Over the past four years, Tervita Corp. has revolutionized its supply chain by combining centralized and decentralized methods that have optimized its operations. The hybrid model, as the company calls it, allows Tervita to be more agile and authorize decision-making powers among its staff and local supply chains that result in greater efficiency and cost-savings.
“We started with a fully centralized model four years ago that we then decentralized a year later, ending up with a pretty scattered supply chain because Tervita used to be several companies,” Director of Corporate Supply Chain Management Juan Herroz Betancourt says. “We are in the process of integrating our procurement services and the way we do business with suppliers and customers. As a company, we slowly started moving into a more centrally governed model. I lead the corporate supply chain team and we are a relatively small division with business-specific procurement pockets embedded in our operations and reporting to and sharing progress with the central function.”
The Calgary, Alberta-based company began as a one-rig operation known as Concord Well Servicing, co-founded in 1979 by David Werklund. In 1984, Werklund made an investment in an oilfield service company in northern Alberta, which became CCS Corp., Tervita’s predecessor company. “We are a vertically integrated environmental solutions provider for mainly the oil and gas industry,” Herroz Betancourt adds. “We have a strong presence in North America offering a broad range of services.”
Today, Tervita has more than 2,700 employees and the industry’s most comprehensive array of environmental solutions to handle all its customers’ needs at all stages. Tervita’s growth is a testament to Werklund’s philosophy of “empowering our people.”
The company specializes in exploration and development, production waste, and abandonment and reclamation. “We are very proud to offer total solutions and be a one-stop shop for our customers,” Herroz Betancourt says. “We are the main stakeholder in the reverse process flow for many of our customers. We are the organization recycling, managing waste or helping achieve sustainability for companies that seek environmentally responsible operations in delivering their products upstream and downstream.”
Tervita dramatically evolved its supply chain operation over the past four years by integrating the ways it does business with suppliers and customers. It combined a centrally governed model with a decentralized supply chain model, creating what it calls a hybrid model. “A lot of companies talk about the benefits of one or the other, but we use both models in our organization, which we believe is a benefit,” Herroz Betancourt explains.
The centralized model consists of support staff that creates policies, runs requests for proposals and underwrites contracts, for example, while its local supply chain teams are empowered to make decisions at the field level. “Some divisions are specialized and you have to be on the customer side to understand the suppliers you need,” Herroz Betancourt explains. “The decisions that need to be made wouldn’t work with a central model. We have specialized buyers at the project supporting our clients’ efforts.”
Tervita continues to evolve its supply chain by focusing on its staff in the field and how they can improve the supply chain operation. “We realize there is a lot of mind power and creative power in our operations,” Herroz Betancourt says. “We have a lot of staff members not reporting to the supply chain line who do a high volume of purchasing. They have an impact on the bottom line and spend totals, so we have just started reaching out to them.”
The corporate supply chain wants to create a buying community among members of its field staff. They do not have the buyer title, Herroz Betancourt says, but are considered informal buyers who understand customers’ needs and market pricing better than anyone. “They are the people who can lead negotiations with suppliers because they interface with them, have developed a great rapport and understand what adequate pricing looks like,” he says. “These are the people working out in the field, running projects, and operating plants and facilities.”
To expand its supply chain and include more informal buyers in the process, Tervita’s supply chain leaders offer webinars.
Tervita invested in a new ERP system three years ago that centralized its procure-to-pay data, which Herroz Betancourt says has been a stepping stone in the evolution of the supply chain. “It’s hard to see how we were performing supply chain analysis without it,” he adds. “We now have full visibility on all our spend channels or who we spend money with and what percentage of our spend goes to each division.”
The company can spend between $500 and $700 million per year with suppliers and, because of the ERP system, it now has a better understanding of how to tackle total spend. Tervita tracks its spend on holding and logistics, trucking, and utilities – especially for its work at treatment recovery and disposal plants, which is its largest investment. “We are developing strategies for each of those categories and deciding which ones we are tackling centrally and which categories justify doing work out of more local levels,” Herroz Betancourt explains. “We can see before we spend the money what is in the budget.”
Keeping the lines of communication open with suppliers is important for Tervita to form long-term partnerships. The company hosts meetings focused on its safety record and its suppliers’ records to review any incidents that could be prevented. The other part of its communications effort recently has been holding tabletop meetings to focus on the oil and gas industry. “Our intention is to bring suppliers to the table to understand our business, how they are helping us, and it’s a really good fit,” Herroz Betancourt says. “We have seen a good response and they appreciate us inviting them to come and meet with us.”
Because of its communication effort with suppliers, Tervita is confident it will be able to navigate the tough few months ahead and then capitalize on the new wave when the market rebounds. “It’s a low commodity market and we are talking a lot about this topic,”Herroz Betancourt says. “We are pretty fortunate that our suppliers are coming to the table with fair pricing and we need them to help accommodate the discounts our customers are requesting from us.”
Tervita has consolidated suppliers to remain flexible and make it easy to move more business to ones giving better discounts. “We know our suppliers will treat us fairly and we treat them fairly, so we are giving priority to keeping business within our supplier community, so far,” Herroz Betancourt says. “That’s not to say we don’t welcome new proposals. We are trying to stay prudent and not make any knee-jerk reactions.”