Southwestern Energy Company

The Supply Chain Services group at Southwestern Energy Company (SWN) is a team made up of 140 individuals with diverse backgrounds and experiences. It is responsible for ensuring that the fifth largest natural gas producer in the United States can continue to grow operations to help meet the growing demand for natural gas. Keith Clay is the director responsible for this group’s activity.

Through its operating subsidiaries, Southwestern Energy produces approximately 1.6 billion cubic feet of natural gas each day through operations in Texas, Arkansas and Pennsylvania. SWN also has exploratory operations in Louisiana, Colorado and Montana.

“We have a hybrid centralized/decentralized model where we procure many of our global services through the Houston office and support field projects and procurement operations as close to the wellhead as possible,” Clay says.

In addition to 20 headquarters-based employees, the group includes 60 employees that manage a major field support facility in Damascus, Ark. This includes a 300-acre pipe yard, a 30,000-square-foot warehouse, 1,000 fleet vehicles and department of transportation oversight. The group also includes 35 employees who manage a 24/7 logistics operations facility, as well as 25 employees who manage project procurement, contract administration and vendor relations.

Southwestern Energy keeps its supply inventory levels as streamlined as possible for what can be a fluid “drill, complete, gather and produce” capital program depending on commodity prices. “The first rule of supply is make sure you have some,” Clay declares. “The second rule is to optimize your re-supply process, and that applies universally. When we start various projects, we tend to overbuy on some items, because we don’t want ‘lacking a widget’ as an excuse for not getting something done.”

Replenishing Inventory

Replenishment of some inventory items is based on time and others are based on their activity. “Each item has its own strategy, and we’ve cut many of our inventory items to just-in-time,” Clay says. He has as much inventory as possible – such as casing for wells – delivered directly to location where they are used to eliminate off-loading and double-handling.

“Anything we can do to get trucks off the road and out of the way of the communities that we work and live in, we’re going to do,” Clay explains.

Most supply transactions are handled by the logistics operations center team, which is responsible for more than 1,000 truckloads of materials per day. Most of the 1,000 daily shipments that are handled by Southwestern Energy’s supply chain are related to water-in, then water-out of the hydraulic fracturing process.

“The next-largest component is sand for fracking, then various drilling fluids and hard goods for well-pad delivery,” Clay says. Southwestern reuses 100 percent of the flowback water from the producing wells. It employs approximately 30 third-party trucking companies to ship its materials. In addition, Southwestern is looking to grow its logistics competency to be as efficient as more mature operations, such as Walmart’s.

“There is a substantial opportunity in safety, environmental excellence, community relations and economics for our industry to optimize large truck requirements,” Clay says. “Well-site logistics are very intense over short amounts of time. It’s important that they are scheduled with multiple layers of contingency planning when Mother Nature does not always cooperate.”

One-team Approach

Southwestern Energy has two vendor programs called Street Smart and Teamworks that it uses to spread its corporate culture to its vendors. That culture uses the motto, “The right people doing the right things wisely investing the cash flow from the underlying assets will create value+.”

“What these programs do is provide – whether in a vendor meeting forum or a specific vendor get-together – an opportunity for us to talk with various providers in a workshop-type environment about behaviors that we expect of them,” Clay explains. “Somebody who has a great attitude – and who works safely and in an environmentally friendly manner – is typically a better performer and will likely create more value in the long-term, both for our companies and for the community in which we perform our work.

“What we do is try to educate our contractors that we expect them to adhere to the same operating standards that we require of our employees, and that it’s a high bar,” he continues. “Then vendors feel confident that if they come into a situation that could be unsafe, they’re comfortable raising their hand and saying, ‘We need to stop and think about this.’ We want our vendors to uphold the same high standards that we do. To have that challenge or appetite helps us innovate – that’s how we collectively get better.”

Clay attributes the success of his department to support from Southwestern Energy’s executives and successful collaborations with operations peers, whom he considers his customers. “It’s our mission to work with and support my operations customers’ challenges – to work with those guys and help them solve a problem – and bring something innovative to the table, and get their buy-in to experiment with a new way of trying things,” Clay says.

“Supply is a people business, and when you have quality resources dedicated to specific project teams, more often than not, successful outcomes are created,” he emphasizes. “This is not to imply there won’t be constructive conflict or occasional mistakes, but overall, we’ve got good buy-in from those we serve.

“Are you working with the customer, keeping the stakeholders up-to-date and informed of what you’re doing?” he asks. “That’s what a purchasing organization gets paid to do, and my team does it very well. What allows them to be successful is the way they support and connect with their customer.” ­­­