OUR GREAT MINDS

    by Scott Fleck

    Terminal Inventory Automation: Developing a More Efficient Supply Chain

    Embracing Efficiency

    In today’s energy markets, embracing new technology is more than just beneficial—it is also an essential step for companies that hope to stay ahead of the competition. Timely receipt of high-quality inventory data is a prerequisite for efficient supply chain operations, well-grounded analytics and smarter decision making. However, many oil and gas suppliers, schedulers and shippers still rely on an outdated and time-consuming process for gathering critical terminal inventory information. Time-sensitive inventory data forms the basis of a scheduler’s daily planning and inventory management activities, but if schedulers spend up to half the day simply acquiring that information, scheduling decisions—along with every subsequent step in the supply chain—are inevitably delayed.

    Further contributing to an inefficient data gathering and reporting process is many suppliers’ lack of system integration with third-party terminal partners. As a result, a supplier that uses a network of third-party terminals receives a collection of disparate daily inventory reports from each terminal. Often, these reports are sent in non-integrable formats such as emailed files and even faxes. They are then manually—and tediously—reconciled into one comprehensive report for the supplier. The absence of a central, digitized source of shared data places a multitude of inefficiencies on the downstream oil and gas supply chain, which become more and more evident as technology evolves in surrounding spaces.

    Another challenge of the current system is that all information reported is not guaranteed to be completely accurate. Manual data entry has high potential for keystroke or translation errors, and any resulting inventory inaccuracies can negatively impact overall business goals and outcomes. For example, if a higher product inventory is reported than is actually available in the terminal, customers may face a shortage accompanied by delays and discouragement. On the other hand, if a terminal overestimates the product demand, limited storage space will pose a challenge for shippers and prices will be forced to drop to prevent an overfill.

    The question remains, why are suppliers still relying on an outdated and inefficient strategy for inventory data gathering and entry, especially when similar problems have already been addressed further down the supply chain? Years ago, suppliers and customers faced comparable challenges with paper bills of lading, but now new operations, communications and database technology provides formatted electronic bills of lading in near real-time. Advancements in technology offer streamlined solutions, and it’s imperative that shippers, schedulers, suppliers and terminals adapt to a changing environment in order to retain current customers while maintaining industry influence.

    Making new strides

    The bottom line: managing the perpetual movement of inventory worth millions of dollars requires consistent, timely and accurate information. To meet this need and overcome current challenges with the outdated communications systems, we have recently unveiled a new Terminal Inventory Management System (TIMS).

    This software provides the first automated inventory data gathering system, eliminating the need for manual data aggregation, translation and delivery. The old method might require data collection from multiple sources such as terminal balances, rail car receipts, pipeline schedules and batches, waterborne receipts, refinery inventories, and inbound and outbound truck activity. Now, by routing all data through a central clearinghouse database, all of that information is monitored for timeliness and completeness, validated and normalized into a single report that is then delivered back to the supplier, formatted for their individual accounting systems.

    To ensure accuracy, terminal operators can now be automatically notified of late arrival or discrepancies in the data as it is being processed by TIMS, rather than having to manually search for errors at the end of the entry process. This way, miscalculations in expected data versus delivered data can be tracked down and properly corrected before reports are sent to stockholders. As a result of more efficient data gathering and validation, daily reports can be delivered in a timely and consistent manner.

    Additionally, marketing and risk management traders benefit from better visibility into inventory positions and supply schedules. Having this information allows them to sell more aggressively while aligning corporate hedge positions more closely to physical positions.

    Looking ahead

    Automated inventory gathering and entry is no longer an idea of the future—it is here, and it’s becoming not just an option, but a necessity. The previous chaos of the inventory-gathering process has been replaced by the ability to receive a single, validated and normalized report of all third-party terminals’ inventory levels. It will soon be standard for oil suppliers to expect all third-party terminals to come equipped with inventory data automation software, and the terminals that adopt this technology are going to be strides ahead of those that continue relying on outdated, inefficient methods.

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