i On the Market: Refining the Supply Chain

The oil and gas industry is more than valves and tankers. It's a world unto itself, with facets as dirty as well shafts and as high-tech as interconnected worldwide operations. With newly greased wheels, it's also a world that is picking up speed toward...



Kendra Martin, chief information officer for the American Petroleum Institute, agrees with Eriksen's views on collaboration, but she goes on to point out that when dealing with the ultra-long supply chain of oil and gas, technological borders are just as intimidating as physical borders. While a corporate office in America might have as many T1 connections as it does M&M's in the break room, that's probably not the case with the field offices out breathing dust and slogging through swamps. She says, Where we like to take every opportunity to avail ourselves of knowledge management systems and collaborative design tools, we have to make sure that the lowest common denominator includes the ability to use a Blackberry in South America, or a handheld, or portable telecom ability.


A Drill Bit and a Mouse


Martin goes on to say that, despite the down and dirty image oil and gas might have, the people in the field have been more receptive to e-commerce activities than workers in other industries. The reason for this acceptance is that underneath the grimy image lies a very high-tech industry. Steel pumps, pipes and tankers might do the physical moving of oil, but it's computers and electrons that manage the oil, a fact that explains the seemingly contradictory high-tech underpinnings of the oil and gas industry. Martin  explains, The guys sitting on a platform in deep water are also using a lot of tools to communicate back to headquarters or with their geologists or their businesspeople. So there's a lot more acceptance in a field environment in our industry than maybe in others because they are used to, and can see the value of, some of the cost efficiencies and time resources they can save with this stuff.


Eriksen gives an example of one way companies can benefit from enabling their supply chain. He says that technology from such companies as Manugistics and Aspen Technology forecast demand and better execute deliveries to retail outlets. If a service station is well-stocked with premium but low on regular, that data can be relayed to a facility that then trucks only regular to that particular station. As you can imagine, managing these needs is an incredibly complicated task. Eriksen says, The product leaves the refinery, generally by pipeline to a terminal. From the terminal, individual trucks come and lift' that fuel, which then is delivered to various retail outlets.


According to Eriksen, it's in the lifting stage that optimization tools can be very effective. In most cases, you don't have very good information on real-time demand at the pump, because even though the demand for fuel is relatively inelastic and doesn't change much with economic conditions it changes with the seasons, but that's fairly predictable what does change is the individual demand at any specific pump, any specific station. That's where it gets complicated. How do you manage that efficiently? It can be a nightmare.


What Can You Do For Me?


According to Eriksen, the oil industry's adoption of marketplaces has been tempered somewhat by the same concerns as other industries will the marketplace interfere with the relationships companies have with each other, but without adding any value, and will adoption of marketplaces necessitate the duplication of effort? If two companies have a long-standing relationship with each other, and the marketplace is just another communication layer to be dealt with, what's the point? And if there are a number of marketplaces, how does a company know which ones to work with? Eriksen says that Web skittishness has lead one entity, OFS (Oil Field Services) Portal to stress that it is not an exchange. The OFS Portal has gone to great lengths to emphasize that it's not an exchange or a marketplace. They don't plan to host any transactions. It's simply a portal in which they will make available the content of all the members in a standardized form.


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