One of the biggest challenges global companies in the oil and gas industry face is finding a cost-effective supply-chain model. Main objectives for this process include maximizing the use of ocean freight versus air freight and balancing procurement and international operations to keep costs low.

The biggest contributor to inefficient supply-chain management is a lack of visibility. Many companies simply do not know the status of source and supply. Vendor compliance also can create problems in the form of late shipments and incorrect materials, not to mention issues with proper certificates and licenses for shipments, especially for overseas markets.

Crane Worldwide Logistics, a Houston-based company established in 2008, currently is helping to bridge these gaps with a new fully integrated global system. The company, while involved in several different industries, has made a solid effort to provide logistics solutions to the oil and gas industry. After two acquisitions, about 45% of the company’s business addresses energy-related supply-chain solutions. The company has grown 300% in the course of 26 months. This growth is being driven by providing Web-based visibility to the supply chain.

A visible solution
When it comes to supply-chain models, many companies operate in a reactionary mode. This means that ordering materials is carried out with very little awareness of when those materials will be received. Not focusing on the purchase order (PO) side or the vendor management side often can create significant lags between order placement and when materials are received. Operating through poor processes without metrics in place to ensure that materials are moved through the warehouse and reach their destination in a timely manner can drive up cost substantially.

Visibility and communication are two keystones of consistent, cost-effective logistics management

Crane combines a number of principles to provide more visibility at both ends of the supply chain. Using a Web-based product, like C2C, the company has completely integrated it into their freight-forwarding system.Where most companies re-key line item PO details into a freight-forwarding system, Crane has developed the ability to release a complete PO or a single line item, which saves time and serves to eliminate errors during re-keying.As the line items are released, the information flows electronically into the company’s freight-forwarding system, which builds the commercial invoice and packing list for that consolidation.

“One of our differentiators is the fact that we operate on one single global operating platform,” said Joe Smeraldi, director of Energy and EPC for Crane Worldwide Logistics. Due to acquisition and legacy systems around the world, much of these data must be re-keyed five or six times in average logistics scenarios. The new approach changes that. “Asia’s exports are Houston’s imports. The data are pulled through electronically.We don’t ever re-key data; we don’t ever have to re-key values. It leads to much less error, and it’s a much more efficient process,” Smeraldi said.

The company’s Web-based portal, known as C-View, gives customers visibility of their materials throughout the entire supply-chain cycle. The account-specific platform allows buyers to search specific POs to see the status online. The platform provides line item details such as promised dates, delivery times, and damage reports. Because the system images all e-documents, customers can even pull a copy of the vendor packing slip from the Web. Within 24 hours of receipt, the system can provide full,Web-based visibility to the client.

“People love to see the status of their inventory, and we’re able to show them in real time,” Smeraldi said. Whether materials are “Issued, Not Received;” “On-hand in the Warehouse;” “In Transit to Final Destination;” or “Arrived Destination,Awaiting Customs Clearance,” the company’s online system can tell its clients the status of their materials in any stage of that supply chain by country.

Improved international operations
Nabors Industries operates rigs in 30 countries around the world. From consumables and spare parts to capital equipment, when crews have a need, a buyer issues a PO, which is then issued to a supplier. When this occurs, Crane receives an electronic copy of the PO.

The company supports its clients out of three major hubs: Shanghai, Houston, and Aberdeen. In the first 12 hours of the PO being issued, Crane contacts the supplier and verifies receipt of the PO.

Operating through poor processes without metrics in place to ensure that materials are moved through the warehouse and reach their destination in a timely manner can drive up cost substantially.

In its most basic form, the system helps to expedite POs as they come into the hub. Traditionally, most companies would not have visibility of the material until it arrived at their freight forwarder’s dock.

After an extensive planning period, Crane went live with its electronic data interchange in March 2008 in Shanghai. “Things went very well there,” Smeraldi said. After the first three months of managing POs, as part of a phased integration, the company discovered that its client’s Chinese suppliers were averaging delivery 60 days past their commitment date. “This had never been measured before,” Smeraldi said.

In addition to running past commitment dates, Crane’s platform showed that a lack of visibility led to other problems in supply-chain management, such as unnecessary reorders of materials and ordering materials that are restricted in certain geographical areas. Without a means of determining the root-cause analysis of inventory on hand and existing problems, the client had a purchasing excess that kept occurring without its knowledge.

On any given day, Nabors can have approximately US $2.4 million in its supply chain. Through Crane’s Web-based system with better-tuned, better-designed warehouse processes, the company has gained the ability to put its material to work quicker.

Looking ahead
In a general sense, logistics simply is moving goods from point A to point B. But with the elevation in global activity, the logistics side of the oil and gas industry is almost an extension of procurement, especially for companies like Crane.

“We manage their supplier base rather than those goods moving blind in a black hole until they reach the freight forwarder,” Smeraldi said. By mitigating the aspect of “blind” movement, the company’s improved visibility works to resolve many procurement issues in an ongoing, corrective-action basis. Rather than work from crisis to crisis, Crane has moved upstream to better manage the logistics process and resolve issues as they arise. “Rather than just reacting to the issue, we’ve gone back and corrected the root cause,” Smeraldi said.

Visibility and communication are two keystones of consistent, cost-effective logistics management. The company’s C-View combines four elements: service, execution, IT (which encompasses all of it), and account management to provide an “eyes-on-the-ground” approach that gives international oil and gas companies more visibility to their supply chain. “At the end of the day, it comes down to service and execution because it is still a people business,” Smeraldi said.