Driving forces accelerating recovery and shaping the future of energy and resources logistics
Logistics and supply chain activities in the upstream energy and resources industry are slowly recovering. Yet, the pandemic revealed just how much the industry needs to transform, both in terms of technology and working practices.
Building on our roadmap to Covid-19 recovery, let´s explore what has changed in our industry and how the driving forces behind those changes can accelerate recovery and build resilience for the future.
How the pandemic reshaped energy and resources logistics
While the pandemic accelerated transformation on many fronts, five stand out for logistics and supply chain in the upstream energy and resources sector:
Agility: Amid global restrictions, Logistics Managers quickly adapted processes and established agile, cross-functional teams to continue the flow of critical workforce and cargo supplies to far-off work sites.
Self-service and handheld technologies: Self-service, touchless, and mobile technology deployments sky-rocketed. Downloads of iLogistics Go, our workforce self-service travel app, increased tenfold this year.
Cargo transportation by drones: Beyond the virtual monitoring, inspection, and surveillance of operations, drone services were deployed for the safe, efficient, and cost-effective last-mile deliveries.
Collaboration and strategic partnerships: New technologies, collaborative ecosystem models, and strategic supplier partnerships surged to simplify processes, lower costs, and increase agility.
Energy transition and net-zero: Amid the global catastrophe, the industry witnessed increased pressure to adopt renewable energies and decarbonize operations in upstream logistics and supply chains.
Energy and resources logistics in a post-pandemic world
The pandemic revealed just how vulnerable, complex, and disconnected supply chains in the industry are. As a result, operators are redesigning how they move people and materials to make their supply chains more resilient, connected, and optimized. Key trends shaping the future in this area include:
Remote work: Domestic and international crew rotation travel will decline, even after business returns to normal. Local hiring will increase as skilled personnel oversee operations remotely.
Digital health passports: Accurate workforce health information, including vaccination sand tests, will have to be securely integrated into digital health, safety, and environmental compliance databases.
Next wave of digital transformation: Technology transformation initiatives will accelerate and run deeper and wider, to achieve and sustain competitive advantage. Key emerging technologies include:
- Artificial Intelligence (AI) and Machine Learning will continuously improve demand forecasting, capacity planning and crew rotation scheduling, and mitigate supply chain disruptions. Natural Language Processing will give rise to virtual travel agents for cost-effective travel administration.
- Network modeling and mathematical optimization will resolve complex logistics network-optimization problems through simulations and analytics. Algorithms will optimize hub locations, ﬂeet size, and logistical plans, reducing costs and maximizing demand fulfillment.
- Supply chain digital twins, virtual replicas of existing supply chains, willuseAI to analyze and predict performance, identify potential uncertainties, and perform scenario planning.
- Emerging technologies like vision picking, augmented reality, blockchain, robotics, and the internet of things will improve operational productivity, traceability, and monitoring, and facilitate smarter collaboration as well as automate repetitive tasks.
Net-zero supply chain: Logistics and supply chain technology will play a critical role in meeting low-carbon and net-zero goals of energy and resources companies by focusing on:
- Optimal fleet selection and routes that minimize emissions and costs
- Cost-saving green travel options
- Tracking annual climate budget of workforce
- Innovative carbon offsetting mechanisms
- Deployment of drones, fleet electrification, and electric vehicle charging kiosks
- Reporting of emissions, environmental cost per barrel, and carbon taxes
- Carbon capture and storage tracking and optimization
Accelerating recovery and avoiding pitfalls
As the energy and resources industry begins to recover, business and digital transformation will play a key role in supporting logistics and supply chain leaders. A few things to consider along that journey:
Maximizing value creation: Early technology adoption has risks, but not evolving with technology has far greater risks. We must sustain the momentum triggered by the pandemic, standard value creation assessment frameworks help measure business value and prioritize investments by ROI.
Cybersecurity and business continuity: Cyber attacks are on the increase. Organizations must have robust security policies, frequent audits and continuously improve cloud security standards. Robust business continuity plans to recover fast and minimize operational impacts should also be part of the strategy.
Avoiding the bullwhip effect: Small changes in workforce and cargo demand (initiated by construction, drilling, maintenance, and production) compound inefficiencies and costs along the supply chain. Accurate demand forecasts and seamless information flows across the value chain help avoid bullwhip effects.
Overcoming the skills shortage: More than one-third of workers changed or lost jobs during the pandemic, sparking a historic workforce overhaul. To flourish after the pandemic, companies will have to invest in training and collaborative recruiting to complete mega projects on time.
Risk of underinvestment: Logistics and supply chain technologies have low to moderate adoption rates in our industry. Investing in supply chain technology is critical to boosting efficiency and performance, particularly when considering the industry's sharp Capex and Opex cuts.
Lessons learned and the road ahead
Energy and resources companies would do well to learn from the industry´s shortcomings the pandemic revealed and sustain the transformation momentum. Strategies need to be put in place so players in the field can become more resilient, adaptable, and agile moving forward. It´s time to completely move away from clunky and inefficient legacy systems that require costly manual and paper-based intervention.
The industry is increasingly under pressure to adopt environmentally-friendly technologies and processes. This shift will require new business models and process innovations across logistics and supply chains. Internal transformation efforts must continue to make the industry more efficient and clean. To that end, revamped logistics and supply chains can play a significant role in helping ensure the industry´s long-term success.