Supply Chain For Gas Stations

Introduction

When Peter Florack swerves in his Toyota Camry into his neighborhood gas station in California,

he has a choice of different grades of gasoline, which he can load into his beauty. The gas station

is a model, modern filling station with all the amenities the residents of this suburb would expect:

pay-at-the-pump lanes, a 24-hour convenience store, and a car wash. Florack goes for the 95

RON grade, which he feels makes his car zip out that much faster, and of course, he is okay with

the small premium he has to pay for that.



Underground, the gas station is as modern. The tanks for super unleaded and for regular (the

midgrade fuel) are larger than the normal tanks. Each tank is equipped with an electronic level

monitor that conveys real-time information about its status through a cable to the station's

management system, and then via satellite to the main inventory management system for the oil

company whose products the gas station markets. When Florack fills up his Toyota, the gas

station will have only 2,678 gallons of the super unleaded and unless the tanks are filled out in 6

hours, the station will run out of gas. However, the station has never had a run out since it

opened a year ago.

The gas station above is among the many dotting the landscape in Central and West America

that are getting connected to the supply stations on real-time basis. The data, which is available

across the gas stations, and the integration work that allows it to be shared across the company

can improve decision making at every point in what the industry calls the downstream, or

customer-facing supply chain that begins once the oil is earmarked for the refinery. (The

upstream chain includes exploration, production, and pumping of crude oil).

The movement from the supply-driven push to a demand-driven pull is slowly taking place in the

segment. Where once the challenge was in getting the best deals on buying crude, the focus is

shifting to give customer what he wants. Couple this requirement with the fact that the crude

buying window closes a month in advance and we need a supply chain, which should have no

weak link.



Components of the Downstream Supply Chain



The downstream business is divided into Refining and Distribution segments. This paper focuses

more on the Distribution segment. Since there is a lot of interplay between the two segments, a

brief description of the Refining business is also included.

The important components of the Refining business supply chain and the interplay between them

is shown below. All the important functions in this business are enabled by IT applications, which

optimize the different portions of the value chain.





















































The Refining business segment supply chain is managed by using linear programming packages,

which can evaluate crudes, schedule cargoes, and blend streams to give products. In addition, in

manufacturing, kinetic models and yield accounting packages optimize the performance of

different conversion units. The major challenges in the supply chain in this sector are the

integration of all these packages with the trading software and with transaction tracking packages

like SAP. Hence, even considering the benefits of LP (Linear Programming?) and scheduling

tools, the disconnect between the kinetic models, yield accounting packages, trading software

and the LP does leave some room for making the supply chain more responsive and headed in a

single focused direction.

Now, let us move to the distribution segment whose vital links are as shown below.



           

           

           

           

           



Crude

Procurement

& Sequencing

Refining

Blending and

Product

Dispatch