CAI Transportation Blog

4 supply chain challenges in the oil and gas industry + how a 3PL can help

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While supply chain management is complex for every company in unique ways, certain industries experience particularly daunting challenges. In the oil and gas industry, the stakes are especially high because of the necessity and sensitive nature of the products being supplied. People all over the world rely on oil and gas products to fuel their cars, heat their homes, cook their food, and perform a myriad of other daily tasks. Energy companies also have the heavy responsibility of ensuring their products are available on demand for industrial and commercial ventures worldwide.

Oil and gas have become among the most prized commodities globally. The ripple effects of missteps in oil and gas supply chains can be significant, with the potential to harm corporate reputations, strain trade relationships, and cause environmental damage. These factors make the oil and gas supply chain even more complex to manage. Let’s take a closer look at some of the unique considerations faced by logistics managers in the energy sector and explore how working with a third-party logistics partner can create a smoother operation.

Scale

In some industries, a fleet of standard trucks and occasional use of rail or ocean freight is sufficient to move products. That is certainly not the case in the energy sector; in fact, the equipment used at drill sites is often so large that only specialized carriers can manage to move it. Inefficiencies at a drill site can result in the potential loss of millions of dollars per day, so it’s crucial for all necessary equipment to be available on time.

Whether a replacement part needs to get somewhere fast, or all necessary equipment needs to be sent to a new drill site, trying to find available and appropriate capacity—occasionally on short notice—can be an exercise in frustration. Working with a third-party logistics partner, particularly one with experience in managing the particular needs of companies in the energy sector, can help ease the stress and frustration that may accompany the search for capacity. Drawing on a network of trusted carriers with varied equipment and capabilities, a 3PL is often able to find a creative and timely solution to meet clients’ particular needs.

Complexity

In order for things to move smoothly in drilling or fracking operations, equipment and other necessary materials (such as the massive quantities of sand and water used in hydraulic fracturing) have to arrive at the drill site in the correct quantities, in the correct sequence, and at exactly the right time. Every hour wasted waiting for these materials represents the loss of massive potential value, so it’s vitally important to have everything lined up and available when it’s needed.

Getting the timing right is a complex undertaking, even for an experienced pro. It involves managing suppliers and carriers on a precise timeline and dealing with countless complicating factors. Partnering with a seasoned 3PL is a great way to offload some of these frustrations, so oil and gas supply chain managers can focus on their own in-house logistics operations instead of scrambling to coordinate with outside groups. Armed with an understanding of your company’s particular needs and time constraints, your logistics partner can find appropriate carriers to get things where they need to be, exactly when they’re needed.

Visibility

Visibility is a pain point for logistics managers in virtually every industry. A more interconnected global supply chain means more potential growth and profit, but also greater risk for late, damaged, or lost shipments. Despite the exciting possibilities presented by new technology, getting and maintaining an idea of where everything is at any given moment is still a challenge.

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Between exploration, production, refining, and distribution, petrochemicals have to be transported multiple times on their path to market, often for long distances. Oil and gas are such valuable commodities, and are important to maintaining friendly diplomatic and trade relationships. That makes it especially crucial for leaders in the energy sector to be able to account for all the product being shipped at all times.

Instead of managing these complex transportation concerns and struggling to maintain visibility entirely in-house, supply chain managers may want to partner with a 3PL to handle all or part of these operations. Whether it’s for particularly complex domestic lanes, or for long international shipments, an innovative logistics partner can find solutions that provide visibility and insights, allowing company leaders in the energy sector to make informed decisions. 

Safety and compliance

Much like the food supply chain, the energy supply chain’s particular transportation equipment needs are governed by safety and compliance concerns. Failure to get oil and gas products to their destination safely can result in more than just lost profitability; it often results in large-scale environmental risk, public relations nightmares, fines, and increased governmental scrutiny.

In some industries, price is the single biggest factor that determines which suppliers, carriers, and distributors a company will choose to work with. While profitability is still an important consideration, energy sector companies often have deeper pockets (and more at risk if something goes wrong). Therefore, these companies are generally willing to pay more to ensure their goods are being transported up to their safety standards.

However, even with these additional resources, sourcing new suppliers with specific qualifications can be time-consuming and costly. Oil and gas companies may find that they don’t have adequate internal staff on hand to qualify carriers and ensure they meet all appropriate safety regulations. This exposes the company to grave risk.

That’s why it’s wise to rely on a trusted logistics partner who is knowledgeable about global safety regulations and best practices; instead of trying to source and build these strategic relationships internally, logistics managers trust that their 3PL has their interests and needs in mind. Outsourcing these tasks to a trustworthy 3PL (whose business depends on the ability to find qualified and appropriate carriers that meet customers’ unique needs) is a great way to reduce risk, protecting your company’s reputation and bottom line.

Get expert help

In these times of tightened capacity, logistics managers in every industry have felt the crunch, while consumers and strategic partners have maintained their high expectations. The combination of these conflicting factors has required supply chain leaders in every sector to look for innovative solutions to their transportation and warehousing needs.

However, in the energy sector, the stakes are often significantly higher. Oil and gas products fuel so many aspects of modern life, including the supply chains that carry every other consumer good. Because of the reduced capacity that’s currently affecting the entire global supply chain, logistics managers in energy companies may find themselves in the frustrating position of not being able to source adequate and appropriate equipment on short timelines.

Relying on an experienced, agile third-party logistics partner to manage all or part of these operations is a great way to ensure that transportation needs will be met, on time and up to standards. At CAI, we draw on our broad global network of trustworthy carriers to meet the transportation needs of our customers in virtually every industry. If your company is finding any aspect of your supply chain particularly frustrating to manage, we’d love to talk to you about how we can find solutions that meet your budget, timeline, and safety standards. Contact us today to learn more.