Gary Kilponen Treasurer, Director Supply Chain Council Carolyn Lawrence

1. Energy, Oil & Gas Upstream Industry MeetingSCOR for Energy, Oil & Gas: Project UpdateForum for industry benchmarking and best practices Gary Kilponen Treasurer, Director Supply Chain Council Carolyn Lawrence Special Programs Administrator Supply Chain Council

2. Agenda • SCC Energy, Oil & Gas Industry Group Update • Seven Steps to Benchmarking • Upstream Supply Chain Brainstorming • Further Definition of Upstream Supply Chains • Prioritize Upstream Supply Chains • Next Steps/Action Plan Oil & Gas Dec 2009

3. SCC Energy, Oil & Gas Industry Group History Why we chose to create Industry Group? • Energy, Oil & Gas Resources are critical business and personal topics that are on the top of mind • E, O & G Supply Chains are: • Unique (Capital Projects (ETO), Operations (process), EAM) • Have limited benchmark data • Still very focused on Procurement (Source) • Create a Oil and Gas Supply Chain Process Model to enable industry chain benchmarking and best practice implementation What has happened so far? • Energy, Oil and Gas Industry Group formed and kicked off December 2007 • Teams were formed to address process models and benchmarking, but realized a common high level model was required to move forward • The team created a high level Oil & Gas Industry Segment Definition • Upstream and Downstream teams have been created and are developing strategies and metrics for top oil & gas supply chains • Work has been initiated on development of Upstream Supply Chain Definition Oil & Gas Dec 2009

4. Defined The Scope of Energy Oil & Gas • Initial focus on Upstream, Midstream, and Downstream with articulation of some details of the material flow. • Identified Infrastructure Equipment & Maintenance as common area to all three. Oil & Gas Dec 2009

5. Benchmarking Supply Chain Definition

6. What is a Supply-Chain Supplier processes Product Management Customer processes Product Design DCOR™ Sales & SupportCCOR™ Supply Chain SCOR™

7. What is Benchmarking • Qualitative Benchmarking • Comparing best practices among organizations • Maturity Assessments • Quantitative Benchmarking • Comparing levels of measured performance • Assessment of Performance Gaps • Competitive Benchmarking • Quantitative Benchmarking between companies • Identifies superior relative performance

8. Framework for Benchmarking Program • Supply Chain Definition • Supply Chain Prioritization • Supply Chain Strategy • Selecting Metrics • Sourcing Data • Creating a Balanced SCORcard™ • Performing Benchmark

9. Supply Chain Definition • Supply Chains are the Totality of processes spanning operations from supplier to end-customer, focused on material, work and information flow • We use a tool called the Supply Chain Definition Matrix to define the Supply Chains within an enterprise • The Supply Chain Definition (i/o Matrix) Matrix helps determine the number and size of supply chains • Columns: Customers (Output) • Rows: Products (Input) • The intersection of each column and row – if the goods or services flow to the customer – is a supply chain Oil & Gas Dec 2009

10. Column Definition • The columns in the matrix are focused on demand e.g. channels or segments or customers – start with making a list of customer groups, level by level. • Ask your Sales or Marketing functions for customer segmentation information • Where you have one customer base with different fulfillment models create two customer segments one for each model • In general you can go to any level of detail you want but be sensible. Examples:

11. Row Definition • The rows in the matrix are focused on supply e.g. business lines or products or locations or suppliers – start by making a list of products, level by level • Ask product divisions for product hierarchy data • If you have the same product that may be build two different create two different products. • In general you can go to any level of detail you want but be sensible. Examples:

12. The Matrix • We now place the customer list as column headings repeating until finished • And then the products list as row headings repeating until finished • For each product that flows to a customer, we put an “X” in the cell • It’s that simple. X X X X X X X

13. Upstream Supply Chain Definition Oil & Gas Dec 2009

14. Supply Chain Prioritization • We use a tool called the Supply Chain Prioritization Matrix to order the supply-chains according to relevance • Each supply chain can be ranked by a number of features • We suggest: • size (revenue, volume, and margin), • complexity (# SKUs) • strategic importance • You can also look at them by • Cash Consumption • Risk • Volume variability • Etc.

15. Upstream Supply Chain Prioritization Oil & Gas Dec 2009

16. Oils and Gas Industry Group Next Steps • Finalize Supply Chain Definition • Complete Supply Chain Priority • Confirm Supply Chain Strategy • Develop Supply Chain Scorecards Oil & Gas Dec 2009

17. Participation Opportunities and Questions • Supply Chain Council Industry Working Group (IWG): • www.supply-chain.org/node/61 or • www.supply –chain.org/my groups and select the IWG: Energy, Oil & Gas Industry Group • Next Meeting: June 16, 2010 10:00 EST Oil & Gas Dec 2009

18. Contacts Joe Francis Executive Director Supply Chain Council, Inc. jfrancis@supply-chain.org (Project Sponsor) Carolyn Lawrence Strategic Programs Administrator Supply Chain Council, In clawrence@supply-chain.org (Industry Group Program Manager) Energy, Oil and Gas Industry Group Executive Team: Gary Kilponen Director, Treasurer Supply Chain Council Oil & Gas Dec 2009