The oil and gas industry is paramount in the American economy. We need oil to run our cars, our airplanes, our trains and buses, and countless machines. Sure, many of the other daily necessities use glass, metal, and paper quite frequently, but over the decades’ American companies have shifted to using plastic, a material made of oil. Our entire economy, literally, runs on oil and gas, meaning that the operations within this industry must all be running smooth, right? Though this would theoretically make sense, it isn’t so.
The oil and gas industry is composed of hundreds of moving parts, each essential to the daily operations of the industry. These parts, such as those involved in the industry’s logistics and supply chain, are so vital to the entire process of fracking that oil and gas companies have invested millions to ensure that there aren’t any service interruptions, rather than risk even a slight problem.
Transportation is a major factor affecting the supply chain side of the industry. In Wisconsin, for example, truckers need to cover 1,500 miles to move sand from the Wisconsin mine to an armada of 114 railcars, which takes approximately 21 days to do so. Then, the sand needs to be moved all the way to the transload units, and then to the truckloads, and then to Devon.
In addition, if chemicals in any oil being transported pass their shelf life, they start to lose their effectiveness, meaning that deliveries need to be made on time. Everything involved with field work is done manually, and currently, there isn’t any real-time visibility in the supply chain that would allow transportation to go faster while decreasing issues in inventory control.
In addition, without real-time visibility, the industry experiences challenges in the supply chain for fracking because of the extra materials required. The sizes of the fields used for fracking are also much bigger than those used for conventional methods of digging up oil.
If that doesn’t make matters complicated, there are actually FIVE supply chains involved in the fracking industry.
The first is the Project Supply Chain, which is involved in rig building and supporting infrastructure. Since oilfields used for fracking can reach peaks and declines in production much faster than conventional oil fields, the logistics become much more difficult.
The second is the Inbound Supply Chain, which is involved in bringing drilling materials such as drills, drill casings, water, lubricants, and drilling mud to the site. Water, sand, and fracking chemicals are used in a greater amount in fracking rather than conventional methods, posing a greater challenge as well.
Outbound and Remote Worker
The third is the Outbound Supply Chain, which takes oil and gas away from the field that they were produced in, and the fourth is the Remote Worker Supply Chain, in which workers are flown in on a small plane to the site.
Last is the Emergency Supply Chain, in which operators (oil companies) have to have emergency response plans for any fires, leaks, or health issues that may take place. This supply chain replenishes and stocks inventory as well.
Factors Affecting the Supply Chain
Clearly, there are numerous factors that affect the supply chain. Though every industry poses supply chain challenges unique to their own companies, the oil and gas industry is at the top of that list. Transportation requires specific equipment, strict safety measures, and strict regulatory compliance. These factors, including moving heavy materials, equipment and logistics, demand urgency for the visibility, which hasn’t been achieved yet.
There are few industries like the oil and gas industry that are so susceptible to financial complications when any issues in the fracking process occur. For example, the retail industry follows a standard guideline in which the VP of the supply chain directs the plan, and the entire organization needs to comply. On the other hand, oil and gas companies create their own operations. Without real-time visibility, these operations become extremely inefficient and expensive.
The truck driving shortage has also proved to be an issue. A single fracking site uses more than 80 local carriers, which are run by local truck drivers instead of contractors. However, with the shortage of drivers that the industry has been experiencing over the last decade, transportation has become a more high stake.
Though the oil and gas industry is essential to our economy, the companies involved are facing great challenges on the supply chain side, ultimately affecting the finance and operations side. Whether it be coordinating transportation, managing requirements, or ensuring safety compliance, real-time visibility poses as a solution that will greatly simplify the operations conducted in all of these sides.
Right now, the software solution offered by TamsLive is the only technology that links the supply chain, finance, and operations sector by offering real-time visibility of all transportation and materials cost. This technology will not only make the transportation process more efficient but will also allow collaborative planning between operating companies and suppliers so that all of the logistics for fracking will run smoother.
Contact us now to get more information about how to increase efficiency and cut costs for your company.