Offshore Technology Reports – Next Generation Real Time Complete Supply Chain Visibility Solutions by Global Business Media

SPECIAL REPORT

Next Generation Real Time Complete Supply Chain Visibility Solutions Track and Trace Technologies are Trending Up in Oil and Gas Challenging Times â&#x20AC;&#x201C; Why Supply Chains Could Hold the Key to the Industryâ&#x20AC;&#x2122;s Future Why Savings in Supply Chain Can be so Important New Trends and Developments for 2014 Technology from the Stars

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Published by Global Business Media

http://www.mojix.com/ solutions/rfid-systems-oil.php

http://www.mojix.com/solutions/rfid-systems-oil.php 11075 Santa Monica Blvd., Suite 350 Los Angeles, CA 90025 1-877-886-6549

NEXT GENERATION REAL TIME COMPLETE SUPPLY CHAIN VISIBILITY SOLUTIONS

SPECIAL REPORT

Next Generation Real Time Complete Supply Chain Visibility Solutions Track and Trace Technologies are Trending Up in Oil and Gas

Contents

Challenging Times – Why Supply Chains Could Hold the Key to the Industry’s Future Why Savings in Supply Chain Can be so Important New Trends and Developments for 2014 Technology from the Stars

Foreword 2 Tom Cropper, Editor

Track and Trace Technologies are Trending Up in Oil and Gas

Mojix Inc Sponsored by

Published by Global Business Media

Published by Global Business Media Global Business Media Limited 62 The Street Ashtead Surrey KT21 1AT United Kingdom Switchboard: +44 (0)1737 850 939 Fax: +44 (0)1737 851 952 Email: info@globalbusinessmedia.org Website: www.globalbusinessmedia.org Publisher Kevin Bell Editor Tom Cropper Business Development Director Marie-Anne Brooks Senior Project Manager Steve Banks Advertising Executives Michael McCarthy Abigail Coombes Production Manager Paul Davies For further information visit: www.globalbusinessmedia.org The opinions and views expressed in the editorial content in this publication are those of the authors alone and do not necessarily represent the views of any organisation with which they may be associated. Material in advertisements and promotional features may be considered to represent the views of the advertisers and promoters. The views and opinions expressed in this publication do not necessarily express the views of the Publishers or the Editor. While every care has been taken in the preparation of this publication, neither the Publishers nor the Editor are responsible for such opinions and views or for any inaccuracies in the articles.

© 2014. The entire contents of this publication are protected by copyright. Full details are available from the Publishers. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical photocopying, recording or otherwise, without the prior permission of the copyright owner.

Tracking Rental Assets Ensuring on time Return to Vendor Using RFID to Track Drill Pipe Improves Safety and Ensures the Right Drill String is Ready for Use Safety through Security of Personnel and Proper Servicing of Equipment Tracking in Intrinsically Safe and Harsh Environments Major Capital Projects Benefit from Tracking Equipment, Thereby Reducing Delays in Fabrication Why should Oil and Gas Companies Embrace Track and Trace Technologies?

Challenging Times – Why Supply Chains Could Hold the Key to the Industry’s Future

Tom Cropper, Editor

Volatile Market Deep Water Political Uncertainty Addressing These Problems

Why Savings in Supply Chain Can be so Important 9 Jo Roth, Staff Writer

Changing Ways Changing Poor Practices

New Trends and Developments for 2014

James Butler, Staff Writer

A Growing and More Complex World An Uncertain World Corporate Social Responsibility New Skills and Technology

Technology from the Stars

Tom Cropper, Editor

From Space to Earth Practical Testing

References 15

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Foreword I

T’S CALLED the butterfly effect – the idea that a

In this report we’ll analyze some of the key supply

small event in one part of the world could create

chain challenges confronting the industry and the

a ripple effect which leads to another, seemingly

solutions being developed to address the issue.

unrelated event, in a completely different country.

We’ll look at problems such as increased cost

This illustrates the problems affecting global supply

pressures, the rise of SME competitors, increased

chains – in an interconnected world, any event

exploration costs and geopolitical problems –

can have a major impact on the supply chain and

all of which make supply chain management an

consequently fortunes of a company.

ever more complicated task.

Small wonder then, that developing a comprehensive

We’ll also look at some of the solutions being used

view of supply chains is becoming a major

such as BP’s award winning supply chain project.

consideration for businesses of many kinds. Each

Working in partnership with Mojix Inc, they have

of these will have their own unique set of challenges

focused on new track and trace technologies which

and benefits. For the oil and gas industry, those

help them enhance their total supply chain visibility.

challenges are multiplied by the unique nature of

In the lead article in this report, Mojix illustrates more

offshore and deep water exploration. At the same

about how this solution works and how technology

time, a more restrictive commercial environment,

is revolutionizing supply chain practices in general.

and more demanding transparency requirements makes accurate, real time supply chain visibility an increasingly important aspect of the business.

Tom Cropper Editor

Tom Cropper has produced articles and reports on various aspects of global business over the past 15 years. He has also worked as a copywriter for some of the largest corporations in the world, including ING, KPMG and the World Wildlife Fund.

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Track and Trace Technologies are Trending Up in Oil and Gas Mojix Inc How BP won the European Supply Chain Excellence Award

HE OIL and Gas industry has always been on the forefront of adopting new technologies, particularly in the areas of exploration, drilling and production. However, many Oil and Gas companies still lag other industries when it comes to adopting technology in the areas of supply chain and inventory management. This is changing rapidly as several pioneering track and trace projects in the Oil and Gas industry are proving how effective these technologies can be in terms of improving safety, operational efficiency, yielding very attractive returns on investment, and in transforming business processes. BP and a number of other major Oil and Gas companies are proving the many significant benefits derived from track and trace technologies applied to improve efficiency, safety and profitability. BP won first place in the Energy sector from the 2013 European Supply Chain Excellence Awards for its ground-breaking supply chain system to track global movement of construction materials for a multi-billion dollar double platform to be deployed in the North Sea. This is a vast operation involving 150 suppliers across Europe, with construction occurring in South Korea. BP’s track and trace system is a cutting edge solution powered by Mojix Inc., a Los Angeles based company. It provides complete supply chain visibility in real-time, giving BP the insight into the whereabouts of materials from the time they leave the suppliers, through multiple transport and storage points, to their final destination at Hyundai’s construction site, giving BP more control over the supply chain, costs and project timeline. Tracking data is available to everyone in the project via a web portal enabling the project team to determine where any piece of equipment is moving or being stored at all times. BP has reaped multiple benefits from the increased visibility, including no lost or missing equipment and no time wasted searching for materials. The process of construction

planning and implementation has been completely streamlined. Going forward, supply chain performance data collected will enable continuous improvement in planning. Oil and Gas companies are driving an evergrowing list of use cases harnessing the power of track and trace solutions featuring RFID and other technologies. A few of the more popular use cases are highlighted below.

Tracking Rental Assets Ensuring on time Return to Vendor Oil and Gas companies frequently lease a wide range of assets from third parties for their projects. Manual methods of keeping track of rental assets are expensive and prone to error, costing companies millions of dollars in extended rental charges, penalties and replacement costs for lost assets. Adopting track and trace technologies to automate the return process to the rental vendor can reduce extra unnecessary rental charges added on every asset as well as catching errors leading to assets being lost in a yard or warehouse for months. Leading Oil and Gas companies are funding successful track and trace projects using RFID and GPS technologies to track rental assets in ports, yards PMFs and Special Vendor Sites, thus reducing human error, eliminating shipping or asset identification errors and providing full visibility of assets throughout the supply chain. These companies are enjoying a positive ROI by reducing the total average rental days and thereby rapidly recovering tagging and infrastructure costs for installations at warehouses, yards and ports. Picking the optimal track and trace technology for each asset type and the ability to integrate the data produced by various sensor types (RFID, GPS) are important factors in successful projects. Thus, many Oil and Gas companies are turning to third party suppliers of track and trace technologies, such as Mojix, Inc., with proven experience in sensor selection, application and system integration. Oil and Gas companies adopting technology to track

An Oil Rig is No Place to Play Hide and Seek. Losing track of a critical asset can bring operations on your oil rig to a grinding halt. That‘s why being able to track asset location at all times is so valuable. With Mojix RFID technology, you can do just that, and a lot more. In fact, you can manage logistics across your entire supply chain, improve safety and mitigate operational risk – all with one flexible infrastructure. To learn more about this cutting edge technology and the business case for Mojix RFID, visit www.mojix.com/solutions/ rfid-systems-oil.php

Redefining RFID Active Performance with Passive Economics www.mojix.com/solutions/ rfid-systems-oil.php

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By harnessing the power of track and trace technologies, pioneering Oil and Gas companies are reducing pipe rework and decreasing turnaround time, resulting in an attractive return on investment rental assets will improve profitability, safety and ultimately validate that they ship the right item to the right place at the right time.

Using RFID to Track Drill Pipe Improves Safety and Ensures the Right Drill String is Ready for Use Pipe and Casing inventory and control is another use case that can benefit significantly from track and trace technologies. Manual methods of inventory require personnel armed with pen and paper to maneuver among yards of stacked pipe, which is hazardous and often inaccurate. Using passive RFID systems to track pipe in process at storage yards and through the supply chain results in a much safer and more accurate means to ensure the right pipe type and quantity is available for drilling. Errors in pipe shipments can cause delays in drilling, and with drilling operation costs of $1,000,000 or more per day, delays that can be prevented using track and trace technologies can save millions of dollars annually. Furthermore, by automating certification and records for pipe and casings, operators can be assured that only the correct and safe pipe is moved to the rig, further reducing downhole failure issues. Full visibility of pipe yard operations helps yard management utilize the pipe more efficiently, reducing unnecessary reserve stock and waste. Over the lifetime of the pipe, records associated to specific pipe assets using RFID technology can help tracking of pipe service lifespan and be used to establish optimal usage patterns. The ability to automatically pull up and update records of individual pipes and other assets is 4 | WWW.OFFSHORETECHNOLOGYREPORTS.COM

one of many benefits of deploying track and trace technologies, opening new avenues of operational efficiency previously unattainable or economically unviable. The impact of reducing drilling delays is often difficult to assess, as these delays are not well reported. The longer term benefits of increasing pipe utilization and the longer life of pipe assets can add up to big savings over time. By harnessing the power of track and trace technologies, pioneering Oil and Gas companies are reducing pipe rework and decreasing turnaround time, resulting in an attractive return on investment.

Safety through Security of Personnel and Proper Servicing of Equipment Tracking personnel for mustering in case of emergency or for access control in restricted areas, is challenging without the use of track and trace technologies. In the event of accidents, the last known location of personnel in an area greatly benefits first responders with significant impact in the rescue operation to save lives. The goal of automating these processes and reporting the results offsite reduces the burden on relying on expert intervention to assess these risks. Oil and Gas Companies have begun to deploy Personnel Tracking solutions using Passive RFID tags. In addition to costing much less than traditional Active RFID tags, standard Passive RFID tags are inherently intrinsically safe as they have no battery. The ROI on safety and cost of human error is difficult to assess, notwithstanding the excessive impact and cost in environmental damage. Tracking assets and assuring all equipment used in operation is in good condition has been

NEXT GENERATION REAL TIME COMPLETE SUPPLY CHAIN VISIBILITY SOLUTIONS

a long standing challenge; the industry has seen the high cost of equipment mistakes and human error when critical components are not promptly serviced and are unwittingly introduced into operation. These risks and costs escalate after each incident and the impact on the company’s reputation and brand has also been significant.

To learn more about this cutting edge technology and the business case for Mojix RFID, visit www.mojix.com/solutions/ rfid-systems-oil.php

Tracking in Intrinsically Safe and Harsh Environments Many assets being deployed in the Oil and Gas Sector need to be explosion proof, typically referred to as Class 1 Division 1 and ATEX class equipment. In combustible environments, tracking projects require intrinsically safe tracking solutions. The good news is that intrinsically safe tracking solutions using both passive and active sensor types and systems are available from select solution providers who focus on the Oil and Gas industry. Passive RFID tracking Sensors are inherently “safe”, as they harvest their energy from electromagnetic waves emanated by RFID systems. Passive RFID tags are therefore classified as a “simple apparatus” with no internal power source. In addition, since servicing a battery on an asset is not required, the need for any human intervention to periodically check the health of each RFID sensor is eliminated. Numerous tagging solutions have been developed for use on subsea and downhole assets to operate in the harshest environments. An extreme example is drill bit operations. Near field passive tag solutions exist for even these extreme environment use cases. With a comprehensive solution, near field tags can be automatically associated to far field tags applied to drill bits and other downhole assets for tracking during transport and storage with far field passive RFID systems like the wide area RFID systems of Mojix. As there are many suppliers of specialized tags for Oil and Gas and other industries, it is

likely that a tracking solution can be developed for every asset used in almost every environment.

Major Capital Projects Benefit from Tracking Equipment, Thereby Reducing Delays in Fabrication Global Tracking and visibility of asset movement worldwide reduces fabrication penalties and delays to construction projects, eliminating huge cost overruns on major projects. When projects cost tens of billions of dollars with tight schedules, delays in the transit and staging of construction assets can result in huge fines and other negative cost consequences. Having a comprehensive track and trace solution in place using passive RFID in combination with other location technologies to provide real-time visibility of assets in transit can allow planners to mitigate such delays days before they occur, reducing the overall impact. Oil and Gas companies have

Redefining RFID Active Performance with Passive Economics www.mojix.com/solutions/ rfid-systems-oil.php

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Cost overruns in construction projects are significant, especially for off-shore deep sea exploration, with projects commonly costing tens of billions

begun using solutions from companies like Mojix, to track assets from vendors throughout the world and maintain near real-time visibility of such assets as they are transported by land, sea and air to staging areas at major construction sites. Solutions like this can also apply sensors on shipments capable of monitoring environmental factors such as temperature, condensation and shock due to mishandling, ensuring that equipment is fit to be used in construction when it arrives. The ROI potential is significant, as delays on major projects have run into years with a massive impact to project costs. Cost overruns in construction projects are significant, especially for off-shore deep sea exploration, with projects commonly costing tens of billions. Historical data indicates that cost overruns occur on 80% of mega projects and these typically go over budget by at least 20%. Examples of overruns include Shell’s Sakhalin II project at Sakhalin Island (off the east coast of Siberia) - the project was sanctioned in 2003 at $10 billion, two years later, the cost had doubled to $20 billion. Chevron has recently raised the cost estimate for Gorgon liquefied natural gas plant in Western Australia from originally $37 to $54 billion – there are concerns it will be greater than $60 billion! Based on research undertaken in the UK from interviews with major project leaders, the common causes of cost overruns on Major Capital projects reveal that the effect of improved visibility found in other industries, the so called “track and trace effect”, can yield savings due to prevented cost overruns as high as 14%. These staggering figures make clear the significant savings potential to be realized by deploying track and trace solutions to reduce cost overruns.

Why should Oil and Gas Companies Embrace Track and Trace Technologies? There has never been a better time for Oil and Gas Companies to embrace track and trace Technologies to improve safety, streamline operations and save avoidable costs resulting from penalties, fines, operational downtime, extended rental fees, asset replacement fees and consumer confidence erosion of brand reputation. Recent developments enabling the convergence and integration of a variety of track and trace technologies have fueled an acceleration of Oil and Gas track and trace Projects spanning a wide variety of use cases.

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The introduction of Cloud-based data sharing, good Wi-Fi and cellular coverage, combined with cost effective RFID solutions with advanced visualization software from companies like Mojix has opened a new era in track and trace Solutions offering near real-time global visibility of assets throughout the Oil and Gas supply chain. Low cost tagging solutions that can be attached to assets for life are now widely available. Track and trace solution middleware and application platforms exist that can be configured or customized to automate the flow of tracked asset information in a manner that conforms to existing business workflows and procedures. Finally, experienced solution providers with domain experience in the Oil and Gas sector are now available to support complete solutions, optimized and customized to suit the individual requirements for each project. Picking a solution provider capable of integrating a variety of sensor types and integrating sensors, readers and data from a broad set of sources is key to a successful project. The Oil and Gas sector is among the leading industries adopting advanced technologies to transform research and field operations. With proven value demonstrated across multiple use-cases, from rental asset tracking, pipe and casing tracking, people tracking to construction projects and even drilling operations, track and trace technologies are among the prominent new frontiers for widespread Oil and Gas industry adoption.

Contact Mojix Inc 11075 Santa Monica Blvd., Suite 350 Los Angeles California 90025 USA Tel: 0049 210 242 0806 Fax: 0049 210 242 062 Web: www.mojix.com

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Challenging Times – Why Supply Chains Could Hold the Key to the Industry’s Future

An Oil Rig is No Place to Play Hide and Seek.

Tom Cropper, Editor Supply chain management is becoming a serious issue for the oil and gas market. This article looks at the major challenges facing the industry.

N AN increasingly complex world, supply chain management has become a major priority for all industries. However, oil and gas companies, despite being in the vanguard of technological development in so many ways have been somewhat less advanced. All that is changing. An increasingly challenging economic outlook, increased licensing requirements, additional competition and an unstable geopolitical outlook, have all added to the complexities facing the major players in this area. Adopting more efficient and robust supply chain management procedures will be crucial to their overall success or failure. Every industry has its own unique set of challenges in supply chain management. The unique nature of offshore oil and gas exploration means its challenges are more complicated than most. The need to transport expensive, delicate and occasionally explosive equipment to remote areas and over large distances means it has to get everything right. However, a difficult economic situation means all that has to be done with as little waste as possible.

Volatile Market First, let’s look at that commercial environment. Forbes magazine adequately summed up the current challenges of the oil and gas market with the headline: “Oil prices – Decline turns into collapse1. Global prices, which had been on the slide since the summer of 2014, suddenly took a 10% nosedive when OPEC defied expectations and refused to limit supply. Brent Oil Prices reached $66 per barrel2, its lowest level since 2009 and a mere shadow of the plus $100 per barrel seen earlier in the year. The problem has been a mix of sluggish growth combined with over supply. The worldwide economy has

been growing, but at a much slower pace than expected – especially in the developing world. This has had a similar impact on the growth for demand, which has been progressively cut during the year. For the oil and gas industry this decline has further magnified the cost and production pressures they are under. Locating and extracting oil is becoming more difficult and more expensive; at the same time the global recession has compelled all companies to be more sensitive over production costs.

Losing track of a critical asset can bring operations on your oil rig to a grinding halt. That‘s why being able to track asset location at all times is so valuable. With Mojix RFID technology, you can do just that, and a lot more. In fact, you can manage logistics across your entire supply chain, improve safety and mitigate operational risk – all with one flexible infrastructure. To learn more about this cutting edge technology and the business case for Mojix RFID, visit www.mojix.com/solutions/ rfid-systems-oil.php

Deep Water Nowhere are these pressures felt more than in deep water exploration. With conventional areas running dry, the majority of new oil found will come from remote and hazardous environments such as the Arctic, Pacific and East Africa. All of these present a much more challenging proposition in terms of supply chain management than areas such as the Gulf of Mexico and North Sea. A key problem is the lack of local area network, which forces companies to rely on a global supply chain network. Transport distances increase, which has a simultaneously upward pressure on supply costs and can also lead to costly delays. These can see major exploration and production projects set back by a year or more. With remote area comes more hazardous conditions – extreme weather, low temperatures and the corrosive effects of salt water can all push equipment up to, and beyond their limits. However, maintenance and support can be extremely difficult to access. The reaction time of the supply chain and support services to oneoff events can be extremely slow, which means there must be a huge emphasis on getting it right the first time. This means more planning

Redefining RFID Active Performance with Passive Economics www.mojix.com/solutions/ rfid-systems-oil.php

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The worldwide economy has been growing, but at a much slower pace than expected – especially in the developing world

and transportation of equipment during the set up phase as Curtis Wendler, Deep Water Team Leader at Halliburton acknowledges. Writing on Halliburton’s Solutions Blog, he says: “Frontier projects will naturally demand significantly more planning, more review, more contingencies, more material, more spare parts and more time than projects closer to major infrastructure. Distances between manufacturing and warehousing locations and the project location not only have the potential to drive up project cost, but have the added potential to drive the project schedule to a point where existing logistics structures do not have sufficient availability, or to the point of multiseason operations.”3 Because of all these issues, the deliverability of any deep water project is a major concern. Costs must be kept under control and supply chains simplified and kept secure. That’s difficult enough given the commercial environment in which companies are operating, but given the worldwide geopolitical situation, it’s even more of a challenge.

Political Uncertainty It only takes a quick glance at the news to see the challenges that an unstable political environment can inflict on the market. Crises such as the rise of ISIS in Syria and Iraq, political upheaval in the Middle East or Militant insurgencies in Africa all have an impact on the global economy and supply chains. This has created uncertainty over the reliability of supply from major areas, especially in the MENA area where the effects of the Arab Spring are still in flux almost four years later. A study from the Oxford Institute For Energy Studies found that, while the short term effects on oil prices were less severe than feared, there were 8 | WWW.OFFSHORETECHNOLOGYREPORTS.COM

more significant concerns in the longer term. “Potential repercussions are likely to be felt through several years of unstable regulatory and investment environment, policy uncertainty, deteriorating security and a lack of much needed energy pricing reform,” states the report4. Events around the world create pressure both on the cost of production for oil and gas producers and also the security of supply. Add to that greater licensing and regulatory oversight in the transport of hazardous or potential explosive materials and you have a major problem.

Addressing These Problems On top of these issues, oil and gas suppliers must also face supply chain issues which are shared in other industries such as a more open and transparent market, lower customer loyalty and greater competition fom SME suppliers with leaner management structures. All these require a superior level of supply chain visibility than most current practices can offer. In finding solutions, manufacturers are looking at ideas such as greater purchasing and procurement automation, contract management, logistics and warehousing and more sophisticated technology such as track and trace. The challenges therefore place great onus on oil and gas manufacturers to up their game. However, the good news is that in securing enhanced supply chain visibility solutions, they are in a good place to deliver savings which could prove critical in securing their long term commercial viability. The rest of this Report will therefore focus on some of the projects and new capabilities which are common to market and allow this to happen.

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Why Savings in Supply Chain Can be so Important Jo Roth, Staff Writer How updating supply chain practices and solutions can help improve a company’s bottom line performance.

CCORDING TO a survey of supply chain consultants around the world, most participants expect their profit margins to increase over the next few years5. This will be secured largely through ongoing improvements in the cost efficiency of supply chains. This confidence indicates the scale of wastage in current supply chain practices and also the scope of improvements they believe can be achieved. In this article we’ll look at the primary areas of waste and inefficiency and also where cost savings can be most valuable.

Changing Ways Current supply chain management practices are often highly labor and knowledge intensive. This means considerable cost in time and personnel as well as greater expense through counting errors and lost equipment. Oil and gas companies often lack the in-house expertise required to identify correctly areas of waste and potential solutions available to them. This creates multiple opportunities for savings. For example, Zero Waste Scotland expects a new supply chain management project on its North Sea operations to deliver a potential cost saving of nearly £600,000. On top of this, they hope to divert around 395 tons of waste from landfill, reduce paper consumption by 47 tons, reduce water consumption by 8,8373, and save over 3,209 tons of CO2. All this will come from improved resource management and efficiency improvements6. When technology comes into play, the savings can be further magnified. Mojix Inc, a leading provider of supply chain technologies, believes its advanced track and trace solutions have the potential to deliver savings in the scale of millions of dollars. These savings come first of all from equipment cost. The Mojix technology relies on passive tags which process a digital signal to provide accurate and real time information on the location of different components. This, they say, costs roughly five percent of active tags, they require no

batteries, which enable them to be used in any environment, and reduce the instances of errors and loss, which can lead to further expenses down the line. A key area of savings, they say, can be in rental costs. The tags are applied to rental equipment and can be read at any time, from the moment they enter a warehouse and staging area to the moment they return from service. This can reduce rental costs by reducing the length of the rental and reduce any penalties by minimizing incidents of loss or damage to equipment. Furthermore, the fact that this process delivers greater automation eliminates the need for equipment to be manually checked and monitored in the warehouse, which again eliminates the opportunities for error as well as reducing expenditure in man hours. A good example of this technology in action can be seen in their award winning partnership with BP, which used the technology for its ambitious Clair Ridge project. The company decided to replace an ageing platform with two new platforms, which will begin operation in 2016. In a related project BP is also working on the Quad 204 FPSO facility which will replace an existing vessel which is being decommissioned. The project is an enormous undertaking. BP has procured over $1bn of equipment from 150 vendors around the world. From a supply chain management undertaking the project is vast. Speaking at the time the contract was awarded, Andy Dovey, Material management PSCM team lead for BP Clair Ridge said:

Redefining RFID Active Performance with Passive Economics www.mojix.com/solutions/ rfid-systems-oil.php CLAIR RIDGE

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Oil and gas companies often lack the in-house expertise required to identify correctly areas of waste and potential solutions available to them. This creates multiple opportunities for savings

“Mojix has delivered a complete and innovative tracking solution that allows BP to monitor its cargo throughout the whole supply chain process. This ensures that we can manage our materials in a more planned and efficient manner.”7 The project has proved extremely successful. Mojix says BP has lost no equipment and wasted zero man hours scanning equipment. BP are said to be planning to roll out the system in other areas. A further example of the potential for track and trace can be seen with Amec, which developed a track and trace solution to track materials across its supply chain from the initial receipt at the warehouse through their use in the field. This has also shown that they can reduce wasted man hours and additional costs to virtually zero8.

Changing Poor Practices Set against this is an example of what can happen when things go wrong. A 2010 study from the University of Dundee looked into the comparatively poor performance of Shell against BP. BP it pointed out had experienced a 19% increase in share price in 2009, while Shell gained only 8%. Much of the problems, it suggested, had been down to Shell’s issues

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with supply chain management. The problem they identified was the complexity of the supply chain system. “Because there are sub-companies of Shell that carry out other operations in the supply chain, one of the main supply chain issues is the likelihood of each sub company acting in its own interests to maximize profits,” states the report9. The result will be a lack of coordination and disorganization within the supply chain which in turn leads to cost and efficiency issues. Shell was suffering from multiple issues including heavy capital expenditure, production issues and an inability to gather and analyze data in the field. The implication of the report was clear. While Shell themselves may blame a variety of commercial factors for their poor performance, the real difference was down to their supply chain issues – and therein lay the key to their solution. Scroll forward a few years, and Shell is addressing the problem. After identifying operating procedures at many of its refineries leading to inefficiencies and lower margins, they launched Enterprise First10. Key to this was the implementation of a supply chain solution which addressed the issues of segmentation within their structure. Because their refineries were operating independently, the actions of one could often adversely affect another. The solution was to standardize and simplify the business process across all of Shell’s operation, introduce technology solutions which support this standardized process and optimize profit margins across the board. Shell therefore represents, on the one hand, some of the problems the oil and gas industry has had in relating to its supply challenges. However, it also indicates a renewed willingness to address the issues. Companies of all kinds are adopting new solutions and technologies to improve their performance and so optimize their business potential.

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New Trends and Developments for 2014 James Butler, Staff Writer 2014 has seen a raft of new trends and technological developments entering the world of supply chain management, but there is much more to come.

UPPLY CHAIN management has traditionally been an arduous, labor intensive and unreliable process. Products and materials have needed to be manually checked, which takes time, effort and can lead to inaccuracies. In the oil and gas industry, the particular nature of global exploration means that supply chains are more complex and sometimes more opaque than in other industries. Companies have long recognized the need to focus on their supply chain performance, but in terms of tangible action they have been lagging somewhat behind. However, all that is changing. Supply chains have become crucial to the planning and strategy of almost every company in the sector.

A Growing and More Complex World Although growth in the oil and gas market has been less than expected in 2014, it is important to note that it is still growth. Prices may be falling, but that’s due to an excess in supply rather than a fall in demand. In other words, the pressure to push on and develop continues with oil companies still expanding their exploration and production (E&P) efforts despite the lackluster number of discoveries so far. This means the supply chain will continue to become more complex, with high specification materials and equipment being sourced from all over the world. Much of this complexity comes from the more competitive nature of the market. Globalization has given energy companies greater choice in the type of companies they can work with. Many have secured savings by choosing to work with cheaper suppliers in emerging economies such as China and India, although core equipment continues to be sourced from established and recognized suppliers. However, this expansion of the supply chain creates problems, firstly in maintaining visibility and ensuring the quality of these new products is up to scratch. There is a real pressure on companies to pre-qualify all their suppliers and monitor their actions.

Not only must quality be good enough, but also the ethics of their business practices and environmental credentials. This development marks an important shift in relations with the end user. Previously the supply chain was marked by long term relationships with trusted suppliers. However, the prospect of cost savings encourages buyers to look to new and untried providers. That is fine in itself; however it heightens the importance of pre-screening any potential new suppliers. Collecting data and intelligence about these suppliers is a major undertaking and requires new and specialist sets of expertise. Resource volatility is also a key issue. Prices can fluctuate, which means we’re seeing a transfer towards longer term contracts which can hedge against future price rises or resource scarcity to a certain extent. However, this also relates to the previous point in that it heightens the importance of risk management procedures to ensure new potential suppliers are properly vetted.

An Uncertain World The world is becoming more uncertain both in geopolitical and economic aspects. Wars in Africa and the Middle East have interrupted supply, created volatility in prices and uncertainty about the future. Equally, while companies are becoming adept at adjusting their supply chain mind-set to source materials from emerging economies such as China and India, they may not remain the cheapest source of parts and labor for long. Other areas can emerge which means added flexibility is required to adjust procurement accordingly. In other words, both major oil giants and SME operators alike are having to become more nimble on their feet and capable of adapting to a greater range of situations.

Corporate Social Responsibility Despite the inevitable impact on the natural environment of drilling operations, the industry is concerned about improving its environmental

Redefining RFID Active Performance with Passive Economics www.mojix.com/solutions/ rfid-systems-oil.php

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NEXT GENERATION REAL TIME COMPLETE SUPPLY CHAIN VISIBILITY SOLUTIONS

Tracing the origins of millions of different products around the world is an enormous logistical challenge and is beyond the scope of many conventional supply chain systems

credentials. BP, for example, both before and after the Deep Water Horizon spill, has been at pains to highlight their green credentials. It was just one reason why they were so proud to be named a sustainability partner for the London 2012 Olympic Games. The impulse to be green stems from both regulatory and public pressure. An adverse impact on an oil giant’s public reputation can also have an impact on their bottom line performance, as BP found out after the Gulf of Mexico spill. Equally, failure to adhere to new and more stringent regulation can leave a company open to significant fines. This focus on the environment stems from two sources. Firstly the focus on emissions – making the exploration of oil and gas safer and more environmentally friendly. But it also has implications for their procurement practices – working only with companies that operate in a sustainable way and adhere to international agreements on working practices. Being able to say where products come from and how they are produced is crucial.

New Skills and Technology Addressing the challenges of exploration requires new thinking, new skills and new technology. The industry has been hampered by a knowledge shortage. Even if it can identify supply chains as a problematic area, it is not necessarily in a position to resolve the issues it faces. Equally, segmentation within the industry is a problem. Oil companies often work with multiple subsidiaries and individual partners, each of whom work in their own interests and have their own working practices. This can make it difficult to work towards one single goal.

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The solution to this problem is for greater homogenization within the entire supply chain, a solidifying of practices across all groups and a way of displaying and interpreting data. Most of all, skilled and experienced supply chain professionals will have invaluable insights which can go a long way towards developing coherent and effective supply chain strategies. All this has to be combined with new GPS and track and trace technologies which are coming to market. These promise gamechanging capabilities which truly could revolutionize the way in which the market works, by reducing costs, overheads and improving accuracy and efficiency. This is, therefore, an environment in a considerable state of flux. Supply chains are becoming more complicated and competitive. Tracing the origins of millions of different products around the world is an enormous logistical challenge and is beyond the scope of many conventional supply chain systems. Technology is crucial to solving this problem and that is the focus of the final article in this report.

NEXT GENERATION REAL TIME COMPLETE SUPPLY CHAIN VISIBILITY SOLUTIONS

Technology from the Stars

An Oil Rig is No Place to Play Hide and Seek.

Tom Cropper, Editor How deep space technology has a crucial impact on the more mundane world of supply management solutions.

HEN NASA developed technology designed to detect objects in deep space, it probably didn’t cross their minds that it could also be used for supply chain visibility solutions. Yet that’s precisely what has happened. As businesses in all industries look for ways in which they can inject more sophistication, cost effectiveness, automation and accuracy into their supply chain management solutions, technologies which originated in deep space is having a transformative impact. Not only are they cheaper, but they are easier to use, more flexible and reduce the probability of errors. As such they provide multiple bottom line benefits.

From Space to Earth The leading company in this field is Mojix Inc. Their market leading Mojix Star product traces its roots back to developments within NASA to track weak signals from deep space. The company’s founder Ramin Sadr led a team dedicated to tracking deep space probes from the Earth. One of their most successful missions was salvaging telemetry data from the Galileo space craft as it passed Jupiter after its high gain antennae failed to deploy. At the turn of the century, work began on taking this technology and using it in the commercial world. The result was groundbreaking technology designed to offer what Mojix describes as the ‘ultimate cognitive packet radio systems for sensory networks as well as intelligence for signal sorting and analysis, all applied to the commercial RFID industry.’11 The results in testing were remarkable, as the system was able to remotely detect signals from tags placed at the other end of a warehouse. The implications are profound. The secret of the Mojix Star concept is to replace traditional passive RFID tags. These promise the ability to track weak signals with an accuracy of 99%. It means there is no need for bulky and expensive battery powered RFID tags. Instead, these are replaced with passive RFID EPCGen2 tags which have a vastly extended range. The benefits are greater accuracy, less expense in terms of product

cost and labor, as well as more automation and reliability of data collection.

Practical Testing The oil and gas industry is in particular need of these products. The supply chain for the offshore industry has never been the most simple of things, but the expansion into remote, deep water and hazardous areas, coupled with the expansion of global and local supply networks has made the entire business far more complicated. Major oil giants are routinely working with hundreds of different suppliers, providing thousands of different parts. Each needs to be traced and catalogued, while the reliability of their origins needs to be confirmed. The complex nature of these networks means projects are continually subject to delays. Around 80% of projects overrun at some time. The expense of overruns can be felt in lost revenues, additional expenses and penalties. With the industry operating on increasingly tight margins, this can influence whether a project can be termed commercially viable or not. So far the biggest success has been their involvement with BP, which used the Mojix Star system for a dual platform project in the North Sea. The technology provided BP with real time information on the movements of products and components from their suppliers around the world to the platforms. It enabled them to reduce time wastage, incidents of loss and transport delays, to deliver multiple efficiency improvements which have been crucial in maintaining the commercial viability of the entire operation. The success of this initial project means they are planning to expand the system for use elsewhere in their work. They’re already putting similar technologies to good use as part of the clean-up operation after the Gulf of Mexico oil spill. BP had already begun using track and trace, and GPS technology the year before the explosion and were able to leverage this into their cleanup operation. Speaking to Information Week John Baumgartner, chief of staff in BPs technology office said: “when the Macondo incident did happen, we were able to respond very, very quickly”12

Redefining RFID Active Performance with Passive Economics www.mojix.com/solutions/ rfid-systems-oil.php

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NEXT GENERATION REAL TIME COMPLETE SUPPLY CHAIN VISIBILITY SOLUTIONS

Supply chains for global oil producers may be becoming increasingly complex, but these case studies show that technology can play an important role in simplifying the entire process The article goes on to show that BP has been using track and trace technology in a variety of ways including trackers on their oil trucks in Alaska. Using GSM based equipment they could transmit information about the location of the trucks via the cellular network or, when that was not possible, via satellite. The data could tell operators if there had been an accident or any kind of dangerous driving behavior such as speeding or sudden braking. It is difficult to underestimate the scale of the task. Each operator works with millions of different components, and tagging each and every one of these represents an enormous undertaking. An example of this could be seen in BPâ&#x20AC;&#x2122;s attempts to place tags on all the flanges and blinds at their Gelsenkirchen factory in Germany. This involves tagging over 100,000 individual flanges with RFID trackers which can be traced by engineers. The benefits of this technology are multiple, and given the amount of waste which can accrue within the supply chain, there are huge cost savings to be had. However, while this technology

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is already transforming the landscape, this is still a work in progress. Widespread adoption across the industry is still a long way off - the settlement of harmonized and consistent working practices between multiple participants would go a long way towards simplifying an increasingly complex supply chain landscape. Moreover, while much work has been done on developing highly advanced RFID tags which can transmit data, there is still room for improvement in how this information is analyzed and interpreted. As such, we can expect the next few years to see further advances in software packages which can translate real time signals into usable data that can enhance performance across business operations. The BP case study has often been used to highlight the way forward for the industry. It shows the benefits of greater automation and enhanced visibility in the supply chain system. Supply chains for global oil producers may be becoming increasingly complex, but these case studies show that technology can play an important role in simplifying the entire process.

NEXT GENERATION REAL TIME COMPLETE SUPPLY CHAIN VISIBILITY SOLUTIONS

References: Oil prices: decline turns into collapse: http://www.forbes.com/sites/billgreiner/2014/12/04/oil-prices-decline-turned-into-collapse/

US crude settles at $65.84: http://www.cnbc.com/id/102241964#.

Challenges related to deep water exploration: http://halliburtonblog.com/challenges-related-to-deep-water-frontiers/

The Arab uprisings and MENA instability: http://www.oxfordenergy.org/wpcms/wp-content/uploads/2014/03/MEP-8.pdf

The five challenges of todayâ&#x20AC;&#x2122;s supply chain: http://www.scdigest.com/ASSETS/ON_TARGET/10-08-12-3.php?cid=3649

Oil and gas supply chain project identifies $500,000 savings:

http://www.mabbett.eu/about/case_studies/105_oil_and_gas_supply_chain_project_identifies_500_000_savings 7

BP selects Mojix Next Generation passive RFID: http://www.mojix.com/news/2013/2013_0426_press_release.php

EIC Awards for supply chain excellence: http://www.the-eic.com/Events/UKEventsataGlance/EICNationalDinner/Award.aspx

Shell in the new decade: http://www.dundee.ac.uk/cepmlp/gateway/?news=31314

Shell adopts global supply chain process: http://www.aspentech.com/case_files/shell.pdf

Mojix RFID: http://www.mojix.com/about/index.php

BP uses track and trace technology to aid oil spill cleanup:

http://www.informationweek.com/it-leadership/bp-uses-asset-tracking-tech-to-aid-oil-spill-cleanup/d/d-id/1100016?

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Notes:

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http://www.mojix.com/ solutions/rfid-systems-oil.php

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