Oil & Gas companies are waging a valiant battle to counter challenges from sustained low prices and margins, a growing and diverse alternative energy mixes, shifting demand and supply imbalances, changing demographics, geopolitical events, regulations and new business models. Thanks to debt burdens compounded by untenably low oil prices, 41 energy companies filed for bankruptcy in 2015 alone. The strategic and tactical responses to these challenges have been predictable: cut costs, improve productivity, restructure and consolidate, explore new revenue models and rationalize capital investments to ensure adaptability and agility.
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.
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?