April 18, 2023
The oil and gas supply chain is complex, impacting businesses when disrupted. Supply chain issues appear the most serious because of several challenges caused by inflation-related problems. Supply chain issues can lead to increased project budget, delayed human and material resources supply, and reduced efficiency.
If your processes aren’t optimized to weather changes and snags in the supply chain, your business could fall behind or risk losing revenue. However, you can streamline processes among your remote teams and mobile workforce with software solutions tailored specifically to your business model. This will facilitate the smooth running of your entire business and create supply chain resilience.
Challenges in the Supply Chain
Different factors contribute to the disruption of the oil and gas supply chain. These include natural disasters, environmental regulations, and the geopolitical landscape. Below are some common challenges impacting operational efficiency, cost-effectiveness, and overall supply chain performance.
- Coordinating stakeholders – Stakeholders in the oil and gas sector include mobile and on-site employees, contractors, and partners. Getting these stakeholders to work efficiently from different regions, states, or countries can be difficult if improperly managed. Communication links may break, affecting some procedures in the supply chain.
- Inventory management – The oil and gas industry is massive, and managing its inventory can be challenging. Many companies don’t have modern systems to ensure that downstream processes and other stocks are available in refineries and warehouses and commensurate to customer demands. In this case, managing inventory levels and ensuring optimal stock levels across multiple locations to weather changes or delays in the supply chain can be difficult.
- Midstream activities - Coordinating logistics and transporting materials and petroleum products across various modes, such as pipelines, tankers, rail, and trucks, is usually a struggle. Often, there’s a delay in transporting and delivering oil and gas to primary and secondary distributors and customers from refineries.
- Managing costs – McKinsey reports that costs in the oil and gas sector increased by 7 to 15% in 2022 and will increase by 6 to 10% in 2023. The increased cost is due to the inflation of raw materials and labor uncertainties and can make the supply chain unstable. Cost issues contribute to fluctuating market prices. Nevertheless, there’s a bright side, as oil price fluctuations protect profitability and inform strategic business decisions that hedge against price volatility.
- Regulatory Compliance – The oil and gas industry is heavily regulated, and companies must adhere to all policies. Aside from being regulated by the Federal Energy Regulatory Commission (FERC) and other federal bodies, the industry must also adhere to compliance policies in certain states. Ensuring compliance with environmental regulations, safety standards, and trade restrictions provided by these bodies across the entire supply chain can be burdensome.
Despite these challenges, there's good news. Oil companies can connect with experts proficient in using new technologies to develop custom mobility software capable of addressing and solving each problem. The software keeps your business stable and gives it a competitive advantage, even during supply chain disruptions.
Oil, gas, and energy companies can maintain supply chain resilience by evaluating risks. According to a McKinsey report, assessing risks is a ternary solution, effective enough to assess your company’s risk exposure. In addition, it’ll pinpoint where custom software will be the most valuable and processes that could benefit from strategies like automation. Let’s examine the three-step process:
Understanding Supplier Risks
Begin with a clear picture of your company’s challenges, the risks suppliers pose, risk categories, and causes. To achieve this, engage function teams within your organization to decide on the appropriate mitigation techniques. Conduct a supplier-level risk analysis to determine the exact suppliers posing these risks. Furthermore, analyze the supply chain's connectivity between tier two and three suppliers. Ensure to analyze and mitigate commercial, operational, and execution risks also.
Assess Exposure to Market Inflation
Energy companies and providers should review contracts to have a bird’s eye view of their exposure level to inflation. Likewise, your company should assess inflation impact mitigation techniques provided in the contracts. It’s also crucial to compare oil and gas inflation to the inflation categories in other industries.
Develop Risk-mitigation Strategies and Calculate the Potential Impact
Oil and gas companies should develop risk-mitigating processes for all business operations to control market inflation. Your company should monitor how these processes affect future costs.
Similarly, develop a risk-sharing mechanism with your suppliers. Maintain sustainability in your oil and gas company by developing or adjusting existing processes to manage relationships and contract performance. After completing these three tasks, you can now consider how mobility software and automation can help you alleviate your problems and create a more stable business.
Automating the Supply Chain
When you work with a software developer, they can help you create a custom solution that gets to the heart of your problem and offers seismic and impactful solutions. Here are a few examples of custom solutions in the energy sector:
Field Data Collection
Oil and gas companies thrive on data. Having the most up-to-date and accurate insights in your system is pertinent to make better business decisions. However, leaving data collection, input, and migration to human teams can result in errors, backlogs, and missing information.
Automating the data collection process while on the field can significantly improve efficiency and accuracy. This process includes automating production data collection, equipment readings, inspection data, and maintenance records.
Employees can use mobile applications and connected devices to capture data directly from the field and transmit it in real time to central systems, eliminating the need for manual data entry.
In oil and gas, minor problems can spiral into big ones. That's why you must ensure they're addressed right away. Relying on manual work order management to achieve this often leads to delays, miscommunications, and potential compliance infractions.
Automation can monitor your equipment and systems to alert you when it needs maintenance. Likewise, automated notifications and alerts can be set up to inform relevant stakeholders about work order status changes.
With automation, you can manage the entire work order process, including creating, assigning, tracking, and updating work orders. Mobile applications can be used to provide field technicians with real-time access to work orders, enabling them to view task details, record progress, and capture necessary documentation.
As we mentioned, tracking your assets and managing transportation logistics can be difficult when there are several irons in the fire.
Automating asset tracking processes improves visibility and control over equipment, materials, and inventory. This sometimes involves technologies like RFID or GPS to track and monitor the movement and location of assets automatically.
Integrating asset tracking systems with enterprise systems allows oil companies to optimize asset utilization, reduce loss or theft, and enhance overall supply chain efficiency.
Safety and Compliance Reporting
Safety and compliance are highly regulated in oil and gas, so your business must ensure strict adherence to avoid expensive fines. To avoid potential oversights and errors, you can automate inspection processes and design workflows that comply with regulatory requirements.
You can use mobile applications or sensor-based systems to conduct inspections, record findings, and trigger automated workflows for follow-up actions. This helps to streamline compliance processes, reduce manual paperwork, and enhance data accuracy.
By transforming these processes with technology, oil and gas companies can improve operational efficiency, reduce administrative burdens, enhance data accuracy, and enable faster decision-making, ultimately leading to improved productivity and cost savings.
Find a Qualified Partner
In your effort to maintain oil and gas supply chain resilience, you need a competent partner. If you're ready to try custom software to support your field team and improve mobile operations, you're in the right place.
EnterBridge specializes in customized solutions for the oil and gas industry. We can help you automate processes and streamline operations to create a more stable business with supply chain resilience. Schedule a call today to start your digital transformation.