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SPECIAL REPORT

Next Generation Logistics and Tracking Solutions Automated and Integrated Remote Logistics Management – A New Offshore Organisational Paradigm A Critical Business For a High Growth Sector The Supply Chain Small Technology: Big Impact Cost Drives Process Development

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SPECIAL REPORT: NEXT GENERATION LOGISTICS AND TRACKING SOLUTIONS

SPECIAL REPORT

Next Generation Logistics and Tracking Solutions Automated and Integrated Remote Logistics Management – A New Offshore Organisational Paradigm

Contents

A Critical Business For a High Growth Sector The Supply Chain Small Technology: Big Impact

Foreword

Cost Drives Process Development

2

John Hancock, Editor

Automated and Integrated Remote Logistics Management – A New Offshore Organisational Paradigm 3 Identec Solutions Norway AS 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

Key Considerations when Specifying a Logistics and Tracking Solution Functionality Hardware Software Deployment Support Services Overall System Performance What Does the Future Hold?

A Critical Business For a High Growth Sector

Publisher Kevin Bell

A Growth Sector More and More Facilities to Supply Quality as Well as Quantity

Business Development Director Marie-Anne Brooks

The Supply Chain

Editor John Hancock Senior Project Manager Steve Banks Advertising Executives Michael McCarthy Abigail Coombes

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John Hancock, Editor

Supply Chain; Established Idea, Recent Term A More Standardised Approach A Growing Management Discipline Offshore Supply Vessels RFID

Production Manager Paul Davies

Small Technology: Big Impact

For further information visit: www.globalbusinessmedia.org

Keeping Track with RFID and EPC From Origins to the Present How RFIDs Can Be Used

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.

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Peter Dunwell, Correspondent

12

Francis Slade, Staff Writer

Cost Drives Process Development

14

John Hancock, Editor

Challenging Places: Challenging Requirements Supply Chain Management as Good as the Information it Uses Sustainability and Responsibility Sharing Information Offshore Supply Vessels Summary

References 16 © 2013. 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. WWW.OFFSHORETECHNOLOGYREPORTS.COM | 1


SPECIAL REPORT: NEXT GENERATION LOGISTICS AND TRACKING SOLUTIONS

Foreword W

HILE MATERIALS and equipment needed

readers are mounted on gates, cranes and forklifts.

to do a job were once sourced as close as

In this way, every time a container is moved and

possible to where the job was being done, that is

every time the manifest for its cargo is updated, that

no longer always the case. Globalisation has made

event and the associated documentation are

it possible to source materials and equipment

immediately available online for all interested parties.

from suppliers who can deliver the best quality

In the next piece Peter Dunwell examines the

for the best price at a time most convenient to

business processes of logistics and tracking, first

the user. This has become increasingly feasible

of all looking at the sector growth that has made

with the arrival of a business process known as

offshore oil and gas such a keen participant in the

‘supply chain management’ in which the logistics

development of better supply chains and processes.

of bringing the right materials and equipment to

We then look at the supply chain itself, how it has

the right place at the right time are supported by

developed, what it does and how it has become one

the ability to track each item within the supply

of the principal business processes of our day. One of

chain. That in turn is supported by a range of

the most powerful facilitators of logistics and tracking

technologies knitted together by sophisticated

solutions has been the radio frequency identifier

business processes and highly capable software.

(RFID) tag supported by electronic product codes

It is very much a story of our times.

(EPCs) and real-time locating systems (RTLSs) –

The opening article in this Special Report looks

Francis Slade looks into where they came from how

at Automated and Integrated Remote Logistics

they work and where they are used. Finally we look at

Management and points out that, while information

the sources of those cost and efficiency drivers

on deliveries has been available at the point of packing

that make the technology that supports logistics

by the supplier and unpacking offshore, in between

and tracking solutions so essential.

these points, the physical location of supplies has

It is no exaggeration to say that offshore oil and gas

been practically a matter of guesswork. The waste of

could not exist without the ability to move countless

time, effort and resources that this causes can mount

costly and process-critical items around the world.

up to millions of dollars. These challenges are met by an end-to-end system such as WatcherRLM from Identec Solutions, under which every cargo carrying unit and its contents are tagged and

John Hancock Editor

John Hancock joined as Editor of Offshore Technology Reports in early 2012. A journalist for nearly 25 years, John has written and edited articles and papers on a range of engineering, support services and technology topics as well as for key events in the sector. Subjects have included aero-engineering, testing, aviation IT, materials engineering, weapons research, supply chain, logistics and naval engineering.

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SPECIAL REPORT: NEXT GENERATION LOGISTICS AND TRACKING SOLUTIONS

Automated and Integrated Remote Logistics Management – A New Offshore Organisational Paradigm WATCHERRLM

Identec Solutions Norway AS

O

Effective Remote Logistics Management therefore relies on accurate, up to date visibility of the location of equipment and supplies – put simply, by knowing exactly what is where now, it is possible for the teams responsible for offshore installation supplies to better anticipate what will be needed and where it will be needed, to organise those requirements to be fulfilled, and to monitor delivery. The same applies when equipment and materials are no longer required offshore and must be returned onshore). However, up to now, while information on deliveries has been available at the point of packing by the supplier and unpacking offshore,

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FFSHORE INSTALLATIONS are in an unenviable position. They are totally dependent for every item they use in their operations on a complex supply chain. This supply chain integrates multiple processes, organisations and people. Every offshore project requires meticulous advance planning to ensure the right equipment and materials arrive at the right place at the right time. Where space is at a premium it is vital to receive goods when they are needed, not to store them in advance, equally when a delayed or mis-directed part holds up operations costs can increase dramatically.

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SPECIAL REPORT: NEXT GENERATION LOGISTICS AND TRACKING SOLUTIONS

Although more data is generated, less physical paperwork frees up personnel to focus on operational rather than administrative tasks and the time saved by the automation of operational processes further increases productivity

in between these points, the physical location of supplies has been practically a matter of guesswork. We can add to this scenario the inevitable complication of human error: containers do go missing. When they do, people have to search for them, posing Health and Safety risks in busy supply bases amongst heavy machinery. Similarly if the missing container is shipping a high value asset, the loss in revenue for the asset owner can be significant. Multiply these issues by the sheer number of deliveries a day and it is easy to see how the waste of time, effort and resources quickly mounts up into the millions of dollars. As oil and gas reserves become ever more remote and complicated to locate and exploit, the essential focus on cost containment does not allow for this level of waste. In fact the drive to lower operating costs is resulting in the definition of new organisational paradigms involving: • Low manning levels, •M  inimization of non-operational activities offshore, and •S  implification and modularization of processes. Such a fundamental change to the operational framework calls for a parallel paradigm shift in logistics management. This is generally expected to be achieved by leveraging the very latest in Automated Identification and Data Capture technology – the next generation of tracking and tracing solutions will form the foundation upon which the new operational paradigm can be built. In the case of Cargo Carrying Unit (CCU) tracking and tracing, the very real world logistics challenges posed by offshore operations can be effectively met with a flexible, end-to-end system such as WatcherRLM from IDENTEC SOLUTIONS. But what does the solution actually look like? What is the ideal outcome?

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It is possible to imagine a completely integrated supply chain where every CCU and its contents are tagged with an appropriate tag (active or passive depending on the cargo), and readers are mounted on gates, cranes and forklifts. Every time a container is moved and every time the manifest for its cargo is updated, that event and the associated documentation are immediately available online for all parties with an interest in the CCU and its cargo to interrogate. The immediate impact of such a system is an exponential increase in the amount of raw data available, as tags and readers generate a constant stream of updates on the location of CCUs and their contents. The value of the system is in its ability to turn that data into meaningful, useful and actionable information which feeds seamlessly through to ERPs, supporting business processes and leading to improved decision making. Although more data is generated, less physical paperwork frees up personnel to focus on operational rather than administrative tasks and the time saved by the automation of operational processes further increases productivity. The real time visibility of assets leads to their full optimisation, increasing efficiency and ultimately leading to cost savings as delays, errors and omissions are minimised. And all of this leads to safer operations and lower environmental impact.

Key Considerations when Specifying a Logistics and Tracking Solution The issues to consider when specifying a logistics and tracking solution can be grouped into a number of headings: • Functionality • Hardware • Software • Deployment (Installation and Commissioning)


SPECIAL REPORT: NEXT GENERATION LOGISTICS AND TRACKING SOLUTIONS

WATCHERRLM

Functionality The first step in specifying a solution is to identify the operational processes within your business that are most suitable for automating. Each operational process to be automated canbe synchronised with an associated business process in order to optimally enhance decision making. In addition to tracking CCU and their cargo, processes that can be automated are: • Manifest updating • Certification alerts • Management of missing tags/untagged CCUs Furthermore, with space on offshore rigs at such a premium and the cost of installing new systems being significantly higher offshore than onshore, the ability to integrate the tracking and tracing solution with other monitoring solutions, such as POB and Mustering, is highly desirable – installing the same infrastructure for both solutions rather than two separate solutions saves both space and resources. Such additional functionality can be specified as a future requirement.

Hardware In the case of tags and readers, the primary considerations arise from the physical environments they will be operating in and who will be using them. The equipment needs to be durable both in terms of environmental factors such as explosive conditions and in terms of resistance to physical wear and tear. Low power consumption is important to maximise uptime and thus connectivity. Where PDAs and PCs feature an interactive screen this will benefit from a night mode and will need to be capable of being operated by someone wearing

safety gloves. The interface should be user friendly and contextualised. As with many logistics processes, the choice of method to tag the asset will depend on the value and the size of the asset being tracked. All CCUs will be tagged with active RFID tags, as will many of the high value assets being shipped. Passive RFID, barcode and other methods will be used as shipments are built up into consignments to be included in the CCU. Active RFID tags may also be used to provide more visibility on the status of the asset, for example the internal temperature of the CCU. Readers can be fixed, e.g. for use on gates and cranes, or mobile e.g. for use on forklifts and onboard vessels. In the case of servers, on-site servers providing local data storage are a must to ensure business continuity during any downtime. Durability and power management will again be considerations for such servers as will memory capacity and redundancy. Devices should be configured to use a variety of communication and location channels – WAN/LAN/Wi-Fi/GPS/RFID to ensure maximum connectivity and reliability.

VISIBILITY DELIVERED.

Software While there is no system without the hardware, it is the software that sets one solution apart from another. The software needs to be flexible enough to be interoperable at both ends of the system – at the input end it must be capable of integrating with a variety of hardware; legacy, current and future – and at the output end it will need to be able to integrate with a variety of ERP applications and with updates to those applications. But flexibility should not compromise robustness and reliability. Software comprises data acquisition middleware, data processing software and WWW.OFFSHORETECHNOLOGYREPORTS.COM | 5

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•S  upport Services (Upgrades, Maintenance and Training) • Overall System Performance


SPECIAL REPORT: NEXT GENERATION LOGISTICS AND TRACKING SOLUTIONS

Harmonization will lead to reduced costs and greater efficiency for everyone as all end users, whether major or independent oil and gas companies, suppliers, bases or CCU owners, benefit from economies of scale

databases/data repositories. Generally, where cost containment is an objective, an off-theshelf solution with configuration capabilities is preferable over a customised solution. Ideally the middleware should be available to purchase by third parties to develop their own top layer applications. Consideration should be given to the user interface – how is the track and trace information presented and visualised? Is it user friendly?

Deployment Essential for ensuring that the system is configured to the specific requirements of the enterprise and delivers added value, deployment starts with a site survey, proposed system architecture and project plan and finishes with an acceptance test certificate. Deployment will proceed smoothly and quickly where an experienced, dedicated and accountable project team is assigned who are able to provide the following: • project scoping, • business process consulting, • feasibility analyses, • system design documentation, and •h  ardware and /or software pre- and postinstallation support.

Support Services The story does not end with deployment. In order to estimate the true long term cost of an AIDC/RLM system the training, maintenance and support services required should be specified. To obtain maximum benefit from the system, key users and administrators at each site will need to be trained in the following: • Hardware training, including retrofitting; •S  oftware training, including ERP functionalities; • Configuration and workflows; • Administration  of the system and device management; and •Troubleshooting Planned upgrades arise out of a number of areas, including but not limited to; the constant evolution of hardware, ERP applications and mobile operating systems; legislation and best practice. Support for users and assistance with troubleshooting needs to be accessible in line with business operating requirements.

Overall System Performance The market for RLM solutions is maturing fast and the underlying technology is proven, for example as a pioneer in the industry IDENTEC SOLUTIONS has been at the forefront of intelligent

WATCHERRLM DASHBOARD

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SPECIAL REPORT: NEXT GENERATION LOGISTICS AND TRACKING SOLUTIONS

active RFID system development since 1999. Key performance indicators and other overall system capabilities which should be specified include: • Stability, availability and performance • IT Security and user authentication • Volumetry • Scalability and customizability • Standardization and interoperability

Contact Identec Solutions Norway AS Kartheia 3 4626 Kristiansand Norway Tel: 0047 3800 3530 Web: www.identecsolutions.com

What Does the Future Hold?

WATCHERRLM

VISIBILITY DELIVERED.

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With Automatic Identification and Data Capture underpinning the new offshore operational paradigm, the outlook for the future revolves around establishing a stable, open architecture and standardised protocols in order to create a global RLM infrastructure for a global industry. Such harmonization will lead to reduced costs and greater efficiency for everyone as all end users, whether major or independent oil and gas companies, suppliers, bases or CCU owners, benefit from economies of scale, while competition and innovation among system and hardware providers is fostered. Crucial to this vision is solving the ‘data management challenge’: each company in the logistics cycle has its own balance to strike between, on the one hand, achieving optimal co-ordination of operations through co-operation with customers and competitors, and on the other maintaining confidentiality of commercially sensitive information. INSERT CHART – WatcherRLM Dashboard – CAPTION – WatcherRLM Dashboard Cloud hosting of data provides the ideal solution to this challenge. Data from operating companies remains separate and confidential and is not merged, but discretionary data sharing in support of individual business objectives is enabled. Efficient communication, planning and logistics management is facilitated not just internally but across and between stakeholders. With over 13 years of industry experience and expertise IDENTEC SOLUTIONS are on the way to becoming the industry standard in track and trace technology. As such they are well placed to provide the open architecture and standardised protocols that could deliver the ongoing efficiency gains and cost savings that will help the industry to continue to meet the global demand for oil and gas. Truly visibility delivered, as we like to say at IDENTEC SOLUTIONS.

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SPECIAL REPORT: NEXT GENERATION LOGISTICS AND TRACKING SOLUTIONS

A Critical Business For a High Growth Sector Peter Dunwell, Correspondent Offshore oil and gas is a large, globally important and growing industrial sector: ensuring that it always has the equipment and supplies it requires is every bit as important

Before we look too closely at logistics and tracking solutions we need to look at what is happening in the offshore oil and gas sector, why that has led to the development of strong logistics and supply chain solutions and what is used to deliver those solutions

E

VERYTHING HAS to have a purpose. Seen in isolation, we might question the purpose of a particular process or piece of equipment but seen in the context of the sector or industry in which it is used, it will often become absolutely clear as to that purpose, why it has developed the way it has and what drivers are shaping its future development. In the case of any process or equipment associated with the world of offshore oil and gas exploration and production, that is particularly true because, given the massive investments and running costs involved, everything that happens must add value to the sector as a whole. In that vein, before we look too closely at logistics and tracking solutions we need to look at what is happening in the offshore oil and gas sector, why that has led to the development of strong logistics and supply chain solutions and what is used to deliver those solutions to the points where they are needed.

A Growth Sector In the case of offshore oil and gas, the big driver behind most developments is the growth enjoyed on the back of increases in demand from a world where, short term economic downturns aside, everybody aspires to live at the highest standards available. That requires energy. Infield systems Ltd in their 2013 report, ‘Global Offshore Oil and Gas Outlook’ authored by John Ferentinos1, reckoned that, between now and 2018, the sector will be investing something in the region of $800 billion with subsea investment in particular, enjoying a gross annual growth rate of 14%. It hasn’t been an overnight growth – offshore production is relatively recent in historical terms. Underwater oil wells have been established since at least the nineteenth century but “The first commercial offshore oil rig began drilling in 1947 off the coast of Louisiana in the Gulf of Mexico in just 14 feet of

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water. Permanent platforms were the first offshore oil rigs to drill successfully in deep waters, followed by the drill ships and semi-submersible offshore oil rigs that became widespread in the 1960s. These could reach to a depth of 1,000 feet. Since then… capabilities have evolved greatly and the amount of offshore oil rigs in use worldwide has skyrocketed.”2

More and More Facilities to Supply Going back to the Infield Systems report, the operational platforms fleet in 2012 stood at just over 11,000. But apart from operational platforms there are also exploration platforms. In its report ‘Panorama 2012, a look at Offshore hydrocarbons’3 IFP Energies nouvelles calculated that… “In September 2011, the world fleet of offshore drilling rigs (jack-up rigs, platforms, submersibles, drilling vessels, etc.) totalled 1,320 units, of which 760 were engaged in drilling around the world.” The same report also estimates that more than 400 new production facilities (fixed, floating and subsea platforms) are being constructed every year and reports that the number of offshore construction projects has grown by an average of 15% per year since 2005: and while the rate of growth may have moderated to less than 5% during the economic downturn, it was expected to have resumed at its high level from 2011 onwards. Of course, not all facilities will be adding to the overall number because there will be old platforms and installations being decommissioned every year and, while production is projected to increase in the next decade, the number of platforms may well decrease, albeit that each platform will become increasingly complex with production facilities for a number of wells. Also, not all old facilities are being decommissioned; a growing number of platforms are undergoing upgrades to extend their capabilities and to extend their lives well into the 21st century.


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Quality as Well as Quantity And it isn’t just the ability to transport equipment and materials out to locations as far as 350 km away from land (Huskey’s SeaRose FPSO, Canada). Because oil and gas production

is very much an industrial process, there needs to be a high degree of predictability and reliability in the correlation between when things are needed and when they are available. There is very little space on board offshore platforms for large-scale storage facilities so the ‘just-in-time’ method of supply used across all industries these days must also be available for this industrial process. Also, in an industry where costs are routinely measured in hundreds of millions or even billions of dollars, waste is a very expensive luxury. Waste in this context is downtime but with complex processes in massively challenging environments the inventory of materials, supplies, individual parts, subassemblies and whole assemblies needed to keep the system working is enormous; creating a supply challenge all of its own. When working at these enormous distances from land, the effectiveness and viability of any exploration or production facility will depend almost entirely on the quality of its supply lines. Given the enormous importance of the oil and gas offshore sector, it can be seen why supplying that sector is itself a critical business.

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All of this boils down to the most compelling statistic of all: 30% of the world’s oil production comes from offshore; that’s why it’s important. And it’s a growing sector in a growing industry. The IFP Energies nouvelles report explains that in 2010, offshore production regions represented nearly 650 billion barrels of oil equivalent (Gboe) or 20% of known remaining global oil reserves. In terms of gas, these regions contain 25% of known reserves and 28% of remaining reserves. The conclusion that the report draws is that offshore is therefore a nonnegotiable imperative for oil companies, but one that presents multiple technological challenges… it also presents multiple supply challenges to ensure that all of the equipment and materials needed to support this critical production area are always available where they are needed, when they are needed.

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The Supply Chain John Hancock, Editor

Getting what is need to the point where it can be used in a sector where installations are many kilometres offshore is the job of a very specialist business process

Supply Chain Management (SCM): the management of the flow of goods. It includes the movement and storage of raw materials, work in process inventory, and finished goods from point of origin to point of consumption

Supply Chain; Established Idea, Recent Term In the previous article, Peter Dunwell wrote of the importance of supply to the offshore oil and gas sector and he wasn’t exaggerating. The Capgemini White Paper ‘BPO Supply Chain Management’4 tells us that “The supply chain forms the core of most businesses.” In fact, while the supply chain concept has been around for centuries (it was why empires were built) the term itself was coined as recently as 1982 by Keith Oliver in an interview for the Financial Times. There are numerous definitions available on Wikipedia5 although they largely refer to supply chain as used in the consumer market, “a supply chain is a system of organisations, people, activities, information, and resources involved in moving a product or service from supplier to customer.” Change the word ‘customer’ to ‘user’ and that definition will serve us well. Supply chains as a BPO sector are all of a piece with today’s notion of businesses focusing on core capabilities; relying on external relationships to supply what they need beyond that core. Overriding enterprise boundaries, supply chains organise business processes as value chains of multiple companies. And in the offshore oil and gas sector, the supply chain is itself big business. As Mike Tholen explained in his May 2013 Oil & Gas Journal article, ‘UK supply chain flourishes on record investment’6 “The supply chain itself makes a significant and growing economic contribution. Its expertise is in strong demand internationally… More than 40 years of exploration and production operations in the UK have resulted in a supply chain that offers a unique array of products, services and expertise, developed in one of the world’s most challenging offshore environments...”

“Integrated supply chains [are] important to Statoil…” and that the company was developing a Supply Chain Operations Reference model (SCOR). Even in 2013, supply services for offshore operations were already demanding with more than 900,000 tonnes of supplies shipped annually to rigs and installations and 50 ships working for Statoil alone on the Norwegian Continental Shelf (NCS). Also, again in 2003, Statoil were thinking about how to get the best value from their supply chain, including addressing the fact that there were a number of different supply chain models used by the business and, importantly, data systems were being used to help manage the supply chain and inventories. More recently and across the industry, supply chain methodologies have seen some standardisation including in the UK, from Oil & Gas UK, the Supply Chain Code of Practice (SCCoP), a set of best practice guidelines which the UK oil and gas industry is encouraged to follow in order to help businesses: • Improve overall performance; • Eliminate unnecessary costs; • Add value and boost competitiveness. The code breaks supply chain down into three key stages: • Plan; • Contract; • Perform and Pay All of this, of course, has been greatly facilitated by the arrival of the Internet. As CIO Magazine8 puts it, “the cheap, ubiquitous nature of the Internet… [has] thrown things more wide open. Now, companies can connect their supply chain with supply chains of their suppliers and customers together in a single vast network that optimises costs and opportunities for everyone involved.”

A More Standardised Approach

A Growing Management Discipline

This is not a new outlook. As long ago as December 2003 in a presentation to Supply Chain World Europe, Statoil7 confirmed that

Along with the supply chain has grown an associated management discipline, Supply Chain Management (SCM): the management

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SPECIAL REPORT: NEXT GENERATION LOGISTICS AND TRACKING SOLUTIONS

management and performance of their supply chain to a specialist. In the case of offshore oil and gas, two devices contribute significantly to the improvement and efficiency of the supply chain, one very large device and one extremely small device.

WATCHERRLM

Offshore Supply Vessels The very large device is the offshore supply vessel which has, over decades of development based on experience, become a very sophisticated piece of equipment. Bjørnar Aas, Øyvind Halskau Sr. and Stein W. Wallace in their article for Molde University College, ‘The role of supply vessels in offshore Logistics’9 explained of Norway that, “oil and gas production takes place offshore. In order to ensure continuous production, the offshore installations need to be supplied regularly. The only way to do this is by using supply vessels that represent one of the largest cost elements in the upstream supply chain of oil and gas installations.”

VISIBILITY DELIVERED.

RFID The extremely small device is the radio frequency identification (RFID) tag described in the CIO Magazine article (see above) as “barcodes on steroids”. Like barcodes, RFID tags can identify an item but additionally can tell what type it is, where it has been, when it expires and what tools are needed with it; in fact, any information considered useful about the item. Also RFID tags don’t need to be passed in front of a reader to divulge their information. Because they respond to the radio signal from a reader, all RFID tags attached to items on a single pallet can be read by a scanner as the loaded pallet passes. RFID technology will be covered in the next article. In conclusion, it is no exaggeration to say that, without an organised supply chain, a significant part of the offshore oil and gas sector would be unviable, the cost of energy would be considerably greater and the availability considerably less. That’s the importance of the supply chain. WWW.OFFSHORETECHNOLOGYREPORTS.COM | 11

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of the flow of goods. It includes the movement and storage of raw materials, work in process inventory, and finished goods from point of origin to point of consumption. Another slightly consumer focused definition but in fact pretty correct for any circumstances. CIO Magazine again describes SCM as, “the combination of art and science that goes into improving the way your company finds the raw components it needs to make a product or service and delivery to customers.” The article goes on to identify five basic components of SCM: Plan; Source; Make; Deliver; and Return. For the full explanation, refer to the article (see above). The Council of Supply Chain Management Professionals defines supply chain management as encompassing, “the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities… In essence, supply chain management integrates supply and demand management within and across companies.” Supply chain management also addresses a number of problems in the business: • Distribution network configuration; • Distribution strategy; • Trade-offs in logistical activities; • Information; • Inventory management; and • Cash flow But, to make it work, supply chain management requires a change of focus away from managing individual functions and towards integrating all supply activities into key supply chain processes. Such business process integration requires collaborative work between various participants in the chain and willingness as well as ability to share information. The expert oversight of this integrated approach to supply is a specialist function and is why supply chain has become a significant part of the Business Processing Outsource (BPO) industry with increasing numbers of companies handing the


SPECIAL REPORT: NEXT GENERATION LOGISTICS AND TRACKING SOLUTIONS

Small Technology: Big Impact Francis Slade, Staff Writer Although RFID tags are small their ubiquity gives them a large impact in supply chain and asset management

RFID is the acronym for Radio-frequency identification, the wireless noncontact use of radio frequency electromagnetic fields to transfer data

I

RFID is the acronym for Radio-frequency identification, the wireless noncontact use of radio frequency electromagnetic fields to transfer data, for the purposes of automatically identifying and tracking tags attached to objects10. RFID tags store information about the item to which they are attached and can pass that information to a reader without needing to be in sight of the reader. This capability makes RFID more useful than barcoding for objects which might, at the time of reading, be part of a consignment or a larger assembly. At the heart of RFID capability is the Electronic Product Code (EPC). Developed as a successor to the barcode, EPC numbers identify products as they move through the global supply chain11. With each item’s EPC recorded in its RFID tag, the system can be used anywhere that a unique identification is required. This can range from a pet owner’s name and address, so that a lost animal can be returned, up to the parts of an aero engine so that engineers can quickly identify the current stage in its working and maintenance life and the parts and tools required to effect repairs or maintenance.

less detectable. However, it was probably Mario Cardullo’s passive radio transponder with memory invented in 1973 that could be termed the first true RFID device. The main brake on development until recently was the price of the tags (only a few cents each but if you need millions of them for a mass produced item they could work out costly), and of the readers which were around $1000 each. There are three basic types of RFID tag: passive tags rely entirely on the energy transmitted to them from the reader; battery assisted passive tags still require a signal from the reader before they commence transmission and an active tag has an onboard battery with which it periodically transmits its ID signal so that it can be tracked wherever it is; this is particularly useful when high-value objects are being transported. Tags can also be either read-only, with an EPC embedded at the point of manufacture, or can be read-write where the user can assign relevant data into the tag in addition to that tag’s original information. Kevin Bonsor and Wesley Fenton’s article ‘How RFID Works’ in ‘How Stuff Works’ neatly sums all this up12… “At a basic level, each tag works in the same way: • Data stored within an RFID tag’s microchip waits to be read. • The tag’s antenna receives electromagnetic energy from an RFID reader’s antenna. • Using power from its internal battery or power harvested from the reader’s electromagnetic field, the tag sends radio waves back to the reader. • The reader picks up the tag’s radio waves and interprets the frequencies as meaningful data.

From Origins to the Present

How RFIDs Can Be Used

The origins of this ubiquitous little device (today’s RFID tags are pepper grain size) go back to 1945 when Léon Theremin developed an espionage tool which retransmitted incident radio waves. Its strength was that it was a passive device, only energised by radio waves from an outside source and therefore

The use of RFID technology is nothing new on offshore oil and gas platforms where RFID tags have been worn by personnel as a safety measure. It means that they can be located at any time to avoid them inadvertently moving into areas where their safety might be compromised and, more importantly in the

N THE previous article, John Hancock mentions RFID as one component in the supply chain management process: however, that does not really do justice to RFID’s enormous impact on the management of not only supply chains but also processes such as inventory, stock control and use of timelimited items.

Keeping Track with RFID and EPC

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SPECIAL REPORT: NEXT GENERATION LOGISTICS AND TRACKING SOLUTIONS

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Although RFID can be used for everything from tracking cattle in the food chain to tracking goods in the supply chain, it is this latter application where the most growth is occurring. The ability to track shipping containers, high-value tools and assets and equipment such as triggering equipment down oil wells is of immense value not only for security but also because it enhances planning and management processes when, with some reliability, it is possible to know where the right items are at any time. That capability is of significant value in a range of management processes including asset management where high value objects are the norm. “RFID promises more effective asset management by providing real-time information about location of assets ensuring employees always have equipment, tools and other resources when and where they need them.” is how Zebra14 describes that. RFID technology and the systems that utilise and support it are set to revolutionise the management of equipment and materials supplies in offshore oil and gas.

VISIBILITY DELIVERED.

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event of an emergency they can be very quickly found. But RFID tags can do a great deal more than that. An RFID reader transmits an encoded radio signal to interrogate the tag which, on receiving the message responds with its own identification which might be all that is needed. However when more information is needed the RFID tag can include and respond with specific product related information such as its stock number, production date, use expiry (where relevant), allowed and disallowed applications plus a whole host of other information for a potential user. An industry that is leading the way in RFID adoption is commercial aviation where airlines have to deal with tens of thousands of parts on, often, hundreds of aircraft. In his early 2013 article in Aircraft IT magazine, Rick Lewis explained one of the reasons why RFID was implemented at Delta airlines13: “knowing when to purchase or replace life limited parts to minimise under-utilisation or expiration may seem like a small thing but…” he continued to explain just how many components this could apply to on a fleet of 700 or more aircraft.


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Cost Drives Process Development John Hancock, Editor And process development drives new ways of working to reflect changing challenges in the offshore supply market.

As easily-exploited oil and gas reserves are increasingly depleted, the price of energy rises making more remote, inaccessible and technically demanding reserves worth exploiting if the technology is available to exploit them

Challenging Places: Challenging Requirements Getting supplies to remote places is always a challenge, even on land: however, when the remote location is at sea, up to 350km from shore and subject to extremes of weather, the challenge becomes a trial. Consider; offshore oil and gas platforms are extremely expensive installations and most of the space on them is devoted to the task of extracting, processing and transporting oil and gas reserves. There is little room for storing quantities of materials or equipment other than that which is in immediate demand. And yet, also because of their costs, platforms cannot afford to lose time to equipment failures, maintenance or materials shortages. So, when materials, equipment and tools are required, they must be delivered with minimum delay. This is known as ‘just-in-time’ delivery in which nothing is there until it is needed but it must be there as soon as it is needed. For these reasons, logistics and supply chain management are important parts in the offshore management process. The task isn’t getting any easier. As easilyexploited oil and gas reserves are increasingly depleted, the price of energy rises making more remote, inaccessible and technically demanding reserves worth exploiting if the technology is available to exploit them. But all of this adds further to the supply challenge.

Supply Chain Management as Good as the Information it Uses Given this importance of the supply chain, it is perhaps not surprising that that process itself has been subject to significant management thinking. There is a Supply Chain Council (SCC) which has endorsed the Supply-Chain Operations Reference (SCOR) that has become the standard diagnostic tool to supply chain management. In support of this there is also

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supply chain management software described by CIO magazine15 as “possibly the most fractured group of software applications on the planet.” The problem is that different companies have different needs and that, without high-quality information, you’re unlikely to get high-quality software outcomes and processes. Again, CIO magazine makes the point that, “the old adage about systems only being as good as the information that they contain applies doubly to SCM [supply chain management]… [Also] if employees bypass supply chain systems and try to manage things manually… even the most expensive systems will provide an incomplete picture of what is happening in a company’s supply chain.” The information required is a mixture of the business taken from a system like ERP (enterprise resource planning) which will usually include the parameters within which the supply chain must operate; and information about the object being supplied which, these days, will increasingly be taken from an RFID reading.

Sustainability and Responsibility Another consideration is that supply chain, like all business processes, is nowadays subject to scrutiny in respect of its sustainability and social responsibility. In this respect, Oil & Gas UK has created a Supply Chain Code of Practice (SCCoP)16 which outlines a set of best practice guidelines for the UKCS oil and gas industry to: • Improve performance; • Eliminate unnecessary costs; • Add value and boost competitiveness. There are three key stages that apply to the SCCoP: • Plan; • Contract; • Perform and Pay. Compliance with the code during each of these stages is expected to help companies


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Sharing Information Another key requirement for successful supply chain management is the sharing of information between different participants in the process. The capability that this information sharing facilitates is the real-time locating system (RTLS)17 which is what manages the information gleaned from RFIDs (radio frequency identifiers – see earlier article) to locate objects in the supply chain. Shared information enables end-to-end vision, making supply chain management an informed and evidence-based rather than an instinctive process.

Offshore Supply Vessels The other key component in this process is the offshore supply vessel. These are becoming increasingly sophisticated machines and larger vessels… reflected in greater costs which, in turn, introduce a further incentive for supply chain efficiency – users don’t want to pay for the use of vessels longer than is necessary and owners want to usefully deploy the vessels for the greatest possible proportion of time. This is a fast growing market. “The offshore support vessel market has experienced several years of sustained growth on the strength of high global demand for offshore exploration and

development. With limited vessel availability, day rates reached record levels during 2006, while during 2007 rates have remained relatively high. This has led to an order book of unprecedented size, with over 500 vessels currently on order… as owners try to capitalise on the strength of the offshore support sector.” says Ocean Shipping Consultants18. Given that the world economy is currently recovering its momentum following the downturn, who would bet on rates falling? The same report suggests, “The search for new hydrocarbon reserves has pushed the boundaries of technology to facilitate new discoveries in deeper water and harsher environments. Under the Base Case, offshore oil production is forecast to increase from an estimated 25m bbls/d [barrels per day] during 2007 to 30m bbls/d by 2010 and 42m bbls/d by 2020. This equates to a rise in output of approximately 62%.”

VISIBILITY DELIVERED.

Summary It all points to a need to get the best value from every component process and that would certainly be true of logistics and supply chain. Given the complexity of this process itself and the need to keep both equipment and techniques as well as software right up-to-date, a growing number of operators are outsourcing their supply management in business process outsourcing (BPO) deals which ensure that the process is always up-to-the-minute.

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achieve the highest standards of business ethics and comply with all relevant legislative requirements.


SPECIAL REPORT: NEXT GENERATION LOGISTICS AND TRACKING SOLUTIONS

References: 1

 Infield Systems, ‘Global Offshore Oil and Gas Outlook’ http://www.gaselectricpartnership.com/HOffshore%20Infield.pdf

2

eHow http://www.ehow.com/about_4597210_offshore-oil-rigs.html

3

IFP Energies nouvelles

4

http://www.ifpenergiesnouvelles.com/content/download/71825/1530746/version/6/file/Panorama2012_09-VA+-+HydrocarbureOffshore.pdf Capgemini White Paper ‘BPO Supply Chain Management’

http://www.capgemini.com/resources/capgemini-bpo-supply-chain-management-white-paper

5

Wikipedia http://en.wikipedia.org/wiki/Supply_chain_management

6

Oil & Gas Journal article ‘UK supply chain flourishes on record investment’

http://www.ogj.com/articles/print/volume-111/issue-8/special-report-offshore-europe/uk-supply-chain-flourishes-on-record.html

7

Supply Chain World Europe, Statoil http://supply-chain.org/f/STATOIL_SCC.pdf

8

CIO Magazine http://www.cio.com/article/40940/Supply_Chain_Management_Definition_and_Solutions?page=2&taxonomyId=3207

9

‘The role of supply vessels in offshore Logistics’ http://eprints.lancs.ac.uk/45409/1/10.pdf

10

Wikipedia http://en.wikipedia.org/wiki/Radio-frequency_identification

11

RFID Journal http://www.rfidjournal.com/site/faqs

12

How Stuff Works http://electronics.howstuffworks.com/gadgets/high-tech-gadgets/rfid.htm

13

Aircraft IT www.aircraftit.com/Uploads/eJournal/MRO/PDF/28fdf47e98264a1.pdf

14

Zebra http://www.zebra.com/id/zebra/na/en/documentlibrary/product_brochures/rfid_supply_chain.html

15

CIO magazine http://www.cio.com/article/40940/Supply_Chain_Management_Definition_and_Solutions

16

Oil & Gas UK

http://www.oilandgasuk.co.uk/knowledgecentre/SupplyChainCodeofPractice.cfm

and… http://www.oilandgasuk.co.uk/cmsfiles/modules/publications/pdfs/SC036.pdf

17

RFID Journal https://www.rfidjournal.com/purchase-access?type=Article&id=7266&r=%2Farticles%2Fview%3F7266

18

Ocean Shipping Consultants http://www.maritime-rh.com/maritime_docs/osc_press_releases/Offshore_Support_Vessels_to_2020.pdf

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Defence Industry – Special Report on Next Generation Logistics and Tracking Solutions