Supply Chain Trends Influencing the Energy Industry

There is a lot of growth toward implementing new technology innovations within the supply chain, and the Internet of Things (IoT)—a network that connects physical objects, communications, software, and sensors to allow machines to transfer data over a network without human-to-human or human-to-computer interaction—has garnered a high level of interest and hype, largely driven from the consumer market with focus on smart, connected kitchen appliances, cars, and wearable activity trackers.

However, the logical extension of the IoT to industrial applications has the potential to transform numerous industries, including transportation, manufacturing, pharmaceutical, and energy, while working under the new name “Industrial IoT.” The disruptive power of the Industrial IoT will bring non-technology industries into the digital age by connecting machines, factories, and industrial infrastructures via sensors and other devices. The use case for implementing Industrial IoT technologies will typically revolve around optimizing the product or business itself. For example, manufacturers are already using industrial IoT capabilities to improve operational efficiency through predictive maintenance by achieving results such as savings on scheduled repairs (12%), reduced maintenance costs (nearly 30%), and fewer machine breakdowns (almost 70%), according to the World Economic Forum[1].

Right now, the energy industry is experiencing complex global growth and other associated challenges such as aging infrastructures, complex and interdependent systems, increasing regulatory controls, and higher consumer expectations. Industry leaders feel the pressure to increase supply chain productivity and profitability while facing these harsh challenges, and 80% of Energy CEOs believe that technological advances, including big data, have the power to transform their business, and positively address these challenges, over the next five years, according to a recent PwC survey[2].

More so, IDC anticipates that IoT technologies will be materially affecting the way that all companies manage their supply chains by 2020. IDC has defined IoT-enabled analytics as a new market that will continue to drive unforeseen operational benefits in the supply chain—estimating that the global market for the IoT will maintain a compound annual growth rate of 16.9% to reach over $1.7 trillion from 2014 through 2020[3].

They state that the IoT has the power to change the way traditional supply chains operate by enabling “a layer of agility and responsiveness never before seen.” They believe that this is only possible through IoT-enabled analytics and its ability to turn raw data into actionable insight. IDC anticipates that intelligent devices and sensors will be a major source of data in the supply chain with an estimated 28.1 billion sensor devices connected via the IoT by 2020.

As a result, the supply chain is moving toward a place that is more and more foundationally-dependent on technology in order to thrive, which allows for a huge opportunity to leverage technology in the energy industry. The Industrial IoT will provide the opportunity for new value creation made possible by massive volumes of data from connected products and sensors.

Sensors, digital meters, and other devices can be used for the measurement of oil and gases, more efficient routine monitoring, leakage detection, energy usage monitoring.  By leveraging IoT capabilities and by applying advanced analytics to historical and real-time data from sensors, digital meters, and other devices, energy organizations will be able to optimize performance in real-time.

Real-time responses are often critical in the energy industry. Today’s operations are traditionally run with physical workers on the floor to operate machinery. With connected machines and factories, a worker can receive real-time notifications to a phone, tablet, or computer without being physically on the floor. More so, if a machine is malfunctioning, a worker can resolve the situation remotely.  This ability to work remotely is significant because it affords a new level of flexibility on where and how work is done. It also provides real-time access to data from industrial assets, such as fleets of trains, trucks, power grids, or drills.

Additionally, employee safety in the workplace is a top priority in the energy industry. Wearable sensors and connected devices help to aid in worker safety. For example, oil and gas workers can wear wireless multi-gas detectors that detects and tracks exposure to harmful gases during a shift. This allows managers to monitor the status, location, and safety of all workers to reduce risk and maintain safety standards/compliance.

With the current challenges in the energy industry, there is a sense of urgency for leaders to implement IoT technologies into existing processes. With the addition of advanced analytics, organizations also gain the ability to strengthen energy supply chain processes through predictive maintenance, automated decision-making, connected components, and real-time well monitoring.

[1] http://reports.weforum.org/industrial-internet-of-things/

[2] https://www.pwc.com/gx/en/ceo-survey/2014/assets/pwc-17th-annual-global-ceo-survey-energy-key-findings.pdf

[3] http://www.savi.com/iot-based-analytic-applications-driving-transformational-improvements/