Business Processes and Industry Requirements

Business Processes and Industry Requirements

Logistical processes in the oil industries are specific in many points; therefore, it is very important to our clients that they work with ORSOFT consultants who have a lot of experience in the oil industries and speak their language. Place your trust in ORSOFT´s experience. Our software is used successfully and productively to plan all production and logistics steps in downstream oil processing.

The figure illustrates the complete downstream oil processing supply chain using a hypothetical example of lubricant production in Europe – starting from crude oil delivery at sea ports and ending with containers filled or tank trailers loaded with lubricant products.

Downstream Oil Processing Supply Chain
Downstream Oil Processing Supply Chain

Quite often this supply chain will span over multiple different companies or independent entities of global enterprises:

  • pipeline operator that handles transportation of crude oil batches to one or many refineries based on their specific scheduled feedstock demand
  • fuel production refinery that processes crude oil with the primary purpose of fuel production and secondarily of producing of oil fractions that are the raw materials for lubricant and wax production
  • lube oil refinery with subsequent lubricants production and container filling / bulk loading
Downstream Oil Processing Supply Chain
Downstream Oil Processing Supply Chain

ORSOFT solutions will address the specific requirements of these different entities with regard to planning and scheduling of production and logistics.

The detailed pages under the main topics Fuel Producers and Lubricant / Wax Producers will give you an in-depth introduction into the challenges of and solutions for the individual parts of the supply chain based on typical production scenarios for which ORSOFT has provided solutions.

Hydrocarbon Product Management and Parallel Inventory

In scheduling and execution processes in the oil industries, it is often necessary to manage a parallel inventory, which means the inventory needs to be managed with quantities in several units of measures belonging to different dimensions (such as mass and volume) at the same time; furthermore, quantity conversion may need to use additional parameters, e.g. based on ambient conditions in a tank or a product´s properties.

Physical inventory in tanks is often managed primarily in volume units – based on tank dips – and compared to the physical volume capacity of the tank.

In contrast, “book stocks” and goods movements on the total material level are kept in mass units as required for excise duty handling. Bills of material – especially for blending processes – are generally also based on mass units and mass percentage.

Oil and oil products are bulk products in liquid form that are processed and shipped in large quantities by the oil industry. Even the smallest fluctuations in temperature can result in considerable fluctuations in volume.

Because the measured volume of an oil product is temperature-dependent, the density of the same material – which is used to calculate mass from volume and vice versa – can differ considerably in different locations or at different times.

ORSOFT Manufacturing Workbench uses an oil quantity conversion that considers temperature-dependent density. It allows volumes at ambient temperature and densities at test temperature to be converted into densities, volumes and masses at standard temperature. The oil quantity conversion is thus used to convert the quantity of an oil product into various units of measure.

ORSOFT Manufacturing Workbench currently uses a single – material-independent – Alpha correction table based on DIN 51757 by default, which has proved to be accurate enough for scheduling-related processes. However, this may be replaced by a more detailed solution if required, using different conversion groups and API/ASTM tables or external API conversion routines.

Geschäftsprozesse und Industriespezifik in der Öl- und Gasindustrie

Flexible Tank Management

Bulk products in liquid form are stored in tanks and transported in pipelines, containers or tank trucks between tanks. Quite often, intermediate tank farms are designed as “non-determined tanks”, meaning a tank may hold different products at different times.

Typical classic ERP systems, such as SAP ERP, cannot handle this type of tank management well with regards to current and projected stock on the tank level – as required for planning and scheduling processes – because their stock management centers on the material and its dedicated stock locations. If they support tank level management at all, then it is often necessary to assign each material to all potential tanks in master data management, which is not very practicable for large tank farms with high flexibility and for a large material master which is constantly being expanded due to new products entering production.

Due to these limitations, companies often use separate Tank Management Systems – based on databases and often closely integrated with production control systems – to handle actual physical stock on the tank level based on tank geometry data (volume correction factors, strapping tables) and regularly taken tank dips. From these Tank Management Systems, current material stock levels are calculated and uploaded to the ERP system in order to correct “book stocks”. However, this is often done only once per day and sometimes even retrospectively, e.g. the “book stock” for today at 6 AM may only enter the ERP system today at 4 PM and thus does not consider any goods’ movements that happened since 6 AM.

ORSOFT Manufacturing Workbench allows the definition of “non-determined tanks” as resources in the standard ERP resource master. It creates “tank event lists” for these resources with stock projection on the tank level and – with the contained material and stock level in several dimensions at any given time. ORSOFT Manufacturing Workbench provides a special graphical visualization for these “tank event lists” that combines aspects of a Gantt chart – showing allocation of logistics processes on a tank along the timeline – with a stock level histogram.

In addition, ORSOFT Manufacturing Workbench can gather actual tank stock levels from a separate Tank Management System and conduct a data reconciliation in order to take planned vs. actual goods movements into account to correct the projected stock level for the future.

Planning with Extremely Volatile Material Costs

The price of crude oil and its derivatives, which determines raw material costs for lubricant and wax refineries, is extremely volatile. A high inventory level is required due to the large size of the production facilities, the great level of vertical integration, and the variation of finished products as well as customers’ short-term delivery requests. Decisions for purchasing raw material in the right quantity and quality at the right time have a substantial economic impact since raw materials represent the biggest cost block by far. Planning with anticipated price changes in mind can create a significant competitive advantage. The planning and forecasting process to enable these decisions and the realization of an optimum of inventories usually covers a time horizon of nine to twelve months.

ORSOFT Manufacturing Workbench supports this decision making process by integrating midterm production and purchase planning – based on the latest sales forecast for finished products – with the calculation of prospective material and production costs based on planned production, purchase quantities and forecasted purchase price changes.

Annemarie Kersten
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