The energy trilemma of energy security, sustainability, and affordability is kicking in full gear in 2023. From the earlier post-pandemic shocks to the Russia-Ukraine conflict and the acceleration of energy transition, these factors have caused further uncertainty for the oil and gas industry. Recessionary fears, price volatility, and uncertain demand growth present challenges for medium- to long-term planning for the oil and gas downstream sector. How can downstream companies be better prepared to address this? In order to answer this question, we’ll have to dive deeper into the workings of a downstream company supply chain network.
Decisions are taken at different stages within the supply chain (supply, manufacturing, and distribution) and at different levels. Aligning each step of this complex process is critical to gaining a competitive advantage. At the strategic planning level, decisions have to be taken on demand allocation, feedstock procurement, utilization of production capacities, distribution, and utilization of modes of transport. If there’s market volatility, whether it’s in sourcing raw materials or demand disruptions due to lockdowns or geo-political crises, it will inversely impact all the different decision nodes in the supply chain. If companies are not agile and equipped with advanced analytics solutions they will not be able to respond to these changes in a timely manner. We’ve seen this time and time again and witnessed a glut of crude and product inventories, product mix changing on the fly, and instead of jet fuel shifting refinery priority to diesel and gasoline, which negatively impacts profit margins.
How does a planning and scheduling tool like o9 help downstream companies? It helps reduce COGs from your supply chain, reduces the risk of being unable to fulfill market demand, and enables sustainability goals. If downstream O&G companies can get end-to-end supply chain visibility with o9’s digital twin and see real-time data, they can make more effective decisions at each node of their network, which in turn will help with:
- Maximizing plant uptime and getting more product out the door
- Reducing demurrage and transportation cost
- Improving fleet utilization
- Keeping optimal inventories by providing visibility into your on-hand and in-transit inventories
With o9, companies can model to understand how each raw material affects operations and how to peg a constrained supply to the highest priority demand and end customer. o9 can assess the leading risk indicators for your supply chain by providing visibility and quantification of n-tier supply-side risks. For example, if we take the lube value chain and operations of a lube oil blending plant, o9 can help provide n-tier supply network visibility and highlight raw material risks that lie 3- or 4- tiers deep into the extended supply network.
How is this scenario executed in o9?
The first step is to map the n-tier supply network working with the customer and the customer’s tier 1 suppliers. Traditionally companies don’t have visibility beyond tier 1 and let their tier-1 suppliers deal with anything at the sub-tier level.
Here at o9, we take a multi-pronged approach. We leverage the data our customers have, then we integrate with 3rd party data providers that specialize in risk data by commodity/raw material and/or by supplier.
Now leveraging o9’s market knowledge hub, we take the 3rd party data integration and develop risk models for each of the sub-tier nodes in this extended supply network. This highlights any sub-tier supplier or commodity risk that may pose a problem at tier 1 and impact operations. o9 doesn’t stop there, it also provides root cause and ‘What-if’ scenario analytics for customers to compare the different available options and promote the one best suited to their current business priorities. o9 customers can proactively mitigate the n-tier supply risks and avoid any plant downtime due to raw material shortages.