Improving Forecasting and Replenishment for New Zealand’s largest fuel retailer

Z Energy is a full-service fuel retailer. They work hard to innovate and put the ‘service’ into service stations. Z Energy operates around 500 retail service stations and truck stops and supplies fuel to large commercial customers like airlines, trucking companies, the construction industry, shipping companies and vehicle fleet operators.

Z Energy is determined to be a world-class Kiwi company – their purpose is to solve what matters for a world on the move. From helping people get to where they need to go with the fuel they provide, through to the care and passion for what’s happening in the neighborhoods they operate in and the planet we all depend on.

Transitioning away from legacy fuel forecasting and scheduling

Z Energy used a legacy demand forecasting and scheduling system to ensure fuel sites were replenished. The solution was nearing end of life and didn’t offer a clear pathway for the fuel retailer to transition from manual planning to optimized replenishment, scheduling and execution of fuel deliveries.

Replenishing fuel stations in an efficient manner is more challenging in New Zealand due to the island nation’s geography. Sometimes, extreme weather and other natural events, such as earthquakes, make replenishment difficult. These disruptions can occasionally result in stock violations. Product shortages at the port terminals require dynamic decision making to ensure sites do not run out.

Z Energy has a unique partnership model with its carrier which draws on collaborative planning. Schedulers who manage the loads for around 60 fuel tankers are employed by the carrier but are working on systems and objectives provided by Z Energy.

Facing unprecedented disruption amidst COVID-19

Z Energy started ‘Project Hapai’ to replace their legacy replenishment solution in 2019.They selected ORTEC and the ORTEC Inventory Routing Solution as their new technology platform.

The project was managed by Z Energy, as a three-way partnership between Z Energy, ORTEC and Z Energy’s carrier. The core team also included the carrier’s mobility solution provider.

Little did the team realize when developing the project plan that they would eventually go live during the most volatile period for fuel demand since World War II, and all staff would be working from home!

New Zealand implemented one of the fastest and strictest lockdown periods in the world to counter COVID –19, using a unique four-tier alert system. Fuel demand fell to a fraction of normal overnight at Alert Level 4, or “full lockdown”, as all non-essential businesses shut their doors and people stayed home with only a few days’ notice. Five weeks later, New Zealand’s approach appeared to pay off in fighting COVID -19 and restrictions were eased, again with 48 hours’ notice. Rules regarding which activities would be allowed were fast-changing, and demand jumped as the country moved to Alert Level 3 and then Level 2 over a matter of weeks. No demand forecasting method could ever be designed to predict volumes for such an unprecedented situation.

Despite the unusual circumstances and with everyone working from makeshift home offices, the project team and the solution users were determined to complete the ORTEC Inventory Routing roll out. Having already piloted in part of the country, both Z Energy and their carrier were keen to transition the remaining four schedulers and 70% of sites without further delay. This enabled the team to take advantage of newly implemented collaboration tools while having fewer trucks on the road to schedule during Alert Level 4. It also helped them ensure the transition was completed before demand picked up again.

Going live in such exceptional circumstances led to unique challenges from the enforcement and subsequent lift of restrictions. In response to the irregular demand, the project team quickly identified that existing demand planning and historical order patterns were no longer sufficiently accurate predictors of future demand, and quickly moved to develop a different approach.

Preventing stock violations with prescriptive analytics

To support a more prescriptive analytics model, ORTEC, Z Energy and their carrier mobilized to implement a combination of special period and exceptional period configurations in ORTEC Inventory Routing which allowed the team to flex the expected future demand. This combination of configurations was conceived, tested, and implemented collaboratively within a week of identifying the need for more responsive replenishment forecasting.

There was an immediate impact on the accuracy of order generation by the ORTEC Inventory Routing system.

The graph below shows a spike in safety stock violations as New Zealand eased restrictions in week 16, but the team and ORTEC Inventory Routing did an excellent job of proactively managing the change to ensure stockouts did not materially increase.

“While it was an extra challenge to transition to a new technology during a pandemic response, having the whole country on ORTEC Inventory Routing enabled us to see and respond to what was happening in a way that was simply not possible before.” - Eugene Nicolson, Customer Supply Performance Manager and responsible for managing fuel replenishment at Z Energy.

The roll out of ORTEC Inventory Routing to all users and sites was completed during April 2020, and the combined team worked together for the next four weeks to stabilize a significant technology implementation and also manage an unprecedented level of demand change. An impressive result from a dedicated team spread across three companies and home offices in New Zealand, Australia, and the Netherlands.

ORTEC Inventory Routing is now fully transitioned into the core business team and is integrated into Z Energy’s JDE backbone and the carrier’s in-cab mobility system. ORTEC Inventory Routing is used to forecast demand at retail and commercial sites, generate replenishment orders, schedule the delivery of orders (including truck allocations and multi-compartment load assignment), and handle dynamic execution via real-time communications with driver tablets.

The results are fed to ORTEC’s Big Data Portal, where users from Z Energy, the carrier and ORTEC all have the same view of the insights to use for continuous improvement.

Eugene Nicolson adds: “ The ability to react to changes in real-time, the immediacy of data and insights, as well as being able to work as a team with ORTEC to push the ORTEC Inventory Routing configuration options to their absolute limit, all meant we were able to manage some extraordinary volume demand changes with a very low-level disruption to our customers.”