ConocoPhillips – using ASCI’s inventory software
Feature Articles, Nov  27  2009 (Digital Energy Journal)

- ConocoPhillips has signed a deal to use inventory management software developed by Asset Management Services (AMS), to manage its global supply chains, both upstream and downstream.

The deal follows a three year trial of the software by ConocoPhillips at three of its largest upstream sites; Alaska, Indonesia and North Sea.

AMS is a subsidiary of supply chain management company Advanced Supply Chain International (ASCI).

The specific software tool purchased is called OAS – Inventory, developed by Australian company Oniqua Enterprise Analytics.

Mike Schwarz, business development manager of ASCI.

Put simply, the software helps you make sure you have the optimum amount of inventory in your storage at any time – not too much that you have more capital tied up than you need to (and higher storage charges), but not too little that you risk running out of an important item and not having it available in storage. It also helps you ensure you are not purchasing items you no longer needs. The software can integrate directly with purchasing systems, maintenance management systems and enterprise resource planning (ERP) systems.

“When working with a customer, we usually see some areas where they are overstocked and other areas they are understocked,” says Mike Schwarz, business development manager of ASCI.

ASCI estimates that companies can typically reduce their inventories by 15 to 25 percent by using the software – and of course the additional benefits that come from having something readily on hand which you might otherwise have run out of, are very hard to quantify.

“The software’s return on investment, calculated in terms of money saved by not having it tied up in inventory, over cost of the software, is usually in “double digits”,” Mr. Schwarz says.

The software gathers together all available data about the company division’s consumption habits of various items, to try to predict what will be needed in future.

To make an analogy with your home refrigerator – imagine a software system which would gather data about your orange juice consumption habits over the past three years and how often you go to the supermarket – it could probably make a good guess of how many gallons of orange juice you should purchase on your next trip so you never run out, and also ensure you never end up throwing out of date orange juice away, or run out of space in your refrigerator. It could do the same for everything else you purchase as well. For busy families, particularly who often buy groceries online, this could be quite helpful.

Companies using the software can have between 10,000 and 400,000 individual items they need to manage inventory of, rather more than you probably have in your kitchen cupboards.

“There are a number of other inventory management software packages on the market,” says Mr. Schwarz, “but they are mainly geared for predictable manufacturing operations – so are not so suitable for oil and gas plants which have much more variables”.

Of course, it is impossible to perfectly predict how much inventory you need in storage when you don’t know what you will need tomorrow – even with the best software. But ASCI’s tools help users refine things until they feel they have the right balance.

The software takes into consideration how critical a certain item is to the running of the plant when determining the optimum stocking level. It also takes into consideration how long it can take to obtain a part directly from a supplier if needed, even if it gets stuck in customs for 10 days on the way.

“It is easy to update the software with plant changes that will affect its consumption habits – such as pieces of the plant being decommissioned,” ASCI says.

But most importantly, users should not have to spend time sorting through individual component orders – they just tell the software what has changed since last month at their plant, and the software changes the orders automatically.

“The inventory analyst is presented with the capability to go in and model different scenarios - e.g. if they know in a month they are going to use more of a certain item than is anticipated by the usage history,” says Mr. Schwarz. “We put a lot of business rules and business logic into the software.”

The system can also be installed at brand new sites (with no purchasing activity) – it can start off with an estimate and refine it as it goes along.

ASCI

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