Transportation and Logistics Management a Critical Piece of the Oil & Gas Puzzle
The transportation and logistics challenges in the oil and gas industry are formidable. Highly specialized equipment, remote locations, and constantly fluctuating freight costs can have a significant impact on profit margins and present a keen logistics challenge. Whether hauling equipment to job sites or moving freight from one location to another, it is important to maximize supply chain and logistics efficiencies in order to improve your bottom line and enhance profit margins.
In that context, it is essential that industry decision-makers establish a detailed understanding of the challenges, key considerations and potential solutions they are presented with to improve their logistics management—including tips and best practices for creating more efficient logistics processes that help save time and money.
One of the biggest issues (literally) is the sheer size and scale of the highly specialized equipment used to pump oil or extract natural gas. Moving multi-million-pound rigs and pumping equipment safely and efficiently is difficult enough, but doing so in a timely and cost-effective manner is even more challenging. The long list of special considerations that must be taken into account includes things like planning a route that does not go under any bridges or overpasses, and arranging for cherry pickers to raise power lines in order for oversized loads to make it through.
Another unique challenge is the logistical complexity associated with getting equipment and infrastructure to where it needs to be. Unlike more traditional transportation and deliveries in other industries, oil and gas equipment is frequently not being delivered to an address, but instead to a set of GPS coordinates. When there is a crew waiting out at an oil patch somewhere, the meter is running, and timely delivery and geographically accurate precision is critical. This also goes for swing engine replacements, which require immediate repair regardless of where the truck is located. Whatever the crisis, time is money and your logistics provider must be able to deliver.
Additionally, because of the structural dynamics of oil and gas exploration and extraction, there are inevitable spikes in demand. Transportation and logistics planning is far more complicated than if a certain number of widgets were being produced and distributed on a regular weekly schedule.
Partly because of these issues, and partly because of the high cost of the equipment, transportation and logistics is a significant factor on the capital side of the ledger. Oftentimes what is being transported is equipment worth millions of dollars, and the cost of moving that equipment can be tens or even hundreds of thousands of dollars. At the same time, oil and gas companies are operating in an increasingly competitive climate and often do not have the same margins today that they may have had in the past. Consequently, maximizing efficiency and getting the most logistical bang for the buck is more important than ever. It is not surprising that more attention is being paid to transportation and logistics efficiencies, and to the best practices required to attain and sustain those efficiencies.
Because of the enormous logistical challenges associated with the transportation of complicated loads under such unique circumstances, there are significant advantages to utilizing the expertise of a proven third party logistics professional. The right logistics management partner should be flexible enough to respond rapidly to spikes in demand—something that is critical when the size, scale and scope of the volume of work changes rapidly from day to day and week to week. Oil and gas is an international industry, and shipping across political boundaries and geographical obstacles presents a range of hurdles that a transportation logistics partners is well equipped to handle.
The best providers offer perks like comprehensive real-time reporting and operational and administrative support. As part of a customized logistics solution, this can make a meaningful difference to the bottom line, making it possible to transport more material faster, and for less money. Working with transportation and logistics professionals can add a level of sophistication and efficiency to your transportation that is virtually impossible to replicate when firms attempt to manage freight internally. Simply enhancing your transportation and logistics strategic planning and support can reduce your shipping and transportation costs by 30 percent or more.
As oil and gas companies express additional interest in sophisticated logistical tactics, awareness is growing of the importance of getting logistics and transportation experts involved earlier in the process. Planning ahead of time makes it possible to optimize transportation, coordinate and consolidate shipments, streamline logistics and ultimately reduce costs. Planning transportation ahead of time not only allows your Enterprise Resource Planning (ERP) system to become fully integrated with your transportation and logistics partner’s Transportation Management System (TMS), but it allows time and flexibility required to position resources and plan optimum routes. When dealing with such specialized equipment and challenging logistics in unique circumstances, scrambling at the last minute can incur added costs. Simply moving vehicles and support resources to where they need to be on short notice can result in a huge price tag.
Coordinate and Collaborate
Beyond the integration of ERP and TMS systems, oil and gas companies will find that additional elements of coordination and collaboration on the front end can save significant time, money and stress on the back end. Today, the best providers of transportation logistics services go beyond analytics to provide an in-person, on-the-ground perspective. When possible, look for a partner who understands every facet of the business that logistics affect—from the shipping dock to the boardroom. Coordination and collaboration that accounts for your unique operational/logistical details can result in a highly customized transportation and logistics solution that is specifically designed to meet your needs.
Authored by Brandon Stallard, CEO of TPS/Argus Logistics
Brandon oversees TPS/Argus Logistics’ leadership team while maintaining a strategic focus on establishing and maintaining key relationships through the company, community and industry as a whole.
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