Impact of Supply Chain Analytics in the Oil & Gas Industry
The entire globe has seen a major shift with the advent of digital offerings. Just like every other industry, the oil and gas arena has also seen a complete overhaul because of digitization. We’re all aware that the oil and gas sector activities are divided into three sections:
- Upstream: Exploration and Production
- Midstream: Transportation and Processing
- Downstream: Distribution and Sales
All three segmentations must work in harmony to ensure efficient utilization of resources and optimum profits. This is where supply chain analytics solutions come in the picture. Unlike other offerings aimed at the industry, supply chain analytics focuses on all three segments simultaneously.
With our experience spanning decades and F500 clients, we’ve learned some things about the oil and gas industry. Our supply chain analytics solutions have helped our client implement superior visibility into their entire process – ranging from production to distribution.
Did you know that the oil and gas players need to invest $500 billion every year just to keep up with the demand?
With such a huge number, all players in the industry need to leverage every advantage they can get to reduce operations costs and stay ahead of the competition. Also, with the increase in dependence on alternate sources of energy, the industry has seen drastic changes. Unlike other industries, the oil and gas sector require prolonged and sustained investments to realize a steady supply chain albeit rife with complexities.
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Due to the complexities involved in the industry, there is a requirement for a plethora of strategies to handle the huge amount of data generated, optimizing inventory, and minimizing machinery downtime. We’ve already mentioned the three segments in the industry, here’s how Quantzig helps you tackle all three: superior insights for the upstream segment, supply chain analytics for the midstream segment, and marketing analytics solutions for the downstream segment.
And like every other industry, the oil and gas sector is also rife with its own challenges, ranging from upstream volatility, midstream constraints, and complex consumer demands. Players in the industry are also looking at demand forecasting to work according to national energy security and economic development. With the pandemic in the rearview, the industry is still reeling back from the reduction in energy consumption, price fluctuations it resulted in. Hence, organizations need accurate prediction of demand and consumption to ensure superior profits while meeting the demands of the consumers effectively.
Challenges Faced by Oil and Gas Client
As mentioned above, the oil and gas industry struggles with its own set of complex challenges, ranging from upstream volatility, midstream constraints, shifting consumer demands, and industry consolidation. With the rapid digitization and the pandemic, it has become imperative for the industry to embrace analytics solutions, especially supply chain analytics.
Despite being a leading oil and gas player based out of Europe, the client was struggling with its delivery cycle planning on top of its supply chain challenges. Due to a limited in-house team, both in terms of experience and numbers, the client was unable to utilize the huge amount of data being generated at its facilities. Without utilizing this data, and with a traditional supply chain solution, the client was unable to keep up with the market demand due to various operational inefficiencies.
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Once the client connected with us to identify and tackle their supply chain challenges, our research wizards started working on identifying other pain points being faced by the client. Here are the results:
- We deduced that the client was also unable to select suppliers effectively, bringing forth the need to crease a comprehensive method for multi-criteria decision analysis (MCDA) through alternate techniques. The client needed to evaluate various aspects of the supplier selection process.
- Our experts also uncovered that there was a need to analyze supplier risk to mitigate future risks and current risks to enable the organization to anticipate changes even before they occurred. This would help the organization understand and adopt to market demands and supply challenges and develop a scalable manufacturing operation.
- Even though the client had huge sales and inventory data, they were unable to forecast demand. Our experts highlighted the need for demand forecasting to generate actionable insights. Client’s margins were taking a hit due to overstocking or understocking of the inventory due to the absence of an accurate forecasting model.
- The unavailability of a forecasting model also meant two other things: inability to meet demands due to understocking and inventory holding costs in the event of overstocking. This ultimately led to both reduced margins and high customer dissatisfaction levels.
- The client was also finding it difficult to find new locations for drilling. Due to no insights about new drilling location, the client was incurring major exploration and drilling costs, unexpected equipment downtime, handling huge amount of data, and managing oil and gas pipeline networks.
- Once these challenges were dealt with, the client also wanted to examine the different life cycle delivery stages. Broadly segregated into five categories – exploration, appraisal, development, production, and abandonment, the client wanted to develop:
- Feasibility Study
- Concept Development
- Front-End Engineering and Design (FEED)
- Detailed Engineering and Procurement
- Fabrication and Construction
- Pre-Commissioning and Commissioning
In a nutshell, the client wanted to identify and tackle these challenges:
- Abundance of unstructured data, inability to convert it into structured data
- Stagnated and crippled supplier base
- Rising operational costs resulting in declining profits
- Understocking or overstocking through the supply chain
- Lack of flow and visibility into the supply chain
- Retain and onboard talent in the workforce
- Assess the changing oil & gas demand and consumer preference
- Inability to eliminate unnecessary delays
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Revolutionary Supply Chain Analytics Solutions for the Oil and Gas Player
Once the challenges were uncovered by our research experts, then came the task of the data experts to find the relevant solutions and help the client catapult themselves ahead of the competition.
- Starting with the basic requirements of the client, the Quantzig team started by developing a data-driven supply chain analytics framework to help the client streamline and effectively optimize every stage of the customers’ delivery process. With the key focus being finding new drilling locations, the client realized a superior field life cycle and ultimately saw a smoother delivery process.
- Our solutions not only helped the client realize a smoother delivery process, rather our solutions eventually led to exact supply forecasts through the integration of several analytics techniques, resulting in fewer stock outs. Our experts didn’t stop the process there, and implemented an IoT-enabled supply chain so that the client could receive real-time data throughout the process.
- With the implementation of the IoT-enabled process, the client was able to achieve vertical integration across all the processes – from drilling to delivery. However, this led to another issue, the creation of enormous duplicate data being generated through the process. Through our state-of-the-art advanced analytics, our teams implemented superior techniques to filter the data and make informed decisions.
- Once the production was handled with, our data experts moved over to pricing analytics to help the client effectively extract patterns and trends in customer behavior to help forecast oil prices. Not only with price, but our solutions also helped the client forecast the customer demand, product flow, and price as well to optimize profits. On top of this, we implemented AI & ML-led risk management tools to help manage volatility. Through the aforementioned tool, the client saw benefits, such as:
- Effectively evaluate profit contribution by division
- Maximize returns through price optimization
- Optimized daily replenishment
- Discover hidden profitable channels
- Our experts implemented multi-criteria decision-making (MCDM) techniques to highlight the high-value suppliers for the client. After going through the list of suppliers for the clients, the technique decides the suitable supplier based on the client’s vertical, application, and regional focus. Through the process, the client was able to derive actionable insights on the performance of suppliers and their impact on process development.
- After the completion of the MCDM techniques, we developed a superior forecasting model for the client to extract reliable data to characterize inventories, promotions, sales, and much more. Through advanced analytics solutions, this data helped the client forecast demand on a weekly and monthly basis for the client’s products. Through feature selection and model analysis, the client was able to leverage a set of time series models created through the trends and uncertainties of all the sales demand.
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Impact Analysis of Supply Chain Analytics For Oil & Gas Client
According to latest data, the upcoming digitization efforts and technological advancements have reduced the oil and gas delivery costs. Why can’t organizations implement analytics solutions to mitigate the risks and improve revenue for all the remaining segments in the oil and gas industry?
Our offerings not only allowed the client to lower their extraction costs by highlighting the optimal location for drilling, it also helped the client replenish their oil reserves and effectively increase profits. This brought scalability for the client, allowing them to anticipate downtimes and surges, thus giving them the capability to stock the products or reduce production according to the market conditions.
Here are the takeaways of how we helped the client:
- Identifying location of oil-rich reservoirs
- Eliminate bottlenecks throughout the entire process
- 16% increase in revenue
- 11% reduction in operations costs
- 24% reduction in unfulfilled orders
- Improved the accuracy of demand forecasting by up to 85%