To most fuel distributors this has become more than clear over the last two years. Many have seen huge fluctuations on both the supply and the demand side or had to deal with labor shortages and congestion at their terminals, which has made timely replenishment of terminal stocks even more challenging. This article will provide insight into how to deal with uncertainty and increase supply chain resilience.
Visibility is key
Resilience starts with visibility. Bringing together information like terminal data, vessel characteristics, daily tank readings and demand forecasts in a central system is the first step in enhancing that visibility. This creates an overview in your voyages, stock levels, enroute inventory, product quality surveyor data and financials. This overview is key in order to make decisions fast.
From here you can start building a model that resembles your supply chain. Automatic recalculations of for example voyage timings, vessel weights and required product qualities can save planners a lot of time and increase robustness by catching violations and infeasibilities in your schedule. Having your planning processes already running in a semi-automated way, allows you to focus on exception management and quickly respond to changing environment.
Expect the unexpected
And these exceptions will occur. Some sources of uncertainty are beyond our control, like changing regulations. As an example, the IMO 2020 regulations and the stricter requirements it posed on the shipping industry were a source of uncertainty for a lot of fuel importers upstream the supply chain. More recently, government-imposed lockdowns were causing demand to rapidly decline, resulting in large volumes of floating storage and tankers not being able to discharge at the terminals. Although we cannot control these events, there are certainly ways to reduce their impact.
It starts with preparing for not only the average, but for the exceptions. This may seem obvious but the importance of taking into account variability in your decision making is often overlooked. Planning for and analyzing different scenarios will provide insight into how robust your planning is and what the effect is of variability or potential disruptions.
Supply chain whack-a-mole
Imagine the offtakes at a certain terminal turning out to be lower than expected. Decreasing the planned discharge amount of the next arriving voyage to respect tankage constraints may cause the vessel to be too heavy to enter the next port. Trying to solve that, visiting that terminal later in the rotation instead may in turn result in arriving too late causing a stock-out there. While trying to oversee the effects of these interventions, you also want to make sure your routing is cost efficient, avoiding small drops and demurrage.
While you may have multiple methods available to counter disruptions, oil supply chains are highly complex, and you might find yourself playing a game of whack-a-mole in which finding a feasible solution is very hard and time consuming. Finding the best decision is often simply impossible, even for the most experienced and skilled human planner.
Smarter shipping
“Smarter shipping does not stop at voyage completion”
Advanced optimization techniques can solve these puzzles for you. These models can take into account every single aspect that needs to be considered when creating a feasible vessel schedule, like tank configurations, available ullage and respecting maintenance tank outages. It will not even just give you a feasible solution, but it will allow you to find that solution that maximizes your business value. The ability to create optimal schedules for different scenarios prepares you for unusual situations. In addition, close monitoring of your supply chain and automatic identification of anomalies let you detect vessel delays or forecast deviations early and re-optimize schedules based on real-time information.
But smarter shipping does not stop at voyage completion. To further increase robustness, you want to make sure to feed the collected data back into your model. This way, you can analyze to what extent actuals differ from planning and understand where variability in your supply chain originates from. Smart algorithms can improve your forecast quality and iteratively improve estimates on for example expected wait times at ports, discharge rates and vessel speeds and recalibrate your models accordingly. After all, in a rapidly changing industry continuously improving is essential for those who do not want to follow but lead.
Increasing product availability against lower costs
Our Terminal Replenishment solution helps our customers decrease demurrage costs, operational costs and increase product availability at their terminals. They find themselves better prepared for the future by benefiting from increased resilience and agility. Our multi-user solution increases collaboration and process transparency and breaks down siloed decision making within your company or even across your supply chain. Our track record with Oil & Gas customers makes us a preferred partner to drive profitability in today’s changing industry landscape.
