Ukrnaftoburinnya Case

More and more companies are integrating electronic document management, software for automating business operations and optimizing the work of the sales department and internal processes (ERP and CRM systems) into their work, as well as switching to online purchases. How it happened in PrJSC “MC “Ukrnaftoburinnya”, and what results it led – we learned from Andrii Chebotarov – the Head of the Department for Material and Technical Supply of the company, and Andrii Vykhrytskyi – the Manager of Supply of PrJSC “MC “Ukrnaftoburinnya”.

Ukrnaftoburinnya Case
The capacities of the future Ukrnaftoburinnya company first began operating in 1981 at the Sakhalin oil and gas condensate field in the Kharkiv region. And in 2004 the company was officially registered as PrJSC “MC “Ukrnaftoburinnya”. Today it is about four dozen wells with a depth of 3.8 to 5.75 km. At the moment we are among the TOP-3 private gas production companies in Ukraine.

Ukrnaftoburinnya Case

What Helps Your Company Grow?

Our company chooses an intensive development path, and that is why we have been smoothly digitizing over the past years. For example, over the past two years, we have completely switched to online tenders, and also tried to digitize our other processes as much as possible: we gradually abandoned paperwork and are implementing an ERP system in the company, integrating it with an electronic trading platform (ETP).

Thus, now in the ERP system, we have not only internal document flow, treasury and personnel management, but also everything related to tenders: planning, the purchase itself on the site, drawing up an agreement with the winner, control of the arrival of goods at the warehouse, warehouse accounting, as well as acceptance and release of goods for production. The procurement process is also controlled by the company's security service: it has a special account in the ERP system and ETP, which allows them to see the details of each of our tenders.

Ukrnaftoburinnya Case

How Did Your Purchases Go Before, and Why Did You Decide to Start Working on the Electronic Platform?

We have been making purchases on the electronic site since 2016. Of course, the transition to this principle of work was not sudden – we gradually increased the number of online tenders, and only in September 2018 we introduced a strict rule to organize most of the trades exclusively on the site. Let me explain why this happened.

Previously, we had one dedicated email, which received offers from potential suppliers. Only two employees had access to the mailbox, and they had to sort out all the requests. Over time, the number of annual purchases grew, and accordingly, the number of proposals grew. Even with a partial transition to the online platform, the process was quite labor-intensive: we downloaded the applications received from internal customers in Excel, then entered them into the platform's database, conducted auctions, downloaded auction reports, and then manually processed the results and chose the winner.

The procedure took a lot of time, so it's not hard to guess why at some point we decided to switch to purchases exclusively using the online platform. This instantly reduced the amount of manual work and allowed us to concentrate more on the analytical component.

How Is Your Procurement Process Organized Today?

Procurement is handled by our Department, which consists of only six people: me and two procurement managers – geographically located in Kyiv, as well as the head of the production support department and the loader and storekeeper accountable to him – they are located directly at the enterprise.

The process of tender organizing is as follows:

1. Manufacturing services (internal customers) form a demand and submit requests to the ERP system. Further, this need is filtered by the warehouse: the customer immediately sees the remains of the required item in the warehouse. Those products that are not in stock go to the formation of a purchase request.
2. The purchase is coordinated with the authorized persons of the company, is accepted by the purchaser, and is placed on the site.
3. At the end of the auction, the winner is selected and an agreement is signed with him.

We have an annual procurement plan, which sets out the most material items for procurement. Also, with operational planning, an internal customer can place orders as needs arise – there is no rigidly established deadline for applications submitting, but there is a limitation on the minimum delivery time for one or another inventory in ERP. The smallest purchases are given at the discretion of the internal customer, of course, with appropriate control. These are purchases for amounts up to UAH 20.000. Everything more expensive is bought strictly according to internal procurement procedures in the format of an electronic tender.

What Results Have You Achieved with E-Procurement?

We believe that the purchasing function is more than just a service function. Sustainable purchasing creates real added value for the Company. Saving a budget is many times easier than dramatically increasing sales, especially in a highly competitive market. Therefore, with each tender, we always estimate the total cost of ownership of the procurement item.

Since the beginning of our work with electronic tenders, the amount of savings has grown significantly:

- in 2017, the savings amounted to about 4%;
- in 2018 – slightly less than 7%;
- in 2019 – 10%;
- in 2020 – more than 19%.

Ukrnaftoburinnya Case

This is made possible by our intensive development approach. We were able to optimize our workforce instead of rapidly increasing the number of employees. In this, we have been helped by the use of innovation in the work, which further increased the productivity of our division.

How Did You Choose the Tender Site?

We tested many different sites and decided to choose SmartTender.biz. First of all, we were attracted by the fact that the site is customer-oriented and helps to develop individual functionality for its users. Let's be frank, the functionality of all electronic trading platforms works for the same goal – to provide electronic trading. The only question is how flexible the site in terms of approach to the client's wishes. For example, we needed to receive ready-made Protocols of the Contest Commissions according to our internal standards in SmartTender.biz – and we were given such an opportunity. It is also pleased that, despite our concerns, recently we have quite smoothly carried out the integration of the site with the company's ERP system.

We also want to highlight the SmartTender supplier base. Because many companies from the oil and gas industry work at the site, a large number of potential participants in our tenders are registered here. Accordingly, the level of competition is higher, and purchases are more efficient.

How Have Recent Market Developments Affected the Work of Your Department?

In 2020, tangible changes have occurred in our field. Many companies have cut investments in drilling and increased production of gas and oil, which, accordingly, freed up the resources of a large number of service providers, as well as construction, drilling, and other works.

This was reflected in our tenders as well. Participants in the oil and gas production market are quite conservative, and earlier contractors preferred not to publicly disclose the cost of the services/works offered. Now they are ready to actively compete for winning the auction, significantly reducing the final price. For example, a recent bidding for the purchase of workover work has been going on for several hours.

What Are Your Plans for 2021?

We plan to continue the gradual digitization of all business processes, which began in 2019. For example, a year ago we started to introduce QR-coding – marking with QR codes of all products coming to our warehouse. Shortly we plan to integrate ERP with the QRSmarty program.

This is very convenient: with the help of only a mobile phone, the storekeeper can move the goods: make an inventory, transfer the goods from the warehouse to the accountable person, etc. Also, anyone who has an application installed on their phone can scan the code on the product, and in a matter of minutes find out what kind of product it is, when, by whom, and at what price it was delivered. This makes it easy to identify stored goods and track their entire life cycle.