Optimizing Your Logistics Network Through Model-Driven Prescriptive Analytics
By Chris Hedge
I know what you are thinking “Wow, that title is a mouthful!” But really, it is not as complicated as it seems. In order to see through its innate complexity, lets break it down into its three constituent parts:
1. Optimizing - The process of finding the best solution from all feasible solutions.
2. Model-Driven - A software development approach that relies on models as main artifacts.
3. Prescriptive Analytics – The application of logic and mathematics to data that specify a preferred (i.e. optimized) course of action.
Essentially, this is the process of using pre-built mathematical components to visually model your business, decisions and constraints into an application that can iterate through all feasible solutions to specify the best course of action given one or more objective functions. An objective function is an equation you want to solve (i.e. to maximize profit, minimize cost, etc.). Using a platform such as the River Logic Enterprise Optimizer, with pre-built components, it is now possible to fully implement projects that are able to demonstrate value in less than four months—without the help of a single data scientist.
(Source: River Logic)
The benefits of this approach to your business are:
· Improved Performance: Typical impact can range from 2% to 5% of a company’s annual revenue in additional profit.
· Increased Efficiency: Typical impact includes 15% to 20% higher throughput or 10% to 15% reduction in addressable cost.
· Maximized ROI (Return on Investment): Typical impact ranges from 25% to 100% — better NPV (net present value) than Excel or similar, rules-driven tools.
· Increased Agility: You will be able to rapidly evaluate dozens of scenarios and develop a faster approach to making trade-off decisions.
· Mitigation of Risk: You will be able to better identify and better quantify risk associated with both short- and long-term decision-making and develop potential risk mitigation strategies
If you are an oil and gas producer model-driven prescriptive analytics technology can be applied to prescribe optimal configurations of controllable drilling, completion and production variables by modeling numerous internal and external variables simultaneously, regardless of source, structure, size or format. Our solutions also provide decision options and show the impact of each so the operations managers can proactively take appropriate actions, on time, to guarantee future exploration and production performance, and maximize the economic value of assets at every point over the course of their serviceable lifetimes.
If you are an oilfield services company the technology can help optimize rig and crew distribution, water, sand and chemicals to the drill sites, including water disposal. Our solutions can optimize configuration, anticipate and prevent unplanned downtime, optimize field scheduling and improve maintenance planning.
For innovative midstream groups and nimble trucking companies these solutions can optimize your crude gathering operations and help you meet your logistic commitments via truck, rail, barge or pipe. Refining and petrochemicals can not only be optimized via their logistical systems, but also help effectively plan and manage turnarounds and maintenance activities.
And if you are looking to buy or sell an asset or a portion of an asset, perhaps adding storage, rack space or more connectivity, this approach can help you identify and assess the true value of that decision, improve your negotiating position before any commitments are made.
Ok, so perhaps it is a little bit complicated, but this is where the staff at Opportune LLP can help. We use prescriptive analytics to model scenarios where, without technology, it is too complex for humans to efficiently evaluate those scenarios and determine the optimal path forward. Our model-driven prescriptive analytics solutions, utilizing the River Logic prescriptive analytics technology, helps our customers fully optimize their logistics network, regardless of complexity, and enables executives to uncover hidden insights to solve their toughest value chain problems.
About the Author:
Chris Hedge is a Director in the Process and Technology practice of Opportune LLP. Chris has 28 years of experience managing and executing complex integration and transformations programs and projects for oil and gas companies. Chris specializes in business and system integration, implementation and transformation in the downstream, midstream and petrochemicals industry. Chris has deep expertise in downstream merger integration and subsequent optimization projects. He is the recipient of two Chevron Chairman's Awards for “ingenuity and initiative that achieved extraordinary results for the company.”
Chris has an MBA from the University of Houston and a BSBA in Management Information Systems from the University of Arizona.