Logistic Trends- Oil and Gas
Key Logistics Trends Shaping the Oil and Gas Industry in 2017 and Beyond
After a period of low prices and slowing demand, oil and gas providers are cautious about the future. The worldwide downturn exposed decades-old weaknesses: few cared about logistics improvements as long as there was constant growth. Now, companies must improve efficiencies if they hope to thrive. Here are some of the key developments I see shaping oil and gas industry logistics in 2017 and the years ahead.
Oil and gas companies have taken a hard look at their use of digital technologies and sought out ways to leverage new technology. According to the annual Upstream Oil and Gas Digital Trends Survey from Accenture and Microsoft, recent trends include:
- Creating Value. Using technology such as advanced analytics, digital is helping oil and gas firms increase productivity, make better decisions and reduce costs.
- Increased investment. Despite low prices, the majority of companies in the industry will invest similar amounts in digital transformation over the next few years.
- Focus on value. While current investments in digital technology are focused on cloud computing, the Internet of Things (IoT) and mobile computing, future investments will shift to analytics, big data, robotics, artificial intelligence (AI) and wearable technology.
- Improved analytics. Although analytics is recognized as a significant opportunity to become more efficient in the use of data, many industry leaders feel they do not have enough capability in this area. For that reason, they expect their firms will invest more in data analytics capabilities in the coming years.
- Continued movement to the cloud. While cloud computing has become a larger part of the digital profile of many oil and gas companies, the survey indicated the shift to the cloud will accelerate. In the past, it was used mostly for cost reduction but is now being looked at as a way to leverage digital solutions that unlock value in logistics and operations.
Hiring Employees with Business Skills
While the oil and gas industries have embraced increased digital implementation to help eliminate inefficiencies, I see a major challenge: finding qualified workers who can work with data. Some companies are using disciplined frameworks such as Lean and Six Sigma to improve operational and distribution efficiency. For example, Six Sigma is not only being used in oilfield inventory and supply chain management, it is also being utilized to improve pressure drilling and rig management systems.
However, the industry needs employees who have the knowledge and experience in these frameworks to provide an immediate impact on the job. Oil and gas industries operate around the clock. There is no time for extensive experimentation. Companies are looking for employees that can think like an outside contractor, evaluate on-site situational inefficiencies and bottlenecks, and use data and digital technology to design solutions that work quickly. I feel companies want employees that have the certifications and training needed to optimize the concepts behind Lean and Six Sigma so they can make an impact on projects immediately. The other option is to bring in outside firms that can disrupt the supply chain in short order.
RENEWED FOCUS ON EFFICIENCY
In 2016, the industry faced uncertain conditions. Many companies continued reductions in headcount and capital investment they had started after the downturn in prices. As the year unfolded, confidence regained as prices slowly rose based on lower US production. Rig counts began to rise in summer, and by the beginning of fall, more than 150 rigs were back in operation.
You and I know the oil and gas business has always been a boom or bust, but the recent worldwide period of discounted prices and lower demand have forced industry executives to seek efficiencies in operations and distribution. The industry has been slow to manage costs, instead concentrating on building revenue and increasing yields. In fact, a survey by Oxford Economics of executives at over 250 energy companies worldwide reported 70 percent of managers are not taking an active role in controlling costs. The downturn revealed glaring inefficiencies, including:
- Lack of modern technology and information systems
- No centralized strategy and execution
- Lack of synergy in planning and collaboration between silos
- Inability to hire qualified workers
- Lack of emphasis on operational efficiency by team leaders and company executives
- Missing or inaccurate data
Logistic Trends- Outsource Distribution
Oil and gas companies continue to try to find ways to reduce costs in their distribution, shipping & receiving and other materials management services. Many are outsourcing to purpose-built distribution companies such as RigServ that offer services including distribution models, warehouse management systems (WMS), mobility solutions, self-serve checkout and SMART packaging. Distribution partners can help improve data analytics and align business processes to maximize value delivery through the supply chain. The benefits of working closely with a purpose-built distribution company include:
- Reduce freight costs up to 20 percent from warehouse to dock.
- Reduce container usage 50 percent or more, which lowers the number of rental days for containers mechanical lifts, in turn lowering the risk of injury to personnel.
- Reduce waste for spare parts being shipped offshore up to 70 percent, which also brings down the risks of cutting injuries offshore or at the worksite.
- Quickly identify and resolve Over, Short and Damaged (OS&D).
- Reduce time in putting away shipments offshore or at the worksite by up to 70 percent.
- Reduce inventory counting times up to 40 percent by using barcoding technology. For example, barcoding and mobility solutions make it simpler for workers to track items being taken out of warehouses, improving inventory accuracy and control.
- Optimize headcount while improving operational efficiency.
- Increased inventory accuracy.
- Purpose-built software saves time and money.
Although the global slowdown was painful, I believe the oil and gas industry has made great strides in digital technology, hiring qualified talent and working closely with quality partners.