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May 16, 2016
Preparing for the driverless supply chain in the oil and gas industry
By: Pierre Mawet

It may be five to 10 years before the driverless supply chain becomes reality. What should oil and gas companies do in the interim to improve the lagging productivity in their complex supply chains? One suggestion is to follow the route taken in other industries (e.g., consumer products, electronics) and invest in decision support tools that have helped companies solve complex problems. These rule-based applications are not as advanced as artificial intelligence (AI) systems but are here today and have proved their worth.

Oil and gas companies should confer with their IT vendors and partners to select tools that will lead to enterprise-wide optimization. Rather than seeing a series of narrowly defined departments (e.g., sourcing, production, transportation), instead look at how decision support tools can optimize performance of more than one function at a time. Be careful of investing too many IT dollars in systems that are large and ultimately may need to be scrapped with the emergence of highly automated, AI-powered systems.

Energy companies also need to re-examine how the incentives they are offering their people limit cross-functional collaboration and performance gains. Performance metrics ultimately should be tied to overall, long-term gains for the company rather than optimization within separate supply-chain functions.

The likelihood of a driverless supply chain will bring workforce ramifications. Today, if an oil and gas company is staffing a sourcing and procurement department, it looks for deep skills in these specialized activities. At some point, however, past experience in a narrow function may become a liability. Hiring managers are more likely to look for people who understand the broad range of potential trade-offs within the end-to-end supply chain, and all of the potential levers to achieve high performance.

The driverless supply chain will demand a new operating model. Organizing a department around functions or processes, such as order to cash or procure to pay, could be counterproductive since traditional handovers will mean little to a machine.

Amid volatile prices for oil and gas, doing more with less has is becoming a mantra in many energy companies. Energy leaders need to strive for supply chain improvements today, driven by decision support tools, while simultaneously preparing for the organizational changes that the driverless supply chain will bring.

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