Improving Profitability by an Integrated, Collaborative Approach to Supply Chain Optimisation and Management

Transcription

1 Improving Profitability by an Integrated, Collaborative Approach to Supply Chain Optimisation and Management David J. Adams, Mgr. Centre of Excellence, Advanced Planning and Scheduling C.E.E. Refining Conference, Sopot, October 2011

2 Profit Issues facing CEE Refiners Regional margins not that good for most companies Most refiners in the region have very restricted crude purchase opportunities, hence crude selection has limited capabilities as a profit improvement tool Most refineries have already invested significant sums in their configurations and operating cost reduction Where else is there room for improving profit? Supply chains are often a neglected area, often with outdated tools, and offer serious opportunities for profit improvement 2

3 Refining Supply Chain Challenges Source Make Distribute Consume Pipeline Pipeline Pipeline Rail Car Pipeline Petrochem Supply Make or buy decisions to meet market demands Silo-developed forecasts from crude selection/acquisition to rack demand for various trade channels Many planning and scheduling tools and non-integrated systems Multiple owners and partners throughout the Supply Chain Large inventories from crude to motor fuel Must balance pushing crude through the system with responding to demand Demand 3

4 Supply Chain Constraints in the Region For clear geographical reasons there are very limited opportunities for companies in Central and Eastern Europe to take advantage of new modes of transportation. Some possibilities do exist for companies in the Danube basin and on the Baltic coast but these are limited. For this reason companies need to find ways to get the most out of their existing physical supply chains. This requires implementing best-in-class solutions to minimise supply chain costs and maximise customer satisfaction within all existing physical transportation constraints 4

5 Typical Supply Chain Problems Limited interconnection between business objectives and production targets and vise versa Partial production optimization, limited supply chain optimization little or no integrated optimisation Often organisational silos prevent collaboration by having their own individual objectives which reduces overall performance Limited tools to support everyday decision making, and limited ability to tie these decisions to planning objectives Not integrated business process monitoring Separate paper-based monitoring of business units No way to walk through whole business chains 5

6 Typical As-Is Oil Supply Chain - Planning Framework Refinery 1 Production Plan Refining Wholesalers Sourcing Plan Refinery 2 Production Plan Crude P/L Plan Refinery 1 Campaign Plan Crude Purchase Plan Plans Supply Planning Shipping Plan Road & Rail Plan Pipeline Nomination Plan Retail Demand Plan NRW Demand Plan Commercial Demand Plan RW Demand Plan 6

7 Decentralized Primary Distribution Typical Problems North terminal Premium Distribution Cost High Growth- North Region Low Growth- East Region West terminal Stagnant Inventory 7

8 Bottom Line Effects Start Get Monthly distribution Plan Stock-In-Transit, Refinery Outlook, Coastal Outlook, Pipeline Outlook Daily Opening stock of product grades at each location (excel/erp) Domain Expertise Prioritize & Rescheduling Poor Yes Communication- No centralized control Generate daily Schedule for 2-3 days View Scheduling Result Is there a stockout condition at any Depot? No Distribution Visibility- Scattered Information Re-Scheduling Send Schedule to Terminal coordinators Re-Scheduling Monitoring & Reporting Inventory Decisions Yes Is it 25 th of Month? OR Has Planning Changed? No Yes Any Crisis or Operational problems? No 8 End

9 Objectives when Improving Supply Chain Performance Visibility to identify internal and external opportunities Efficiency and safety to execute new process targets while minimizing latency between business decisions and execution Agility to translate these into profitable business and operating decisions Continuous improvement to improve competitiveness Combined approach to planning (SC optimisation) and scheduling (SC Management) 9

10 Planning - SAND Planning Optimizer Economically optimize integrated supply/demand network Uses LP technology Supplemented with integer programming Supports strategic planning, annual budgeting, S&OP Optimizes for raw material selection, sourcing, exchanges, production levels, plant allocations, distribution levels, transport mode selection, and routings Models all physical or economic constraints in the operation or distribution systems 11

11 INVENTORY An SKU s inventory performance over time (PICASO) HIGH TARGET LEVEL SAFETY STOCK LEVEL STOCK OUT TIME 12

12 INVENTORY Same SKU in a top-down view (PICASO) TIME 13

13 14 Top-down view with multiple SKUs (PICASO).

14 The Grid: End-to-end Enterprise Visibility (PICASO) Real-time view of entire supply chain: Inventory Finished products Orders Intermediates Forecast Feedstocks, Crude Purchasing Production Distribution Flexible, role-based views Exception-based alerting Calculates available-to-ship dates for customer orders and stock transfers Changes to any grid or schedule are instantly visible throughout the entire supply chain. 15

15 Primary Distribution a day in the life of. 1.) Every night we synchronize all data needed by supply chain users with ERP and plant systems, i.e. all ERP master and transactional data, including changes to materials, locations, orders, downtimes, etc 4.) Macro issues requiring major rebalancing or weekly/monthly replanning are optimized in SAND SAND Distribution Scheduler 3.) Micro issues requiring minor (daily) adjustments to individual quantities, rates, etc., are handled by Distribution Schedulers, guided by the active plan SCEM (The Grid) 2.) Every morning users are presented with the latest supply/demand balance in the grids, including changes to demand and supply 16

16 Retail and its part in supply chain optimisation One of the major elements of a best-in-class supply chain solution is the effective integration of the primary and secondary distribution functions. Fully automatic point-of-sale systems that are effectively integrated with the primary distribution can lead to noticeable improvements. Integration focus is at the terminal management level 17

17 Secondary Distribution Solution Consists of two major components : Automatic Order Generation Operational system for Scheduling & Routing 18

18 Order generation Automatic generation of replenishment orders that are tailored to the distribution fleet Allows peaks and troughs in demand to be smoothed Promotes full loads Promotes simultaneous re-order points Reduces risk of run-outs Increases efficiency of order-taking 19

19 Scheduling and Routing features Multi-drop Cost optimisation Mixed fleet Product availability Priority levels Compartment planning Time windows 20

20 Secondary Distribution Solution Calculations Generated / Customer Orders Automatic Scheduling Generation of Schedule PLANNING PLANNING SCHEDULING SCHEDULING SCHEDULING Sales / Stock Recording Delivery Confirmation Load Confirmation Assign order to vehicles Orders by Phone Sales / Stock Data ATG Retail Automation 21

21 Product eretail Solution Map Refinery Fuel Delivery Mgmnt. System Fleet Tracking System Product Product Cost Product Demand Dispatch Details Replenishment Plan Transportation Schedules Pricing Promotions Marketing HQ Area Gas Station Automation Office Price System Loyalty Campaign Monitoring Product Sales, Inventory Existing Prices Sales, Receipts, Inventory Customer Info Own & Comp. Prices Network Planning Dynamic Pricing Demand Forecasting Sec. Dist. Planning & Scheduling Head Office Mgmnt. System Sales, Receipts, Inventory Consumption Info Fleet Management System Loyalty Campaign Primary Distribution 23 Product Gas Station Private Stations

22 Benefits from improving Primary Distribution Improved demand forecasting Lower inventories Reduced distribution costs Increased customer service Improves Distribution Planning Raises Competitive Capacity of the Company on the Market Supply Chain Monitoring provides Decision making support Key operating decisions directly impacting bottom line costs and revenues can be made. All major supply chain stakeholders within a company, (executives, managers, planners, sales representatives, production schedulers, customer service representatives and purchasing agents can benefit from the powerful analytics and workflow enablers provided. 26

23 Primary Distribution Financial Benefits Benefit Areas Potential Paybacks Reduction in Inventories 25-60% Improvement Lower Supply Chain Costs 25-50% Improvement Forecast Accuracy 25-80% Improvement Improved Customer Satisfaction 16-28% Improvement Source: Pittiglio Rabin Todd & McGrath (now part of PWC) Supply Chain Benchmark Study 27

24 Benefits from improving Secondary Distribution Remote Monitoring Remote Inventory Management Replenishment Forecasting Order Management Transportation Cost Reduction Optimum vehicle utilization Reduction in Operational overheads Increase in service levels 28