Inventory Pooling In Petroleum Upstream Logistics Network

Abstract

The petroleum industry is heading toward the era of efficiency and cost reduction. Oilfield service companies have to raise their efficiency to stay competitive. This dissertation explores the efficiency issues facing an existing upstream petroleum logistics network, with 30 products, 30 countries and two hubs, for an international Oilfield Service Company (OSC). Inventory control was found to be a main source for inefficiency. Safety stock was studied by implementing inventory pooling concept, joint ordering, demand outliers analysis, demand bucket size analysis and regional distribution centers.Six-sigma (DMAIC) approach was used to diagnose the issues in this network and propose alternative solutions. Theoretical proposed solutions were first tested using supply chain optimization software. The solutions were analyzed, tested and criticized later from operational and business perspectives. The models' results have recorded significant safety stock reduction by implementing demand outliers analysis, demand bucket size analysis, and regional distribution centers, where necessary.