANDARDIZATION

The benefits of introducing an open marketplace in the oilfield industry grow expo-

nentially once machine intelligence is applied to a good content structure and practical

user tools. In fact, this should ultimately be the goal of any e-Commerce endeavor: to

feed real-time information back into the business model and establish a consistently

evolutionary mindset when it comes to customer experience.

The Oilfield Marketplace, for instance, is betting on this future. While the first iteration

of the platform is an easy-to-use interface that offers essential purchasing capabilities,

the steps that follow promise to be just as ground-breaking. One centers on payment

methods and expanding them to include invoices, e-checks, and customer-specific

contracted pricing. The other expands products and services to include brands outside

of the inaugural ones, thereby creating an OEM-independent platform that offers maxi-

mum selection of the best products.

Tomorrow’s Intelligence.

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And the third (possibly, the most important) upcoming evolution of the platform relies

on data. The incorporation of rich domain knowledge into the consumer journey, for

example, is something that will elevate the customer experience above that of main-

stream e-Commerce. After all, it enables a much richer buying experience versus a sim-

ple recommendation engine built without a strong understanding of industry processes

and buyer lifecycles. The latter is necessary when connecting buyers to the products

they want right now, along with possible solutions that they have yet to be aware of –

something that The Oilfield Marketplace already has in its purview.

This application of intelligence as a technology will eventually come to affect the decisions

made on-site and in product/service development. Information from consumers’ purchases

will be fed back to product designers and engineers in an effort to optimize future lines – in

other words, the data produced by a platform like Hexacom’s becomes influential to the ac-

tual work of oilfield professionals across various parts of the business. This includes a better

understanding of well lifecycles, which products work better in certain areas or conditions,

and the customer behaviors that stand to drive the industry most.

About the Authors..

JEROME FERREIRAExecutive Producer, Hexacom

While living in Paris, Jerome obtained a bachelor’s degree in computer science before

joining Schlumberger at their global headquarters. Over nearly two decades of program

delivery Jerome has held varied titles and led many teams, all based on a singular focus:

finish the work. From delivery manager to Hexacom’s executive producer, Jerome has

honed his skills – and Parisian style – inside the oil and gas industry. He has a unique

talent for consistently motivating clients and stakeholders, all while managing project

budgets of various shapes and sizes. jerome@theofmp.com

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PHILIPPE TEIJEIRAVP & Chief Supply Chain Officer, Enbridge

Phil leads Enbridge’s centralized Supply Chain Management team through its trans-

formation to create value for the business by optimizing enterprise-wide spend and

logistics of quality goods and services, streamlining and simplifying processes, clarifying

decision rights and enabling reliable information for decision-making. Phil joined En-

bridge from Schlumberger Ltd. where he served as Vice President, Production Technol-

ogies (Houston) and Global Head of Procurement & Sourcing (Paris) with over fifteen

years of Supply Chain experience in North America, Europe and Africa. He is deeply

experienced in aligning supply chain strategies with business strategies, serving internal

customers, building effective teams and achieving savings to drive better bottom-line

results. phil.teijeira@enbridge.com

ALEX TAPPERSenior Strategist, Hypergiant

Alex Tapper has over a decade of crafting technology and businesses strategies for

scrappy startups and Fortune 100 companies. He firmly believes good products require

a vision that end-users buy into before immediately degenerating into hard work to get

it done. Having worked in the service industry prior to his professional career he knows

that perception, empathy and a cold beverage go a long way in delivering a successful

experience. Alex is based on Austin, Texas and owns a suitcase. alex@hypergiant.com

CHAD HARKNESSDirector of Sales and Commercial, Schlumberger

Chad Harkness, a 20-year oilfield veteran, is Director of Sales and Commercial at

Schlumberger. In his role, Chad is responsible for the global Sales and Commercial

Processes, the IT enablement of those processes, and Schlumberger’s two Commercial

Hubs. His previous position was VP for Drilling and Measurements in Europe and Afri-

ca. Earlier in his career, Chad held a number of positions around the world in multiple

business units (Wireline, D&M, and Drill Bits) and has worked in Schlumberger’s prod-

uct engineering, manufacturing, and sustaining organization. He holds an Aerospace

Engineering Degree from the Royal Military College of Canada. harknessc1@slb.com

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