Combat oil price volatility through effective supply chain and inventory management - Inatech
- April 2, 2017
- Posted by: Inatech
Combat uncertainty in markets through effective supply chain and inventory management
Fluctuating oil prices and unpredictable revenues are making it difficult for oil companies to accurately manage and deliver on their profit commitments.
This uncertainty has forced oil producers to look more closely at their operating costs and look for ways to make savings.
For many their supply chain is inefficient, has disconnected and inadequate processes and information is often siloed, making cost management, decision making and reacting to changing market conditions, difficult.
These inefficiencies offer opportunity. In our experience an oil refinery producing 200,000 barrels a day that implements tighter supply chain integration, drives process improvements and implements real-time reporting can deliver annual savings of $1.5m plus!
Of course the challenge for any company is finding where and how they will deliver their specific savings.
Implementing best practice across the supply chain
Industry best practices highlight the need to manage a company’s supply chain in an integrated and cohesive manner. To do this effectively oil companies need to look at three key areas:
• Integration – this needs to include demand, production and inventory systems.
• Collaboration – between planners, schedulers and operations.
• Real-time visualization and reporting.
In order to deliver against these areas, oil companies need to coordinate activities, collaborate across the whole oil supply chain and look to deploy the very latest information systems and communication technologies.
Inventory management a critical first step to supply chain transformation
As with any change management strategy the challenge is deciding where to focus the energy and where to start. When faced with the task of taking cost out of the supply chain and integrating new technologies and systems, oil companies need a strategy that delivers results fast. Transforming the full supply chain can be daunting and is a long term project.
An effective first point would be tackling inventory management.
Efficient inventory management is critical to maintaining good margins and reducing working capital, two of the key drivers in improving oil supply chain management.
Implemented effectively it will deliver
• System wide visibility into feedstock, production and finished product to achieve optimal inventory levels.
• Enable better production and transport planning, cost and quality control
• Lower working capital and transport costs resulting in higher margins.
There are a number of specialist software products on the market that enable oil companies to achieve system wide visibility and so transform inventory management processes.
Good inventory management applications help leverage a company’s inventory assets and maximise through-put.
Product features need to cover everything from inventory valuation, scheduling and planning optimization, to tracking the inventory that is in-transit, through to automated accounting and valuation of inventory, and automatic inventory adjustments in case of unplanned or diverted deliveries in multiple locations. Movement summary and inventory summary are also key reports.
A sound inventory strategy coupled with a system providing real time decision support will typically deliver significant savings depending on type of operation.
It is an effective first step to helping many oil companies transition to a fully integrated, end to end supply chain that will eventually enable them to accurately manage cost, react quicker to changing market conditions, optimize the supply chain and combat the continued oil price uncertainty.
About Techoil ETRM
Inatech has developed Techoil ETRM, an intelligent and integrated end-to-end cloud software product for the oil trading industry. A key application of Techoil is inventory management. Contact us today to book a product demo or speak to an expert about your supply chain or inventory management requirements.
To discover how implementing an effective supply chain and inventory management system can combat oil price volatility and deliver costs savings – download Inatech’s latest whitepaper.