Optimisation of the downstream logistics of a division: : a case study

University essay from KTH/Industriell produktion

Author: Marie Lagree; [2015]

Keywords: ;

Abstract:

The drop of oil prices has led to a significant decrease in the demand in oil-related industries, and thus to severe competition in the market. In this context, the companies are striving to reduce their costs and lead times in order to remain attractive to the customers. While companies are used to challenging the production costs and lead times, and are aware of the profits that can be drawn from such studies, logistics aspects being more difficult to assess, they are less often dealt with.This thesis aims at building a model of the costs and lead times involved in downstream logistics in order to understand the impact of downstream logistics on the global costs and lead times of a product. It also aims at providing a method to allocate the customer demand to the division’s mills in order to optimise either the downstream logistics costs or the lead times.This thesis was performed in the Oil and Gas division of an industrial French company. This division’s scope is the oil companies in Europe, Africa, the Middle East and Asia. Ten mills were considered in this study, in Germany, France, the United Kingdom, China, Nigeria, Saudi Arabia, Brazil and Indonesia.The context of the company and the concepts related to downstream logistics were investigated. Then, workgroups consisting of logisticians and the author of this thesis were organised to build a model for the costs and lead times of downstream logistics. This model was used to analyse a Sales and Operation Planning, and to optimise the allocations of the customer demand to the mills from a logistics perspective.The results show that the downstream logistics costs and lead times are very sensitive to the choice of allocations to the mills. The integration of the production is the main factor in the minimisation of the logistics costs, i.e. the downstream logistics costs are at the lowest when the manufacturing mill is the supplying mill. On the other hand, the main factor in the minimisation of the logistics lead times is the proximity between the manufacturer and the country of the customer.This thesis shows that the logistics budget of the division vary significantly depending on the choice of the supplier and the manufacturer. Besides, the optimisation of the costs and the optimisation of the lead times have opposed effects, so both optimisations cannot occur at the same time.

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