Optimization of LPG delivery process for an oil company

Abstract

Science and technology, which have shown a great improvement in recent years, has driven companies to diversify their activities and to analyze their processes in order to sustain their existence. In this context, many companies which are operating in large geographic regions are conducting process analysis on supply chain management. The main reason behind is that supply chain activities consist of various decision-making mechanisms and any improvement will be effective on the overall system. In this study, the LPG delivery system is analyzed for an oil company that also active in Turkey. The system contains supplier selection and vehicle routes. In the current system, LPG procurement and delivery processes are carried out by two independent departments. There are annual agreements with suppliers and LPG price is the only concern for the procurement department. These suppliers are then shared with the distribution department. Since the location of suppliers are not considered, an extra transportation cost may occur. For this reason, a solution approach that integrates both procurement and distribution components are suggested. The number of suppliers, parking lots and stations yields us to a three-phase solution approach. In the first two stages, stations were clustered and suppliers and parking lots are assigned to each cluster with using mathematical models. In the last phase, an Inventory Routing Problem that works for 3-days period is created and routes are generated for each cluster.