TTI’s general manager of its Houston, Texas branch, Jim McNiel examines the state of the market for harsh environment components in oil and gas exploration.
Oil and gas is heading into a multi-year ‘up cycle’ after the longest period of underinvestment in the industry’s history. Instead of putting money back into equipment, stakeholders wanted quicker investment returns. Those business objectives coincided with political and social forces moving toward green technology, electrification and higher fuel efficiency standards.
Now, in addition to those ‘normal’ factors we have the impacts of global supply chain disruptions, China tariffs, runaway inflation, war in Ukraine, sanctions against Russia and more tension around global energy supplies in general.
This is a critical time for manufacturers in the oil and gas space. The new cycle begins as higher demand for components across the board means long lead times and, in some categories, short supplies of components used in oil and gas exploration.
As buyers compare standard component prices with the impact of several rounds of price increases, they are likely facing PPV issues. A distributor with specialized knowledge of this industry can deliver new approaches to dealing with those challenges.
Firstly, a distributor can help with strategic buys. Focusing on short-term component needs may not be the best way to deal with longer lead times, inflation and looming price increases. A distributor can provide guidance to help make the right investments now.
Historically, extreme component requirements led manufacturers to mil-spec parts that were tested, proven and available to purchase at volume. Miniaturization trends have impacted availability, while higher demand for space-grade and mil-spec parts is also affecting supply. While automotive-grade parts are similarly well-tested and rated for harsh environments, they are also in high demand.
A distributor partner with market foresight can help customers navigate product changes and find new solutions. One customer recently set up a supply chain program with TTI, with the goal of getting PCBA lead times to under eight weeks. Once the customer shared its 24-month forecast, TTI worked with them to overcome bottlenecks and smooth the production schedule.
Distributors can also help manufacturers with process improvement. In down-hole drilling applications through-hole components have been the traditional choice. However, manufacturing is moving toward SMD, influencing the move toward automotive-grade resistors and capacitors. Some customers have been transitioning for nearly a decade, while others still rely on tried-and-tested technology. A distributor partner can help mitigate obsolescence issues by maintaining stock of parts that may not be readily available.
Customers look to TTI to help them identify opportunities to improve planning and forecasting, offering a better understanding of trends, EAUs and quantity sensitivity. TTI delivers information that helps them stabilize costs: providing components and the data required to open their planning window and minimize risk.
When a new oil and gas cycle begins, everyone wants parts but in a multi-year cycle, customers have to focus on price. Look at the benefits of multi-year price agreements to stabilize price. Manufacturers should consider partnering with a distributor that can help its business be proactive, not reactive. This way, manufacturers can reduce reliance on expedited freight/drop-shipping and lower the risk of line-down situations.