The recent COVID-19 pandemic exposed many vulnerabilities in supply chains of organizations across the world. The challenge for companies will be to make their supply chains more resilient without weakening their profit margins. This includes identifying the vulnerabilities in the supply chain and bring in various process innovations. One such innovation can be to bring in all the data points of a supply chain to planning phase to uncover most of the hidden risks. This can be time consuming and expensive. But this is better than the cost involved in surprise disruptions.
The Oil & Gas supply chain is highly complex, and the hidden risks are in great number. To uncover this at an early stage would be equally complex. Before going further, some things to keep in mind.
Inventory levels are the most important indicators of both physical position and balance around a supply network. The traders negotiate deals with a counterparty and enter contracts for purchase and sale of commodities. Schedulers are an important arm of trading, arranging freight, handling pipeline trades and exchanges.
Let’s take a real time example to explain how scheduling of crude oil works and the various business processes involved in it.
A trader had negotiated and finally executed a sale deal in the system. The sale deal is to sell crude at a customer location. The scheduler receives the deal and would start working on it by looking at the inventory position at various supply points. The scheduler would be creating a nomination in TSW to specify the source location, transport system, vehicle, carriers, vendors, Inspectors etc. The nomination document would hold everything related to movement of crude from supply to demand location. This includes the supply route too. To shorten the turnaround time, he can choose a previous nomination and copy details from it and complete the planning.
The planning was completed and the execution too. In the settlement phase the scheduler realizes that what was profitable in the last month turned out to be a costlier option this time which in turn resulted in a lean profit margin.
The increased cost may be due to one of the following.
- Change in inventory level at supply point – Lack of insight into real time data can result in not identifying the change in current inventory or safety stock level or future projections
- Change in material price -Due to varying supply and demands the material price can keep changing
- Increased logistic cost – If the supply were not diverse and the options were not assessed based on logistic cost during planning, this can result in a hike in logistic cost, thereby increasing the procurement cost of products
- Change in supplier category from low risk to high risk categories -During planning its equally important to select suppliers during planning phase. There may be some past incidents based on which the supplier categories would’ve changed from low risk to high risk. If this information is not available at the planning point, during the actual movement of products , it would’ve become too late to change the vendors
- Unforeseen costs like demurrage or detention charges – Route information is important to understand the past cases of demurrage and detention charges incurred. If this is upfront known there is possibility to change the route or take proactive actions
The scheduler’s decision would’ve been an informed one if these data points were available during the planning phase i.e. when he was scheduling the move. This would’ve resulted in better operational efficiency and reduced cost. He could’ve achieved this by looking into multiple reports, transactions and data which is scattered across the supply chain. But this would’ve resulted in a longer turn around time.
The best solution for this is to bring in all the required data at one place and help the scheduler make an informed decision.
SAP’s Scheduling Assistant app solves this problem to a great extent. Scheduling Assistant is a new SAP Fiori application shipped along with the SAP S/4HANA Oil & Gas 1909 release. The app can integrate with multiple sources of data and bring in real time data and provide ranking of various supply options for the scheduler. It is not always required to have a complex machine learning algorithm to study the vulnerabilities of the supply chain. Scheduling Assistant app simply works on the data in the system and provides useful insights for decision making.
The app shows open demands from various sources.
The open demands can be a discharge line nomination created based on a sale contract which was the result of a deal closed by the trader.
For each demand, the supply options are shown with real time information like physical inventory, material valuation price, purchase price, logistic costs, trip duration etc. Just like google search provides recommendations with the best match being at the top of the results, the app also provides ranking of supply options based on procurement cost. The route used in the supply option will help in calculating the duration. This important to understand whether its possible to meet the schedule date. The route also helps in identifying some of the demurrage and detention charges in the past.
It also provides an opportunity to select partners and alter the cost. This is an important step a stated above. By selecting the partners, we can avoid the risk of selecting a high-risk partner in the system and the system re calculates the cost based on partner selection. This again gives a chance for the scheduler about the supply recommendations.
The app also makes it simple for the scheduler with a single click to create a nomination with both source and destination details. This saves a lot of time juggling between apps and reports and thereby helping the scheduler take an informed decision with all the data points across the supply chain at one place. There is an out of the box integration with other SAP Trader’s and Scheduler’s Workbench applications like Inventory Planning work bench and Supply chain Visualization app.
When we know that the supply chain will remain highly volatile in the coming years and there can be more demand and supply shocks in future, it is important to switch to such process innovations that improves resilience and reduces the risks from future disruptions that are certain to occur. When we have Smart TVs, Smart homes why not Smart Scheduling.