Delft University of Technology
Faculty Mechanical, Maritime and Materials Engineering Transport Technology
J.J. de Boer V-Power Diesel Supply Chain Robustness
Masters thesis, Report 2005.TL.7006, Transport Engineering and Logistics.
V-Power Diesel is a new form of diesel fuel, introduced in Western Europe in 2004. Compared to regular diesel this premium fuel is cleaner and delivers an improved engine performance. Because of the high standard that Shell guarantees for this product and the implications this has for its components, the normal supply network for fuels in the Netherlands, Germany and Austria is not used. The separate V-Power Diesel supply chain is characterised by a limited number of refineries, a critical component supplied from another continent, and long distance supply routes.
The main objective of this study is to better identify and analyse the critical elements in the VPower Diesel supply chain in the Netherlands, Germany and Austria (the 'Rhine envelope') and to develop a quantitative method to measure and improve the robustness of this supply chain. In short, this report will give answers to the following two research questions:
What is the robustness of the V-Power Diesel supply chain in the Rhine envelope?
What is the most suitable tool for evaluating the robustness of this and other supply chains? Based on risk management literature, the process in Figure 1 is applied to answer these two questions
Figure 1, Framework applied in this study
The description presents the three components form V-Power Diesel: a special-quality base fuel, a gas-to-liquids (GTL) component and a specially developed additive. The base fuel is produced in two refineries in Germany; the GTL component is shipped from a single-supply source in Malaysia and the additive is produced locally by a third party. The three components are blended in Vopak Hamburg and from there supplied to twelve depots in Germany, the Netherlands and Austria. A comparison of this supply chain with the supply network for regular diesel articulates the need for this study. Since literature on 'supply robustness' does not provide one unambiguous definition, a specific operational definition is formulated in the second step of this study. Supply chain robustness is defined as 'the ability of a supply system to sustain a defined minimum performance in the face of certain specified disruptions.ö The disruptions can be either internal or external events.
The third step of this study is the identification of the disruption risks to which the V-Power Diesel supply chain is exposed. Using 'initial indicators', experts' interviews, and a structured approach from literature, an extensive list of possible disruption risks is formed.
The identified risks are assessed on their likelihood in the fourth step of the study. A qualitative assessment marks the 'top-of-the-heap' risks. This shortlist in turn is quantitatively assessed, characterising each risk by two numbers: the likelihood and the 'affected period', the period that the risk has effect when it actually occurs.
The fifth step of this study is the evaluation of the supply chain. The step starts with a list of 30 possible methods and methodologies to evaluate a supply chain, which were found in a literature review. An initial cut-off and a multi-criteria analysis are used to determine the most suitable way to evaluate a supply chain: a spreadsheet-based model.
Based on the operational definition of supply robustness three performance indicators are used in the model: the likelihood of depot stock-outs, costs and 'missed throughput'. The latter is the name for a factor that multiplies a depot's stock-out likelihood with the throughput in that depot, thereby indicating the hypothetical decrease of throughput in that depot as a result of a stock-out.
Using the spreadsheet-based model, five different studies are carried out: an analysis of the current supply chain, an analysis of two existing plans to improve supply robustness, an analysis of the number of tanks in the Vopak Hamburg depot, an analysis of the effects of increased flexibility in the Harburg refinery, and an analysis of renting an extra tank in Rotterdam Odfjell.
Based on the results of these analyses, six actions are recommended. Three actions can be implemented immediately, the other three are for further consideration. Table 1 lists these actions.
Immediate actions Actions for further consideration Implementing the two existing plans for
2006
Installing a dedicated loading rack in Harburg
Renting an extra tank in Duisburg Improving the situation in Arnhem Reducing the number of tanks in Vopak
Hamburg
Developing a manuscript for alternative distribution
Table 1, Recommended actions resulting from the analyses in this study
It is concluded that the current V-Power Diesel supply chain has a supply robustness such that there is a calculated total of six to seven stock-outs per year in one of the eleven depots of the chain. Furthermore it is concluded that a spreadsheet-based model is the most suitable tool for evaluating the robustness of a product-specific supply chain, but that it is less appropriate if analyses require quick changes in the design of the chain or if complex supply networks are to be evaluated.
Recommendations are made to further study the link between depot stock-outs and retail station stock-outs and to analyse the effect of (temporarily) lowering the quality standard for V-Power Diesel on the supply robustness.
Reports on Transport Engineering and Logistics (in Dutch)
