February 2 - A whitepaper from DHL suggests that a lot of companies operating in the energy industry have yet to adapt their supply chains to the exceptionally harsh market conditions the sector faced in 2015, and will continue to do so in 2016.
The new whitepaper looks at both the conventional and renewable energy industry and suggests improving supply chain visibility and efficiency, as well as adopting a new mind-set to share logistics assets and resources across departments and companies.
"2016 is a make-or-break year for the energy sector when it comes to supply chains," said Steve Harley, president, energy sector at DHL Customer Solutions & Innovation.
"Given the market development for oil and gas companies, there is little to no leeway for operational inefficiencies, which could be tolerated before. Invisibility of inventories and utilisation as well as decentralised control systems need to be eradicated - especially in the upstream sector where margins are very tight or non-existent now."
The last two years have brought unprecedented challenges to the energy industry, particularly for oil and gas companies. Prices for both crude oil and liquefied natural gas (LNG) have dropped more than 60 percent since July 2014, said DHL.
Renewables, on the other hand, continue to increase their share in the global energy mix. Last year, renewables contributed to more than half of the additionally installed power generating capacity. Despite the pleasant outlook, however, renewables projects are often still reliant on subsidies harbouring the risk of political changes, suggestsDHL.
"Although the industry faces challenges, there are a lot of opportunities for both conventional and renewables businesses. The survey responses show that there is room for improvement when it comes to efficient, well-organised supply chains," continued Harley.
According to the whitepaper, statements from logistics managers in the oil and gas industry confirm that more than 40 percent believe their organisation lacks supply chain visibility. Only one in twenty managers thinks that their company has full visibility.
The whitepaper suggests a more central approach to logistics coordination supported by global supply chain visibility. This will enable energy companies to reduce overheads and improve materials management by centralising stock, pooling resources and lowering obsolescence, says DHL.
DHL added that it believes sharing facilities and knowledge with competitors will enable the sector to become more efficient.
Historically, explained DHL, the energy industry has struggled to adopt measures such as standardised equipment or shared industry structures. According to the whitepaper, the majority (73 percent) of decision makers think that they should be more open, while only 13 percent are already open to share facilities and knowledge to drive down costs.
Energy companies should also consider learning from businesses in other sectors, with the automotive industry being a specific example for adapting the supply chain to increase operational maturity, concludes DHL.