• Agile collaboration, and better risk management
• Design thinking to reimagine operations and stakeholder experience
  

Can downstream oil & gas supply chains be revitalized to create resilience and sustained competitiveness?

Across industries the logistics domain is being reimagined and digitally transformed for improved operational and capital efficiency, revenue growth, agile collaboration and better risk management. Logistics providers such as DHL are using smart glasses to assist warehouse operators achieve a more efficient and accurate package picking process. INTTRA provides an ocean-shipping e-marketplace for paperlessprocesses across booking, shipping, payments and other allied processes. Retail majors such as Amazon, Alibaba and JD.com have spent on robotics for goods handling and warehouse operations. Retail and last-mile logistics companies are using drones for product delivery, pick-ups and returns.

In the oil & gas industry the downstream supply and distribution (S&D) business has much to gain from targeted digital enablement to improve returns from asset investments, exploit new growth opportunities, enhance operational effectiveness through more agile planning, scheduling and optimization, and deliver safer operations. To achieve these outcomes, S&D organizations can deploy a range of digital tools such as design thinking to reimagine operations and stakeholder experience, advanced analytics to exploit data for meaningful insights, and a growing spectrum of digital technologies including automation, machine learning, augmented reality, IoT and more.

Key challenges

For oil majors, there are four chief challenges in the supply and distribution domain.

The first and most important challenge is the growing supply chain complexity with network consolidation and restructuring as well as greater dependency on external entities and independents across the value chain. Suboptimal network strategy in response to supply/demand imbalance is further complicated by fragmented visibility and traceability of supply and demand andlowered agility across a multi-tier enterprise.

The increasing cost of service is another major challenge. This is driven by rising supply chain costs due to operational inefficiencies, hybrid back office operations and other factors.

Poor cross-functional collaboration is a third key challenge. A lack of integrated supply chain planning and execution, limited flexibility for event- and exception-based planning and absence of real-time insights combine to complicate collaboration and decision-making.

Finally, S&D operators are challenged also by mounting risk management and compliance requirements. Increasingly stringent standards to ensure safe and reliable operations and a heightened need to mitigate business risk add to operational complexity.

All of this means that S&D executives must find answers to several crucial questions:

• How can the fuels and lubes supply chain be made more agile and responsive to market dynamics?
• How will companies transform S&D planning, scheduling and optimization for greater effectiveness?
• How will technology and new ways of working elevate collaboration amongst S&D stakeholders?
• How can companies leverage technology to achieve improved real-time supply chain visibility?
• How will companies exploit their rich data repositories to drive asset performance and reliability?

Priority areas for digital intervention

These challenges indicate three clear priority areas where S&D operators can use digital enablement to drive business performance, agility and resilience.

• Planning and scheduling have traditionally been bound by time series based demand forecasting and calendar-based, siloed planning optimization. However, given today’s volatile business and operating environment, these functions need to become highly responsive. Today’s machine learning technologies and prescriptive analytics can drive planning and scheduling optimization with causal model-based demand sensing methodologies to improve forecast accuracy, fulfillment and customer satisfaction. Fragmented inventory, supply and distribution systems can be digitally integrated to respond to events and exceptions in real time. Such systems also bring end-to-end visibility of the supply chain, enabling agility and improved performance management. On the other side of the supply chain, functions such as trading, manufacturing and distribution can be tightly integrated, making the entire organization responsive to business signals in near real time.
• Logistics, operations and back -office have evolved into effort-intensive and error-prone processes. Today, every repetitive and rules-driven back office process can be entrusted to fast, accurate and cost-effective robotic process automation (RPA) solutions. That’s only the start. Leveraging machine learning capabilities for higher order learning-capable automation will then offer greater agility and cost efficiencies across a range of processes such as customer onboarding, order to cash, hydrocarbon management, procurement and more. In addition, analytics can be brought into play for smart contract management, real-time inventory monitoring and replenishment planning, and to move from traditional siloed warehouse management constructs to connected warehouse management. Overall, logistics scheduling and operations in the industry have so far shown significant inefficiencies. There is enormous potential to reduce working capital and inventory, minimize cost-to-serve and reduce supply risk.
• Next generation asset management is an urgent need in an industry that is asset heavy. Manual and onsite pipeline surveillance and inspection of tanks and terminal assets is time consuming and expensive. However, drones, robotics and video analytics can alter the equation. Already, industries such as telecom are using drones to reduce inspection time by 40%. Augmented Reality, Virtual Reality and other assistive technologies such as real-time access to remote expertise over mobile networks can be further used to ensure speed and effectiveness of field work. Most of all, as organizations embrace the Internet of Things (IoT) and data from various devices, sensors and ERP is integrated, organizations will be able to generate predictive and prescriptive maintenance strategies to further reduce downtime.

Open the door to the future

Digital is rapidly opening the door to impressive new capabilities. In the oil & gas industry, where operations are spread across vast geographies, digital offers the potential to reimagine decades-old business processes. Imagine for a moment the impact of 3D printing which can be used to manufacture spares on demand and on site. This has the potential to completely disrupt traditional supply chains and asset management processes.

The oil & gas supply and distribution business is not only intrinsically complex, it also faces several external challenges from the market and regulatory environment. To respond more nimbly to external challenges, S&D companies must reduce internal complexity and become more agile and efficient in their operations. These companies are now approaching an inflection point in their trajectory. To propel themselves towards profitable growth requires the ability to exploit their data, reimagine their processes and the deft and targeted use of new digital technologies.