For organizations in the fuel industry, the push-and-pull between supply and logistics is well known. While both groups work towards the same ultimate goal – getting fuel in the ground at the lowest possible cost – the complexities of achieving this can create tension.
Supply teams welcome complexity; a more complex plan can take advantage of more opportunities. They operate in a world of arbitrage, taking advantage of price variations between markets, racks, indexes, suppliers, contracts, and times. Supply aims to benefit from market inefficiencies to maximize profit and minimize cost.
While supply teams focus on what’s perfect (the best price), logistics teams deal with what’s possible. For them, simpler is better. Logistics must execute on the supply team’s strategy, even if that strategy doesn’t take logistical constraints into consideration. Their world is tactical: how many and which drivers and trucks are available? How long are wait times? Will the site run out of fuel before the truck can get there? Even if it makes sense on paper to drive farther for a cheaper price, do the realities play out?
The gap between supply and logistics is compounded when logistics is outsourced to an external carrier. Logistics can find itself between a rock and a hard place, being measured on whether they run a site out of fuel while being asked to move heaven and earth to take advantage of a supply opportunity – all while only getting paid on loaded miles.
To achieve their ultimate shared goal of profitability, supply and logistics teams must stop playing tug-of-war and start working together. To do so, both teams must shift their mindsets from us vs. them to a unified party working towards the same objective. They also need a shared platform that can make that unified approach possible.
A shared technology platform breaks down the walls between supply and logistics by integrating their plans and data from the beginning. It increases visibility on both sides, so supply can see and incorporate logistical constraints into their plans and logistics can view and understand supply strategies in order to better execute on them. With a single pane of glass, a shared platform acts as a single source of truth, so supply and logistics teams can work together to make smarter, more effective decisions.
For example, leading dispatch solutions provide real-time best buy data to inform teams of their best options at any given time. Both supply and logistics can see each terminal or refinery within a large radius and collaborate on the optimal choice. Further, best buy engines can integrate with forecasting tools down to the order level to reduce retains and runouts.
Shared dispatch solutions enable supply teams to work more dynamically through real-time calculations integrated into the logistics. Instead of pushing out a static plan or pull sheet, supply gains instant visibility into the laid-in price of their plans, incorporating the logistics constraints so they can set strategies with variability built in. A mutual communication platform streamlines operations as well. Logistics can communicate with supply in real-time to make changes to the strategy on the fly and take advantage of opportunities while navigating constraints.
In addition, the benefits of a shared platform extend beyond “right now” and into the future. With a common set of historical data, both teams can run analysis on what’s working and what’s not. They can track missed opportunities, capture why the breakdown occurred, and understand how much money was left on the table. With these insights, the teams can understand trends and make better decisions moving forward: increase the number of trucks, add more drivers, grow the number of suppliers, etc. The shared platform enables the teams to quantify issues and figure out how to fix them.
Finally, a shared dispatch solution underpins and supports a unified mindset. It allows for more feedback, more understanding, and the ability to speak the same language. It sets the stage for creative problem solving and shared goals, metrics, and rewards. It engenders an agreed-upon version of what success looks like so both teams can be compensated fairly and accordingly.
While supply and logistics teams may always have different perspectives, a shared technology platform can change the dynamic from winners vs. losers to a healthy tension that benefits everyone.
Joel has fuel in his DNA with his family being in the petroleum business for close to 100 years. Growing up around this business has given him a unique perspective on what it takes to run and grow a company in this competitive, highly regulated industry. Joel is passionate about supply & logistics and process automation through technology. He has spent the last 10 years serving the petroleum industry as a software salesperson and trusted advisor.