Problem

For a European oil distribution company, we developed an optimum strategy to support their operations in a large archipelago. The company had a refinery in the main island, producing a wide-variety of fuels, including several grades of fuel oil and gasoline, as well as liquid gases for home consumption. They distributed gasoline, diesel and heavier fuels, as well as liquid propane and butane in 8 major islands. Gasoline and diesel were delivered to gasoline sta- tions, heavier fuels to industrial sites and liquid gases to homes, or small dealers, which did the final delivery.

Solution

We specified the optimum number, size and tank layout for each ship in the optimal fleet to distribute the goods. We simultaneously deter- mined the optimum number, loca- tion and size of fuel depots and liquid gases warehouses, to distrib- ute the forecasted demands, meet- ing customer service requirements while maximizing the company’s profit. In addition, we provided a system to calculate the optimal dis- tribution routes for the fleet.

Outcome

We completed the project in 5 months, at a cost of $580,000. Tangible savings identified on this project amounted to $41 million per year, or 28% of total controllable costs.