Written by Todd Burke, Senior Account Executive
Due to increasingly sophisticated onboard electronics in tools, industrial companies face navigating complex sourcing challenges and risks inherent in relatively low-volume, critical components. Component lifecycle management is a turnkey service that positions companies to ensure smooth, operational continuity while attending to financial margins.
Increased semiconductor and electronics penetration has been the steady norm for a while in industrial sectors. The continuously-growing electronics adoption has benefitted not only these sectors and industries through new tools and processes that have improved operations, but also the semiconductor industry, as a once-niche market continues to expand. Alongside the improved processes, data capture, and analyses, industrial customers are facing new challenges regarding electronic sourcing and inventory management to support these electronic tools.
New opportunities bring new challenges
Advantages to increased electronics in the industrial sector are immediately evident, both in the field and at main locations. The ability to reduce time and improve production and yields while relieving margin pressures offers opportunities for companies that are directly related to the technologically-advanced tools in use. Importantly, these new tools, data capture, and analyses also give companies critical strategic and financial operational advantages. The tech advances are in both electronic tools that are highly ruggedized for harsh environments and conditions, and in powerful, big data facilities for collection, analyses, visualization, and real-time monitoring that support field stations and inform decision-makers who are often at scattered locations and/or remote field sites.
At the heart of all of these advances and opportunities are critical electronic components upon which the new, highly-sophisticated and -dedicated tools are built. Operations controls the tools that run the jobs, but the components run those tools. Supporting these electronic tools brings new challenges and requires knowledge and experience in a complex global supply chain. A set of knowledge and experience which many industrial companies may not have.
Electronic component lifecycle management is increasingly complex, even for the more readily available parts. Industrial corporations are not only newer entrants to this global supply chain, they are also often dealing with specialized electronic components that are more limited in supply and sources, meaning the challenges mount more quickly. The new challenges facing industrial customers include managing an array of critical issues for smooth field operations: anti-counterfeit testing, quality assurance, inventory management, specialized warehousing, logistics, pricing, end-of-life (EOL), and logistics to support prompt and safe electronic parts distribution to field sites.
The electronic component challenges span the wider industrial sector, but are particularly high for those in oil & gas (O&G) because of the sourcing challenges for highly-specialized, often low-volume, ruggedized components used to support downhole, Measurement While Drilling (MWD) tools.
The O&G industry serves as an excellent example of the significant challenges and balances facing long-standing, experienced corporations. The tools that O&G relies on have become more sophisticated to improve operations, but these tools have also become more challenging to maintain and support. Exploration and production (E&P) has seen rapid increases in activity as the hunt for more natural resources continues. The use of sophisticated MWD tools that provide critical data to the surface while drilling is improving operations and successful site location, and avoiding costly and potentially dangerous problems. However, these tools and their onboard components must be highly-ruggedized and capable of withstanding the most extreme conditions for periods that easily last for a few weeks at a time.
The E&P electronic component challenges typically go beyond those industry sectors we may commonly think of as being the most difficult to source for – namely, military, defense, and aerospace. E&P onboard tools actually exceed requirements for these other highly rugged industrial uses. The O&G industry's E&P tools have a long-standing history of being extremely specialized, often company-unique or site-specific. For E&P, tool innovation and modification to meet unique downhole environments or data delivery requirements are not uncommon. As a result of being a truly niche market, volume production and cost of electronic components can be equally extreme.
These extreme E&P tools, like the specialized tools for other industries, have become more rapidly and widely available because of both pricing and the advances in the electronic engineering of ICs, microprocessors, sensors, accelerometers, gyroscopes, and microelectromechanical sensors and systems that improve tool capabilities. Material engineering has similarly advanced, providing a wider set of possible packaging solutions that are just as critical as the semiconductors and chipsets that they house. Without both the chip and the packaging being able to withstand the rugged environmental demands, failure of the component will occur.
Sophisticated industrial tools push component advances not only in design and packaging, but also in signal strength, robustness, power consumption, remote micro-processing, reliability, and failure rate reduction, to name just a few of the necessary capabilities of onboard electronics. While initial tools are well-tested and supported, these tools often must last well beyond many of the individual components' lifecycles. EOL events and part sourcing can quickly become the Achilles' heel of a highly-sophisticated and costly industrial tool.
Strategic component management
Once a tool is developed and in use in E&P, that tool can reasonably be expected to have a lifespan of five to fifteen years. That is, unfortunately, a longer lifecycle than that of the majority of electronic components at the core of the most advanced aspects of these tools' capabilities.
Navigating through challenging geological formations is the core competence of E&P companies and industrial tool manufacturers supporting this sector. Navigating the rapidly-changing, volatile, and complex global electronic supply chain is a very different skillset. While sourcing a component may seem as simple as a web search and part number match, the global semiconductor industry presents a labyrinth of challenges, and requires its own set of sophisticated, dedicated testing and measurement laboratories to ensure that parts are not only authentic but, particularly when the situation necessitates, are also capable of serving as substitutes for obsolesced components that are truly no longer available.
Strategic and successful inventory management is a collaborative process that engages teams from within both the industrial customer (tool manufacturers and their clients) and the supply chain solutions partner, typically a leading, open market supplier. Together, these teams establish the best practices, criteria, requirements, strategic component lifecycle plans, and – of course – cost parameters, so that inventory and margin management are aligned and costly work stoppages due to component problems are avoided.
Sourcing should really begin early in a tool's lifecycle. Looking forward and having realistic, strategic inventory management solutions prior to last time buy (LTB) or even EOL events puts companies in the best position to support these costly, sophisticated, and critical tools. However, balancing margins and having the warehouse capability to handle sensitive electronic components is not always a real possibility. To balance both the inevitable future event of needing replacement components that have likely gone EOL, and abiding by increasingly tough margins for holding inventory, many industrial companies are looking at their leading turnkey component partners to provide inventory management and proper warehousing support that ensures smooth, operational continuity while attending to financial margins.
Leading open market suppliers are long-standing professional corporations with industry-recognized operational standards, processes, procedures, testing and laboratory facilities, and quality assurance programs that meet and hold the highest accreditation standards (e.g., ISO, IEC, ANSI/ESD, etc.). Collaborative teams that include these leading open market suppliers provide the necessary opportunities to determine whether legitimate, verified, original equipment components are available. Leading suppliers have the broad, global market expertise to locate legitimate, top-quality, original parts, as well as to provide certified, cutting-edge testing labs, dedicated equipment, and qualified technicians to conduct thorough testing. Furthermore, long-term, secured, ESD- and climate-controlled holding and stocking programs are also available when working with certified Independent Distributors.
Component sourcing requires diligence, careful vendor screening, and sophisticated knowledge of the latest anti-counterfeiting techniques (i.e., from vendors to technical laboratory testing in industry-accredited facilities, such as those with the ISO/IEC 17025 accreditation or similar, as well as the essential specialized laboratory equipment and trained inspectors necessary for counterfeit detection). Anti-counterfeiting is critical in today's global supply chain, regardless of the industry or commodity being handled. Quality control and anti-counterfeiting are even more critical when dealing with low-volume, higher-cost, in-demand electronic components, because these can be the opportunities that a counterfeit operation will seek out. Furthermore, when counterfeit testing goes beyond the norm for component tests, ensuring that your sourcing partner has the experience, knowledge, and capability to verify that the components are tested to the extreme conditions demanded of them makes the difference between safety and disaster once the inevitable component replacements are made and placed downhole.
Industrial corporations have much to balance in daily operations alone. Engineering advances continue to improve tool technology that supports these industries, but supporting the tools' electronic components is a strategic business process that demands a professional skillset of knowledge, sophisticated laboratories, advanced anti-counterfeiting capabilities, and global market agility in the electronic supply chain. The path to successful component support is complex and demands significant numbers of experts collaborating to ensure smooth and safe operations, and – fittingly – there has been a sharp rise in the demand for turnkey services for industrial clients. Turnkey services have become so important because of the number of challenges in ensuring quality during component sourcing, and because of the strategic inventory management necessary to stay within cost limits but maintain top-quality.
Turnkey solution partners support and participate in focused teams with deep expertise in industrial partners' tools, business challenges, and risk management concerns. Risk management for offshore E&P tools, both downhole and at surface stations, depends on reliable and verified components tested by suppliers who understand the requirements. Smith & Associates has long been a trusted, experienced partner for O&G, and has kept pace with the evolution of the specialized, highly-rugged electronic components used in today's tools, as well as supplying hard-to-source and EOL components for O&G electronics.
The SmithSecure framework fuses real-world expertise with industry best practices to provide services, including counterfeit detection, visual inspection for quality and reliability, vendor screening, and internal training.
As a partner to O&G customers, Smith & Associates:
- Provides ESD, humidity, and temperature-controlled storage of last time buy (LTB) electronic component inventory.
- Acts as a strategic logistics partner specializing in handling, packaging, and shipping of electronic components to O&G OEMs and their subcontractors.
- Assures quality through SmithSecure – Smith's product and service quality framework, which includes extensive in-house testing capabilities.
- Keeps abreast of the latest price and supply trends in the open market worldwide.
- Identifies the optimal times to make cost-saving high volume purchases.
- Manages stock and liquidates excess inventory as surpluses develop.
- Provides downhole sourcing support for control boards, ruggedized electronics, directional drilling systems, and instrumentation.
- Manages component acquisition for service and warranty programs, ensuring cost savings and adequate supply on high-value and end-of-life (EOL) components.
- Assists with research and procurement of parts compliant with various environmental regulations emerging worldwide, including the European Union's RoHS legislation.
- Develops innovative programs to address emerging needs of O&G industry.