For Rowan Companies (Rowan), a delayed supply shipment is more than a temporary inconvenience. “If we’re waiting for a part or material and not having that item prevents us from doing our work, our clients and our revenue are directly impacted,” says Kirk Hoffman, director of supply chain management for the Houston-based company. “It would be a big problem if we had to go off-line because we weren’t fulfilling our job requirements.”
The company’s clients include several of the world’s leading oil and gas producers who retain Rowan to provide offshore contract drilling services. The company operates a fleet of 34 offshore drilling units, including three ultra-deepwater drillships and 30 jack-up rigs; a fourth deepwater drillship is under construction. Rowan Companies has operations in the Gulf of Mexico as well as in the North Sea, Mediterranean Sea, in the Middle East, Trinidad, Southeast Asia and the western coast of Africa.
“The amount we earn per day for one of our rigs range from $70,000 to $625,000,” said Hoffman. “The ramifications of not having a smooth-running logistics operation can have a profound impact on our bottom line.
“We never want a rig to go offline because we are waiting for materials,” he adds.
Rowan’s internal supply chain encompasses large, highly technical equipment as well as standard supplies used by rig crews such as office supplies and toiletries. The company purchases materials and supplies throughout the regions it operates in and employs buyers who are responsible for those specific areas, Hoffman says.
Approved purchase orders are sent via electronic data interchange (EDI) to freight forwarders, each of whom has a two-way EDI link to Rowan’s SAP system. “We get items into our supply chain system as soon as possible, so we work with contracted logistics providers that have a link to us,” Hoffman says.
Materials and supplies are sent through consolidated air, urgent air or ocean shipments to regional hubs, then into the country nearest to the offshore rig being supplied. Logistics providers in each country handle customs and last-mile shipping, then make deliveries to shore bases operated by Rowan’s clients or by companies contracted by Rowan.
Supplies are provided in certified containers and with all required documentation. “We provide everything as a finished product, and have to consider how the items will get onto the supply boat and from the boat to the rig,” Hoffman says. “We don’t just show up with boxes in hand and say ‘run this to the rig for us.’”
Offshore deliveries from the bases to the rig are typically handled by Rowan’s clients, who hire supply boats and clear delivery routes through local authorities.
Supplies are delivered in a just-in-time manner. “There’s very little storage space, especially on jack-up rigs,” he adds. “These rigs rarely come to dock, so our supply chain has to reach offshore 100 percent of the time.”
Value, Visibility, Velocity
Rowan’s approach to supply chain focuses on three things: value, visibility and velocity. The company pays suppliers the appropriate value for the work they perform, maintains visibility by tracking purchases and inventory levels through its SAP and EDI systems and stresses the need for velocity among its suppliers, Hoffman notes.
“One of our greatest strengths is removing impediments to the smooth flow of items,” he adds. “We’ve established relationships with suppliers who understand our urgency and our need for visibility and velocity. No matter what mode we choose, be it ground, urgent air or ocean freight, we have to maintain appropriate velocity, because our rigs are counting on those items to arrive when they should.”
Maintaining close ties to its suppliers helps Rowan overcome the logistical challenges that are inherent in its type of work. These challenges include meeting the demands of its large, global fleet and understanding the customs requirements of its countries of operation.
Rowan’s growing drillship fleet has added further complexity to the company’s supply chain. “These ships are larger than the rigs in the rest of our fleet, have more people on board and are more mobile,” Hoffman says. “We’ve had to develop new supply chains for areas of the world we hadn’t operated in the past, and ramped up our supply chain to meet the demands of these rigs.”
In recent years, Rowan gained a closer understanding of the customs processes in the countries in which it operates. One strategy the company uses is a “green light” process it established with its logistics providers. The process entails having logistics providers clear delivery and customs documents with destination countries before telling Rowan to go through with the shipment. “We’d rather take extra time at the point of origin to eliminate discrepancies,” Hoffman says. We’ve proven effective at understanding the fine details and eliminating tripping points over the past nine months.”
Hoffman says he is proud of the improvements the company has made to its supply chain to accommodate its new additions. “We’ve been able to adapt our supply chain for the deepwater rigs that have come online in 2014, and are prepared for the fourth rig coming online in 2015,” he says.