Product Managers Deal With The Problem Of Too Much Sand

It turns out that there's too much sand for fracking
It turns out that there’s too much sand for fracking
Image Credit: Andy Arthur

Being a product manager in a growth industry is one of the best jobs that any of us can have. Everyday things seem to be rushing forward faster and faster, it’s all that we can do to keep up. This is exactly how life must be for product managers who are involved in the fracking industry. Just in case you don’t know, fracking is the process of injecting liquid at high pressure into subterranean rocks, boreholes, etc. so as to force open existing fissures and extract oil or gas. This technique has opened up vast new areas of land for drilling for gas and oil. A product management job in this industry has been one to have for a long time. However, now things are changing and these product managers have a problem on their hands: sand.

The Problem With Sand

I sorta hate to say this, but the product managers for the companies that provide sand to the fracking industry appear to have built their business on a foundation of sand. What happened is that the fracking boom took off and in order to support it, a host of new industries and product development definitions were created. One of these new industries is the supply of sand which is critical to the process of performing fracking. Fracking has become such a big business that it now makes up over 60% of how the U.S. generates its supply.

If you don’t believe that the market for sand has been hot, hot, hot then all you have to do is look back to 2014-2015. Back then, the business of sand was such a hot place to be that the combined market value of the six companies that were either wholly or partially dependent on the sand business was a cumulative US$18B. Being a part of that industry would look good on anyone’s product manager resume. How these companies were doing was considered to be an indicator of how the shale part of the market was doing. However, that’s bad news for sand product managers right now because those companies now have a combined market valuation of roughly $800M. Some of these firms have gone so far as to signal that they may have troubles staying in business going forward.

The current slump in oil prices is affecting everyone. It is equally bad for privately held companies as it is for publically held companies. Predictions are starting to be made that some of the industries weaker companies, both operationally and financially, may be running into problems. What this means is that some of the firms that have been backed by private equity may end up dropping out of the business. If this happens, then it may ease the pressure that is being placed on the larger better organized players in the industry.

Next Steps For Dealing With The Sand Problem

So what is the problem that sand product managers are currently facing? The good news is that their product is still very popular. The use of sand as a type of propellant that is used to hold open fissures in wells that have been fracked is growing. However, customer needs are starting to change. Some miners are starting to move towards using local so-called “brown sand” instead of the more expensive higher-quality “white sand” that is mined in the Midwest.

Where the product managers are starting to run into problems is that there is currently too much sand being mined. To make things even worse, this is a time in which drilling activity has slowed down. This slowdown can be seen in the price of a ton of sand. It used to be over $100 per ton. Now it’s down to $15 – $20. This is the level that it was at in early 2016 when oil prices and drilling were at their lowest point. Sand comes with a high cost of transport. Sand is transported by both rail and by truck. The cost of transporting it can be as much as 75% of the cost of delivering sand. The end result of this is that it can force some operators into a cash loss situation.

Product managers are starting to discover that their customers, the companies that buy sand, are starting to favor suppliers who can provide them with the most efficient transportation as well as storage. They are also looking to do business with the firms that are the most financially stable. The product managers who also serve other industries with their sand (companies that make integrated circuits, solar panels, and glass) will be the best ones positioned to do business with fracking customers. These product managers are going to have to keep their eyes on oil prices in order to determine when the market for their fracking sand is once again going to come back to life.

What All Of This Means For You

One of the industries that is growing at the fastest rate right now is the fracking industry. This is the industry that is using novel new technologies in order to get oil out of the ground where in the past it was not possible to do so. In order to do this fracking successfully, drillers need a lot of sand. The fracking industry has caused a new industry, the providers of sand, to be created. However, now that things have slowed down in the fracking industry, the sand product managers are starting to look at their product manager job description and scramble in order to stay in business.

In the U.S. currently, the primary way that oil is taken out of the ground is through the use of fracking technologies. Just a few years ago, the six major companies that were involved in fracking had enormous market values. However, since then the price of oil has fallen sharply. The market value of the fracking firms has sharply decreased and there are discussions that some of these firms may even end up having to go out of business. The sand product managers are dealing with a situation where their primary customers are starting to substitute cheaper versions of sand for the more expensive and higher-quality versions. Too much sand is being mined based on how much sand the market currently needs. One of the biggest costs associated with sand is its transportation to where it is needed. Customers are starting to favor the sand firms that can help them to minimize these costs.

Sand product managers have a real challenge on their hands. Their product is basically undistinguishable from other sand providers. These product managers are going to have to find ways to work closely with their customers in order to reduce the costs of getting their product to where it needs to be used. Additionally working with their customers to help them though the slow times may end up making everyone more successful once the price of oil once again starts to go up.

– Dr. Jim Anderson Blue Elephant Consulting –
Your Source For Real World Product Management Skills™

Question For You: How can sand product managers make their product appear to be different from everyone else’s?

Click here to get automatic updates when The Accidental Product Manager Blog is updated.
P.S.: Free subscriptions to The Accidental Product Manager Newsletter are now available. It’s your product – it’s your career. Subscribe now: Click Here!

What We’ll Be Talking About Next Time

Grocery product managers are starting to face a real problem. More and more of their business is starting to be driven by customers going online and ordering food and then expecting it to show up at their door. What this means for these product managers is that the old way of doing business, building more grocery stores, is no longer going to work in the future. Product managers are going to have to change their product development definition and find ways to keep up with the changing times.