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An Optimization Based Integrated Short-Term Refined Petroleum Product Planning System

Author

Listed:
  • Darwin Klingman

    (Graduate School of Business, University of Texas, Austin, Texas 78712)

  • Nancy Phillips

    (Graduate School of Business, University of Texas, Austin, Texas 78712)

  • David Steiger

    (DSI Consulting, 8312 S. Quebec, Tulsa, Oklahoma 74137)

  • Ross Wirth

    (Citgo Petroleum Corporation, One Warren Place, Box 3758, Tulsa, Oklahoma 74103)

  • Rema Padman

    (School of Management, University of Minnesota, Minneapolis, Minnesota 55455)

  • R. Krishnan

    (Graduate School of Business, University of Texas, Austin, Texas 78712)

Abstract

This paper contains a new and very successful application of mathematical programming in the petroleum industry. Specifically, the paper describes the design and implementation of a model and computer system to address the complex short-term planning and operational issues associated with the supply, distribution, and marketing of refined petroleum products. This system has been successfully implemented at Citgo Petroleum Corporation. The benefits include a $116 million reduction (based on historical inventory-to-sales ratios) in product inventories resulting in a $14 million per year reduction in working capital costs and an additional $2.5 million per year estimated contribution to bottom line profits due to multiple supply, distribution, and marketing insights provided by the system.

Suggested Citation

  • Darwin Klingman & Nancy Phillips & David Steiger & Ross Wirth & Rema Padman & R. Krishnan, 1987. "An Optimization Based Integrated Short-Term Refined Petroleum Product Planning System," Management Science, INFORMS, vol. 33(7), pages 813-830, July.
    • Handle: RePEc:inm:ormnsc:v:33:y:1987:i:7:p:813-830
    DOI: 10.1287/mnsc.33.7.813
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    Citations

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    Cited by:

    1. Nieboer, Roelant A. J. J. & Dekker, Rommert, 1995. "Brownian motion approximations for tankage assessment and stock control," European Journal of Operational Research, Elsevier, vol. 85(1), pages 192-204, August.
    2. Dreany, Harry H. & Roncace, Robert, 2019. "A cognitive architecture safety design for safety critical systems," Reliability Engineering and System Safety, Elsevier, vol. 191(C).
    3. Draman, Murat & Kuban Altinel, I & Bajgoric, Nijaz & Tamer Unal, Ali & Birgoren, Burak, 2002. "A clone-based graphical modeler and mathematical model generator for optimal production planning in process industries," European Journal of Operational Research, Elsevier, vol. 137(3), pages 483-496, March.

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