HP Integration Strategies: The journey to supply-chain excellence in refining and petrochemicals
In downstream refining and marketing, the handoff between manufacturing operations and product distribution and marketing is often performed in a sub-optimal manner. Most process manufacturing compani..
In downstream refining and marketing, the handoff between manufacturing operations and product distribution and marketing is often performed in a sub-optimal manner. Most process manufacturing companies claim supply chain as a core competency, yet many still attempt to manage the workflow from end to end. In many cases, the production operations and supply-chain groups operate in silos. Refinery production groups typically make superb products, using the manufacturing assets available to them. However, since the logistics and supply-chain groups in refining and petrochemical businesses usually handle product distribution and sales independently from production, their journey to supply-chain excellence clearly lags behind many other industries.
With this understanding, leaders in process manufacturing periodically peer into other industries—such as discrete manufacturing and specialty chemicals—to learn ways to improve supply-chain operational excellence. When they do, they often learn that manufacturers must look at the entire supply chain through multiple lenses and develop business processes based on industry standards, best practices and appropriate use of technology. All often offer opportunities to streamline business operations. In the downstream refining and petrochemicals industry, one of the last levers left to improve profitability, is to streamline the liquids supply chain.
It’s often difficult to attain clear visibility into liquid-product inventories due to inefficient or disconnected business processes and technologies across primary and secondary distribution. Terminal inventories are not reconciled in a timely fashion because businesses often don’t have the time to deal with spreadsheets and complex IT applications.
Organizations implement supply-chain improvement projects routinely, but with sub-optimal overall benefit. Successful IT projects for supply-chain integration need the business leaders to get involved early in the project definition. However, these leaders are usually busy running various marketing, distribution and trading activities, and they seldom have adequate staff to support IT projects. Many business end users use a host of manual business processes that involve e-mail, Microsoft Excel and hard-copy reports to manage the complicated supply chains in the process industries.
Enter the Supply Chain Council.
In 1996, the Supply Chain Council (SCC) was formed to create and evolve an industry-standard process reference model to help companies improve supply-chain operations. The SCC created the Supply Chain Operations Reference (SCOR) model; now companies can evaluate and compare overall supply-chain activities and evaluate their own performance.
The SCC is made up of over 800 members from worldwide organizations. Owner-operators—such as Shell, DuPont, Irving Oil, ExxonMobil and Chevron—comprise 40% of the membership. North American and European companies comprise approximately 70% of the total membership. Most manufacturers reported that the supply chain accounts for 60% to 90% of the total company costs, while oil companies like ConocoPhillips and Chevron disclosed spending 90% and 88%, respectively.
The SCOR model and framework.
As the industry-standard supply chain business process reference model, the SCOR contains over 200 high-level business processes; 550 supply-chain metrics; and 200 skills classifications, including risk management. The SCOR reference model includes five key management process categories of activity. These provide a framework to link suppliers, enterprise supply chains and customers. The SCOR model is arranged with the fundamental business processes of plan, source, make and deliver.
SCOR project toolkit.
Initially, executing a supply-chain project looks like a traditional project in which teams are developed, roles and responsibilities are aligned, and the standard project charter is written. With the SCOR model, the competitive SCORcard benchmark and analysis are introduced at an early stage. SCOR metrics included in the benchmark are reliability, responsiveness, agility, costs and assets. This process allows companies to determine a supply-chain strategy and to analyze current performance against competitors.
The SCOR project toolkit includes a number of tools that have been used successfully to define a long-range plan to fix a supply chain. Process mapping tools, like Aris, can be used in addition to external benchmarking, logical and geographical maps, and defect analysis tools. The SCOR model has several hundred best practices that are easily identifiable with a given business process.
Organizations must execute IT projects in the correct order. People, business process and technology are fully intertwined. At the beginning of a project, it may be good practice to envision the technology that will transform an organization’s supply chain. But technology cannot be implemented successfully on broken business processes. Successful manufacturing companies look to similar manufacturing companies and adapt standards when they exist. These companies use the SCOR model to support technology procurement activities and the requirement documents that are released to IT suppliers for bidding. The SCOR project provides a proven methodology to transform the supply chain. It includes the tools to define, analyze and benchmark supply-chain performance and to choose the right supply-chain projects. HP
Peter Reynolds has more than 19 years of professional experience in process control, advanced automation applications, information technology, enterprise and supply chain in the downstream oil refining and petroleum product marketing industry. Prior to joining ARC in 2011, Mr. Reynolds served as the strategic planning manager for automation and IT at Irving Oil in Saint John, New Brunswick, Canada. Irving Oil operates Canada’s largest refinery.
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