Santosh Mathilakath, Jonathan Rhoads - National Oilwell Varco
Beginning as a model developed with Scorpion Offshore, National Oilwell Varco’s (NOV) Distribution Services division is putting supply stores, called Rigstores, onto rigs with the aim of reducing maintenance, repair, and operating (MRO) costs for contractors. The Rigstore is owned and staffed by NOV, and is stocked with NOV inventory.
NOV owns the inventory/parts and manages the supply chain onboard Scorpion’sOffshore Defender while Scorpion employees make the purchasing decisions. Photos courtesy of Scorpion Offshore.
As a result, Scorpion Offshore says it can focus on its core drilling competencies, and leverage NOV’s supply chain expertise to ensure the necessary products are available on the rig when needed, and on time and on budget.
According to the model, regardless of where a drilling rig happens to be operating, the drilling crew can walk into the Rigstore for the product they need without concern about how it got there or how they will get more. NOV is supporting each Rigstore from its more than 200 Distribution Service Centers around the world
Financial benefits
Another benefit of the Rigstore is that all the supplies and spares on a rig waiting to be used are on NOV’s books as inventory, not on the drilling contractor’s. The driller pays only for what is used, does not have to take possession until necessary, and bears no risk of obsolescence or write-downs. This frees up the average MRO spend of $2.2 million per month per jackup rig.
null
Additionally, the Rigstore eliminates the accounting and auditing issues that can accompany MRO inventory management. The bookkeeping treatment of MRO material typically is handled one of two ways. Either the drilling contractor expenses the item when acquired, creating the issue of recording an expense that has not yet occurred, or the contractor puts the MRO material on its books as inventory upon purchase, but are then left open to the risk of shrinkage and obsolescence. Rigs using a Rigstore do not face this issue because all MROs can be expensed immediately, since possession is not taken until the moment the product is needed. In the event a particular product actually is not used, it can be returned to the Rigstore where NOV takes that product back onto its books.
Adding value to the Rigstore system is the fact that NOV Distribution Services is one instance of SAP across the globe. This means no matter where, or in how many different parts of the world a customer is operating, it will have transparency into what it spends and where it is spent through a single portal. This not only provides access to the consumption data necessary for efficient management and planning, but also reduces the costs associated with Sarbanes Oxley and Foreign Corrupt Practices Act compliance.
