The oil and gas supply chain is an irreplaceable part of people’s lives: it warms houses and offices, fuels vehicles, and makes the world go around. Unlike any other industry, oil and gas logistics is incredibly complex.
How do the oil and gas logistics work?
Supplying every operation with heavy equipment, rigs, pipes, and hazardous materials requires extreme organization and strategy. Transporting such materials in large volumes demands multiple modes, high capacity, special vehicles, and strict regulatory compliance.
Oil and gas supply chains will not survive delays, disruptions, or poor management. Any mistake or missed deadline can cost a company millions of dollars. As a result, mismanagement of such global processes can cause worldwide issues because the world is highly dependent on energy supplies.
What are the main types of logistics oil, gas, and mining companies outsourcing?
- Transportation operations
- Warehouse management
- Yard and dock management
- Track and trace features
When is the right time for shippers to seek logistics help for mining, oil, and gas operations? Any time! A risk-free way to discover the potential of a third-party logistics (3PL) partner is to receive a logistics opportunity assessment from PLS Logistics Services. During this process, shippers will provide data on freight volume, current rates, shipping locations, and other information for evaluation.
Read this case study on how a mining and exploration company grew its supply chain visibility through a 3PL partnership with PLS Logistics.
How do companies struggle with oil and gas logistics?
Logistics Costs Rise
New exploration sites tend to be in remote locations with no transportation infrastructure, with great distance between the exploration site, suppliers, and refineries. Transportation to and from remote areas results in higher costs and longer delivery times. In addition, oil and gas logistics typically require bulk equipment and a comprehensive safety policy— any shipping disruption results in a significant loss for an industrial company.
Inventory Surplus
Oil, gas, and mining companies usually hold too much inventory due to inefficient inventory management and unreliable delivery from suppliers.
Unreliable Service
With no long-term partnership implemented, industrial shippers can experience inconsistent freight service during individual moves. As a result, it becomes hard to plan shipments, which leads to supply chain disorganization.
Lack of Visibility
Not all companies are ready to invest in a costly transportation management system, but they also experience less visibility and control without one; poor visibility results in inventory surplus or shortage, decentralized decisions, and an inability to control freight movement.
Expedited Shipping
Inconsistent transportation schedules make supply chains vulnerable to disruption. As a result, shippers are often forced to use expedited delivery, which increases freight costs.
Lack of time
Oil, gas, and mining companies find it difficult to concentrate on business development because more time and effort are spent on logistics operations management and resolving numerous transportation challenges.
Oil and Gas Logistics Solutions
Handling logistics for oil and gas companies by yourself is an expensive and inefficient approach, which often lacks visibility. In addition, since transportation is a large branch of the energy business, it requires tons of time, effort, and responsibility.
Just one rig site may involve equipment from 80 different carriers. Also, most drilling sites are in inaccessible areas, so it is hard to imagine the volume of responsibility and costs involved in the process. Here are some strategies that will help optimize your business.
Analyze Processes
The first step in solving a problem is to define it. Run through your operations and use an expert to help detect where you could reduce costs, eliminate waste, and increase productivity. Further investigation will give you a clear picture of your company’s current situation, letting you make profitable decisions.
Many oil and gas companies are afraid to outsource their freight management and expand their carrier network due to the complexity of building trusted relationships. However, stretching your carrier base can significantly benefit your business. Outsourcing with a reliable logistics company can also help increase efficiency if your old carrier relationship lacks trust or suffers from disruptions.
Use Advanced Technologies
Staying up to date with new technological innovations is essential for the progress of the oil and gas supply chain. An example of supply chain technology is a transportation management system (TMS). A TMS is an online system for companies to use for data storage and analysis.
A TMS saves companies time and money and increases visibility in the supply chain process. A robust TMS lets you see details and get insights into any part of the transportation process. As a result, it is an excellent solution for oil and gas companies to manage their shipments and move essential loads from one location to the next.
“If an oil rig goes down due to not having the proper materials in place, it can mean the loss of $1 million every day,” says Brian Murphy, director of business development in Menlo Worldwide Logistics, in his interview with Inbound Logistics. Expert logistics providers can effectively help manage such complex supply chains to avoid disruptions.
Remain Flexible
Due to constant changes in the transportation and logistics industry, it is even more important to be up to date with shifts and adjustments during energy service shipments. The energy services industry is fast-paced and constantly experiences new shipment modifications. Multiple processes mean lots of data that must be stored and systematized efficiently. In addition, government regulations, including import/export laws, drilling policies, and environmental regulations, are vital to track so that renewing offers for your customers keeps their shipments arriving on time.
Use Effective Communication
For years, most oil and gas companies tended to work with the same narrow circle of carriers. However, the industry is expanding, with many new drilling and mining locations. Considering the monstrous size of the energy sector, a single shipping operation may involve around a hundred trucks and combinations with another transportation mode.
Constantly communicating with an enormous number of carriers on your own can take a lot of personal resources. If you feel overwhelmed by the logistics of your business, partnering with a reliable 3PL can help. A good 3PL will not only manage your freight but will also take the hassle of communication and tracking by providing freight brokerage and track & trace services.
Getting feedback from your customers, suppliers, and business partners will help you understand which parts of your operations are working well and which ones are going poorly. Be as transparent as possible on your shipments needs to ensure all parties involved understand goals clearly and work towards reaching them.
Safety
Safety is a top priority for the oil and gas sector due to its specific nature. Cutting costs on safety compliance is unacceptable, and 3PLs consider this factor while managing your supply chain. Logistics experts will assist with regulatory compliance and ensure that transportation runs smoothly.
Technology and Visibility
Due to its complexity and time sensitivity, oil and gas logistics operations require increased visibility. In addition, multiple processes mean lots of data that must be stored and systematized efficiently— 3PLs leverage advanced transportation management systems, which give complete visibility into the supply chain and reports.
Read Transportation Management in the Oil & Gas Industry
Why outsource Oil and Gas logistics services to 3PL?
Finding the correct transportation mode and providing the necessary equipment is crucial for on-time delivery. 3PLs partner with a wide range of experienced carriers and have various options to offer for your shipping needs. Flatbed trucking, casing, and tubing deliveries, rig site delivery, combining transportation modes, warehousing, freight management, and hotshot services – all these options fall under 3PLs expertise.
Many companies apply customized shipping solutions to their supply chains by outsourcing logistics operations to third-party logistics providers. When choosing a 3PL for oil and gas logistics solutions, consider the experience they have in your sector. While technology and a diverse range of carriers are essential, understanding the specifics of oil and gas industry challenges will help you succeed. PLS Logistics can help you fulfill your specific requirements and resolve your challenges.
Learn more about PLS’ Oil and Gas logistics services and get a free logistics opportunity assessment today!
Whitepaper download: Freight Transportation in the Oil & Gas Industry: Five Mistakes that Cripple Profitability
