IOCBPA 2016 Conference presentation of research effort by Gayialis S.P., Stamatiou D.-R.I., Ponis S.T. and Panayiotou N.A.

1. CREATING A PARTIAL SUPPLY
CHAIN REFERENCE MODEL FOR
THE ENERGY INDUSTRY
Proceedingsof3rdInternationalOpenConference
onBUSINESS&PUBLICADMINISTRATION
1
Gayialis S.P., Stamatiou D.-R.I., Ponis S.T.,
Panayiotou N.A.
Hellenic Open University & Hebei University of Economics and Business
16-17 April 2016

2. • Research aim
• Energy industry characteristics
• Energy industry supply chain
• REMEDY reference model
• Methodology for partial model creation
• Energy supply chain partial reference model
• Conclusions
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Presentation Outline
SIMORNTUA-ProceedingsofIOCBPA2016

3. The creation of a partial reference model
for the supply chains of energy companies
SIMORNTUA-ProceedingsofIOCBPA2016
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Research Aim

4. • Great importance in global economy and local economic
health
• Large size of supply network dispersed over vast geography
• Complex production operations
• Inherent uncertainty, related to decision making processes
• Uncertainties include market demand, prices of crude oil and
end products, and product or production yields of crude oil
from chemical reactions in the primary crude distillation unit
• Primary products: Oil and Gas
• Transportation of products involves various means of
transport such as ships, pipelines, rail and road, often leading
to high transportation costs
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Energy Industry Characteristics
SIMORNTUA-ProceedingsofIOCBPA2016

5. • Oil and gas companies face their supply chain configuration
and coordination systems as worthy of improvement
• Supply chain improvements allow for competitive advantages
in the marketplace
• Anomalies in the global supply chain can have adverse effects
in operational efficiency, maintaining quality, profitability, and
customer satisfaction
• Causes of anomalies include uncertainty in supply of crude,
demand, transportation, market volatility, and political
conditions
• Need for modelling and analysis of the dynamics of the supply
chain, critical decisions and risks
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Energy Industry Supply Chain
SIMORNTUA-ProceedingsofIOCBPA2016

6. SIMORNTUA-ProceedingsofIOCBPA2016
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REMEDY Reference Model
• Developed through the research program “ODYSSEUS” - A
Holistic Approach For Managing Variability In Contemporary
Global Supply Chain Networks
• A reusable process framework for companies in different
industries to organize supply chain processes in an effort to
manage demand variability and its effects on the supply chain
• It consists of a complex of diagrammatic techniques,
mathematical modelling methods and verbal descriptions
• Extends to three tiers of a supply chain (supplier-company-
customer)
• Nine functions: Define Supply Chain Strategies, Customer
Relationship and Service Management, Product Development
and Commercialisation, Supplier Relationship Management,
Develop KPI Framework, Demand Management, Order
Fulfilment, Manufacturing Flow Management, and Returns
Management

7. • Top-Down/Bottom-Up approach
• REMEDY reference model served the Top-Down approach
• Three case studies in energy companies, each at a different
stage of the supply chain, served as the Bottom-Up approach
(A refinery, a petroleum product producer and a natural gas
vendor)
• ARIS diagrammatic techniques maintained
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SIMORNTUA-ProceedingsofIOCBPA2016
Methodology For Partial Model Creation

8. Main differences to the generic REMEDY reference model
include:
• At value chain level
• “Supply, inventory and production flow management” replaces
“Manufacturing flow management”
• “Claims management” replaces “Returns management”
• At function level
• Addition and removal of functions
• Industry specific verbal alterations
• At process level
• New industry specific processes
• Adaptation of risk, decision, IT and organisational diagrams
• A total of 40 processes and 25 other diagrams altered
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Energy Supply Chain Partial
Reference Model
SIMORNTUA-ProceedingsofIOCBPA2016

9. • Determine Supply Chain Management Strategies
• Need for strategies to adapt to a highly fluctuating market
• Eight strategic/long-term functions corresponding to the other
functions in the value chain, no operational functions
• Functions describe the strategy defining and decision making
processes for each supply chain function
• Customer Relationship and Service Management
• B2B, B2C customers and company are bound by highly intricate
contracts.
• In case the contract terms are breached by either part, the other is
entitled to claims
• Five strategic/long-term and eleven operational/short-term
functions
• Good information sharing provides the organisation with a direct
window to demand
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Energy Supply Chain Partial
Reference Model
SIMORNTUA-ProceedingsofIOCBPA2016

10. • Product Development and Commercialisation
• Products are specific and unchanged, one must not forget the
service as a product trait
• New services may affect the supply chain just as innovative
products disrupt manufacturing supply chains
• Five strategic/long-term and eight operational/short-term functions
• Supplier Relationship Management
• Important role in the products final price and availability
• Four strategic/long-term and seven operational/short-term
functions
• Good information sharing provides the organisation with better
supply choices
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Energy Supply Chain Partial
Reference Model
SIMORNTUA-ProceedingsofIOCBPA2016

11. • Develop Framework of Metrics
• More of a supportive function
• Selected framework of metrics should be constructed carefully
• Eight strategic/long-term functions
• Demand Management
• The core function of the partial reference model
• Four strategic/long-term and five operational/short-term functions
• Good forecasts are important in the energy industry since they
dictate contract strategies and claims arrangements
• Order Fulfilment
• Relates to orders from the point of entry to the collection of
feedback after delivery
• Three strategic/long-term and six operational/short-term functions
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Energy Supply Chain Partial
Reference Model
SIMORNTUA-ProceedingsofIOCBPA2016

12. • Supply, inventory and production flow management
• Energy companies, in some cases, categorise supply and inventory
management as embedded or related to manufacturing
• Traditional manufacturing does not exist in the energy sector
• Process manufacturing
• Three strategic/long-term and four operational/short-term
functions
• Claims management
• Energy companies do not or cannot, practically, return products
• Claims have a similar impact on the energy supply chain as returns
have on a manufacturing supply chain
• Two strategic/long-term and four operational/short-term functions
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Energy Supply Chain Partial
Reference Model
SIMORNTUA-ProceedingsofIOCBPA2016

13. 13
Energy Supply Chain Partial
Reference Model
SIMORNTUA-ProceedingsofIOCBPA2016

14. 14
Energy Supply Chain Partial
Reference Model
SIMORNTUA-ProceedingsofIOCBPA2016

15. 15
Energy Supply Chain Partial
Reference Model
SIMORNTUA-ProceedingsofIOCBPA2016

16. • This reference model is based on the instantiation
(specialization) of a generic reference model of the supply
chain, the REMEDY model, which has been developed in the
context of a research project.
• This reference model is a 3-tier supply chain model (vendor-
producer-customer) and is focused on demand management.
• The instantiation of the REMEDY generic model is based on
the insights and knowledge from various case studies of the
energy sector, mainly oil and natural gas companies.
• Model instantiation should go beyond the development of the
partial reference model for energy industry sector and it
should be specialized in particular business models for specific
energy supply chains and companies.
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Conclusions
SIMORNTUA-ProceedingsofIOCBPA2016

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The research efforts described in this paper are part of the research project “A Holistic Approach for Managing
Variability in Contemporary Global Supply Chain Networks” in research action: “Thales - Support of the
interdisciplinary and/or inter-institutional research and innovation”, which is implemented under the Operational
Programme: Education and Lifelong Learning, NSRF 2007-2013 and is co-funded by European Union (European Social
Fund) and Greek Government.
Thank you for your attention!
SIMORNTUA-ProceedingsofIOCBPA2016