Naftogaz reforms procurement system: 10-15% savings expected on all purchases

Naftogaz Group has introduced a new approach to structuring its procurement system. The aim is to ensure higher transparency, unified procedures, and efficient processes

This reform was initiated by the Technical Division. Naftogaz Group will now implement a unified Supply Chain Management (SCM), including category management mechanisms developed in cooperation with KPMG experts.

A newly created team of category managers will be responsible for purchases during the entire life cycle of products — from the development of standards to physical delivery to the site. In close cooperation with planning managers who will provide an aggregated list of products to be purchased, category managers will ensure the following:

· optimization of stocks;

· minimization of shortage;

· proper storage and transportation conditions; and

· quality assurance of purchased goods.

Category managers will also develop and implement category strategies, while existing procurement departments will continue preparing and holding purchase procedures (tenders).

“The revision of the procurement function is designed to save funds and time, and to ensure long-term planning as well as the right choice of purchased products along with their quality and quantity, which is relevant to actual production needs. When developing category strategies, which will further be reflected in qualification documents for tenders, we apply unified technical standards, clearly differentiate between purchasing a product itself and related services, apply transparent pricing formulas with our commercial partners, and switch to long-term contracts,” commented Technical Division Director Andriy Khomenko.

To enhance transparency and independence in procurement, this reform also separates control functions over certain procurement processes. This will be implemented now at two levels — the major contract board (MCB) chaired by the Group CFO, and local contract boards at the enterprises of the Group.

The procurement ethics office — a body where suppliers can file their complaints, including anonymous ones, or get advice — will continue to operate at the Group level.

“By reforming the procurement function we are trying primarily to increase transparency of processes and to gain more trust with suppliers. We also expect those changes to help us save 10-15% on all purchased goods and services,” added Khomenko.

Integrated Communications Department
NJSC Naftogaz of Ukraine


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