By Jan van Rooyen [Solutions Specialist: Resolve]
The Industry Challenge
The fuel industry is of critical importance to the entire southern African regional economy, which is significantly interconnected in terms of its energy market. There are regular cross-border flows of electricity, crude oil, liquid fuels and gas – over 8.5 billion litres of liquid fuels alone are traded cross-border in the region annually, with Transnet Pipelines pumping over 16 billion litres of liquid fuels in total.
South Africa has 4 500 retail fuel delivery points, and over 700 000 road tanker drops are made each year at these and other delivery sites.
Due to the central position occupied by the energy industry within the regional economy, substantial pressures exist on South African energy markets – the major source of supply and demand. Among these are variable and uncertain electricity supply, weather-related disruptions, constrained refining capacity, low macro-economic growth, and oil price and exchange rate volatility.
Specific downstream supply chain challenges also test the ability of fuel companies to match supply and demand in a cost-effective and efficient way. Among these are:
- Primary transport: limited in-transit planning and movement visibility, sub-optimised and non-integrated truck/rail/pipeline schedules.
- Fuel terminals: poor downstream demand and upstream supply visibility results in too low or too high stock levels.
- Distribution: POS (point of sale) data as an excellent source of consumer demand not utilised within distribution or supply decisions.
- Financial: inability to optimise total end-to-end retail and commercial supply chain costs, a poor understanding of all cost drivers and a poor understanding of individual customer profitability.
Many initiatives are under way, with the end goal of creating an integrated and adaptive supply chain where planners and operators have end-to-end visibility. This would improve decision making, reduce supply chain costs, optimise inventory, better utilise downstream assets and improve operating margins. However, despite investment in planning and scheduling capabilities, business processes remain fragmented.
The Future, Now
An effective set of supply chain solutions for the fuel industry already exists, with the following capabilities:
- Balancing supply against demand in an automated system, multiple times a day. This takes into account stock on hand, inbound volumes, outbound volumes, depot capacities, primary and secondary carrier capacities, optimal fuel station docking windows and tactical fuel exchanges across multiple parties.
- Real-time and integrated planning, execution monitoring and event management. This provides the ability to adjust planned bulk fuel movements based on real-time data and to account for fuel returning to depots.
- Integrating tactical business planning: “What-if” scenario planning capability projects the impact of optimal service levels, cost-to-serve and customer profitability conditions on net operating margin.
Technology that enables a multi-party, multi-echelon view of the supply chain is a crucial enabler of collaboration. The need for such a ‘network resource planning’ system is exacerbated by the reality of a diverse IT landscape with poor integration and co-ordination. New cloud-based and ‘networked’ systems that reliably provide integration capabilities are essential.
An integrated multi-party, multi-echelon fuel supply chain bring many benefits. Revenue enhancement and cost reduction mean reduced downstream logistics and distribution costs, optimal terminal and depot inventory and improved operating margins, as well as reduced working capital and better downstream asset utilisation.
Reduced supply chain risk is another benefit, and means better-defined roles and responsibilities between multiple parties, full fuel accounting, increased teamwork and collaboration, and increased supply chain visibility.
Lastly, this approach increases competitive advantage through real-time, integrated business planning, real-time execution monitoring, increased response time to customers (both external and internal), increased speed to market, and improved decision-making.[/vc_column_text][/vc_column][/vc_row]