Terminal and Fleet Operator
We engaged at petroleum products terminal and fleet operator that distributes hundreds of millions of barrels of product annually. The client operates a nationwide network of pipelines and terminals, and a captive fleet of tanker trucks. It also partners with third party providers for additional reach and capacity. As a result of our work, the company banked $42 million in annual savings and significantly reduced the complexity and capital requirements of its operation.
The Accunomics’ profitability model provided new insights into the profitability of each terminal location. Historically, the company had focused on gross margin and volume metrics. However, the standard transportation and terminally rates did not fully allocate under-absorbed capacity back to the customer and terminal profitability. With the more rigorous allocation approach, Accunomics’ identified that 25% of the terminals were unprofitable.
Through a comprehensive review of the company’s assets, Accunomics’ identified significant underutilization of capacity in both the terminal and fleet operations. Root causes included misalignment of objectives between the sales and operations groups, lack of effective forecasting and service policies that rewarded inefficient activities.
Supply Network Optimization
Using publicly available information sources and insights from the client’s subject matter experts, Accunomics also conducted an analysis of competitor costs and throughput rates. The company operated at significantly higher service levels, and at a higher safety standard, that the average competitor. However, the operating expenses necessary to support the company’s operation were also significantly higher than the competition.
Accunomics’ collaborated with the company’s management team to develop strategies to improve utilization rates and cost structure. Improvements in scheduling and terminal policies will yield $18 million in annual savings, while improvements in pipeline operating procedures will contribute an additional $7 million. Importantly, Accunomics’ analysis also revealed the company’s strategic objectives and profit imperatives could be best achieved by divesting select terminals and outsourcing fleet operations.