A supply chain lesson from the oil fields

While listening to the American Public Media radio show Marketplace during my evening commute recently, I heard an unusual news story about hydraulic fracturing, better known as "fracking." That the show included a story about fracking was not surprising; it's a controversial subject that's in the news almost daily. What made this particular report unusual is that it had a supply chain angle—one that made me think about the disruptive impact of technological change carried out on a huge scale.

Hydraulic fracturing requires massive amounts of water, chemicals, and sand, which are mixed together and are forced into wells in order to extract oil and gas from shale. The water cracks open the rock, and the sand props the cracks open so machinery can extract the oil or gas from the rock. That much is well known. But as reporter Dan Weissman explained in his report, what many people don't know is that since 2013 fracking has created huge demand for a particular type of sand. That's when technological advances allowed the energy industry to develop shale extraction on a commercial scale in the United States, Canada, and China. In just two years, supplying sand to fracking operations has become a $10 billion industry involving some 100 billion pounds of that commodity annually, according to Weissman.

Think about that. Practically overnight, the energy industry has had to develop a supply chain capable of extracting, processing, delivering—and later removing—millions of tons of a hard-to-handle commodity in some pretty remote areas.

Could you do that? I don't mean literally, of course. What I'm asking is, if a technological development brought massive, disruptive change to your company and industry, would you be prepared to redesign your supply chain or perhaps develop an entirely new one, and in short order? The magnitude and speed of change in the fracking sand example may be rare, but in a world where technological advances occur at lightning speed, no one can assume that how a business looks today is how it will look tomorrow. The next time your supply chain risk management team gets together, it may be worthwhile to discuss whether you have the ability to respond if something came along that truly rocked your world.