As the world population rapidly depletes the supply of crude oil in places like Saudi Arabia, scientists and energy investors turn an ever-hopeful eye toward “unconventional oil,” such as heavy crude oils, tar sands, and oil shale. The evidence is obvious: these alternatives can produce a significant amount of energy and be harvested in the U.S., thus decreasing American energy dependency. However, innovative ways of mining and refining these resources are still too costly to be viable.
That may not be the case much longer, though, thanks to on-going research from Mays Business School at Texas A&M University.
Mays faculty members Antonio Arreola-Risa and William Stein from the Department of Information and Operations Management, as well as doctoral students Jeremy Brann and Jaime Luna-Coronado, have teamed with the Royal Dutch Shell Oil Company to examine hard-to-predict disruptions to a product’s supply chain. These “stochastic” variables, such as natural disasters, machine failure on the assembly line, and worker strikes, must be accounted for to determine the best supply chain model. Predicting these unpredictable elements is getting easier, as researchers build complex formulas to mitigate risks through strategic diversification.
The current research has focused on a specific technology, Shell’s heat delivery systems, but the model can be modified to accommodate different technologies, say the researchers. The findings will help Shell, and eventually other companies, keep costs low by minimizing disruptions to the supply chain to maximize output.
This research may have a deep impact on the economy, as Arreola-Risa says that it could allow Shell to produce energy from unconventional oil much more efficiently than in the past. As the cost of traditional fuel sources increases, there may soon come a time when capturing unconventional oil becomes a viable option for Shell.
This new technology will benefit the United States, as it helps move the oil-addicted country toward energy independence. It will also be a boon to the Texas economy, as it has the potential to create thousands of jobs and billions of dollars of revenue in the state of Texas where Shell is headquartered.
“The courses of action suggested by the model could be very helpful during the supplier engagement process and contract design,” says Arreola-Risa. “The main objective of this development is to offer a general framework for the strategic design of supply chains in the presence of [unpredictable] supply disruptions.”
Categories: Research Notes