Shell rolls out first phase of supply project

Shell has completed the first phase in its overhaul of its global supply chain - a project which could save the oil industry...

Shell has completed the first phase in its overhaul of its global supply chain - a project which could save the oil industry millions of pounds, according to industry experts.

The oil giant announced it has deployed Demand Planner Downstream Oil at its US subsidiary Shell Oil Products. This first implementation began in March.

The joint venture project with supply chain management specialist i2 is estimated to cost hundreds of millions of dollars.

According to Cap Gemini Ernst & Young, the project could achieve savings of 50c a barrel, which would amount to $35m a day for the entire industry, and has been described as potentially spectacular by oil industry IT analysts.

The project aims to provide an integrated supply chain system for Shell. It will allow near real-time decision-making to meet demand by refining product at the optimum location according to factors such as cost and deliverability of inputs and distance to market.

Currently planning occurs on a monthly basis so calculations cannot respond to real-time supply and demand changes.

But industry watchers have stressed the formidable challenges posed by the project, such as the requirement to link a large number of business units, product specifications and decisions.

Simon Bragg, analyst with ARC Consulting, said, "That it has taken Shell, i2 and Cap Gemini some eight months just to finish the design phrase, confirms the enormity of the challenge.

"Few believe that a saving of 50c a barrel is really achievable, but the potential benefits are significant.

"Tackling a tough project, with the entire oil industry watching, cannot be much fun for the participants," Bragg added.

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