PETRO RABIGH Supply chain transformation in Saudi Arabia
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Transforming supply chain strategies at Petro Rabigh WRIT TEN BY
SE AN GA LE A-PACE PRODUCED BY
HE Y K EL OUNI
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Michael Gustafson, General Manager of Material, Procurement and Contracts discusses the procurement methods that Petro Rabigh is utilising through significant change in Saudi Arabia
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I
n a country driven by change amidst the incoming Saudi Vision 2030, companies in Saudi Arabia have an obligation to
adapt to and embrace the latest trends in order to thrive in a competitive petrochemical industry. With ambitions of becoming one of the most profitable refinery and petrochemical plants in the world, Petro Rabigh knows first-hand just how vital the next few years are to the future of Saudi Arabian businesses. Originally formed in 2005 as part of a joint venture between Saudi Aramco and Sumitomo Chemical, Petro Rabigh produces 18.4mn tons per annum (mtpa) of petroleum-based products and 2.4mtpa of ethylene and propylene-based derivatives. With the plant’s Phase I and recently launched Phase II together valued in the region of $20bn, Michael Gustafson, General Manager of Material, Procurement and Contracts, believes that these
“ We have two incredible foundation partners in Saudi Aramco and Sumitomo Chemical; a terrific partnership with aligned goals that have brought the strengths and diversity of two great organisations into this project” — Michael Gustafson General Manager of Material, Procurement and Contracts
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Working for the futu
Founded in 1968 as an industrial service and supply unit, Eastern Msar is recogniz of the biggest and leading business conglomerates in the Kingdom of Saudi Arabi
Eastern Msar provides services to oil & gas, chemical & petrochemical, power, wa mining sectors.
Eastern Msar values understanding the past, participation for the present and wo the future. With a partnership that is pursued through agency or joint venture arrangements covering company representation, trading, contracting, services, engineering and construction, commissioning and support.
The company works with leading companies such as Petro Rabigh, Saudi Aramco Aramco JV’s, Sabic, Saudi Electricity Company, Ma’aden and SWCC etc.
Eastern Msar has continued to rise to challenge and achieve new goals through it the clock services within new and established industries.
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zed as one ia.
ater &
orking for in activities
o, Saudi
ts round
foundation partners laid the ground
MAINTAINING PROCUREMENT STRATEGIES
work for the company’s success.
As a way of affirming Petro Rabigh’s
“We have two incredible foundation
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commitment to the Saudi Vision, the
partners in Saudi Aramco and Sumi-
company has confirmed the imminent
tomo Chemical; a terrific partnership
arrival of The Petro Rabigh Phase II
with aligned goals that have brought
expansion project, which provides an
the strengths and diversity of two
even more diversified product slate
great organisations into this project,”
with the implementation of a number
says Gustafson. “Both companies
of new high added value petrochemical
possess a deep set of technical and
products. The project is set to cost
commercial experiences and world
approximately $9.4bn with capital
class product mix that continues to
project debt funding. Gustafson
improve with expansions to capitalize
outlines the procurement strategy his
on the strategically placed location
company is utilising in this exciting
and resources.”
new era for the Kingdom.
“ People think of procurement as being some sleepy, back office support group – but it’s not. You’re actually on the front line and if this spare part, chemical additive, or catalyst doesn’t arrive on time, you could shut down a facility” — Michael Gustafson General Manager of Material, Procurement and Contracts
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“We’ve almost finished Phase II to
handling and procurement all housed
expand our business. It’s like you’re
under the same roof. Gustafson
running on a treadmill and the speed
maintains its current procurement
is set at a six-minute mile but you’re
strategy is to enhance its existing
used to running an eight-minute mile,”
arrangements.
he explains. “People think of procure-
“In general, the majority of our
ment as being some sleepy, back
strategy is to push our agreements
office support group. But, it’s not.
and expand into MRO and chemical
You’re actually on the front line and if
agreements,” he explains. “This is
this spare part, chemical additive, or
opposed to the ongoing spot buying
catalyst doesn’t arrive on time, you
that takes place, which decreases the
could shut down a facility.”
time it takes to turnaround, as well as
Procurement is certainly an area that Petro Rabigh prioritises. The
the cycle time.” In a bid to handle its supply chain
firm has three different departments
items more effectively, Petro Rabigh
operating in that area of its organisa-
has made the decision to split into
tion; with contracting, material
two separate groups.
E X E C U T I V E P R OF IL E
Michael Gustafson Having joined Petro Rabigh in 2017, Michael has used his 25+ years of experience and knowledge from working in commercial and business development, acquisitions, divestiture and supply chain management to develop the supply chain infrastructure for the $20bn Refinery & Petrochemical business in Saudi Arabia. Michael has outlined his intention for Petro Rabigh to embrace the incoming Saudi Vision 2030 and is responsible for driving the company’s procurement strategy.
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“The group here in Saudi Arabia handles all the inbound supply items and we have a separate organisation that is responsible for the finished goods and products. It’s primarily more of a marketing and sales function,” explains Gustafson. “Alongside that, there’s the production planning which coordinates what the needs of the refinery and petrochemical business are, as well as the requirements of our customers. I believe it’s very much a collaborative effort to enable the supply chain to get going.”
“ The group here in Saudi Arabia handles all the inbound supply items and we have a separate organisation that is responsible for the finished goods and products. It’s primarily more of a marketing and sales function” — Michael Gustafson General Manager of Material, Procurement and Contracts
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With the company investing almost $400mn annually on its supply chain
tives, all the way to papers and pens. We cover the full spectrum.”
activities, Gustafson is well aware just how big Petro Rabigh’s supply
EMBRACING SAUDI VISION 2030
chain is. “The magnitude of it is that
In a bid to reduce Saudi Arabia’s
it spans to over 2,000 suppliers
reliance on oil and diversify its economy,
worldwide that are split evenly
Crown Prince Mohammad bin Salman
between America, Asia and Europe,”
announced plans in 2016 to launch
says Gustafson. “Of those, we have
Saudi Vision 2030. With around 80
around 1,200 really active, highly
projects expected to be completed in
consumable suppliers. They deal
Saudi Arabia by 2030, Gustafson
with everything from highly danger-
believes it’s an interesting time to be
ous explosive and chemical addi-
involved in such a historic process.
C OMPA N Y FA C T S
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Rabigh Refining & Petrochemical Co. — Petro Rabigh — was founded in 2005 by the Red Sea in the Kingdom of Saudi Arabia as a joint venture between Saudi Aramco and Sumitomo Chemical from Japan. The original 10-billion dollar Phase I of the plant is the world’s largest single-phase integrated refining and petrochemicals complex, making the company one of the Kingdom’s largest producers of polypropylene, polyethylene and mono ethylene glycol, and the sole producer of propylene oxide in the Middle East. The Phase II expansion, which came into full operation in early 2018, diversifies the product slate with new high value-added petrochemicals aimed at making the Kingdom’s downstream industry more competitive and affording potential investors the opportunity to manufacture new products and create new jobs and skills.
JANUARY 2019
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“ These are exciting times for Saudi Arabia.When I tell my friends about it back home in America, I feel like I’ve got a front row seat,it’s a major transformation in the Kingdom and these are fabulously exciting times.There are things going on in Saudi Arabia that are truly historical” — Michael Gustafson General Manager of Material, Procurement and Contracts
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“These are exciting times for Saudi Arabia. When I tell my friends about it back home in America, I feel like I’ve got a front row seat,” explains Gustafson. “It’s a major transformation in the Kingdom and these are fabulously exciting times. There are things going on in Saudi Arabia that are truly historical.” Petro Rabigh has responded to Vision 2030 by embracing all 24 areas highlighted in the vision to provide a thriving economy, a vibrant society and an ambitious nation for the Kingdom of Saudi Arabia. In order to meet these w w w.pe t ro ra big h . com
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requirements, Petro Rabigh has rolled
doing a great job,” says Gustafson.
out a number of initiatives such as plans
“We also have several women within
to increase women’s participation in the
the supply chain organisation and we
workplace, supporting improvements
intend to hire more in the future.”
to logistics and building relationships ments. However, Gustafson insists
FORMING KEY STRATEGIC PARTNERSHIPS
Petro Rabigh isn’t finished yet.
Establishing and maintaining key
for additional direct foreign invest-
“We could and will do more in the
partnerships are vital to any success-
area of women participating in the
ful business. Over the last five years,
workplace; I just hired the first female
Petro Rabigh has collaborated with
secretary at Petro Rabigh and she’s
Germany-based logistics firm, DHL,
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to provide all of its inbound logistics activities, in addition to operating its warehouses. However, having consulted their Key Performance Indicators (KPIs), Petro Rabigh recently split the contract with Kuehne & Nagel to handle all of the company’s international forwarding activities. “We’re very excited with this joint effort between the two companies. It will enable us to draw on the strengths of each company to ensure a smooth supply chain process,” says Gustafson.
“ Rabigh PlusTech Park provides for 37 investors, including nine manufacturing companies that have started production, eight that are under construction and over 30 under negotiations” — Michael Gustafson General Manager of Material, Procurement and Contracts
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$10bn Approximate revenue
2005
Year founded
3,600 Approximate number of employees
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How have we maintained top sales in the logistics equipment field since our founding in 1972? Chiba Sogyo has continued to support the distribution which is the core of our economic activities. Ever since our founding, we have constantly led the logistics equipment industry. “How can we satisfy customer needs to the greatest possible extent?” – To achieve this goal, we have accumulated knowledge and expertise, and then steadily incorporated this wisdom into our services. CS JAPAN CO., LTD 2-2-18 Tmasakinsi, Ichihara City, Chiba, Japan 2900044 Tel: +81-436-23-0511 Fax: +81-436-23-1611 www.csjapan.net kawarai@csjapan.net
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“They are our two primary partners that we’ve got on the logistics side and they’re absolutely essential to us. Our partners have to over-communicate and be joined with us at the hip. DHL and Kuehne & Nagel are two world class organisations and they’ve done a great job.” Gustafson affirms how much Petro Rabigh relies on the consistent performance of its suppliers. “The notable suppliers that have been consistently reliable for our
“ When things start to change,you’ve got to be able to adapt very quickly.Whether it’s changing your grades or the type of product mix that you can develop” — Michael Gustafson General Manager of Material, Procurement and Contracts
The Perfect PARTNER Synergies Tech Engineering Division caters to customer requirements for Complete MRO packages. With procurement offices in USA and Europe and sales offices in UAE, Oman and Saudi Arabia, we stay committed to providing prompt offers from worldwide suppliers backing it up with on-time delivery and after-sales support.
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OUR INDUSTRIES: • Petrochemicals • Oil & Gas • Metallurgy • Environmental • Chemicals • Food & Beverage • Printing Consumables • Other
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HQ: Unit 101 & 108 Mazaya Business Avenue BB2 Jumeirah Lake Tower Dubai United Arab Emirates P.O Box 114477 KSA Branch Office: Jawhara Al Tabishi Building Suite no. 9, 2nd floor King Faisal Bin Abdul Aziz Road Al Tabishi, Dammam 32415-7184
business include the likes of CS Japan,
industries in Saudi Arabia. Located on
Gold Wing, Axens, EableBurgmann
a site adjacent to the Petro Rabigh
and SPIG. We’re highly dependent on
refinery, it provides a place to convert
the performance of these five out-
petrochemical products into down-
standing suppliers/vendors in
stream products and offer substantial
particular, as well as to
investment opportunities to local
the other 1,200 active suppliers in
and foreign investors in conversion
our network.”
industries. Gustafson believes it’s
The introduction of Petro Rabigh’s
an ideal investment opportunity.
collaboration with Rabigh PlusTech
“This large scale, secure complex
Park saw it become the first private
also houses the Sumitomo Chemical-
industrial estate for conversion
run Rabigh Plastic Technical Centre
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“ The vision for the future is to continue to make the Material, Contracting and Procurement organisation a great place to work” — Michael Gustafson General Manager of Material, Procurement and Contracts that provides tenants with technical support and training in plastic processing technology, warehousing, plug and use utilities and feedstock
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supply agreement opportunities for sustainable, competitive prices,” says Gustafson. “Rabigh PlusTech Park provides for 37 investors, including nine manufacturing companies that have started production, eight that are under construction and over 30 under negotiations.”
SUSTAINING A SUCCESSFUL FUTURE Petro Rabigh has begun to explore options to fully automate its warehouse operations and review the way they receive, monitor and move spare parts around. This ability to consistently adapt to change is something Gustafw w w.pe t ro ra big h . com
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son places a lot of importance on. “In the area of supply chain, I believe we still have work to do in digital transformation,” explains Gustafson.
the moment with climate change and environmental conditions. And if we don’t change, then it’s going to hurt us.” As far as the future is concerned at
“However, in other areas of the
Petro Rabigh, the company has lofty
company there has been much more
ambitions of becoming the best in class
progress made, especially in operations.”
in the Gulf Cooperation Council (GCC)
“When things start to change, you’ve
within the next 18 months. “We have to
got to be able to adapt very quickly.
deliver on the business expectations in
Whether it’s changing your grades or
two areas: 99% availability and on-time
the type of product mix that you can
delivery of materials to support the
develop. You’ve got to stay ahead. We’ve
ongoing operations,” says Gustafson.
got a lot of big changes going on at
“Our processes and practices must w w w.pe t ro ra big h . com
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change and this will be enabled through the finalisation of the ARIBA implementation, integration with SAP and further digitalisation of the processes.” “This is crucial for us to handle the increase in volume due to the expanded capacity of the operation. We must reduce the number of touches on work orders from procurement to pay with seamless vendor integration through the process.” Petro Rabigh also plan to begin to take steps to become a world-class service minded organisation that will
“ Our processes and practices must change and this will be enabled through the finalisation of the ARIBA implementation, integration with SAP and further digitalisation of the processes” — Michael Gustafson General Manager of Material, Procurement and Contracts
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enable the firm to provide exceptional
Petro Rabigh also plans to increase
customer service that goes beyond
its employee development, training
expectations.”
and planning to ensure everyone
“This can happen when we break down
successfully obtains their Certified
silos, over communicate to customers
Supply Chain Professional certifica-
and provide proactive service levels
tion as well targeting an 85% or higher
with their absolute best interest in mind,”
Saudization level and a 40% rise in
explains Gustafson. “We will do this
the hiring of women. In addition, the
through cross development opportuni-
firm expects to make a more deliber-
ties with operations, by co-locating
ate effort in its supply relations and
people closer to the customers they
strategic sourcing.
serve and rewarding people for delivering on their commitments.”
“We will be conducting a major supplier recognition conference soon 37
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in order to build deeper, strategic relationships with key suppliers and vendors,” says Gustafson. “This will take time, but the idea is to personally visit our key suppliers for them to understand the direction we’re going, how they can optimally support and ways we can further collaborate together to meet the Saudi Vision 2030 plans.” With major changes incoming at Petro Rabigh and in Saudi Arabia itself ahead, Gustafson remains determined that the future is bright for the company in the next 18 months and beyond. 38
“The vision for the future is to continue to make the Material, Contracting and Procurement organisation a great place to work. We also envision becoming a leader in driving collaborative value through matrixed processes, creativity commercial acumen and focused commitment to the priorities that will make Petro Rabigh the most valuable company in the region.”
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PETRO RABIGH PO Box 101 Rabigh 21911 Kingdom of Saudi Arabia T +966 12 425 0390 www.petrorabigh.com