Supply chains for the oil and gas industry has been through some difficult times in recent years. Some industry experts predict that the storm is not quite over for companies struggling to navigate the turbulence. However, there are solutions that will help to ease the complexities of the industry.
Cutting costs, adding revenues and increasing profits are obvious solutions for any industry. For the oil and gas supply chain family, these solutions cannot come fast enough.
A renewed focus on end-to-end logistics is one essential aspect to launching a new course. From suppliers to petroleum product delivery, industry leaders must find value in the current supply chain model. Any missed areas, particularly for transportation services and warehousing, can be exploited to improve services.
Basically, there are three key segments that utilize crude oil and natural gas resources through supply chains.
Upstream is the segment that consists of oil exploration, field development and production. Midstream is for transporting oil and gas through pipelines, water freight, and road and rail vehicles. The process for refining oil and gas, distributing and marketing fuels to consumers is the downstream segment.
Despite struggles within the supply chain industry, crude oil and natural gas are very important to global markets. Not only are these representative of important commodities, but they also have strategic and political significance in many regions. Therefore, oil supply chain must continue to adapt to the modern business landscape.
Companies must do everything possible to maintain a lean and efficient supply chain. With pressures from declining oil and gas reserves, cost overruns on some construction projects every opportunity to reduce costs is consistently assessed. Add to these operational issues the expectation of shareholders to receive profits and the reevaluation of supply chain operations is essential for a competitive edge.
Typically, a revised sourcing strategy can have an effect on supply chain operations that links directly to the bottom line. This may include adopting a different supply chain model. A review of short and long-term forecasts for the price of steel and other commodities might alleviate high prices.
Another factor that may impact whether a company has a lean and efficient supply chain is contractor relationships. The company should get the most out of the relationship to ease operations and for profitability. Some things to consider include developing a strategic alliance with another company and improving transportation strategies.
There are also advanced tools and technologies that the company could adopt for efficiency. For example, e-procurement systems can be used to purchase supplies online. The right system can connect the company to suppliers through each procurement phase to streamline the process.
Taking advantage of asset based lending can ease burdens for a cash strapped company. Generally, this type of financing can help the company maximize its borrowing capacity. Expensive equipment connected to the oil and gas supply chain industry can be used as collateral while the company implements its revised sourcing strategy.
Supply chain efficiency is also fueled by transportation and logistics solutions. High freight costs can quickly diminish profit margins in this industry. Whether the company is a distributor, refiner, marketer or manufacturer of petroleum, structural changes can impact the fuel landscape.
Growing demand in developing nations and new regulations in developed ones converge to create unprecedented volatility. Pressures on profit margins and budgets demand efficient strategies through each phase of the supply chain. Financing these operations is one tool that a supply chain company can use to achieve better efficiencies.
In general, the modern landscape of global operations and sourcing has changed business processes. Many companies have managed to increase cost savings by using these methods. However, benefits can erode quickly when challenges to managing global logistics arise. Even as information technology has flattened the world, supply chains still have a three-dimensional construct.
So, even when the company manages to reduce costs through global operations and sourcing, costs for transportation and logistics continue to rise. Fluctuating fuel prices increase as a percentage of the cost of goods sold budget item. Attached are the inherent costs for the long haul flow of goods and imbalances associated with ongoing transportation capacity. Additionally, increasing costs are not only limited to supply chain logistics across oceans, but also localized regions.
Accounts receivable financing is a helpful resource to access cash when needed. Daily expenses cannot wait until an invoice is paid. Since companies that service the oil and gas industry operate with long collection periods, borrowing on receivables turns a tangible asset into cash.
Invoice factoring also works for value chain opportunities in the oil and gas industry. Raw materials mark the beginning of the supply chain model. Purchases of drilling equipment, specialized tools, copper and steel are essential to delivering service to oil and gas companies.
Construction of drilling rigs, off-shore platforms and other facilities continue the chain that extends to production and refinement of these resources. Finally, oil and gas are transported for human consumption.
Along the way, the company involved in the supply chain process must look for solutions to improve revenues, costs and profits. As with fuel efficiency solutions, financing receivables is also a good way to have the working capital required for value chain opportunities. Whether the company needs to purchase field equipment, drill rigs, pipes, production tools or drilling fluids, an invoice factoring company can help.
Supply chain logistics for oil and gas remains a crucial element for the industry. Creating an efficient system for moving products that people use for daily activities is an ongoing process. For most companies, this requires various levels of improvement before finding the right solution. The process begins within the company and extends outward through developing trusting relationships.
In the mean time, delivery of services often depends on having sufficient resources to maintain the network. Selecting the right financing options for oil supply chain systems will help improve logistics costs and customer satisfaction