Monitoring and managing demand variability (e.g. demand surges) Managing weather related disruption Managing supply chain disruption (near demand centre refinery, shipping disruption, distant refinery issue) Planning and execution As noted in section 3.1, security of supply is key for meeting customer requirements. A supplier with a reputation for being unreliable will risk losing customers to a more reliable competitor. As well as the supply decisions outlined in the previous sections, the key decisions made by marketers will be decisions on domestic inventory levels. Companies will make decisions on how much inventory to hold in order to meet their customer demand on a number of factors. These include: Reliability of the supply Options if a key component of the supply chain is disrupted; Ability to respond to changing market demand; Cost of inventory and the appetite of customers to pay more for additional buffer stock; and Supplier reputation. Holding inventory has a financial impact on a business, so increasing the inventory levels needs to be weighed against the cost and risk of stock outs. Generally, a company with a number of supply options (multiple refineries, a lot of import options) may be more comfortable with a lower inventory level than a company with a single or limited supply options. This consideration of inventory levels will be both company wide and by location a location on the main import – shipping routes generally holds less inventory (in days cover) than a location more difficult to reach. Operational experience is also likely to influence inventory decisions recent events causing lower – than planned stocks are likely to encourage a more conservative strategy for a period. Another factor taken into account is possible disruption to the supply chain for example, companies will – hold higher inventory in locations that might be impacted by cyclones during the cyclone season. Once minimum planned inventory levels are established (usually minimum working stock plus operational buffer stock), the level for cargo arrival times will be set the cargo planning process – works backward from this timing. One aspect not covered in this report is that customers, particularly customers, also need to make decisions on their supply security. For those which hold their own inventory, the decision will be on the minimum level they are prepared to drop to before they request resupply from their supplier. Customers with critical fuel requirements may decide to operate a more conservative inventory strategy than their supplier, and therefore, hold more stock. Other critical users, particularly those which rely on diesel as backup for power generation (e.g. hospitals), are likely to keep stock on site as they require instant access should backup be required.
Monitoring and managing demand variability (e.g. demand surges) Managing weather related disruption Managing supply chain disruption (near demand centre refinery, shipping disruption, distant refinery issue) Planning and execution As noted in section 3.1, security of supply is key for meeting customer requirements. A supplier with a reputation for being unreliable will risk losing customers to a more reliable competitor. As well as the supply decisions outlined in the previous sections, the key decisions made by marketers will be decisions on domestic inventory levels. Companies will make decisions on how much inventory to hold in order to meet their customer demand on a number of factors. These include: Reliability of the supply Options if a key component of the supply chain is disrupted; Ability to respond to changing market demand; Cost of inventory and the appetite of customers to pay more for additional buffer stock; and Supplier reputation. Holding inventory has a financial impact on a business, so increasing the inventory levels needs to be weighed against the cost and risk of stock outs. Generally, a company with a number of supply options (multiple refineries, a lot of import options) may be more comfortable with a lower inventory level than a company with a single or limited supply options. This consideration of inventory levels will be both company wide and by location – a location on the main import shipping routes generally holds less inventory (in days cover) than a location more difficult to reach. Operational experience is also likely to influence inventory decisions – recent events causing lower than planned stocks are likely to encourage a more conservative strategy for a period. Another factor taken into account is possible disruption to the supply chain – for example, companies will hold higher inventory in locations that might be impacted by cyclones during the cyclone season. Once minimum planned inventory levels are established (usually minimum working stock plus operational buffer stock), the level for cargo arrival times will be set – the cargo planning process works backward from this timing. One aspect not covered in this report is that customers, particularly customers, also need to make decisions on their supply security. For those which hold their own inventory, the decision will be on the minimum level they are prepared to drop to before they request resupply from their supplier. Customers with critical fuel requirements may decide to operate a more conservative inventory strategy than their supplier, and therefore, hold more stock. Other critical users, particularly those which rely on diesel as backup for power generation (e.g. hospitals), are likely to keep stock on site as they require instant access should backup be required.