Maximizing LNG Supply Chain Efficiency with Simulation Modeling (2003)

Abstract To maximize LNG supply chain efficiency, companies must ensure they meet contractual obligations, seize opportunities for spot cargoes, minimize operational costs and use all assets as effectively as possible. The challenge of achieving these objectives is complicated because they are inextricably related and often conflicting. Moreover, when all the factors that can disrupt the supply chain are considered-weather, maintenance, equipment failures, tidal and darkness restrictions, seasonal demand patterns, marketing scenarios and more-it becomes almost impossible to assimilate the overall system. By using simulation modeling to analyze these factors holistically, managers can maximize LNG supply chain efficiency and improve profitability. Introduction Using discrete event simulation software to model the complexities of manufacturing systems has provided world-class companies with the ability to more precisely envision the benefits and consequences of change prior to implementing decisions. Visual interactive simulation modeling has been used since the early 1980s to quantify the true performance of a facility, enabling alternative proposals to be evaluated to ascertain their true worth. This has enabled, and continues to enable, decision-makers to identify and address unforeseen issues and exploit commercial opportunities. In a marketplace driven by increasing competitive pressures with the ongoing need to reduce capital and operational costs, the ability to "run the plant before it is built" through simulation modeling ensures that the world's leading manufacturers "get it right first time." There are many case studies that evidence how millions of dollars have been saved through the realization of the following benefits: Fully Validated Capital Proposals - the ability to quantifythe business benefit that will be achieved through the purchase and commissioning of new equipment to either increase efficiency or increase capacity. Capital Avoidance - the ability to determine that the resultant performance of a proposed investment will not deliver the benefits that were envisioned. This may apply to all of the equipment in the proposal or a subsection of the equipment. In the latter case, this may be due to over-engineering or the provision of excessive redundant capacity. Cost Reduction - the ability to understand how operational expenditure can be reduced by modifying current practices and operating policies. This typically involves saving labor and material costs through greater agility. Similarly improved performance can reduce or eliminate contractual penalties and leverage reward when such schemes are in place. Improved Asset Utilization - the ability to identify how existing assets can be used in a more efficient way by changing operating practices. This has led to increased capacity and reduced unit costs. Until quite recently, simulation modeling was seen as a practice better suited to manufacturers. However, advances in simulation technology that have improved run speed, ease of use, flexibility and the ability to reflect systems where interdependency between interacting aspects coexists in conjunction with complex constraints, has enabled a wider variety of industries to take advantage of this innovative approach to add value through their supply chains. This paper examines how the world's leading gas companies are now harnessing the power of simulation modeling to improve the quality of their decision making, and consequently realize benefits running into hundreds of millions of dollars.