integrating petroleum supply chain
TRANSCRIPT
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Integrating the Petroleum SupplyChain Drives Value
June 2009
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22009 Aspen Technology, Inc. All rights reserved 2
Disclaimer
Aspen Technology may provide information regardingpossible future product developments including new
products, product features, product interfaces,integration, design, architecture, etc. that may berepresented as product roadmaps. Any suchinformation is for discussion purposes only and does
not constitute a commitment by Aspen Technology todo or deliver anything in these product roadmaps orotherwise. Any such commitment must be explicitly setforth in a written contract between the customer and
Aspen Technology, executed by an authorized officerof each company.
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Agenda
Petroleum Industry Trends
Petroleum Supply Chain Challenges
Petroleum Supply Chain Solutions
Petroleum Supply Chain Best Practices
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Global Oil Outlook
Information derived from CERA market briefing dated January 12, 2009
Forecasted average oil prices for 2009and 2010 are $47 and $59 per barrel
respectively US and Canadas GDP forecasted to be
negative in 2009 rebounding in 2010
Global GDP is expected to shrink in 2009
Global oil demand expected to decreaseby 2 MBPD in 2009
Spare oil production capacity could growto 6MBPD in 2009
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Tight capital markets will continue to impact new projects and production runs
Low margins and high capital investment hurdles will delay or cancel a significantnumber of capital projects
Downstream chemical volumes and margins will remain weak for 2009 Increased potential for mergers and acquisitions as smaller companies struggle
with financial and capital issues
Petroleum Industry Expectations
Continued lower global demand with
rising spare capacity will keep average
oil prices around $50 per barrel in 2009
OPEC could cut production in the first
quarter of 2009
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Strategic Issues for Petroleum
Globalization
Fundamental shifts in demand, flow of trade anddemography
Changing capital investment and restructuring patterns
New competition from India and ChinaEnergy Management & Sustainabili ty
Long term energy demand growth and the geopolitics ofresources
Alternative feedstocks Compliance regulations
Portfol io Management M&A primary vehicle for growth for certain segments
(mid-sized companies) Sharpen product portfolio through restructuring New groups of buyers emerge (India, China, Middle
East)
Innovation
New business models and processes (skills, knowledgemanagement,collaboration, value add services)
Advanced IT technologies to support innovation Managing IP
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Merger & Acquisi tion Economies of Scale
Stay cost competitiveness
Throughput & Margin Increase
Increase Capacity Utilization (USA, Western Europe, Japan, etc.)
Grass-root refinery & petrochemicals complex (Middle East, China, India,Russia)
Revamp existing plants (Korea, China, India, etc.)
Increase conversion unit capacity
Optimization
Feedstocks
Yields Explore high value products
Collaborative Decision Making Focus on supply chain coordination to maximize margin and reduce supply
chain disruption
Increase focus on collaborative decision making
Explore Alternatives Ethanol, Bio Diesel, H2, Solar, etc.
Gas Cracking, Catalytic Cracking, etc.
Petroleum Industry Strategy
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What are the High Value initiatives in
Petroleum Downstream?Supply Chain Initiatives1. Improve Feedstock Selection
Integrate Planning and Scheduling Workflows
Reduce Gap in Plan vs. Actual Crude Selection2. Optimize sourcing and distribution of products
Distribution Optimization
Manufacturing Initiatives
1. Decrease GAP between Plan and Actual Molecular management /Component modeling System Application of Planning and Scheduling
2. Increase Unit Throughput and Improve Reliability Advanced Process Control and optimization with
Performance Monitoring3. Real-Time Visibility into Refinery Operations
KPI and Refinery Visualization Production Performance Analysis
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Trend - Integrating the Supply Chain
Traditionally each operation within the supply chain (bothinside and outside of the refinery) was managed andoptimised in isolation
Most oil companies have started to realise the large benefitsto be had by integrating the supply chain and optimisingacross the enterprise.
Integration of the supply chainrequires changed businessprocesses and workingpractices, supported by new
and integrated tools.
Optimisation of the supply chain can make a significantimprovement in overall company profitability.
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Agenda
Petroleum Industry Trends
Petroleum Supply Chain Challenges
Petroleum Supply Chain Solutions
Petroleum Supply Chain Best Practices
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The Petroleum Supply Chain
Produce Crude
Primary DistributionSecondary Distribu tionInbound Logistics
Refine CrudeWholesale (Rack)Marketing
1 Supply and
Trading Crude valuation Crude and
Products Trading Crude blending Constraint
modeling Inbound Logistics
Refining2
Product blending Operations Scheduling Advanced controls Order execution Performance
Management
Product Placement
and Sourcing
3
Demand Management andForecasting
Regional Refinery Planning Unplanned Event Response Buy/ Make/ Sell/ Exchange
tradeoffs Exchange management
4
Retail Marketing
Distribution
InventoryManagement Scheduling (In-plant
and Distribution) Performance
management
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Supply Chain Challenges Business Impact
Wrong products at terminals
Large Demurrage charges
High inventories or run-outs
Many users with unlinked spreadsheets
Local optimization without enterprise-wide visibility
Poor visibility into future operational needs
Difficult to define best mix of make, buy and tradedecisions
Difficulty in executing term and exchange deals
profitably
Scheduling thousands of products/crude movements
Nominating vessels, pipelines, inspections
Managing exchange contracts
Managing compulsory stock obligations
Product/crude shortages in the network
High working capital
Uncertain Demand
& Supply
Inventory Management
Planning Directives
Operations Scheduling
Enterprise Visibili ty
Petroleum Supply Chain Challenges
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Summary of Challenges and
Opportunities Fundamental changes in the industry are
creating opportunities and challenges inmanaging the petroleum supply chain.
Unprecedented global changes ofsupply/demand balance requires excellentSupply Chain Management practices.
Market volatility its here to stay, feast orbe feasted upon
Overcoming organizational barriers is asignificant challenge
How do you get there continuous focuson improving supply chain practices
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But how will the best handle the
challenge?AspenTech observes Best in Class Petroleum Industry
Leaders working in these areas:
Enterprise Strategy versus Individual Market/Region Strategy &Management
Nimble, Market-based Refining, Marketing, and Supply Strategy Organizational and Process Alignment
(Refining Supply Trading and Marketing)
Building an integrated view of key shared data (inventories, demand,supply plan, production plan)
Standardized Work Processes and Enabling Technology
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Agenda
Petroleum Industry Trends
Petroleum Supply Chain Challenges
Petroleum Supply Chain Solutions
Petroleum Supply Chain Best Practices
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Typical Supply Chain work processes
Refinery activityHeadquarters activit y
MarketDemand
Forecasting
Refinery Operational Planning
BlendScheduling
& optimisation
Production Plan
Primary Distribution Scheduling(Physical Operations)
Supply/Demand OptimisationUnconstrained Forecast
Constrained Forecast
RefineryProduction targets
Distribution &
Exchange Plan
Demand plan
Scheduled Movements
to/from Refineries
SecondaryDistributionScheduling
Retail Demand(by terminal)
RefineryScheduling
Trading
Accounting
Sales History&
Open orders
Production Schedule
Actualisedmovements
Advanced Process Control
Process UnitSet-points
Blend recipes
PipelineScheduling
Pipelineschedule
Product availability& demand
ShipScheduling
Shipschedule
Product availability& demand
Load/deliveryConfirmation,
Credit checking
Feedstock selection
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Corresponding AspenTech Products
Refinery activityHeadquarters activity
Aspen CDM(Collaborative
Demand
Manager)
Aspen PIMS
Aspen
Refinery
Multi-Blend
Optimizer
Production Plan
Aspen IMOS
(Inventory Management&
Operations Scheduling)
Aspen Petroleum
Supply Chain Planner
(DPO)Unconstrained Forecast
Constrained Forecast
RefineryProduction targets
Distribution &
Exchange Plan
Demand plan
Scheduled Movements
to/from Refineries
Aspen
Fleet
Optimizer
Retail Demand(by terminal)
Aspen
Petroleum
Scheduler
Trading
Accounting
Sales History&
Open orders
Production Schedule
Actualisedmovements
Aspen APC
(DMCplus, etc)
Process UnitSet-points
Blend recipes
Aspen
Distribution
Scheduler
Pipelineschedule
Product availability& demand
Aspen
Distribution
Scheduler
Shipschedule
Product availability& demand
Load/deliveryConfirmation,
Credit checking
Aspen PIMS
Terminal Demand
& Inventories
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Refinery activityHeadquarters activity
Aspen CDM(Collaborative
Demand
Manager)
Aspen PIMS
Aspen
Refinery
Multi-Blend
Optimizer
Production Plan
Aspen IMOS
(Inventory Management&
Operations Scheduling)
Aspen Petroleum
Supply Chain Planner
(DPO)Unconstrained Forecast
Constrained Forecast
RefineryProduction targets
Distribution &
Exchange Plan
Demand plan
Scheduled Movements
to/from Refineries
Aspen
Fleet
Optimizer
Retail Demand(by terminal)
Aspen
Petroleum
Scheduler
Trading
Accounting
Sales History&
Open orders
Production Schedule
Actualisedmovements
Aspen APC
(DMCplus, etc)
Process UnitSet-points
Blend recipes
Aspen
Distribution
Scheduler
Pipelineschedule
Product availability& demand
Aspen
Distribution
Scheduler
Shipschedule
Product availability& demand
Load/deliveryConfirmation,
Credit checking
Aspen PIMS
Terminal Demand
& Inventories
Collaborative Demand Management
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Why Demand Management Matters
Demand Forecast Drives CriticalDecisions
More accurate demand = better
planning
If you do not know where you need to go,
then you risk optimizing the route to get
to the wrong place!
Forecast
Aspen PIMS
Aspen IMOS
Aspen DPO
DistributionPlanning
Operations
Scheduling &InventoryManagement
RefineryPlanning &Scheduling
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Why Demand Management Matters
Demand Forecast Drives CriticalDecisions
More accurate demand = better
planning
If you do not know where you need to go,
then you risk optimizing the route to get
to the wrong place!
Forecast
Aspen PIMS
Aspen IMOS
Aspen DPO
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Collaborative Demand Management
Business Process Flow
Generate
Statistical
Forecast
Statistical
Forecast
Analysis/
Metrics
View
Forecast
Adjusted
Forecast
AdjustForecast
Generate
Demand
Plan
Consensus
Demand Plan
Sales
History
Data
ERP
View
History
Adjusted
History
Data
AdjustHistory
Consensus
Forecast
CompetitorpricechangeCompetitor
price change
Overridedemandforecast
Information
Overridedemandforecast
Information
Newpromotion
Newpromotion
Changeinplanned
promotion
Change inplanned
promotion
CompetitorpricechangeCompetitor
price change
Overridedemandforecast
Information
Overridedemandforecast
Information
Newpromotion
Newpromotion
Changeinplanned
promotion
Change inplanned
promotion
IncorporateMarket
Information
ValidateMarket
Information
Collaborative Steps
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Refinery activityHeadquarters activity
Aspen CDM(Collaborative
Demand
Manager)
Aspen PIMS
Aspen
Refinery
Multi-Blend
Optimizer
Production Plan
Aspen IMOS
(Inventory Management&
Operations Scheduling)
Aspen Petroleum
Supply Chain Planner
(DPO)Unconstrained Forecast
Constrained Forecast
RefineryProduction targets
Distribution &
Exchange Plan
Demand plan
Scheduled Movements
to/from Refineries
Aspen
Fleet
Optimizer
Retail Demand(by terminal)
Aspen
Petroleum
Scheduler
Trading
Accounting
Sales History&
Open orders
Production Schedule
Actualisedmovements
Aspen APC
(DMCplus, etc)
Process UnitSet-points
Blend recipes
Aspen
Distribution
Scheduler
Pipelineschedule
Product availability& demand
Aspen
Distribution
Scheduler
Shipschedule
Product availability& demand
Load/deliveryConfirmation,
Credit checking
Aspen PIMS
Terminal Demand
& Inventories
Primary Distribution Planning Optimisation
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Aspen Petroleum Supply Chain Planner
(DPO)
Sales
Terminals
Rail
Barge
Pipe, Truck orRailtoTerminal
Refinery 2 Tanks
Exchange Receipts
Pipeline
Exchange Delivery
Pipelin
e,
Rail,T
ruck
toTerm
inal
Bulk Terminals
Purchase
Sales
Sales
TruckRack
Pipeline RailTruck
Sales
TruckRack
Refinery 1
Tanks
Pipe, Truck orRailtoTerminal
Sales
Sales
Sales
Aspen Petroleum Supply Chain Planner is an LPplanning tool used to optimize the economics ofdistributing multiple commodities, using multiple
modes of transportation, over multiple time periods.
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Aspen Petroleum Supply Chain Planner
(DPO): General Functionality and UseStrategic Users
Study effects of adding or removing assets (e.g. terminals or markets)
Evaluate expansion of distribution facilities (e.g. pipeline expansions)
Determine the optimal size of rail/barge/marine fleets Developing financial budgets
Operational Users
Optimize product distribution using varied transportation options
Evaluate make/buy/exchange options
Use economics to drive decisions in response to supply chain events
Proactively evaluate supply & demand problems before they occur Optimize terminal inventory
Seasons and seasonal changeovers Turnarounds, shutdowns, slowdowns
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Refinery activityHeadquarters activity
Aspen CDM(Collaborative
Demand
Manager)
Aspen PIMS
Aspen
Refinery
Multi-Blend
Optimizer
Production Plan
Aspen IMOS
(Inventory Management&
Operations Scheduling)
Aspen Petroleum
Supply Chain Planner
(DPO)Unconstrained Forecast
Constrained Forecast
RefineryProduction targets
Distribution &
Exchange Plan
Demand plan
Scheduled Movements
to/from Refineries
Aspen
Fleet
Optimizer
Retail Demand(by terminal)
Aspen
Petroleum
Scheduler
Trading
Accounting
Sales History&
Open orders
Production Schedule
Actualisedmovements
Aspen APC
(DMCplus, etc)
Process UnitSet-points
Blend recipes
Aspen
Distribution
Scheduler
Pipelineschedule
Product availability& demand
Aspen
Distribution
Scheduler
Shipschedule
Product availability& demand
Load/deliveryConfirmation,
Credit checking
Aspen PIMS
Terminal Demand
& Inventories
Inventory Management and OperationsScheduling
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Inventory Management & Operations
SchedulingPrimary Distribution Scheduling environment
Provides visibility of future inventory positions acrossthe organisation
Web-based, multi-user environment
The backbone of the Petroleum Supply Chain integrates with: Refinery Planning and Scheduling
Primary Distribution Planning
Secondary Distribution Scheduling
ERP system
Tank Gauging systems
Back office systems
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Refinery activityHeadquarters activity
Aspen CDM(Collaborative
Demand
Manager)
Aspen PIMS
Aspen
Refinery
Multi-Blend
Optimizer
Production Plan
Aspen IMOS
(Inventory Management&
Operations Scheduling)
Aspen Petroleum
Supply Chain Planner
(DPO)Unconstrained Forecast
Constrained Forecast
RefineryProduction targets
Distribution &
Exchange Plan
Demand plan
Scheduled Movements
to/from Refineries
Aspen
Fleet
Optimizer
Retail Demand(by terminal)
Aspen
Petroleum
Scheduler
Trading
Accounting
Sales History&
Open orders
Production Schedule
Actualisedmovements
Aspen APC
(DMCplus, etc)
Process UnitSet-points
Blend recipes
Aspen
Distribution
Scheduler
Pipelineschedule
Product availability& demand
Aspen
Distribution
Scheduler
Shipschedule
Product availability& demand
Load/deliveryConfirmation,
Credit checking
Aspen PIMS
Terminal Demand
& Inventories
Aspen Fleet Optimizer
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Poor inventory management
Missed Opportunistic purchasing
No demand planning
Primarily manual processes (phone,
fax, email, excel) Reactive order process
Excess transportation costs
No control over supply chain
The Business Problem
Traditional Processes
The Result
Excess inventory positionscreate poor cash flow
High Cost per Volume Delivered(CPVD)
Poorly negotiated freightcontracts
Excessive run-outs, retains
Supply shocks result inexcessive transportation costs orrevenue loss
Lost revenue at the terminal
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Inventory Management
Order Placement/Capture
Fleet Scheduling & Source Optimization
Order Assignment to Accounting
Distribute for execution to fleets
Execution (Real time) Management
Reconcil iation with ERP
Aspen Fleet Optimizer
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Agenda
Petroleum Industry Trends
Petroleum Supply Chain Challenges
Petroleum Supply Chain Solutions
Petroleum Supply Chain Best Practices
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Industry Leading Practices
Standardization and streamlining of businessprocesses Well defined business processes from forecasting, planning,
scheduling to execution
Standardization and integration of tools and systems Well defined system functional scope and data transfer
Enterprise visibility Inventory, production, deals and movements
Network optimization Refining and distribution
Analytic-based decision support Case study and situation simulation
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In Closing
The global oil market will continue to be volatile.
Leading oil companies are working on operationexcellence to manage financial risks and marketdynamics.
Operation excellence in S&D focuses on enterprisevisibility and collaboration to improve forecastaccuracy, supply optimization, and distributionscheduling & execution.