Acuren Business Analysis PDF

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Summary

Acuren is a company that provides engineering, inspection, rope access universal services and nondestructive testing services at over 80 locations in the United Kingdom and North America. It employs over 4000 professionals in its operations. Under the engineering department, it offers services deali...

Description

Executive Summary Acuren is a company that provides engineering, inspection, rope access universal services and nondestructive testing services at over 80 locations in the United Kingdom and North America. It employs over 4000 professionals in its operations. Under the engineering department, it offers services dealing with materials, structural integrity, mechanical, welding, metallurgical testing, civil, forensic and corrosion. Inspection services involve the use of nondestructive testing methods such as the use of digital radiography for pipeline inspection, phased array tests, laser scanning services to inspect tanks and also x-ray tests. These inspections services ensure that tests are carried out while a plant is online leading to considerable cost savings for the customer. These services serve a wide array of industries: Aerospace industry, the food industry, automobile industry, the construction industry, power generation, chemical, manufacturing, mining, metal fabrication, nuclear power, petroleum industry, pipeline and tanks. The company strives to ensure that the highest standards of safety and quality in service delivery are maintained. To achieve ultimate quality standards, the company runs different types of testing laboratories with state-of-the-art equipment. The test equipment therein requires constant maintenance. Additionally, the laboratories need a continual supply of materials to keep them running. A delay in the supply of the necessary materials is the critical problem affecting this company. After analyzing the root cause of the problem and the operating environment at Acuren, a resolution has been reached. It has been recommended that Acuren establish a centralized procurement department. Such a department has clear advantages over a

decentralized purchasing setup. The company will enjoy lower costs and increase the efficiency of its operations. Issue identification Acuren is a business that provides engineering testing services to numerous clients. It has a myriad of machines in the testing laboratory. Operating such a laboratory requires a constant supply of chemicals, materials to keeping the test machinery operational, maintenance of the equipment and annual calibration of the same. Running Acuren services is a sophisticated endeavour that requires an efficient procurement service. Acuren procurement is decentralized is far from sufficient in ensuring the smooth operation of the business. Lack of a central procurement process is the crucial problem plaguing Acuren operations. The finance department is using improvised measures to run supply chain activities of the company. The lack of specialized procurement officers in the company causes unwarranted delays when the finance officers fail to understand the complicated procurement procedures. As such, most employees are forced to commit to further research on procurement matters at the expense of their assigned productive activities at the office. Not to mention, the company has experienced avoidable financial losses. The lack of a specialized procurement office in the company also means that the company lacks procurement policies and procedures. Absence of such a system has dealt Acuren a substantial financial penalty due to misinformed decisions. Concerning poor procurement decisions, a decision was once reached to purchase a million-dollar test machine instead of leasing it. The buying decision has wounded the finances of the company immensely because of the ownership costs of running the equipment, e.g. servicing and training new employees to

operate it. A financial audit revealed that leasing the machine from an outsourcing company would have saved Acuren an estimated two hundred thousand dollars in operational costs. Finally, the absence of a central procurement office has adversely affected supplier management. The short of this is that most deliveries are now mostly delayed, inconsistent quality of similar products from different suppliers and an increased cost of purchasing. The net effect of these inefficiencies is that Acuren customers are experiencing increased delays and inaccurate test results. Acuren has many loyal customers. Erroneous test results have in the recent past resulted in deterioration of the trust in our relationship with some critical customers. As a result, the business has lost considerable revenue. The sad state of procurement affairs at Acuren cannot be allowed to continue as it will eventually lower trust in our brand or cripple the business. Environmental and root cause analysis Acuren Group focus is on engineering and materials testing services. As a quick highlight, the company has the following testing departments and test equipment therein. The chemical laboratory which has a corrosion chamber and other test stands which require a regular supply of various chemical reagents to effect the required tests. The metallurgical examination laboratory, on its part, has multiple test equipment. One is the auto polishing machine that is used daily with different grades of sandpaper, diamond polish paste (very expensive) and an etching solution. Regular microscopes and a scanning electron microscope (SEM) are also used. SEM calls for routine maintenance, and there is now the need to buy a new imaging software to operate it. The mechanical testing laboratory has a force machine and a hardness testing machine with both pieces of equipment requiring regular maintenance. Micrometer gauges and Vernier calipers are also used in this laboratory.

Apart from the regular maintenance required for all test equipment, annual calibration is carried out for some select equipment. The machines that require this special treatment include thermometers from the corrosion section, Vernier calipers and micrometer gauges from the mechanical testing lab, and finally the regular microscopes and the SEM. The calibration procedure is usually quite expensive for some equipment. As identified above, the critical ailment plaguing this company are the delays in procuring the required supplies to maintain a smooth operation of the laboratories. The root cause of the problem is the lack of a central procurement department. In its stead, the company relies on the finance department working in collaboration with the relevant departments to procure the necessary supplies thereof. Acuren group has dozens of success stories on its table. The central theme of these stories is that it has helped its clients save hundreds of thousands if not millions of dollars. They show that Acuren’s commitment to ensuring that its clients' problems turn out to growth opportunities. However, delays in the procurement process might derail its noble vision of serving customers efficiently. The immediate, most effective solution would be the creation of a central procurement department.

Away from the flaws, the company has notable strengths: 

Innovation. One chemical industry success story indicates the culture of innovation at Acuren. The story in question is Acuren’s HTPAUT solution is cited for having beaten the competition and saved the concerned client almost five million dollars in costs. Another success story is helping a client save several months in a cast-iron reliability

problem. Acuren reliability engineering team found an ingenious way of testing over 200 subjects in a record time of two weeks. 

Commitment to excellence. Acuren has employed top engineering talent to ensure that its clients get timely, smart and creative solutions to their problems. A story on the company website proves this claim. The company ensures that its technicians receive the best training on nondestructive testing procedure. Another story that shows commitment to excellence is equipping its weld inspection engineers with the best radiography tools which ensure they have perfect productivity.

Key solution: Centralized procurement Centralized procurement is buying all the necessary materials by one department for all departments of an entire company. A purchasing manager runs a centralized procurement department. Centralized procurement is an ideal solution for striking the best supply deals with local sellers near the physical location of a company. Besides minimizing duplicate orders, centralized procurement has a myriad of other benefits: the supply of materials at discounted prices and decreased inventory administration costs.

Advantages of centralized procurement 

Financial savings. Consolidation of purchasing activities for office supplies, machine maintenance services and chemical supplies to one department in Acuren will lead to considerable cost savings. The purchase of necessary materials in bulk has key merits: materials are purchased at discounted prices, and management and assessment of the company’s inventory will be made more accessible. Financial department employees will

halt doubling up as procurement officers and now concentrate on their regular roles. Any need for additional employees in the finance department or duplicate staff due to the burden of purchasing will soon be eliminated by instituting a central procurement department. 

Supplier selection, rationalization and certification will be improved. Acuren has reported cases of inconsistent product quality from suppliers. A specialized procurement department is better placed to deal with the quality problem. Quality assurance will be implemented by constant monitoring of the supplied goods to ensure compliance with the appropriate standards. Over time, the department will establish quality profiles of materials from different companies. This profile will now be used to rank and select the best suppliers for Acuren.

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Advanced inventory control algorithm. Central purchasing will establish a pattern of materials supplied to various departments in the company. The pattern created will be used as a model for predicting future demand of materials for the departments in question. A suitable example of Acuren’s case is the materials needed in the metallurgical examination laboratory. The metal lab has several machines with daily intensive use. These machines require several materials to operate: sandpaper, diamond paste and etching solution. A demand pattern for these materials will be recorded over time. An advanced procurement software will help predict the demand for these materials ahead of time. This intelligence will ensure that surplus stock is maintained in the inventory as a buffer for future needs.

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The company can try negotiation and competitive bidding. By establishing a central procurement office, Acuren will afford the opportunity of trying out competitive bidding

of materials supply tenders. The competition will overcome the shortcomings of handpicking suppliers that are currently being employed by the company. Hand-picked suppliers are most likely to blame for the inconsistent quality of products. Competitive bids will help this company evaluate the quality offered by each company before opting for their supply services. What more? Acuren will now have the chance to try out negotiation with its suppliers regarding specifications, price and the number of goods supplied.

Disadvantages of centralized procurement 

Complex management. As the company expands its operations, the task of monitoring the stock needs for all departments will become an enormous task. This complication will call for better-trained employees and the adoption of advanced software which may be very expensive.

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Emergency need for materials may be difficult to meet especially from local suppliers. A centralized procurement system emphasizes the materials that are often needed. Therefore, emergency material needs will rarely be fulfilled because the local suppliers always stock the materials that are usually required by their buyers. E.g. if a part of the scanning electron microscope breaks down, the local vendors will most likely not have the item in stock.

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Centralized procurement may be unsuitable for situations where the companies’ departments are located at distant geographical locations from each other.

Alternative solution: Outsourcing procurement

An alternative to a centralized procurement system would be outsourcing procurement to a third party. In this arrangement, Acuren’s key purchasing activities and supplier management functions would be surrendered to the third party. Apart from lowering costs, a specialist comes to work in tandem with Acura’s procurement team to improve the productivity of the department. Indirect materials and services are critical purchasing activities that will be outsourced.

Benefits of outsourcing · Outsourcing of procurement will allow access to specialist procurement experts where the cost or demand would not warrant an internal expert. The company, on its part, will gain access to an expert who can improve the performance of the procurement department of the company.

Disadvantages of outsourcing · The company does not have the controllability factor with an outsourced expert as it would have with its employee. Alternative solution: Tactical and strategic procurement Strategic procurement refers to procurement methods that take into account several factors such as procurement timeline, budget and funding opportunities and the projected opportunities and risks. Strategic procurement is developed with several things in mind, the key of them being company objectives, the available supplies and resources and the financial constraints of a company. As such vital decisions, e.g. the purchase of expensive equipment should be in agreement with the goals or objectives of the company. Another critical choice that Acuren would consider in a tactical procurement method is the option of either making the materials required or outsourcing procurement. This decision is influenced majorly by

sustainability and cost of either choice, i.e. whether the resources of the company would have the ability to anchor the option selected in the long term. Under strategic procurement, the company will have better planning control over the supplier relationship management (SRM). SRM is applied to the entirety of the supply base to minimize risks and maximize value. The other purpose of SRM will ensure that the company improves its relationship with its suppliers to contribute to the business strategy of the company eventually. SRM is realized in five steps. The initial step is identifying suppliers who have been in contact with the company for a period. The second step is segmentation of the suppliers. Supplier segmentation is the process of identifying suppliers that can promote the strategy of the company. Only the suppliers that align with the company strategy will be worth the effort and time of building a close partnership. The third step is relationship analysis. Relationship analysis involves evaluating the type of relationship the company has with the segmented suppliers using a supplier partnership analysis tool. The second last step is relationship management. Relationship management applies to the top segment suppliers. The target is to have a quintessential relationship type with such, i.e. leverage-based relationship type. Lastly is the evaluation. The lessons realized from the SRM process are evaluated and documented at this stage. The experiences result in the development of worthy recommendations for the business such as commencing research and development endeavors with the top suppliers or the option of restarting the SRM process from the supplier segmentation process, i.e. step two.

Recommendation

In the short term (6 months), Acuren should outsource procurement activities to a third party. The third-party will come in with an expert who will liaise with the company’s ad hoc procurement staff in the finance department to identify the critical areas of the purchasing setup that need improvement. Besides this, the employees will learn a lot of procurement skills from the expert. The team effort, coupled with improved procurement skills, will help the company achieve better efficiency in the materials procurement process. In the long term, the company should establish a centralized procurement department. The pioneering staff of this department will be drawn from the ad hoc procurement team that will undergo the six-month training from the outsourced procurement expert. This team should ensure the company overcomes the previously mentioned supply challenges and gains financially from them.

Implementation In the short term, the senior management should make an advertisement requesting the services of a procurement expert. The Human Resource team should then shortlist those surpassing the threshold and call them for interviews. The candidate with the best performance record amongst them should then be selected for the role of training an ad hoc procurement team of the company. In the long term, the senior management should make plans to establish a specialized procurement office. The best performer that emerges from the ad hoc team should be selected to head the procurement department. Additional benefits should be prepared for the pioneering procurement team to boost their morale.

Monitoring and Control For monitoring purpose, several key performance indicators should be utilized: the material quality, delivery time and cost. These indicators should be tested against the company’s targets. Moreover, the supplier should be aware of the expected standards of materials. These results should be availed regularly to the senior management for evaluation purposes. For control, there should be a scorecard system that captures the key highlights of Acuren’s relationship with its suppliers. This scorecard will ensure that net positives are being drawn from this relationship. The management should regularly examine this scorecard to ensure that there is a constant improvement in this process....