Menu

supply and demand

405943

Minimising Warehouse Costs Using Density and Robotics

, , , , 0

Just like any other property, the cost of warehousing is subject to the whims of supply and demand. AutoStore Business Development Manager for Australia and New Zealand, Julian Brancaccio said vacancy rates across commercial and industrial warehousing in Sydney are down to 0.04%. What makes that figure scarier is that it refers to stock that has already been built and the majority already leased. “We’re seeing rate rises of between $200 per square meter all the way up to almost $400 per square meter,” he said. “Customers are asking, ‘How can we get denser? Can we use conveyor systems to increase efficiency? How can we lower the price per square meter by making everything denser?’ That is one of the biggest trends we have seen. “Labor costs for processes like pipe fabrication Australia  is another huge trend that’s forcing organisations to automate and reduce footprint at the same time.” One of the options for denser warehousing is cube storage. “Some solutions currently in the market are dense, however their racking only goes up to two and a half meters, so anything above is a wasted opportunity,” Brancaccio said.

When it comes to automation in intralogistics, robotics is the way forward. “Automation is known, but robotics is new. It is a wave that has come in the last five years to disrupt the market and provide a cheaper alternative,” says Julian. “There’s a lot of moving parts to this solution. For example, there are a lot of vendors that do not have a significant partner network to be able to support the structural steel fabrication products they have in the region. That is where a lot of these kinds of vendors and solutions fall short. They are not able to get their solution into the market and set up a reference site. “It’s one thing announcing a partnership with an integrator, but it’s another thing to have a reference site people can see. There is a lot of interest in terms of what the solutions are and how they work, but the customer wants to know who’s the edge?” Brancaccio believes an AutoStore solution can deliver ROI in just a few years. “If you fulfill 3000 Bins per day as an example, it takes around 15 people. For us in an AutoStore system you’re probably looking at two people to pick 3000 Bins because everything becomes automated,” he said.

AutoStore is addressing the local market needs through Bin presentation. “There’s two things you’ve got to look for in a solution. There’s Bin density, how many Bins can fit on one square meter, and robot density,” Brancaccio said. “We’re denser and lower, which helps with fire compliance as well. AutoStore’s Bin density is 40 Bins per square meter which makes it the densest solution on the market. “The robot density of other solutions is usually around one robot per 50 square meters. On 1000 square meters, there are around 20 robots to fit that space and they can present around 30 Bins (plastic tubs) per hour. Comparatively the AutoStore system, on 1000 square meters we can have around 166 Robots and present 30 Bins per hour. Because a warehouse footprint is so expensive, AutoStore can help scale using that to get more out of it. Robot density is key.”

2149739749

AI Adoption in Supply Chains

, , , , , 0

 

Modern supply chain management is experiencing revolutionary technological changes that transcend traditional production methods. Software companies are pioneering these changes by developing AI solutions for areas of concern and ensuring adequate supply chain operations. From planning production schedules and managing inventory to enhancing demand predictions and optimizing shipments of products such as pressure vessels, leveraging AI can refine tasks across the board. Applying this level of innovation guarantees efficiency, reliability, and accuracy, permitting staff to focus on transforming the AI’s findings into meaningful action steps. This blog delves into this exciting topic in greater detail.

Transforming Demand Forecasting

Growing geopolitical tensions cause supply chain companies to face heightened levels of uncertainty, especially when predicting upcoming product demands. Advanced AI algorithms analyse large datasets in real time to anticipate inventory and market changes and helps in future-proofing supply chains. They use current market trends, historical consumer patterns, and economic factors. Utilizing these results can prevent stockouts and overstocking, which improves your company’s cost-effectiveness. It can also streamline the shipment process and respond faster to setbacks, mitigating issues of timely deliverables to customers. Traditional methods primarily focused on past performances rather than future ones, but AI specializes in predictive analytics across all industries, not just supply chains. AI models are simply more agile and adaptable than traditional analytics, which require frequent manual updates. With an ever-evolving system constantly teaching itself to perform sufficient calculations, supply chain experts can rest assured that this technology is not overlooking complex data patterns.

Planning and Optimization

Depending on a company’s specific needs and areas of improvement, AI can significantly impact supply chain planning and overall optimization. AI systems can track material and warehouse capacity limits to meet demands. They can also prioritize tasks like order fulfilment, inventory and storage updates, risk management, and supplier communication. One transformative approach is utilizing AI automation. Mundane, manual tasks like data entry are not always quick and easy. These tedious but necessary duties consume much of employees’ time, taking their attention away from critical projects. Substituting human intervention with AI. such as introducing AI video surveillance, to perform these assignments could allow the team to devote more time to planning and structuring.

Barriers to AI Adoption

Arguably, one of the most significant barriers that prevent supply chain companies from using AI systems is the lack of AI knowledge within an organization. It is a classic case of “blissful ignorance,” which is why it is essential to start educating leaders on the powerful advantages of implementing AI. Highlighting benefits like improved cost-effectiveness, optimized proficiency, and reduced resources could lead them to embrace the latest evolution of workplace technology. Bergur Thormundsson, a research expert with Statista, published a survey where 600 senior technology personnel at supply chain companies were asked about AI usage. Roughly 38% said integrating AI into their operations will be critical by 2025. Augmenting different roles could result in employees carrying out new hybrid structures, improving productivity, and acquiring more skills, which could increase growth opportunities. For all these reasons, organizations must overcome barriers when they’re initially trying to apply AI-driven solutions.

What’s Next?

Supply chain companies underwent many production and inventory setbacks within the past five years. Labor shortages, geopolitical conflicts, cybersecurity, unreliable suppliers, and fluctuating demands of pipe fabrication Australia were some of the most prevalent obstacles. AI solutions are combatting these disruptions. In cybersecurity, for example, AI algorithms can detect and prevent potential cyber threats by optimizing data security. They also track usage patterns to enhance data encryption and identify fraudulent activity. AI adoption is becoming a standard within supply chain management, and its integration will not slow down anytime soon!

Logistics Isometric Flowchart Composition

Future-proofing Supply Chains

, , , , 0

 

As discussed in a previous blog on post-pandemic fabrication supply chain, the COVID years were harrowing for supply chains with the imminent threat of lockdowns creating volatility in demand and supply patterns. With the return to normalcy, the future of global logistics has become significantly brighter — however there are lessons to be learnt during the pandemic and which should be avoided in case of a similar situation in the future. There is a gradual realization that many forces need to be considered when creating truly resilient, dynamic supply chains. So, what are these forces and how should they be leveraged correctly? This writeup looks to decode this subject in greater detail.

 Supply-Demand Mismatch

In a perfect world, supply and demand sync evenly but in the real world, often one outpaces the other – such as the shortage of certain consumer goods of 2020. Oversupply can also cause issues which can pile up and quickly eat through a business’ bottom line. A common issue is where to store the overstock and how to continue to sell it and profit, and this can cause issues up and down the supply chain of heavy steel fabrication companies. These pockets of exponential demand will continue to exist as will moments of oversupply. Both need to be built into forecasts to help stakeholders better manage inventory and adapt as forces shift the balance.

Commodity Shortages

Commodities like lithium and cobalt are in high demand but not always easy to procure. Producers that need hard-to-replace materials must factor in forces such as potential tariffs, weather patterns, upcoming environmental regulations, and variable pricing of mining plant and equipment to ensure production does not suffer. The emergence of innovative design is a trend which can be used to resolve shortages. Engineers are using smaller geometries, so the required amount of the given commodity is reduced without sacrificing product capability. An example would be the small size of computers today compared with earlier days when they were the size of a room and exponentially less powerful.

Economy and Pricing

The state of the economy is a major factor which is a bell weather for consumption trends, such as using local steel companies in Australia. With rising inflation, consumers are looking to spend less but still get that bang for their buck — and that translates all the way up the chain. At the same time, between labour, the rising cost of materials, tariffs, and more, suppliers are getting squeezed on cost. While there will never be a perfect model for economic forecasting, knowledge of known forces and their impact on consumer behavior can be built into pricing projections.

Labour Shortages

Forces such as labour shortages always impact product availability. For instance, Japan needs more than 200,000 engineers in the next couple of years to maintain current production levels. In 2030 it is expected that Japan will not be able to fill 270,000 artificial intelligence and IoT jobs. One of the drivers of this trend is ageing populations. The engineers who have been designing and building components worldwide are now retiring and there are fewer people available to fill those gaps. Not only is there an inverted population pyramid at play here, but the increased need for these products is driving up the demand and exacerbating this skill gap. Consider how many things require technologies that did not exist even 10 years ago. The demand is going to skyrocket, which means even more engineers and IT professionals will be needed going forward.

Final Thoughts

In the context of future planning for supply chains, none of these forces are new but the need to accurately build them into supply chain forecasts is increasingly important. The pandemic helped highlight the need to take all these forces into account to ensure that disruptions are limited when a black swan event occurs. Hence, supply chains are ever-evolving and it is up to us to keep pace with its evolutionary development!

business-5477997_1280 (1)

Saudi Arabia Cuts Oil Prices for Asia and Europe

, , , , 0

 

Saudi Arabia cut oil prices for customers in Asia and Europe as coronavirus lockdowns and sagging economies cool energy demand and impact oil price determination in the two regions. For the first time in four months, state-controlled Saudi Aramco has slashed prices of October crude oil exports for European and Asian buyers just a day after OPEC+ symbolically cut output for that same month by 100,000 bpd on global demand concerns.

On Monday, 5th September, OPEC+, the oil producers group that Riyadh leads along with Russia, endorsed a decision to cut the collective oil production target by 100,000 barrels per day (bpd) for October, despite Russia reportedly resisting such a move. The 23-nation alliance is seeking to stabilize oil markets and the steel fabrication industry amid faltering economies and rising inflation. In China, the world’s biggest crude importer, the spread of virus lockdowns is hurting manufacturers and retailers. Saudi Arabia sells most of its oil to Asia where China, Japan, South Korea and India are the biggest buyers.

This would imply returning targeted production levels to the August quotas. The OPEC+ decision is largely symbolic for markets, sending a message that the cartel is ready to meet at any time and decide on any cuts it deems appropriate to “stabilize” oil prices.  The price cut also comes shortly after Moscow announced it would increase shipments of oil leveraging pressure vessels to Asia in response to the G7’s plan to implement a price cap on Russian oil beginning on December 5th, when the European Union ban on Russian seaborne oil goes into effect. The price cap would remain in place for two months.

Aramco lowered its key Arab Light grade for next month’s shipments to Asian refineries from a record $9.80 a barrel to $5.85 a barrel above the Middle Eastern benchmark. That’s a decrease of almost $4 from September. Aramco lowered all grades to Northwest Europe and the Mediterranean, most of them by $2 a barrel. The company raised pricing for US buyers by 50 cents, except for Arab Light, which was kept unchanged.

The move was largely in line with traders’ expectations and follows a 25% drop in Brent crude futures in the past three months to below $95 a barrel. Despite signals of slowing consumption in many major economies, the global market remains tight. Many analysts forecast that demand will outstrip supply in the final quarter of this year, especially if Russia reacts to a G7-proposed cap on its oil prices by limiting exports. Saudi Energy Minister Prince Abdulaziz bin Salman said in an interview late last month that futures markets were “in a state of schizophrenia” following Russia’s invasion of Ukraine. They are giving “a false sense of security at times when spare capacity is severely limited and the risk of severe disruptions remains high,” he said.

rio-1303951_1280

Drilling In South America Set To Peak During 2022

, , , , 0

 

Drilling and completion activity in South America is expected to peak this year after a significant slowdown in 2020 due to the destruction in global demand brought on by the COVID-19 pandemic, Rystad Energy claimed. According to Rystad, the rebound is more pronounced for offshore wells, primarily driven by an uptick in activity in Brazil and Guyana. With the overall recovery in drilling, South America is also winning back a global market share of new wells drilled, with offshore proving the standout sector.

New wells drilled with the support of steel fabrication in South America in 2014 contributed to 8 percent of new wells globally in the offshore sector and 4 percent in the onshore. Activity has been on a downward trend since then following the slump in oil prices in late 2014 and the following year. Onshore drilling activity had witnessed a steep drop in 2016 before stabilizing, while offshore drilling activity saw a relatively smoother decline. The number of new wells drilled in the region was hit again in 2020 with a 50 percent decrease recorded compared to the previous year, as the outbreak of Covid early in the year wreaked havoc on global markets. Drilling activity in South America in 2020 constituted only 2 percent of global onshore activity and 3 percent of offshore.

The number of new wells has since increased due to the return of demand and increase in prices of oil and gas. Activity is expected to peak this year before going on another downward trend towards the end of the decade, partially due to Brazil having very low discovered onshore volumes in the last six years, making it difficult to support long-term growth. Offshore drilling activity in the region will remain at around 6 percent of global activity over the coming years, while onshore drilling will remain at around 3 percent. It should be noted that, while the offshore well count in the region is significantly lower than that of onshore, offshore production makes up nearly half of South America’s current output and is expected to exceed onshore production by 2024 due to increases in Brazil and Guyana. Advancements in drilling technologies are also expected to boost South America’s oil production in the years ahead.

Another region in South America that is seeing all-time high activity is Argentina’s Vaca Muerta. The country recorded further production growth records, as operators step up fracking in the prolific Vaca Muerta shale formation in Neuquén. While activity is at an all-time high, persistent supply chain bottlenecks suggest there is not a lot of room for incremental put-on production activity in the next few quarters. Yet, with base decline remaining low given the basin’s early phase of development and the improving type curves, oil output is still poised for significant growth in the coming years. Rystad Energy research claims that the region’s production could exceed 300,000 barrels per day early next year, expanding further to 400,000 bpd in 2024, helping the country’s total rebound to levels not seen in nearly 20 years.

barrel-racing-53295_1280

Calgary Stampede Returns with Oil Boom Vibe

, , , , 0

 

The biggest party in Canada’s oil patch is staging a comeback this year, fueled by soaring energy prices and a population eager to mark the end of two years of pandemic lockdowns. The 110-year-old Calgary Stampede is pulling out every nostalgic stop, from chuck wagons, to rodeos, to tapping movie cowboy Kevin Costner as parade marshal. Long a barometer of the Canadian oil sector’s health, this year’s festivities take place as oil trades above $100 a barrel, helping the province of Alberta post its first budget surplus in seven years.

Whether it also marks a last hurrah for the industry is an open question. Longer-term, Canada’s oil sector is facing an existential challenge as the world shifts away from fossil fuels and investors shun the spending excesses of the past. “I am expecting this stampede will be good because people are tired of being cooped up,” said Vern Kimball, who served as chief executive officer of the stampede during the most recent oil run-up from 2006 to 2015. But oil companies understand that high prices “come and they go,” sometimes in a matter of months, he said. “People in the oil patch are talking about paying down debt and returning money to shareholders.”

That’s a far cry from past decades, when global energy companies invested billions in the oil sands and investment banks vied to host the biggest and best stampede events. Invitation-only parties like FirstRowdy, hosted by FirstEnergy Capital Corp. — now Stifel FirstEnergy — became legendary for attracting thousands of boisterous attendees, rivalled only by Firewater Friday, thrown by Peters & Co. Ltd. Entry donations went to charities, helping the community as well as generating business at a time of massive deal flow, Brett Wilson, a FirstEnergy founder, said by phone. “We were raising hundreds of thousands of dollars off what was usually just a drunk-fest.”

Today things look a bit different. Stung by years of depressed oil prices, Calgary-based companies (including heavy steel fabrication companies) are being disciplined even as commodity prices roar higher. FirstRowdy hasn’t returned since it was cancelled in 2016 although Peters & Co.’s event will be back this year. Following a much-slimmed-down version of the stampede last year, and a complete cancellation of the event in 2020, organizers are expecting more than a million visitors in 2022, in line with pre-pandemic stampedes.

Companies including oil sands producer Suncor Energy Inc. and pipeline giant TC Energy Corp. are sponsoring fairground days as well as parties and pancake breakfasts for employees. Cenovus Energy Inc. signed a new four-year sponsorship agreement that includes sponsoring the “Saddle Bronc,” in which a rider tries to stay on a bucking horse at the daily rodeo, and is holding its first in-person event for staff in two years. “There is a huge buzz going on in the city,” organizer Robert Laidlaw, of Acumen Capital Partners said. “Things are better for the energy sector and people have been pent up for three years now and can finally go out and have some fun.”

oil-99220_1280

Determination of Oil Price

, , , , 0

 

Did you ever wonder how the price of oil is determined? Oil price movement is the in-vogue topics as a consequence of the Russian invasion of Ukraine and the ongoing inflation of prices in countries like India. It is a testament to the importance of oil that, despite continued efforts to reduce its use and to find alternative green energy sources, oil remains one of the most in-demand commodities globally. Rising oil prices is also an indicator of simultaneous price rise of daily essentials like fruits, wheat, vegetables etc. So, price determination of oil is crucial and it has the potential to affect the global economy. This blog will dive deeper in this regard.

Primary factors that impact oil price

With oil’s stature as a high-demand global commodity comes the possibility that major fluctuations in price can have a significant economic impact. The two primary factors that impact the price of oil are:

  1. Supply and demand
  2. Market sentiment

The concept of supply and demand is as follows: As demand increases (or supply decreases) the price should go up and as demand decreases (or supply increases) the price should go down. The price of oil as we know it is actually set in the oil futures market. An oil futures contract is a binding agreement that gives one the right to purchase oil by the barrel at a predefined price on a predefined date in the future. Under a futures contract, both the buyer and the seller are obligated to fulfill their side of the transaction on the specified date.

The other key factor in determining oil prices is sentiment. Similar to stocks, the mere belief that demand for oil will increase dramatically at some point in the future can result in a dramatic increase in oil prices in the present, as speculators and hedgers alike snap up oil futures contracts. Of course, the opposite is also true. The market sentiment that oil demand will decrease at some point in the future can result in a dramatic decrease in prices in the present as oil futures contracts are sold (possibly sold short as well), which means that prices can hinge on little more than market psychology.

Oil Price Economics Variations

Basic supply and demand theory states that the more a product is produced, the more cheaply it should sell, all things being equal. If someone were to invent a well stimulation technique that could double an oil field’s output for only a small incremental cost, then with demand staying static, prices should fall. Actually, there have been periods of time when supply has increased. Oil production in North America was at an all-time zenith in 2019, with fields in North Dakota and Alberta producing large quantities of oil. Since the internal combustion engine still predominates on American roads, and demand hasn’t kept up with supply, it is expected that the price of oil was low at that point in time. However, a completely different situation gave rise in this scenario. Production was high with oil being stored in pressure vessels, but distribution and refinement were not able to keep up with it. Hence, the price of oil did not fall as much as was expected. This is because refineries operate at 90% of capacity; the excess capacity is there to meet future oil demand.

Final Thoughts

As discussed, the factors around determining oil prices are manifold and at times, they may cause well-known economics to become redundant. Considering the number of financial and geopolitical factors at play, guessing or “timing” oil prices in advance is difficult; however there have been cases where oil and gas prices have been manipulated. As the world becomes more inter-connected, oil prices become more ubiquitous in our lives – from the oil price at the local gas station to the prices displayed on financial indices!

© K999 Engineering & Construction Co. Ltd. 2023