Supply Chain Trends

New Solutions for Oil & Gas Markets

Earlier this month, more than 100,000 people attended the Offshore Technology Conference (OTC) 2014 in Houston to explore and share in the latest technology, tools, and solutions for the Oil & Gas (O&G) industry. One of the ongoing themes in O&G is the penetration of high-tech solutions across the array of operations, from surface to downhole and from central offices to remote field locations.

The O&G industry continues to face significant operational challenges to improve exploration and production (E&P) in order to meet the still growing demand for fuel and energy sources. Yet while demand continues to rise—especially with the impending coal retirements in the United States in 2015 due to environmental regulations—companies need to balance tighter margins and the challenges of significantly more complex sites and extraction methods requiring unconventional production solutions. Adding on to the list of challenges facing O&G are the increases in regulatory reporting, more instances of constant operations, and the rising costs due to all of these complexities.

These challenges are being met with the help of various on-board, highly ruggedized electronic components that can withstand extreme temperature, vibration, and pressure and that are able to transmit data for measurement-while-drilling (MWD), logging-while-drilling (LWD), regulatory reporting, and to provide assessment data in real time to monitor tool and part status so that advance alert of tool problems can be addressed before stoppages or unsafe events occur.

Sophisticated O&G tools push component advances not only in design and packaging, but also in signal strength, robustness, power consumption, remote micro-processing, reliability, and failure rate reduction, to name just a few of the necessary capabilities of onboard electronics. While initial tools are well-tested and supported, these tools often must last well beyond many of the individual components' lifecycles. End-of-life (EOL) events and part sourcing can quickly become the Achilles' heel of a highly sophisticated and costly industrial tool. Because O&G tools have a long-standing history of being extremely specialized, the tools may be modified or can be company-unique or site-specific.

Supply Chain Management Essentials

Navigating through challenging geological formations is the core competence of E&P companies and industrial tool manufacturers supporting this sector. Navigating the rapidly-changing, volatile, and complex global electronics supply chain is a very different skillset. Although sourcing a component may seem as simple as a Web search and part number match, the global semiconductor industry presents a labyrinth of challenges and requires its own set of sophisticated, dedicated testing and measurement laboratories to ensure that parts are not only authentic but, particularly when the situation necessitates, are also capable of serving as substitutes for obsolete components that are truly no longer available.

Managing EOL and last-time buy (LTB) situations for electronic components for the tools and equipment is a pressing issue for O&G. Once a tool is developed and in use in E&P, that tool can reasonably be expected to have a lifespan of five to 10 years. That is, unfortunately, a longer lifecycle than that of the majority of the electronic components housed in today's advanced O&G tools. Adding to this challenge, because these tools are truly a niche market, volume production and cost of electronic components can be equally extreme and difficult to source, meaning that dedicated supply chain solutions are critical. 

Supply chain management is critical and so sourcing should really begin early in a tool's lifecycle. Looking forward and having realistic, strategic inventory management solutions prior to LTB or EOL events puts companies in the best position. However, balancing margins and having the warehouse capability to properly store and handle sensitive electronic components is not always a real possibility. To balance both the inevitable future event of needing replacement components that have likely gone EOL, and abiding by increasingly tough margins for holding inventory, many industrial companies are looking at their leading turnkey component partners to provide inventory management and proper warehousing support that ensures smooth, operational continuity while attending to financial margins.

Todd Burke is a senior executive at Smith & Associates where he specializes in major account support and development. With more than 16 years at Smith, his experience also includes serving as general manager in the company’s Guadalajara office and expertise in distributor and OEM sales. Todd holds a B.S. in Industrial Distribution from Texas A&M University and an M.B.A. from Christian Brothers University. 

TAGS: Supply Chain
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