WHAT IS THE DEVELOPMENT LEVEL OF THE O&G SUPPLY CHAIN ​​IN BRAZIL? FOCUS ON OFFSHORE LOGISTICS

By Marcus Vinicius Esperian D'Elia and Mayara Gabi Barrionuevo

The Offshore support logistics chain is responsible for ensuring the availability of materials at the offshore units, without damage, in compliance with the stipulated deadlines, with the proper documentation and at the best cost, so that the main process of oil exploration and production can proceed without interruption. interruptions.

Given the current scenario of increased oil exploration and production activities, it is expected that there will be a relevant growth in demand for Offshore cargo. Thus, it is essential that the logistics chain is structured efficiently, so that a high level of service can be offered to the maritime units with the optimal use of the assets needed in this operation.

In order for this objective to be met, the Offshore support logistics chain was analyzed in detail, in order to understand how the logistics processes are structured, and how the interface between the companies involved occurs. The analysis addressed three distinct aspects: processes, technology and people. For each of the aspects, opportunities for development in the chain were pointed out.

 

Introduction

Since the 1990s, there has been a rapid growth in the demand for materials supplied by the Offshore support chain. In numbers, it is estimated a growth of approximately 35% (in tons), in the period from 2010 to 2015, as shown in the graph (Figure 1). Movements of general cargo, fluids and bulk, diesel and water were considered.

As a result, the network of suppliers that supports this operation has developed through market growth and without a medium-term vision. Many operations started with contracts of 3 to 5 years, and were always structured timidly, given the absence of market studies that supported medium and long-term investments. Currently, there are around 700 companies operating in this market, considering the supply of materials and services, and which have different degrees of development. That is, there is no uniformity in logistics operation practices among companies in this chain.

Figure 1 - Offshore cargo demand growth estimate
Source: ILOS

 

In 2013, ILOS carried out a study on Offshore support logistics, based on its operations in the market, in order to identify the critical points of this chain, focusing on: processes, technology and people. From these analyses, which will be presented throughout the article, it is possible to qualitatively assess the level of maturity of the logistics chain. The results of the study indicated the actions to be applied on this chain so that the performance objectives were achieved, namely: high level of service, reduction of operating costs and high occupancy of maritime assets.

To complement the study carried out, it is also intended to present a survey with companies operating in the Offshore support chain in order to assess their degree of development, according to the criteria:

1. Transport management
2. Inventory management
3. storage management
4. Purchasing and supply management
5. Logistics Operators
6. Information technology
7. Logistics Organization

With this research it will be possible to quantify the degree of development of the Offshore support chain in each of the listed criteria, and compare the results obtained with the qualitative study presented in this article.

 

3- The Offshore Logistics Chain

In the study carried out by ILOS, the Offshore support chain was defined according to the following structure: suppliers (on more than one level), Offshore bases, maritime terminals and maritime units (production or exploration units). The purpose of the Offshore support chain studied is the reliable and regular supply of materials to the offshore units.

In this defined structure, suppliers represent the supply of both materials and services. Offshore bases include customer bases and supplier bases (“first tier”). The maritime terminals studied are markedly exclusive for Offshore cargo, without sharing berths with other types of operations.

Figure 2 – Offshore Support Logistics Chain

 

The Offshore logistics chain is expected to reach a high level of performance, that is, it requires the delivery of the desired quantity and variety of products, in the correct place, on time, without damage and correctly documented. This demand for a high level of service is a consequence of the impacts that failures in the logistical process can have on the system, such as, for example, production stoppages and delays in drilling schedules, raising the costs of critical exploration and production activities.

Therefore, two important concepts must be present along this chain: integration and synchronism.

• Integration will sustain efficiency in the supply chain, reducing gaps between internal processes and improving interfaces between companies.
• Synchronism can be represented as the ability to maintain order and discipline in the supply chain, allowing the constant flow of material to its destination.

The two concepts must be applied simultaneously in the Offshore support chain. The need for integration can be clearly seen in the management of the flow of information that crosses the chain, originating in the maritime units and continuing to the suppliers of materials and services. If this flow takes place in an orderly manner, the requests for materials will trigger the logistical processes along the chain, synchronizing the agents present, in order to move the materials to the maritime units (clients) within the requested period.

 

Offshore Logistics Chain Analysis

To assess the maturity of the Offshore support logistics chain in meeting the required service level, the logistics performance was studied based on three main components: processes, technology and people.

Processes

For a structured analysis of the logistics processes involved in the chain, ILOS used the methodology proposed by Paulo Mendes Jr in his book “Demand Driven Supply Chain: A Structured and Practical Roadmap to Increase Profitability”, from 2011. framework Based on the established basis, it was possible to identify the expected logistical processes in the Offshore support chain. Subsequently, it would be possible to make a comparison between the expected logistical processes, and the way the chain is currently structured and works, in order to identify the gaps logistics.

According to Mendes (2011), several companies have implemented forecasting tools and processes to improve demand planning performance. However, these initiatives were not enough to eliminate out-of-stock problems or improve supply chain performance. This is justified by a mismatch between supply and demand, low accuracy in forecasting demand, high variability in demand, among other factors. With this low accuracy of demand forecasting and/or its high variability, companies often have to increase their safety stock levels or transfer products from one warehouse to another in order to maintain the required service level. However, these practices directly affect operational efficiency and increase supply chain costs.

To better deal with demand management, Mendes (2011) points out that many companies are trying to move from a “Push” chain strategy (where production and distribution are based only on forecasts), to a “Pulled” system (the which is based on actual customer demand) in order to improve the balance between supply availability and customer demand, providing the expected customer service level, while achieving the required supply chain efficiency.

The “Push” supply chain strategy is generally suggested for products with little uncertainty in demand, as the forecast will provide good guidance on what to produce and keep in stock, and also for products that place great importance on economies of scale in downsizing. of costs. The "Pull" supply chain strategy is generally suggested for products with high demand uncertainty and low importance in economies of scale, which indicates that aggregation does not reduce cost and, therefore, the company would be willing to manage the chain supply based on actual demand.

Lastly, the “Hybrid” (Push-Pull) supply chain strategy is generally suggested for those products where demand uncertainty is high, while economies of scale are important to reduce production and/or delivery costs. . It is important in this approach to define where to locate the Push-Pull boundary in the supply chain. Harrison (2003) apoud Mendes (2011) states that the “Pushed” strategy is applied in the part of the supply chain where the demand uncertainty is relatively small, and, thus, the management of this part based on long-term forecasts is appropriate. On the other hand, the “Pull” strategy is applied to the portion of the supply chain where uncertainty is high, and therefore it is important to manage this portion based on actual demand.

Mendes (2011) states that supply chains must be able to respond dynamically to information. As demand information can be transmitted with speed throughout the supply chain, customers and suppliers must be better equipped to collaborate to provide appropriate responses in real time. A Demand Driven Supply Chain it is a highly dynamic supply chain, in which all participants are interested in responding to consumer demand information and meeting demand in real time.

Figure 3 – Framework based on the book “Demand Driven Supply Chain: A Structured and Practical Roadmap to Increase Profitability”

 

Given this scenario, Mendes (2011) identifies and describes the three practical components for evaluating the Demand Driven Supply Chain (DDSC): Demand Management, Supply and Operations Management, and Product Lifecycle Management. And, based on these components, it develops a framework of structured and integrated assessment, which can be used by companies to assess current and desired supply chain statuses, taking into account the concepts of Demand Driven Supply Chain.

Based on these presented concepts, an analysis was made of the main types of products involved in the Offshore logistical support chain, in order to be able to identify the particular characteristics of each of these chains. The objective was to classify which supply chain strategy was indicated for each product category individually.

For this, we categorized the lead time (total time of material flow from the supplier to the customer), the variability of demand, and the relevance of the economy of scale of a given product within its supply chain. Based on these labels, the supply chain for each type of product was classified as “Pulled”, “Pushed” or “Hybrid”, considering the most appropriate strategy for each chain. For the chains classified as “Hybrid”, it was also determined where the “Push-Puxada” border would be located.

Figure 4 - Materials belonging to the Offshore logistics chain

 

Once the strategy that the logistics of each product segment should apply in its supply chain is defined, it is possible to mirror this strategy in the Demand Management, Operations and Supply Management processes, and Product Life Cycle Management, in order to to point out what are the levels of the expected logistic processes, from the framework by Mendes (2011).

In parallel, ILOS analyzed the Offshore support chain, verifying the existing logistic processes, and identified the current strategy adopted for all product segments.

As a result of this comparative analysis between the expected logistical processes and the Offshore operation in Brazil today, the gaps to overcome in the Offshore logistics chain.

With regard to Demand Management, it was identified the need to develop processes that could act on order management for “Pulled” and “Hybrid” chains. These processes must guarantee the flow of orders between the various stages (or agents) of the Offshore support chain, seeking integration and facilitating synchronism. In the study carried out, it was observed the difficulty of companies in maintaining full control of the flow of orders and adequate management of service levels. Typical examples are the flow of consumables and the flow of maintenance materials, which do not have constant demand.

Complementarily, in the case of hybrid chains, the presence of well-defined processes with traditional techniques for forecasting the demand for materials, as in the case of fluids, diesel and chemicals, would allow the achievement of higher service levels and the adequacy of inventories in jail. It is verified in the studies carried out the attempt to simplify the demand forecast, which prevents the achievement of the desired service levels. The focus on implementing demand forecasting processes is a second point to be addressed in Demand Management.

The second component of Demand Driven Supply Chain is Product Lifecycle Management, which deals with the company's product portfolio. When studying the reality of the Offshore support chain, it was deemed more convenient to adapt the analysis of Product Lifecycle Management to an analysis of SKU Management in the Chain (Stock keeping unit), in order to assess how the Portfolio of materials circulating in the chain.

Thus, in this second analysis criterion, the processes associated with the Management of SKUs by the agents present in the chain were evaluated. It is common in the cases studied, the lack of standardization of the materials present in the chain. In addition, the lack of updating of information associated with each SKU and the “duplication” of records in the companies' registers are also constant difficulties. The solution to these points goes through design disciplines (standardization) and well-defined processes for creating and maintaining SKU records. These processes must necessarily involve the participation of related areas such as Purchasing or Engineering in each company.

Also within the SKU's Management vision, the application of inventory policies with clear and periodic procedures for reviewing planning parameters is a necessity for the materials present in the Offshore chain, affecting the “Pulled” and “Hybrid” chains. This point is greatly impacted by the material registration issues pointed out, that is, excess of SKU's to be analyzed in the inventory policy and the non-consolidation of demands, given the duplication of registration. The main indication verified in the cases studied was the presence of a large amount of low-turnover inventory, as well as obsolete items, in the supplier companies.

Figure 5 – Gaps in the logistics processes of the Offshore logistics chain

 

Considering Supply and Operations Management of the Offshore chain as the third analysis criterion, three aspects are markedly less developed in relation to others in the chain: Procurement, Storage and Transport.

No case of Procurement, supplier management is the central point of the analysis. The existence of clear policies applied in the evaluation and continuous development of suppliers would allow not only the increase in the number of participants in the chain, but mainly the improvement of the quality of the materials and services offered. In the current situation, the distance in the relationship between customer/supplier is the determining factor for development cycles to become long.

A second aspect analyzed was the storage standard used in the chain, considering both the standardization of reception, storage and dispatch processes, as well as complementary activities such as inventory and conservation. Given the low turnover of some of the materials stored in this chain, the presence of strong storage procedures is essential to guarantee service levels and reduce losses, especially with regard to the conservation of materials. In the case of non-stock materials, the application of good practices such as cross-docking could be expanded.

In the aspect of transport, fleet scheduling and control processes are still little applied by chain participants, which can mean opportunities for productivity gains in material handling. However, the fact that land transport in the chain is characterized by point-to-point movements can make it difficult to justify the investment in infrastructure for the application of procedures normally used in fleet management in other chains, such as fleet routing and tracking.

 

Tech

The focus of the analyzes of the technology used in the Offshore chain were the systems or software that should be disseminated among companies in order to support and increase their performance. Before specifying the systems, it would be important to present the concept of Process Driven Technology.

O Process Driven Technology deals with the development of flexible solutions to meet the needs of the process from a delimited implementation, with standards for systems and communication in a specific supply chain. As the title itself suggests, the supporting technology is fully based on the process (and not the opposite, as it usually happens, where the process fits the existing technology), so that there are no extra functionalities underutilized, and in a way that does not compromise stages of the process without technological support. In addition, this system must have the necessary standardization to integrate with other software transactional.

Figure 6 – Process Driven Technology

 

Given the particularities of the Offshore support chain, the existing logistics management systems on the market tend to have limitations to cover the chain's scope of activities, requiring a high customization time. In this way, the implementation of these software may be costly and time-consuming and, in some cases, the speed of modifying existing processes may be many times faster than the speed of adapting existing ones. software, making its application in the operation limited or incomplete. The concept of Process Driven Technology seeks to eliminate these difficulties and ensure agility in implementation.

Figure 7 – Application of Process Driven Technology

 

Going deeper into the analysis of the technology present in the Offshore support chain, it is possible to separate the need for systems into two large categories. The first deals with the technologies operating within the company, considered intra-organizational. These are related to gaps of processes described in the previous topic, such as systems that support Demand Management, SKU Management and Supply and Operations Management. These systems are not completely widespread today in the chain, causing the processes to be executed many times manually, becoming susceptible to failures and reducing the performance of the process.

The second category deals with technologies operating in more than one company, allowing the integration of information, in order to improve the management of the logistics chain based on communication between its agents (operators, suppliers of materials and services, carriers, among others). ). These systems aim to ensure communication, as they avoid losses in message transmission, determine the expected frequency of information and standardize the transmitted data. In addition, communication priority is established, as there will be a specific procedure for verifying and processing this information. Finally, it is worth noting that the messages contained in the systems are encrypted, ensuring greater information security.

 

People

In addition to all the investment suggested in improving logistical processes and technological support, it is necessary that the employees involved in the process acquire a new set of skills and knowledge about the activities they will develop. In many cases, the proposed improvements are not commonly used by companies, creating a gap of technical-operational knowledge.

On the other hand, the dissemination among people of the concept of Supply Chain Management will serve as a basis for the proposed improvements to actually be implemented and maintained. O Supply Chain Management proposes collaboration between companies to improve operational efficiency. In this case, operations in the logistics chain require management processes that cross functional areas and connect companies beyond organizational boundaries.

The expectation is that mastering processes and technology in the logistics operation associated with the concept of Supply Chain Management allow people to develop properly to work in the high-performance Offshore support chain. Complete qualification must be provided, in order to prepare them to perform their tasks, as well as to deal with integration in the decision-making process of the logistics chain.

 

Conclusion

The relevance that Offshore support logistics has been taking on in the Oil & Gas segment is increasing, due to the demand for high levels of performance in support activities for the operation of oil exploration and production companies. As it is required to deliver the requested material within the quality standards, within the stipulated period, to the correct destination and with adequate documentation, it is important to have a logistics chain with a high degree of maturity, capable of responding to requests for materials and services. .

Thus, the analysis of the degree of development of the Offshore support logistics chain showed us possible opportunities for improvement in the three evaluated criteria. They are: processes, technology and people.

In processes, it is noticed gaps in logistical processes associated with demand management, SKU management and operations and supply management. In technology, the lack of support systems for the mentioned processes was evaluated, as well as systems that help in the integration and synchronization of the chain, in order to facilitate communication between companies and, consequently, the decision-making process. Finally, there was a need to qualify the human resources working in the Offshore operation in concepts of Supply Chain Management, as well as technical-operational ones, in order to internalize the importance of each activity in the logistics process, and to train employees to deal with the integration of the logistics chain.

Therefore, the oil exploration and production market has offered many opportunities for suppliers of materials and services in the segment, putting them in the face of the challenge of developing the logistics chain to meet the growth in demand with the expected high level of performance.

 

Bibliographic references

• Mendes Jr., P., Demand driven supply chain: A structured and practical roadmap to increase profitability; Berlin. Springer, 2011.
• Yusuf ,YY, et al. , A relational study of supply chain agility , competitiveness and business performance in the oil and gas industry. International Journal of Production Economics, 2012.
• Harrison, Terry P., et al., The practice of supply chain management: where theory and application converge. Boston, Kluwer Academic Pub,
• Mohammadi, M.; Mukhtar, M. Service Process Modeling for Demand-driven Supply ChainBased on SOA. Malaysia, International Journal of Digital Content Technology and its Applications, 2012