It’s no secret that the oil and gas industry as a whole faces challenges in efficiently tracking and transferring materials for use in everyday operations. However, with advances in modern technology these processes are undergoing a remarkable transformation. Still, the overall industry tends to be a laggard in terms of how these technologies are actually deployed.
In fact, a recent McKinsey study found that even though the majority of E&Ps are digitalizing their business practices, only 70% have moved beyond the pilot stage.[1] While the reasons for this usually come down to the cost of change management and implementation, the benefits of technology and digitalization are far-reaching and significant.
Back to materials management.
It’s an area that’s both extremely important (as it allows up to keep things up and running), but also a source of significant waste (of both materials and capital assets), including spend leakage. Current innovations in this area mean that inventory management systems provide real-time visibility into inventory levels and their physical and financial locations, connecting the office to the field in ways that were impossible before. These innovations can significantly reduce waste and spend leakage by giving a clearer picture of the location (both physical and financial) and condition of inventory.
As you can tell, we’re big on technology and its impact on inventory trackability and visibility. Let’s take a look at the latest innovations making impacts in the industry, and then we’ll turn to a relative newcomer to the stage, OpenMaterials, which provides holistic materials management catered to the specific needs of oil and gas.
The Latest Technology and Inventory Management
With the advent of technology-driven inventory tracking solutions, the industry has seen a significant transformation in how it uses and deploys technology. These new technological solutions leverage a range of tools and approaches to increase efficiency and give better visibility into inventory management, including:
- Internet of Things (IoT): IoT devices, such as sensors and smart meters, are being used to monitor and track inventory levels in real time. This allows for more accurate forecasting, reduces the risk of overstocking or understocking, and enables quick response times to any changes in inventory levels.
- Blockchain technology: Blockchain is being used to create a secure and transparent record of inventory transfers. This not only reduces the risk of fraud but also improves the efficiency of transactions by eliminating the need for intermediaries.
- Artificial intelligence (AI) and machine learning (ML): AI and ML are being used to analyze inventory data and predict future trends. This helps in making informed decisions about when to buy, sell or hold inventory.
OpenMaterials: Enhancing Accuracy and Visibility in Materials Management
As we mentioned before, accurate materials management is crucial in the oil and gas industry. With large quantities of materials and equipment involved, any discrepancies or errors in inventory tracking can have significant financial implications. But often materials management processes used by oil and gas producers are fragmented and reliant on multiple systems and processes used to order, track and move inventory between locations.
Supply chain, AP and field operations may employ a mix of emails, texts, phone calls – and even paper forms – to get needed materials out to the field to keep production running smoothly. While this might “get the job done” at the time, it also creates serious efficiency issues that stem from manual data entry and validation, incorrect asset valuation and “hazy” visibility of materials that lead to inconsistencies between the physical location of items and their financial coding.
One of the newest solutions to hit the market that uses cloud-based automation to address these challenges is our own OpenMaterials. It allows you to track the physical and financial location of materials and equipment that are received and held in inventory in warehouses, or at field locations. Check out a walkthrough of OpenMaterials from our latest EVOLVE conference here.
Whether you manage ordering using an existing ERP, have defined workflows for ordering into multiple sublocations, or order directly into inventory using phone calls, emails, or Excel, OpenMaterials can accommodate your existing ordering workflow. With automated compliance checks and orders linked to project coding and cost estimates you can monitor and regulate the purchasing of materials and services up front, giving you flexible spend control and early visibility into accrued spend.
A final note on material transfers.
Once you receive items, OpenMaterials ensures the proper financial and physical tracking of assets as they move from warehouse to well site and anywhere in between. In a nutshell, it helps ensure that necessary materials are always on hand for field crews by shining a light on available inventory and in-use items and automates back-office accounting processes for digital material transfers created by field staff.
Interested in learning more about how OpenMaterials can optimize how you manage your inventory? Fill out the form below for a live demo.
[1] McKinsey, 2022. Harnessing Volatility: Technology Transformation in Oil and Gas. Accessible at: Technology transformation for oil and gas companies | McKinsey
