The Path Forward
The Path Forward
The Path Forward
You also want an ePaper? Increase the reach of your titles
YUMPU automatically turns print PDFs into web optimized ePapers that Google loves.
............<strong>The</strong> <strong>Path</strong> <strong>Forward</strong><br />
David Hammerle<br />
Principal Vice President<br />
Corporate Manager of Procurement and Contracts<br />
Bechtel Corporation
Procu<br />
P EG<br />
Discussion Topics<br />
• Procurement Executives Group (PEG)<br />
• Global Economic Environment<br />
• Market Specifics<br />
• EPC Industry Landscape<br />
• Risks and Influences<br />
• <strong>The</strong> <strong>Path</strong> <strong>Forward</strong><br />
2
Procu<br />
P EG<br />
Procurement Executives Group<br />
Aker Solutions, Jeanean Slamen<br />
AMEC, Peter Jessup<br />
Bechtel, David Hammerle<br />
Black & Veatch, Mike Gammill<br />
Burns & McDonnell, Matt Nordhus<br />
Burns & Roe, Michael Clark<br />
CB&I, Jerry Haley<br />
CH2MHill, John Mika<br />
Fluor, Jim Scotti, Ed Ruane<br />
Foster Wheeler USA, John Crockett<br />
J. Ray McDermott, Skip Lee<br />
Jacobs, Harry Breijaert, Jim Reynolds<br />
KBR, John Townsend<br />
Kiewitt, Robert Osborn<br />
Mustang, Ted Kelly<br />
S & B, John Cook<br />
Shaw, Mark Hood<br />
Technip USA, Art Wardlaw<br />
<strong>The</strong> Industrial Co., Michael Chambers<br />
URS, Joe Christopher, Larry Dinger<br />
Worley Parsons, Tom Brock<br />
Zachry, Steve Richardson<br />
3
Procu<br />
P EG<br />
2010 PEG Membership Profile<br />
ENR Rankings<br />
•Top Contractors<br />
4 of top 10 are PEG<br />
8 of top 25 are PEG<br />
12 of top 50 are PEG<br />
•Top D/B Firms<br />
7 of top 10 are PEG<br />
12 of top 25 are PEG<br />
13 of top 50 are PEG<br />
•Top Design Firms<br />
7 of top 10 are PEG<br />
11 of top 25 are PEG<br />
14 of top 50 are PEG<br />
4
Procu<br />
P EG<br />
Charter<br />
<strong>The</strong> Procurement Executives Group<br />
(PEG) serves as a forum for the<br />
executive leadership of procurement<br />
and supply management in the<br />
engineering and construction<br />
industry. We seek to represent,<br />
promote, and improve the<br />
contributions of our profession to the<br />
industry we serve. In fulfilling this<br />
mission, PEG and our member<br />
company representatives are<br />
committed to a set of Core Values….<br />
Core Values<br />
• Safety<br />
• Quality<br />
• Ethics and Integrity<br />
• Leadership in<br />
Procurement<br />
Excellence<br />
• Sustainability<br />
• Diversity<br />
For more information, visit http://peg-eci.org/.<br />
5
Procu<br />
P EG<br />
Headlines<br />
• Banks keep failing<br />
• Metals prices up 45%<br />
• Steel production approaches pre-crisis levels<br />
• Trade battles stir fears of new depression<br />
• Gold strikes record high, US dollar tumbles<br />
• Crude oil and energy prices up over 30%<br />
• China economy slows<br />
• Stock markets: beyond risk lies uncertainty<br />
• Prepare for volatility<br />
• Megaprojects will increase next few years<br />
6
Procu<br />
P EG<br />
Global Economic Environment<br />
• Mixed global recovery and growth<br />
• Stimulus spending influence fading<br />
• US recovery inconsistent and weak<br />
• High public debt in some countries<br />
• Asia - increasingly world’s growth engine<br />
• Developed economies - low interest rates<br />
• Dollar declining against most currencies<br />
• Economic volatility to be expected<br />
7
Procu<br />
P EG<br />
Global Manufacturing Backlog<br />
• Recovery lacks momentum<br />
• Producer pricing pressure<br />
weakening<br />
• Impacts similar developed<br />
and developing economies<br />
• Developing countries<br />
slowing is significant<br />
Source: Institute for Supply Management<br />
8
% Change<br />
Procu<br />
P EG<br />
15<br />
Global GDP<br />
10<br />
5<br />
0<br />
-5<br />
-10<br />
China<br />
Russia<br />
M.E. & N. Africa<br />
NAFTA<br />
India<br />
S. America<br />
Western Europe<br />
07 08 09 10 11 12 13 14 15<br />
9
World Rig Count<br />
Procu<br />
P EG<br />
Crude Price & Rig Count<br />
4000<br />
3500<br />
3000<br />
2500<br />
World Rig Count<br />
Crude Oil $/BBL<br />
140<br />
120<br />
100<br />
80<br />
60<br />
$/BBL<br />
2000<br />
1500<br />
03 04 05 06 07 08 09 10<br />
40<br />
20<br />
Source: Baker Hughes<br />
10
Procu<br />
P EG<br />
Market Capital Expenditures (Capex)<br />
• Power<br />
• Oil, Gas, and Chemical (OG&C)<br />
• Civil<br />
• Mining<br />
11
Nominal $US Bn<br />
Procu<br />
P EG<br />
Power Global Capex<br />
1400<br />
1200<br />
1000<br />
800<br />
600<br />
400<br />
200<br />
0<br />
06 07 08 09 10 11 12 13 14 15<br />
Source: Global Insight<br />
12
Nominal $US Bn<br />
Procu<br />
P EG<br />
Oil, Gas & Chemicals Global Capex<br />
1000<br />
800<br />
600<br />
400<br />
200<br />
0<br />
06 07 08 09 10 11 12 13 14 15<br />
Source: Global Insight<br />
13
Nominal $US Bn<br />
Procu<br />
P EG<br />
700<br />
600<br />
500<br />
Civil Global Capex<br />
400<br />
300<br />
200<br />
100<br />
0<br />
06 07 08 09 10 11 12 13 14 15<br />
Source: Global Insight<br />
14
Nominal $US Bn<br />
Procu<br />
P EG<br />
Mining Global Capex<br />
500<br />
400<br />
300<br />
200<br />
100<br />
0<br />
06 07 08 09 10 11 12 13 14 15<br />
Source: Global Insight<br />
15
Procu<br />
P EG<br />
Global Percentage Growth in Capex<br />
300%<br />
Civil<br />
Power<br />
OG&C<br />
Mining<br />
200%<br />
100%<br />
Year 2006 baseline<br />
0%<br />
07 08 09 10 11 12 13 14 15<br />
Source: Global Insight<br />
16
Nominal $US Bn<br />
Procu<br />
P EG<br />
Regional Global Capex<br />
3,000<br />
2,000<br />
1,000<br />
0<br />
06 07 08 09 10 11 12 13 14 15<br />
Africa North America Western Europe<br />
Asia-Pacific Middle East Latin America<br />
Source: Global Insight<br />
17
Procu<br />
P EG<br />
EPC Industry Landscape<br />
• Strong capital expenditures 2011 – 2015<br />
• Significant growth in EPC Spend ahead<br />
• Global project challenges<br />
‣ Attracting and retaining staff<br />
‣ Local labor shortages<br />
‣ Lack of infrastructure<br />
‣ Remote and challenging locations<br />
‣ Complex scope and size<br />
• Global sourcing<br />
‣ Opportunities and challenges<br />
18
Nominal $US Bn<br />
Procu<br />
P EG<br />
EPC ‘Crystal Ball’ - Spend Forecast<br />
1600<br />
1200<br />
Civil<br />
OG&C<br />
Mining<br />
Power<br />
800<br />
400<br />
0<br />
11 12 13 14 15<br />
19
Procu<br />
P EG<br />
Supply Base Risks and Influences<br />
• Supplier performance<br />
• Shop capacity restraints<br />
• Global dispersion of supply chain<br />
• Regulation changes and compliance<br />
• Financial condition and access<br />
• Commodity volatility<br />
• Energy cost and availability<br />
• Counterfeit, fraud, and suspect items<br />
20
Procu<br />
P EG<br />
Complex Supply Chain<br />
21
Freight Spend in $US Billions<br />
Freight Tons in Billions<br />
Procu<br />
P EG<br />
‘Crystal Ball’ – Part II<br />
180<br />
160<br />
140<br />
120<br />
100<br />
80<br />
60<br />
40<br />
20<br />
Total Freight Spend<br />
Total Freight Tons<br />
2<br />
1.8<br />
1.6<br />
1.4<br />
1.2<br />
1<br />
0.8<br />
0.6<br />
0.4<br />
0.2<br />
0<br />
0<br />
2011 2012 2013 2014 2015<br />
22
Procu<br />
P EG<br />
…….<strong>The</strong> <strong>Path</strong> <strong>Forward</strong><br />
• Significant growth ahead in Capex & spend<br />
• Supply chains; longer and more complex<br />
• Greater project challenges – scope and size<br />
• Increasing compliance and security controls<br />
• Delivery predictability – more difficult<br />
Now and in the future, Logistics is<br />
even more critical to EPC success!<br />
23
Procu<br />
P EG<br />
Thank You<br />
24
Change language