Supply Chain Transformation in the Oil and Energy Industry

There is a lot of discussion today about supply chain transformation, most of it focused on the consumer goods and retail industries, but there are many challenges and opportunities in the Oil and Energy industry too. It’s an industry that has a major impact on the world economy and on our personal lives. What are some of the key trends impacting the Oil and Energy (O&E) industry? Where are most companies in this industry today on their digital transformation journey? How can they move up the maturity curve and leverage logistics partners to achieve their objectives?

Those are the main questions I discussed with Francois Xavier Lanne, Director Global Business Development, and David Marshall, Global Account Manager, at GEODIS, in a recent episode of Talking Logistics.

Oil & Energy Trends

When most of us think about the oil and energy sector, we’re more likely to think about the price of the gasoline we put in our cars than the supply chain that gets it there. To level-set the conversation, therefore, I asked Francois to describe the current supply chain trends and challenges in the industry.

Francois says to understand the current issues you have to go back to the late ‘90s and early 2000s when oil and energy companies moved toward “uncontrolled outsourcing” of their supply chains with multiple 3PLs across Asia, Europe and the US. “This made their supply chains very complex, with loss of control over functions such as transportation planning and execution, track and trace, financial reporting, and other functions. On the IT side, there was a loss of control over data access and availability. This led to inconsistent service, poor cost predictability, and lack of visibility.”

David adds that whether it’s offshore drilling or oil shale production, companies just accepted that these were all in remote sites and transportation would be unpredictable. But now companies are realizing they need predictability to improve supply chain efficiency.

Digital Transformation in O&E

Many companies today, especially in retail and CPG, are looking to digital transformation as a way to reshape their supply chain operations for greater efficiency and customer service. I asked Francois where companies in the oil and energy industry are on this journey.

Francois notes that O&E companies are behind others in digitizing their supply chains, even though they are very advanced in digitizing other aspects of their business such as engineering for oil exploration. “They are behind because they have a lack of visibility and data monitoring, and because even though they have a lot of data, it is disseminated across their complex partner network,” he says. “So there is a lack of unified planning. They have not yet dealt with the data complexity issues.”

David points out that a big issue is the lack of data connectivity. “The data is there, but it’s in different formats and locations. It has never been a focus. It has to be focus now, however, to catch up with other industries.”

Moving Up the Maturity Curve

According to Francois, before companies look at a digital transformation of their supply chains, they must first consider their overall business strategy and transformation roadmap to determine if supply chain is strategic and a core competency. “If it is strategic, but not a core competency, they can’t simply outsource everything without control. Companies want safe, reliable, scalable global solutions. They want commercial models with their suppliers that incorporate continuous learning and improvement. They want clear alignment on the process plan, the people plan, the skills plan, the methodologies plan and the IT plan. Digital transformation should be part of this overall plan.”

David recommends that companies consider two steps. “First, they need to do a deep dive to identify their overall business strategy and what the business wants, and how digital transformation will impact that. But they need to go in with an agile mindset because what they understand today may be very different than what they discover during the deep dive or what they may need tomorrow.”

Leveraging Partners

Given the complexity of their supply chains and the many variables of digital transformation, I asked Francois and David how oil and energy companies can leverage partners to help them to create the necessary framework and plans to proceed on this important journey.

Francois provided five different partnering models and the benefits of each, while David discussed vested partnering and collaboration. I encourage you to watch the full video for all of their insights and advice on these topics and more. Then post a comment and share your perspective!