CREATING A PARTIAL SUPPLY CHAIN REFERENCE MODEL FOR THE ENERGY INDUSTRY

CREATING A PARTIAL SUPPLY CHAIN REFERENCE MODEL FOR

THE ENERGY INDUSTRY

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Gayialis S.P., Stamatiou D.-R.I., Ponis S.T., Panayiotou N.A.

Hellenic Open University & Hebei University of Economics and Business16-17 April 2016

• Research aim• Energy industry characteristics• Energy industry supply chain• REMEDY reference model• Methodology for partial model creation• Energy supply chain partial reference model• Conclusions

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Presentation Outline

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The creation of a partial reference model for the supply chains of energy companies

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Research Aim

• Great importance in global economy and local economic health

• Large size of supply network dispersed over vast geography• Complex production operations• Inherent uncertainty, related to decision making processes• Uncertainties include market demand, prices of crude oil and

end products, and product or production yields of crude oil from chemical reactions in the primary crude distillation unit

• Primary products: Oil and Gas• Transportation of products involves various means of

transport such as ships, pipelines, rail and road, often leading to high transportation costs

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Energy Industry Characteristics

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• Oil and gas companies face their supply chain configuration and coordination systems as worthy of improvement

• Supply chain improvements allow for competitive advantages in the marketplace

• Anomalies in the global supply chain can have adverse effects in operational efficiency, maintaining quality, profitability, and customer satisfaction

• Causes of anomalies include uncertainty in supply of crude, demand, transportation, market volatility, and political conditions

• Need for modelling and analysis of the dynamics of the supply chain, critical decisions and risks

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Energy Industry Supply Chain

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REMEDY Reference Model

• Developed through the research program “ODYSSEUS” - A Holistic Approach For Managing Variability In Contemporary Global Supply Chain Networks

• A reusable process framework for companies in different industries to organize supply chain processes in an effort to manage demand variability and its effects on the supply chain

• It consists of a complex of diagrammatic techniques, mathematical modelling methods and verbal descriptions

• Extends to three tiers of a supply chain (supplier-company-customer)

• Nine functions: Define Supply Chain Strategies, Customer Relationship and Service Management, Product Development and Commercialisation, Supplier Relationship Management, Develop KPI Framework, Demand Management, Order Fulfilment, Manufacturing Flow Management, and Returns Management

• Top-Down/Bottom-Up approach• REMEDY reference model served the Top-Down approach• Three case studies in energy companies, each at a different

stage of the supply chain, served as the Bottom-Up approach (A refinery, a petroleum product producer and a natural gas vendor)

• ARIS diagrammatic techniques maintained

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Methodology For Partial Model Creation

Main differences to the generic REMEDY reference model include:• At value chain level• “Supply, inventory and production flow management” replaces

“Manufacturing flow management”• “Claims management” replaces “Returns management”

• At function level• Addition and removal of functions• Industry specific verbal alterations

• At process level• New industry specific processes• Adaptation of risk, decision, IT and organisational diagrams• A total of 40 processes and 25 other diagrams altered

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Energy Supply Chain PartialReference Model

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• Determine Supply Chain Management Strategies• Need for strategies to adapt to a highly fluctuating market• Eight strategic/long-term functions corresponding to the other

functions in the value chain, no operational functions • Functions describe the strategy defining and decision making

processes for each supply chain function• Customer Relationship and Service Management• B2B, B2C customers and company are bound by highly intricate

contracts.• In case the contract terms are breached by either part, the other is

entitled to claims• Five strategic/long-term and eleven operational/short-term

functions • Good information sharing provides the organisation with a direct

window to demand

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• Product Development and Commercialisation • Products are specific and unchanged, one must not forget the

service as a product trait• New services may affect the supply chain just as innovative

products disrupt manufacturing supply chains • Five strategic/long-term and eight operational/short-term functions

• Supplier Relationship Management• Important role in the products final price and availability• Four strategic/long-term and seven operational/short-term

functions • Good information sharing provides the organisation with better

supply choices10


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• Develop Framework of Metrics• More of a supportive function• Selected framework of metrics should be constructed carefully • Eight strategic/long-term functions

• Demand Management• The core function of the partial reference model• Four strategic/long-term and five operational/short-term functions• Good forecasts are important in the energy industry since they

dictate contract strategies and claims arrangements• Order Fulfilment• Relates to orders from the point of entry to the collection of

feedback after delivery• Three strategic/long-term and six operational/short-term functions 11


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• Supply, inventory and production flow management• Energy companies, in some cases, categorise supply and inventory

management as embedded or related to manufacturing• Traditional manufacturing does not exist in the energy sector• Process manufacturing• Three strategic/long-term and four operational/short-term

functions• Claims management • Energy companies do not or cannot, practically, return products • Claims have a similar impact on the energy supply chain as returns

have on a manufacturing supply chain• Two strategic/long-term and four operational/short-term functions

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• This reference model is based on the instantiation (specialization) of a generic reference model of the supply chain, the REMEDY model, which has been developed in the context of a research project.

• This reference model is a 3-tier supply chain model (vendor-producer-customer) and is focused on demand management.

• The instantiation of the REMEDY generic model is based on the insights and knowledge from various case studies of the energy sector, mainly oil and natural gas companies.

• Model instantiation should go beyond the development of the partial reference model for energy industry sector and it should be specialized in particular business models for specific energy supply chains and companies.

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Conclusions

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The research efforts described in this paper are part of the research project “A Holistic Approach for Managing Variability in Contemporary Global Supply Chain Networks” in research action: “Thales - Support of the interdisciplinary and/or inter-institutional research and innovation”, which is implemented under the Operational Programme: Education and Lifelong Learning, NSRF 2007-2013 and is co-funded by European Union (European Social Fund) and Greek Government.

Thank you for your attention!

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CREATING A PARTIAL SUPPLY CHAIN REFERENCE MODEL FOR THE ENERGY INDUSTRY

Presentations & Public Speaking

Transcript of CREATING A PARTIAL SUPPLY CHAIN REFERENCE MODEL FOR THE ENERGY INDUSTRY