The State of the Oil and Gas Supply Chain
Pruks Itchayapruks, a Discovery and Strategy Manager at ExxonMobil, provides his perspective on the state of the end-to-end oil and gas supply chain.
The End-to-End Supply Chain of Companies in the Oil and Gas Industry
The oil and gas industry operates a global supply chain that can be complex, operating in unimaginable geographic and climate conditions worldwide. The industry's primary mission is to ensure that materials, equipment, and products are delivered on time and in full to their destination. The oil and gas industry supply chain generally falls into three segments: upstream, midstream, and downstream. Pruks's experience is in the chemical supply chain, which falls under the downstream segment.
"The key challenge is to ensure that we deliver on time the materials, the equipment, and the products to the destination in full. The key message is on time, in full."
Pruks Itchayapruks -
Discovery and Strategy Manager at ExxonMobil
The Most Common Supply Chain Challenges in the Oil and Gas Industry
The top three most common supply chain challenges that oil and gas industry companies face are resilience, operating costs, and environmental regulations. According to Pruks, companies' first challenge is the ability to manage the unexpected. "All of these are related to the majority of the capacity, whether it's going to be the storage, the terminals, the warehouse, the labor shortage, from the truck drivers or the warehouses, or even the port operators or the congestion in ports around the world. And also the available container and marine freight," he explains. Operating costs have always been a challenge, and companies need to manage these costs to be competitive to remain the supply chain of choice, even for internal customers. Finally, the environmental challenge is where companies need to put their focus on as oil and gas companies consume so much energy and resources like water. They are subject to strict compliance and standards; the challenge is keeping up with the industry and government regulations.
"The ability to manage the unexpected is the first one… And all of these are related to the majority of the capacity…And also the available container as well as marine freight."
Building a Resilient and Robust Supply Chain
Companies can build a resilient and robust supply chain by understanding their capability and weak points. Companies could stress test their supply chain to understand and uncover weak points and identify potential options that they can manage and plan the costs. "Work with the service provider upfront. Prepare what we can. That will be one of the main things that we could do." Another critical factor is having visibility into the supply chain. Companies must know their current situation to predict and respond to unforeseen circumstances. If they don't have visibility, they are left in the dark.
"For you to be robust, you need to understand the situation you have at hand."
Critical Priorities for Supply Chain Leaders in Oil and Gas Industry
According to Pruks, we should take digital transformation seriously. However, even though companies have digitized and transformed significantly, many processes are still paper-based along the value chain, along the process and step they must do. Therefore, companies must work with industry and suppliers to digitize those paper-based processes. Explained Itchayapruks, "Because that's going to be the key enabler for us to be able to collaborate. And that will be the key enabler for us to react to unforeseen circumstances when we need to be right. And that will also be the key enabler for us to improve our data visibility closer to the near real-time if there's such a need for us. So that would be one of the main things that I would think that the Supply Chain Leaders should consider seriously."
“[Digitalizing paper-based processes across the value chain]—that would be one of the main things that I would think that the Supply Chain Leaders should consider seriously."
1.The most common supply chain challenges companies to face in the oil and gas industry include supply chain resilience, operating costs, and environmental compliance.
2.Companies can build a resilient and robust supply chain by stress-testing their supply chain, identifying weak points, and working with service providers to plan and manage costs.
3.Supply chain leaders should focus on digitizing supply chain processes and improving data visibility in the next three to five years.
Ok! good afternoon, Pruks! Many thanks for taking the time to have the interview recording today. And I hope you're excited for our discussion.
So let's get right into it. If you can start first please by introducing yourself and share what you do. Sure. Happy to be here.
And thank you for the invitation. So my name is Pruks Itchayapruks. I've been - My current role is a discovery and strategy manager for Central Data Office. This is a centralized organization that develops and manages enterprise level data products and also publish data management guidelines and best practices for ExxonMobil Corporation to maximize the value of the data that we possess.
So my scope of work covers several areas and business lines, this including supply chain as well. It has been 18 years since I joined ExxonMobil, where I started in I.T. and spent seven years in chemical supply chain planning, process optimizations, logistic management with working experience in United States, Singapore and Bangkok, spent a few years in chemical business and also back into I.T. into the data space. So that's me in a nutshell. Thank you for sharing.
Still on the topic of your background and experience, right, so what excites you about your current field? What excites me in my current field is that there's so much potential value from the data. It's a huge potential. We need to set a goal and to explore and experiment how we want to tap the invisible value from the data data that we possess.
Right? And we do it all the time. You know, like everybody else, like other companies, we look at data, we collect data, analyze them, and we turn them into those insights that we can action. Right.
What makes it so exciting to me is that we can leverage the artificial intelligence capabilities and to unleash the true potential of the data that we possess. Right. Like many other organizations, we have ambitious goal to implement an AI driven operations, for example, like inventory planning, logistic management based on the AI driven capabilities, signals like demand forecasting or the economics. Right.
There are numbers of opportunity in supply chain that we can leverage these capabilities to extract the full value from the data. And this really excites me in this space. So maybe for
today, let's spend a bit more time to discuss about supply chains and specifically in the oil and gas industry, given your extensive background, 18 years in Exxonmobil. And so maybe to kickstart, if you can help share to us a simple overview of how the end to end supply chain of companies in the oil and gas industry is like please?
Yeah. So the oil and gas industry operates a global supply chain. And some part of it could be a really complex scenario. This includes the transportation, shipping, ordering, inventory management.
Supply chain for the oil and gas usually works in marginable geographic and climate conditions worldwide. Right. So that's also another unique characteristic of the oil and gas industry. The mission for the supply chain, like other companies, is to ensure that we deliver on time the materials, the equipments, the products to the destination in full.
The key message is on time in full, right? Typically, the supply chain for the oil and gas industry is divided into three segments. First, the upstream segment, is the the segment where the normal operation is where we find and produce crude oil and natural gas. Right.
And then the second is the midstream, the segment that we handle and process, store and transport the commodities - the energy commodities, the hydrocarbon product that we've got. And the last segment is the downstream segment. This covers the oil refineries, the chemical plants, the warehouse and terminals. My experience purely is in the chemical supply chain, which is categorized into the downstream segment where we coordinate production schedules.
Just to name a few - develop optimized supply chain networks, manage the demand and supply, optimize inventory, manage logistics which is like the order to delivery process and also be running the customer service operation, which is the order to cash process. So in a nutshell, that would be the end to end supply chain for a typical integrated oil and gas company. Given that oil
and gas is very different from other industries, what might be the most common supply chain related challenges that companies in oil and gas industry face? The challenges have been, shifting its priority here and there.
But the top three that I can think of is the supply chain resilience. It is the ability to effectively manage the unexpected so that we can still deliver on time in full during the unforeseen circumstances. What we have seen in recent few years, like labor shortages, COVID and also the strikes and majority of these are related to the the capacity, whether it's going to be the storage, the terminals, the warehouse, the labor shortage from the truck drivers or the warehouses or even the port operators, all the congestion and in the ports around the world and also the available container as well as marine freight.
So that's going to be the first one, the ability to manage the unexpected. Right. The second is the operating costs, which has always been there. How do we manage our operating cost to be competitive so that we can still maintain supply and be the supply chain of choice, even for internal customers?
Right. Last but not least, this is where we have to put our focus on which is the environmental. Oil and gas companies oftentimes consume so much energy and resources like water. We are subject to strict compliances and standards.
So the other one is the industry and government regulations. That's the challenge that we need to keep up, because now, there's a lot more focus in this area. Now we discussed about the most common supply chain challenges and I think you've already alluded to it, which is companies need to be able to have a resilient and robust supply chain to be able to manage uncertainties. And so how
do you think, companies in oil and gas can be able to build a resilient and robust supply chain in their organizations?
Yeah, we learned the hard way even before COVID. How do we kind of have to react on the unexpected circumstances? And I think one of the things that we can do to build that resilient and that robust supply chain is to understand our capability and understand the weak points that we have. One of the things that we could do is stress test your supply chain to understand and uncover those weak points and identify potential options that we can manage and plan the costs.
Work with a service provider up front to prepare what we can? That would be one of the main things that we could do. One of the important things that we could do, right. The second is having the visibility of your supply chain.
What I've heard recently was like, if you can track it, you can measure it, right. You need to start knowing your current situation so that you can predict and respond to your unforeseen circumstances. And if you don't have the visibility, you are in the dark and that's going to limit a lot of your actions. Right?
You can only guess. So in order for you to be able to be robust, you need to understand the situation that you have at hand and in order for you to understand those weak points, one of the things that you could do is to kind of stress test your supply chain and understand the options that you could do and plan that upfront. Maybe. Let's move now to discuss more about the future, given it's also a new year and companies will also undergo their annual planning process.
And so what do you think
are maybe key priorities that supply chain leaders in oil and gas industry should focus on maybe in the next 3 to 5 years? Yeah, 3 to 5 years to focus. I would say that take digital supply chain seriously. What I mean seriously is because even though we digitize and even though we transform so much but there are so many processes that are still paper based right along the value chain, along the process and stuff that we have to do, We would need to work with industry, work with your suppliers to digitize those paper based process.
Because that's going to be the key enabler for us to be able to collaborate and that's going to be the key enabler for us to be able to react to the unforeseen circumstances when we need it to be. And that's also going to be the key enabler for us to improve our data visibility closer to the near real time if there's such a need for us. So that would be one of the main things that I would think that the supply chain leaders should consider seriously. Right.
Thanks. Thanks, Pruks. Very good insight.
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