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ConocoPhillips Fulfilling Demand at Least Cost

February 28, 2014

ConocoPhillips, one of the world’s largest oil refiners, has used COST2SERV Network Strategy in its European operations for nearly a decade in order to optimise its supply chain. Unlike other systems that the company has looked at, COST2SERV Network Strategy considers both the primary and secondary supply chains, thus enabling ConocoPhillips to reduce its total cost-to-serve.

Customised Approach

The software product, created by Cirrus Logistics specifically for organisations with complex national or international distribution networks, is designed to build upon the user’s own in-house systems and be customised to meet the specific requirements of the user team. It identifies current costs in the supply chain from refinery through transportation and onto the point of delivery, quantifying cost-to-serve down to the level of each customer. In so doing, the tool reveals the least cost source and supply route for each demand point, determines primary modes of distribution, allocates demand points to depots and calculates the resources required to fulfil the demands of the network. By modelling ‘What if?’ scenarios, COST2SERV Network Strategy also establishes the effect that changes to the infrastructure, constraints, process or modes of transport would have on costs; in addition, it can reveal the extra costs that might be incurred by adopting a non-optimal solution for the supply chain.

Maximising Exchange Agreements

ConocoPhillips runs COST2SERV Network Strategy continuously during the annual re-negotiation of exchange agreements.The system considers the full range of sources available, their related costs and the volumes that could be handled from that source, the resources required and the impacts on the entire supply chain in the event of a change in the network. Once data has been fed in, it is only a matter of seconds before COST2SERV Network Strategy delivers a response, enabling ConocoPhillips to quickly evaluate each potential agreement during this highly pressurised time and reach the most cost effective deal.

Managing Continuous Change

The Company also uses COST2SERV Network Strategy to measure the impact of proposed changes to the network.The system is run several times each month to evaluate new management ideas, to consider the effect of entering a new territory or of handling additional volumes as well as to identify the cost of future transport requirements or the removal of particular constraints. By this means, impacts can be quantified and they can also be demonstrated visually in a way that can be readily shared across teams, the benefits of relaxing certain constraints can be identified and the merit, or otherwise, of planned investments can be clarified.

A Future of On-Going Development

COST2SERV Network Strategy is able to support a pan European infrastructure operated either from a central hub or regionally. ConocoPhillips is currently focused on enhancing this capability in conjunction with its own system to further ensure integration across its supply chains. So successful has it been for the company in Germany, Belgium and the UK, that its use is being extended to the ConocoPhillips supply chain operation in the USA.

“COST2SERV Network Strategy has enabled us to gain an unparalleled picture of the entire supply chain so that all the components are optimised. Its graphics are excellent, stimulating buy-in from all team members, and new data assessments can be delivered in less than 20 seconds.”
Heiko Buechler
Manger Supply and Exchange
ConocoPhillips Germany