Supply chain optimization in the Fuel Industry

Zooming out: making decisions that benefit the business as a whole

When trying to solve supply chain puzzles like this, it is important to do so from all relevant perspectives. This requires zooming out from a very specific issue and taking a helicopter view. This may be challenging because companies are often organized in a functional way, which may result in siloed views. One team is responsible for ship scheduling, another for trucking operations, and asset management is making decisions on long-term investments. At the same time, purchasing is focusing on negotiating new supplier contracts. This makes it hard to find the most beneficial solution over the entire chain, while the interdependencies between the company’s different functional units are very real.

Supply chain design solutions help you to break down these silos by modeling primary supply and production flows, inventory, and secondary distribution flows within a single model. This allows you to (re-)evaluate, design, and optimize your supply chain and test various what-if scenarios.

Increasing storage capacity in a terminal might appear to be a huge investment cost, but when considering the increase in scheduling flexibility on both the shipping and trucking side and the accompanied cost savings, it may turn out being a very profitable move. Likewise, you might find out that you are able to decrease safety stocks or that the increased cost of delivering higher quality products will be justified by the savings resulting from being able to deliver more efficient drops at the terminals.

Being on the same page: cross-functional alignment is key

As illustrated, when making decisions in complex systems like these adopting a holistic view pays off. When zooming out though, many companies will find that the different functions in their company are misaligned, causing supply chain to optimize the wrong strategy. Alignment between these functions is critical to meet supply chain performance targets and optimally contribute to business value. Before diving into quantitative solutions, we therefore advise starting off by analyzing the current state and business challenges.

To zoom out and address alignment challenges, ORTEC has developed the ORTEC Supply Chain Opportunity Assessment, a proven method: a proven method to identify and close alignment gaps. It signals performance gaps between current and target performance, followed up with a root cause analysis to identify improvement opportunities to create more business value. Read this customer case to learn more about how ORTEC helped a crude oil pipeline and marine terminal operator company assess their supply chain: https://ortec.com/en-au/customers/crude-oil-handling.

Increasing supply chain resilience: scenario management

At many companies, the current supply chain strategy is the result of a historic way of working. While business models, business strategy and marketing and sales strategy evolve over time and often have become much more differentiated, often supply chain strategy has not been able to keep up with these changes and still uses a historic one size fits all strategy. This is a major source of misalignment for many companies.

Aligning supply chain strategy with business strategy and marketing and sales strategy is one of the most identified opportunities to start with. When misalignment ends, supply chain excellence starts. Now that you are aligned on what you want to achieve, you can start optimizing that supply chain strategy. A model is typically created to reflect the actual situation and measure the current performance. Using such a model, scenarios can be evaluated to calculate the impact of changes. Leveraging the power of mathematical optimization lets you find the best among all possible decisions and the sweet spot in a myriad of trade-offs.

Traditionally, supply chain design solutions were mainly used as a strategic tool to re-evaluate the network every couple of years, or around big events like merging two networks or selling-off parts of the business. Now that modelling tools have become more mature, companies have started using their models on a tactical level as well, to increase resilience and to speed-up decision making in the light of market changes and disruptions like port congestions and unexpected wharf line maintenance. It enables them to identify potential risks and to investigate how to mitigate them long before these situations occur. Besides better risk mitigation, these companies can quickly decide if they should jump on opportunities that arise, like spot sales and purchases. Companies that are able to adopt supply chain modeling in their daily business processes like this will find themselves benefiting from a substantial competitive advantage.

From efficiency to profitability

Customers using our supply chain design tooling save nearly 7% on average in annual operational costs. They find themselves better prepared for the future by benefiting from increased supply chain resilience and agility. Our track record with Oil & Gas customers makes us a preferred partner to drive profitability in today’s changing industry landscape. Read this customer case to see how ORTEC helped a leading European Oil & Gas supplier to save costs and increase worker productivity (https://ortec.com/en-au/customers/major-oil-company).