Distribution network modeling and optimization for rapid and cost-effective deployment of oilfield drilling equipment

Abstract

AAA, a large oil and gas field services company, is in the business of providing drilling services to companies that extract and market hydrocarbons. One of the key success factors in this industry is the ability to provide comprehensive drilling solutions on short notice and in demanding conditions; fast and reliable delivery of drilling equipment to well sites is critical to maintaining customer satisfaction and market share. The company is considering a reconfiguration of its tool distribution network in order to facilitate a more rapid and cost-effective delivery of drilling tools to drilling sites. Specifically, the company is considering using either a "pure" hub-and-spoke distribution setup, with one of its major facilities - OK - serving as a logistics hub, or a hub-and-spoke system with postponement capabilities, whereby the OK facility will also have certain assembly and configuration capabilities. This thesis develops a model of the AAA distribution network and creates a simulation of the flow of drilling tools through the two alternative network configurations. As customer service levels and logistics costs are evaluated under various levels of end-user demand, both network setups are shown to increase the effectiveness and cost-efficiency of tool deliveries. The key finding is that the hub-and-spoke with postponement design appears to be superior in terms of logistics costs and timely deliveries.