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:
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.
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.