According to the U.S. Energy Information Administration, the U.S. ranks second in the world in both oil consumption and total oil production. Information and analytics firm IHS Global Inc. also projects that “an average of greater than $80 billion will be invested annually in U.S. midstream and downstream petroleum infrastructure” between 2014 and 2020. Supplies are needed to expedite the building of new extraction points, pipelines, roads and plants while maintaining regularly used drilling locations and exploring new sites. As huge capital investments continue to be made in this market, distributors should look to capitalize on the industry’s exponential growth to facilitate their own profitability and expansion.
Today’s industrial distributors are being called upon to provide supplies including machine and cutting tools, pipes, valves and fittings, pumps and hoses, power transmissions and much more. Distributors have an opportunity to increase their revenue by serving a customer base that is hyper-focused on expansion and often located in regions not previously considered part of the energy market. Suppliers to the oil and gas industry are now beginning to question whether they are “adequately resourced to fully take advantage of the business opportunities that exist in unconventional oil and gas,” according to the Energy, Equipment and Infrastructure Alliance (EEIA). Considering the vast amount of revenue to be made, distributors should find a way to fully capitalize on the industry’s potential or perhaps consider the acquisition of another organization that already does.
As a result of both initial capital expense and lease limits, companies must access and extract the deposits quickly in order to maintain profitability. With the current decline in oil prices, speed and efficiency have become particularly critical as companies look to move larger volumes of their product. Distributors can position themselves as valuable business partners by demonstrating that the organization can keep pace with the industry’s demands. In order to achieve this, distributors should invest in modern technology to equip themselves with the necessary agility to deliver exceptional customer service.
At its most basic level, technology should be flexible, integrated and industry-specific. Distributors must have the ability to quickly and easily react to the needs of the customer. A rigid or antiquated system often requires extra time and expense to make significant alterations, and this could potentially inhibit the distributor from effectively meeting the service requests of fast-paced oil and gas customers. Similarly, a lack of integration can have the same effect by creating data silos and limiting visibility into available inventory. Distributors can optimize efficiency by ensuring that all critical systems are seamlessly connected for speed and consistency in information sharing, as the ability to quickly communicate relevant information to all stakeholders is key when serving this market.
In addition to these capabilities, distributors should consider implementing an integrated business intelligence (BI) platform as a means to improve decision-making. With in-context analytics and the ability to drill down into comprehensive data, distributors can gain a new level of visibility into their organization and derive actionable insights that can help to further improve efficiency and productivity. Consider this illustration. An oil and gas customer places an urgent order for materials needed to fix a pipeline. Whether or not the distributor has the inventory currently in stock, they will be determined to fulfill the order in time by whatever means necessary. Decision-makers equipped with an advanced BI application can drill down into inventory data to identify the pattern in which the ordered items typically arrive, including the quantity and timing. If necessary, adjustments can then be made to ensure the items are stocked more frequently and at shorter intervals, allowing the distributor to better serve the needs of its customers by ensuring that all future orders, even urgent ones, can be filled when needed.
Typically, finding the right balance between profit margins and what the customer will pay is top of mind for distributors. However, when serving the needs of the oil and gas industry, companies are likely more concerned with achieving production goals than haggling over price. Everything hinges on fulfilling their demand in that particular moment and exceeding their expectations through superior service. One way to achieve this may be through an integrated supply model, where inventory is already on site yet still managed by the distributor’s technology. This strengthens the relationship between the distributor and customer, and allows the distributor to do what they do best by appropriately managing the inventory needed to achieve optimal productivity.
There are numerous other modern technologies that can have a significant impact on distributors’ ability to serve the oil and gas industry. Mobile applications make information sharing easier by providing employees with insight into accounts and orders while in the field. Social collaboration tools also help to create a more agile enterprise by enabling transparency in business processes and promoting ease in communication between stakeholders.
As wholesale distributors seek out additional revenue streams, the oil and gas industry certainly offers a tempting niche in which to establish a presence and build relationships. However, distributors should be prepared for the dynamic nature of the market itself, the high demand for service and an increase in competition to earn and keep business. Distributors who rely on a modern, holistic technology environment will be best equipped to partner with oil and gas companies by first establishing the necessary level of internal efficiency. Then, they are positioned to keep pace with the shifting landscape that is the oil and gas industry.