General Manager of TTI at its branch in Houston, Texas, Jim McNeill

Jim McNeill, general manager of TTI’s Houston, Texas branch, looks at the state of the market for crude environmental components in oil and gas exploration.

Oil and gas are moving towards a multi-year “boost cycle” after the longest period of underinvestment in the history of the industry. Instead of putting money back into equipment, stakeholders wanted a faster return on investment. These business goals coincided with political and social forces moving towards green technologies, electrification and higher fuel efficiency standards.

Now, in addition to these “normal” factors, we have the consequences of disruptions in the global supply chain, tariffs in China, unprecedented inflation, the war in Ukraine, sanctions against Russia and more tensions over global energy supplies in general.

This is a critical moment for oil and gas producers. The new cycle is beginning, as higher demand for components across the country means long lead times and, in some categories, short deliveries of components used in oil and gas exploration.

As buyers compare the prices of standard components with the impact of several rounds of price increases, they are likely to encounter PPV problems. A distributor with expertise in this industry can offer new approaches to address these challenges.

First, the distributor can help with strategic purchases. Focusing on short-term component needs may not be the best way to deal with longer lead times, inflation and impending price increases. A distributor can give guidelines to help make the right investment now.

Historically, extreme component requirements have led manufacturers to parts with nice specifications that have been tested, proven and available for purchase in large quantities. Trends in miniaturization have affected availability, while higher demand for parts of space and mile-specification is also affecting supply. Although automotive parts are also well tested and evaluated for harsh environments, they are also in high demand.

A distributor partner with a market forecast can help customers navigate product changes and find new solutions. One customer recently set up a supply chain program with TTI to increase PCBA execution time to less than eight weeks. After the customer shares his 24-month forecast, TTI works with them to overcome bottlenecks and smooth out the production schedule.

Distributors can also help manufacturers improve the process. In bottom hole drilling applications, through hole components are the traditional choice. However, production is moving to SMD, which affects the transition to resistors and capacitors of the automotive class. Some customers go through almost a decade, while others still rely on proven technology. A distributor partner can help alleviate aging problems by maintaining a stockpile of parts that may not be readily available.

Customers are looking for TTIs to help them identify opportunities to improve planning and forecasting by offering a better understanding of trends, EAUs and sensitivity to quantity. TTI provides information that helps them stabilize costs: providing the components and data needed to open the planning window and minimize risk.

When a new cycle of oil and gas begins, everyone wants parts, but in a multi-year cycle, customers need to focus on price. See the benefits of multi-year price stabilization agreements. Manufacturers should consider partnering with a distributor who can help their business be proactive rather than reactive. In this way, manufacturers can reduce their dependence on accelerated freight delivery and reduce the risk of crash situations.

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