In today's globalized world, logistics companies play a pivotal role in facilitating the movement of goods and services from producers to consumers. These companies form the backbone of supply chain management, orchestrating intricate processes to ensure products reach their intended destinations efficiently and reliably. In a complex landscape, logistics companies employ various strategies to streamline operations and enhance customer satisfaction.
For Energy, optimizing the movement of hydrocarbons can be a complex and intricate challenge requiring innovative solutions. Activera Consulting, in conjunction with our ecosystem partner e2log, took a deeper look at what we see in the industry and have highlighted two major problems + solutions below.
Before we dive into the Energy industry specifics, though, let's set the stage by looking at a few fundamental principles that make efficient logistics happen:
Now that we’ve outlined four critical tenants of logistics excellence let’s look at two problems that rear their ugly heads, specifically in the Energy industry.
Problem 1: Integration Inefficiency
Efficiently transporting energy resources is often hindered by operational inefficiencies that can stem from myriad sources – for example, outdated technological infrastructure or perhaps missing/dilapidated transportation infrastructure that results in delays and operational complications. At the core of this is a consistent challenge in matching the shipper's needs with the performance and execution of their logistics partners. Their processes and systems don't match up.
Rising fuel and fleet management costs make it even more challenging to maintain profitability – we've all seen a significant hike in shipping prices over the past two years. The interplay of these elements adds complexity to an already intricate operational landscape, forcing companies to innovate and adopt strategies that mitigate disruptions while keeping costs manageable.
Solution 1: A Holistic Approach
Amid these challenges emerges a transformative approach that centers on cohesive data integration; one connected system where different parts of the energy value chain can unite is a step in the right direction. For example, a digital control tower system can enable a 360-degree view of Oil and Gas operations. Using a route optimization tool for workovers or complete views of all inventory at rest and in transit or identifying preventive maintenance opportunities for system longevity can also help reduce inefficiencies. The bottom line is that looking end-to-end for proper Systems Thinking use cases is much better than optimizing parts, inadvertently creating bottlenecks (see Goldratt's The Goal).
Problem 2: Lack Of Communication
A handover happens when moving across Segments from Upstream to Midstream.
Production data sits in one system, and transportation (Shipping, Trading, Pipeline, Rail, etc.) will sit in another (or in multiple others!). Inadequate communication can further propagate when we make changes or updates. If we promptly communicate at every supply chain step, the result can be a cohesive process.
Solution 2: A Facilitation Platform
The ideal solution is to provide a clear and structured way to manage and navigate the movement of resources. This approach would track the trajectory of a product from Production (exit point of Upstream) to the final destination (exit point of Midstream).
Visualizing the voyage of hydrocarbons can be a powerful advantage. This mechanism empowers stakeholders with real-time insights into the geographical journey of resources, facilitating informed decisions. The overarching goals of a platform in this space are to unify communications for maximum profitability, assist with control over the logistics providers' performance, and solve deeper issues with data-driven insights.
Navigating the Path of Progress
A holistic, end-to-end approach becomes mandatory as Integrated Oil Companies approach effective Value Chain (Up, Mid, and downstream) analysis as a cost-cutting and value-generation mechanism. To solve the problems identified above (integration inefficiency and communication dysfunction), energy companies need a solution that provides Portfolio-level visibility. An integrated platform offering real-time tracking, efficient resource allocation, and enhanced decision-making is a step in the right direction.