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Supply Chain Efficiency in Oil & Gas

Supply Chain Efficiency in Oil & Gas

The critical objective of mega Oil & Gas firms is to locate and produce oil. However, it’s becoming increasingly challenging to transport the oil from remote locations.

Hence, an efficient logistics and supply chain management is the need of the hour to find the optimal route for moving from the reservoir to refinery while ensuring a bottleneck free supply chain.

Every industry presents a unique supply chain challenge, but the Oil & Gas sector is the most complex among them. It could vary from delivering materials to rigs to transporting heavy equipment and hazardous material expeditiously. If an oil rig faces operational breakdown due to the non availability of any material, there could be a significant loss in revenue.

The logistical challenges have a bearing on the cost of oil and its derivatives. The industry is leveraging efficient supply chain risk management processes to mitigate supply chain constraints. Again, robust systems maintaining the suppliers’ information have been established to ensure data security.

The effects of globalization can be found on the industry as well. The Oil & Gas conglomerates are entering into long term contracts with suppliers, thereby hedging against cost increase and any disruption in supply of products and services.

Since the Oil & Gas firms manage their operations, the 3PL partners find it extremely difficult to function, and they must continuously change their perception, drive enhancement in engineering capabilities and interface with the clients operations personnel to be relevant in a competitive market.

Hydraulic fracking has revolutionized the Oil & Gas sector, but has also thrown in supply chain challenges.

Establishing the assets (large and expensive equipment) that would enable fracking is very tedious. Increasingly, fracking companies are looking at logistics partners to not only facilitate a safe transaction but also devise solutions that would bring value.

The massive size of the materials and the need to move them in a particular order can unnerve logistics providers.

Energy companies are roping in the services of fourth-party logistics (4PL) providers to handle dispatch, optimally utilize resources and plan for any changes in capacity requirements.

- Jess Potts
Published on:
September 30, 2014
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