Improving Inventory Management Efficiency for Oil and Gas Companies

Improving the efficiency of your inventory management can help your gas or oil company. Whether you believe your existing system needs to be redone or if you’re just looking for tips to improve it, every company can benefit from reevaluating its current operations. 

While inventory management may not be at the forefront of every gas and oil company’s mind, this process can easily be tweaked and improved to increase your productivity. 

What is Inventory Management?

Inventory management is just that: managing and organizing the items your company uses, creates, or produces. That can include ordering materials, storing them, and planning how you use your inventory.

Inventory includes anything you buy or sell, such as raw materials, finished goods, and any line items you make or use in warehouses or production centers. For gas and oil, that will include the oil or gas you drill, the machines you use to drill it, and any other tools you may need.

Why it’s Important for Gas and Oil

The gas and oil market fluctuates greatly, with periods of extended highs and lows. When you’re in a low rut, it’s essential to know what you have in your inventory, if you can afford to wait to restock on certain items, and even how low you can afford to sell your goods based on your inventory or gas or oil. 

You also will need to use expensive specialized equipment. As such, you must know how many of each of these machines you have, logs detailing when you bought them and when they were repaired, when regular maintenance is scheduled for them, and if you have any spare parts to do quick repairs on-site, and how many of those parts you have left. 

Improving Inventory Management 

If you’re looking to improve how you manage your inventory, there are a few tips you can start with to lay a good foundation for successful and stress-free inventory management: 

• Automate Where Possible- There are certain items that any company uses regularly. For gas and oil, not having the correct number of stock items in your inventory can result in dig delays and profit losses. To avoid that happening, automate restock orders for items that you’re continually using and running out of. 

• Use Software to Track Stock- Software is one of the easiest and most effective ways to make inventory management less stressful. Find software that helps your company keep track of what you have, what you need, and what you’ve sold. 

• Regularly Audit Your Inventory- Items can go missing, break, or need unexpected repairs, mainly if a piece of machinery hasn’t been used for a while. Don’t wait until you need that rarely used equipment to find out a part rusted out and needs to be replaced. You can avoid these emergencies by regularly checking your inventory. 

• Use the Same System Company-Wide- If you have multiple sites or locations, be sure that everyone in your company uses the same inventory methods. Allowing different locations to use other ways can result in confusion and irregularities when doing a company-wide inventory assessment. 

• Track Sales- While this may sound simple, tracking how much oil or gas you’re selling and to which markets are crucial for inventory management. Sales affect how much gas or oil reserves you have and what price you can afford to sell your products. This affects decisions such as what markets you can compete in, how much of your product you should keep on hand, and even how often you need to be drilling to keep up with demand. 

• Keep Logs for Equipment Repairs and Parts- Gas and oil equipment and machinery tend to be more expensive than other industries’ equipment. As such, it’s crucial to keep track of where that equipment is, how often it’s used, when it needs to go through regular maintenance, and when it’s reached the end of its lifecycle. Keeping your machinery in good working condition can help you avoid delaying digs because of unexpected machinery or equipment issues. 

Getting Help 

Whether you’re in the middle of redoing your inventory management strategy or just need advice, oil and gas accounting services from EAG 1Source or another reputable consulting firm can help. Accountants are experts at creating effective management systems to ensure your books and your actual inventory match. They can even provide suggestions to help you save money while handling your inventory.

Inventory and Expenses

Inventory and expenses often go hand-in-hand. If you don’t keep track of your inventory, you put yourself at risk of overbuying or missing out on bulk discounts instead of ordering smaller amounts of supplies at once. Be sure to keep a good track of your inventory so you don’t miss out on easy ways to lower your costs.