Shifting trends in outsourcingAugust 18, 2020
Sylvain Benoit, executive vice-president of catering and facilities for Saudi Airlines Catering, talks to The Energy Year about shifting trends in outsourcing in Saudi Arabia and how the company has managed to minimise the impact of Covid-19 on non-transportation activities. Saudi Airlines Catering provides food services to the country’s upstream and transportation sectors.
What is Saudi Arabia doing to bolster local activity?
The government is raising import taxes, which is a big game changer. The idea is to support local production. It will be interesting to see how local production will cope in terms of price and production capacity.
We are in a country where decisions have been taken and implementation is ongoing. When things need to be adjusted, such as import taxes, it is done. Even if the oil price is suffering, Saudi Arabia is a financially strong country. These days, cashflow is key.
How will Saudi Aramco’s acquisition of a 70% stake in SABIC reshape market dynamics?
It will take time to digest and transform the model since we are also in a new environment due to the current crisis. Large clients like SABIC used a model based on input. They tend to rely more on suppliers to develop new operating models.
The transformation should accelerate once the situation is stable. We look forward to engaging with them and exploring new opportunities to have more efficient collaboration. For example, must we cook all meals onsite? Can we rely on meal delivery or cook chilled or frozen food? We have developed many different operating models that we intend to share. We want to do this in the next year.
Will the current situation cause people to re-evaluate outsourcing services?
Saudi Arabia has a transactional model for managing outsourcing that is highly driven by prices without deep consideration of the impact services have on their core business. Food and transportation, for example, might not be considered core services. However, when these services stop, nothing can function. A rise in understanding of the cost of outsourcing and the impact it has on core business should give companies like ours more opportunity. While companies may not outsource more, they will outsource better.
Another trend is being more cost driven. While it is hard to increase prices in periods of crisis, companies understand that spending a bit more can make a big difference in services. Additionally, Saudi Aramco and SABIC are testing integrated facility management, which is widespread in more mature countries. This model is based on output rather than input. The crisis has pushed people to explore new systems.
How has the Covid-19 pandemic affected your company’s operations?
Our business focuses on food not only for the energy industry, but for factories and offices, Hajj, parties and events, laundry, trains and flights as well. We have been impacted like everybody else by Covid-19, with the majority of our business shutting down or facing a significant decrease of activity. We are recovering step by step, but it is going to take time. Nobody knows where the airline business will go. Aramco announced that they will delay all projects and shut down more than 45 rigs across the kingdom, which will have some consequences.
Our rig management segment has been stable and going up in some areas. The crisis has pushed clients to reconsider who they are working with. Good relationships with our clients have kept us stable.
We are focusing on entering new segments, such as staff service and meals for labour camps and to accelerate our presence in industrial areas. With remote working measures, volumes are dropping in the white-collar sector. Localisation of production will turn the tide. The industry has realised it is important to work with reliable suppliers due to the pandemic.
The oil and gas industry creates long-term opportunities but can be challenging in the short term. Companies must reconsider business models and look at the sustainability of operations. We are transforming and reviewing our operating model. It takes time to set up opportunities. Although we are a private company, we are lucky as we are listed and are quite strong financially.
How receptive have employees been to restrictions necessitated by the Covid-19 pandemic?
It has been extremely challenging. We have about 4,600 employees with a good number of them working decentralised. Communication has been challenging, but we received positive responses from our employees about decisions we have taken to protect them, the company and our clients. People are now extremely sensitive to safety and hygiene. We cannot compromise on this.