Marketing & Operations Relationship in a Refinery: A New Look
12 Pages Posted: 12 Sep 2012
Date Written: September 11, 2012
The downstream sector has been facing several challenges in the recent times. One of the most important challenge being the development of efficient supply chain to meet the ever increasing demand. Besides, there are other factors like reducing the operational costs, regulatory policies relating to environment friendly fuels, the regulatory risks arising from an inability to raise retail prices, effective refinery processes to increase margins and produce quality fuels by processing highly sour and heavy crudes. Increasing competition from new entrants, surplus situation in the domestic market and exposure to volatility, through currently buoyant, refining margins are also set to fundamentally change the landscape for the sector participants.
The PSU oil companies still enjoy several sustainable competitive advantages, the success of their upstream and downstream diversification initiatives are likely to have a critical bearing on their prospects, going forward. In the scenario, the concerned topic focuses upon the various operations - both marketing and refining, that are undertaken by refining companies and picture a relationship that exists between them. This study would try to answer some of the vital questions that need to be looked into while developing a business plan for a refining company. Some of these questions would relate to: Demand schedule sent by the marketing unit to the refinery regarding demand of various petro products which varies with season. The kind of forecast to be provided by marketing to operations people. After acceptance of the demand schedule, any operational process change in the refinery to produce any product in greater quantity as per demand. Procurement of raw material, i.e. crude its quality and the quantity to be procured along with inventory management. The supply chain for the procurement of crude from market. Dispatch of petro products from refinery gate till the retail outlet-supply chain. Distribution of products in the markets. The approximate time for the products to reach the customers. Measures taken to meet the demand fluctuations.
Keywords: efficient supply chain, sustainable competitive advantage, volatility, downstream diversification, marketing and refining, demand schedule, inventory management
JEL Classification: H80, L6, L71, L72, O31
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