Maximizing Cash Flow through Operational Effectiveness
It doesn’t matter if the cost of supply is at an all-time high or fluctuating wildly, the impact of excess inventory and inefficient operations can be crippling to cash flow. While it is obvious that inventory costs money, most companies are not aggressively exerting the control needed to carry fewer overall gallons. The same holds true for operational efficiency. There are transportation savings to be had from the company fleet or from outsourced carriers. These savings will flow directly to the bottom line, enhancing positive cash flow. In order to achieve the desired results we must provide the proper tools to operations and stop asking them to try and keep up with an increasingly complex operating environment.
Inventory Management
Many companies in the oil, gas and chemicals industry have invested heavily in tank monitors and telemetry in order to track inventory levels for their customers. As an unanticipated consequence, these companies have actually become less efficient because they either can’t keep up with the influx of information from so many data points, or they effectively become slaves to the low stock alarm. In either case effectiveness suffers and costs rise. More than simple visibility is needed for effective inventory management. Companies need to be thinking in terms of carrying the least amount of inventory possible while still being able to serve the customer. Doing this requires more than aggregating data from telemetry readings. It requires a robust system able to track inventory levels over time and predict usage rates into the future. It is this demand forecasting capability that allows financially savvy companies to drive down their stock levels, thereby increasing cash flow, in both bulk plant and retail operations.
Combining demand forecasting with integrated order generation can further enhance the bottom line by freeing up resources and eliminating a source of data input errors. At this level, operations personnel can now start managing by exception when it comes to determining which customers get serviced each day. Considering everything dispatchers and operations managers are asked to manage and maintain, this is no small task. Every minute saved from operations management in the form of task work is a minute that can be used to make operations more efficient. This theme extends even further when route planning and dispatch are added to the discussion.
Delivery Management
Hundreds of companies across the country are taking a “seat of the pants” approach to some of their most critical daily decisions. There is very little in the way of decision support for processes ranging from supply point selection, compartment utilization, or delivery planning. As is the also the case with inventory management, operations personnel are asked to keep track of numerous actions without systems designed to automate these tasks. Something as seemingly mundane as building routes each day actually requires a high degree of sophistication because there are simply more possible combinations than a human mind can handle. Even a fleet of less than ten trucks can have more than ten trillion possible combination choices every day. Most companies would like their dispatchers to consider those trillions of possibilities while simultaneously trying to determine which supply points make the most sense when considering available inventory, allocations, and pricing. This simply is not possible; even the best dispatcher has to limit the scope of what he or she considers in a given day.
Just moving from a paper based process to manipulating orders and trucks on a screen will not improve operations in any appreciable way. In order to truly impact cash flow, companies need a system that can automate the planning process and optimize the delivery plan to achieve the lowest total operating costs. Factors that need to be considered include driver pay, asset costs, compartment utilization, delivery windows, and supply sourcing. Companies can knock ten percent off their delivery miles through better compartment utilization alone. With a routing and scheduling optimization system in place, a company’s operations staff will be freed up to actually manage people, resulting in even higher increases in productivity.
Achieving operational efficiencies is an attainable goal. Companies that streamline their operations teams’ workflows see improved efficiencies throughout the enterprise. It pays dividends every time.