For companies, “time is money” and this is certain for oil and energy companies who have scheduled jobs to complete on certain dates according to extraction cycles. These cycles require alignment with specialized personnel in restricted areas, if the material does not arrive when the personnel is scheduled to work, there is nothing to do, wasting resources and valuable time. This scenario stresses the importance of material readiness and in transit visibility in real time, as it facilitates information on when they will receive the material. In the oil and energy business exists a sanction called “non-productive time” (NPT) and it means that when a segment or a job is not started or completed on time, the oil and energy company economically penalizes the party which caused it.
This is evaluated before the installation of the well and depends on the services that the supplier provides, could be for drilling, heavy transportation, maintenance of equipment or drilling fluids for example. The International Oil Company (IOC) and the suppliers generate a contract with responsibilities and NPT sanctions which include payment for the work to install the well, the rent of the well per day or a free fee for transportation, depends on the conditions that the IOC and the suppliers arranged.
In this business the environment is volatile, one minute everything is in control and the next can be a disaster, this is when the crisis mode is activated and intense follow up is required to move either large or small pieces of equipment in a matter of hours. In such cases, details are extremely important to assure a successful course of action including dock hours, special loading and unloading instructions and transport regulations due to material nature. Logistics professionals must be constantly alert, anticipating events and have an efficient plan to ensure the on-time delivery of the materials.
4 Key Strategies for Successful Situation Management in Oil & Energy
- Effective Communication
Include all details clearly and in short lines within the communication this allows the involved parties to understand the situation and the required steps. It is crucial to understand what the client needs and wants which may not be the same in all cases. If we don’t understand what the client actually needs, all provided information might not be useful, and this situation if not handled properly, could cause delays, sanctions or incidents.
For oil and energy, visibility is vital to ensure a good tracking and monitoring of the movement of goods. This includes visibility timeliness to the end user, suppliers, and carriers which will allow the logistics expert to identify and solve immediate issues as they occur in the short term. However, a greater value comes in the long run, as with the appropriate visibility, the client is empowered to improve contracted lead times and purchase order life cycles, therefore reducing expediting costs, as well as safety stock inventory.
- Track & Trace System
Visibility refers to providing information to the end user, but if the tracking system that the companies use is not efficient the information cannot be provided in a timely manner or EDI (Electronic Data Interchange).
- Qualified Staff
Working with experts in oil and energy, transportation and logistics will allow you to optimize your supply chain process. Trained professionals easily generate and improve solutions for the client as they are familiarized with the industry constraints and alternative strategies to successfully overcome issues. They can also find opportunity areas for new business. If you don’t have enough experts, train them, empower your staff to have the knowledge and the required operational skills.
Now you have a notion about the importance of the on-time delivery and visibility for the oil and energy industry, applying the above strategies to optimize your daily operation can improve efficiency, lower costs, an mitigate risks.