Petrolsoft Corporation
Encyclopedia
Petrolsoft Corporation was a supply chain management
software company with a focus on the petroleum industry
.
Petrolsoft Corporation was founded at Stanford University
in 1989 by Bill Miller and David Gamboa as Petrolsoft Software Group. It was later incorporated
in 1992. Petrolsoft introduced demand
-driven inventory management to the petroleum industry.
When they approached Chevron
with their solution, they discovered this was more than just a family problem, rather an industry-wide problem. The software solution to this problem became Petrolsoft's initial product, based on inventory proportionality.
Gordon Hartogensis, a Stanford computer science graduate, joined the company in 1993 as the third partner to lead product development. Petrolsoft's products grew to include sales forecasting, inventory management, demand aggregation, remote inventory and sales reporting, and transportation optimization for the downstream petroleum supply chain and other bulk liquid supply chains.
typically sell three or four different grades of motor fuel. Each delivered grade of motor fuel must have a dedicated underground storage tank. For example, a four compartment truck bringing up to four different products can be filled in 256 (44) different ways. Petrolsoft’s technology would choose the optimal way to restore inventory proportionality to the station based on its forecasts of sales by product grade.
The technology would accurately forecast
hourly demand for each grade of motor fuel at each service station, enabling it to determine when the first product would run out, the amounts of other products that would be left at that time, and when the optimal load chosen would fit in the underground storage tanks. The period of time from the forecasted time of fitting in the tanks to the point of product run out was called the “delivery window”. The delivery window represented the delivery flexibility of when the load could arrive at the service station so that it would fit in the tanks, and arrive prior to first product run out.
Based on all of the delivery windows for all of the forecasted deliveries for all of the stations in an oil company’s directly supplied service station network, Petrolsoft’s technology would optimize the distribution of motor fuel by scheduling fleets of tank trucks to meet the demand across the distribution network. This optimal
automation of the replenishment process led to lower average inventories, better utilization of tank truck fleets, lower overall distribution costs, and reduced manpower requirements. This type of time-based demand-balanced replenishment (just-in-time) was extended up the supply chain from the filling stations to the bulk terminals, where finished product was stored and then to the refinery where the product was made from crude oil feedstocks.
, ARCO
, Mobil
, Exxon
, and Tosco
, expanding to many of the major oil companies in the United States, and eventually world-wide at companies such as YPF (Argentina) and Ampol
(Australia). Petrolsoft grew quickly, eventually making the Inc. 500 list of America's fastest growing private companies in both 1998 and 1999. By this time, Petrolsoft had about 50 specialized employees working in three global offices: San Diego, London and Singapore and had released multi-lingual versions of their software for use worldwide. In September of 2000, following an extended sales effort, on-site pilot program and the acquisition of Petrolsoft by Aspen Technology, Chevron
became one of the largest US customers. The Chevron contract was executed on September 30, 2000 and announced on November 16, 2000. In May of 2001, Petro-Canada
became the largest Canadian customer, utilizing the software to manage the majority of their company-owned sites located in Ontario and Quebec. In 2003, Petro-Canada extended the solution nationwide. Irving Oil
became the next largest Canadian customer, also executing a contract in 2001. Savings for these companies as a result of using Petrolsoft's solutions was in the millions of dollars each year.
Prior to the implementation of Petrolsoft's technology, the petroleum industry functioned as a "push" manufacturing system. That is, product was manufactured based on current market prices without regard to actual branded demand. Once Petrolsoft's demand forecasting based inventory management system was implemented, oil companies were able to track and aggregate demand from their end customers on a real time basis. This allowed them to optimize transportation resources such as tank trucks and pipelines
, and to inform how much of their daily demand was constant branded demand versus spot price
-driven demand. This real-time information flow changed the way the downstream
petroleum industry operated and increased profitability across all adopters. Additionally, the technology prevented service stations from running out of gasoline, lowered inventory carrying costs, and lowered the cost per gallon delivered to the customer.
(AZPN), a public software company focused on the process manufacturing software space in an all-stock transaction valued at approximately $60 million at the time of acquisition. Over a several month period, Petrolsoft's Supply Retail software suite was integrated with Aspen Technology's PIMS crude selection and refinery operations planning and execution software. Petrolsoft's suite of supply chain management tools completed Aspen's fully integrated petroleum offering from the sourcing of crude oil, through the manufacturing process, and down to the end customer putting gasoline into their vehicle.
Supply chain management
Supply chain management is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers...
software company with a focus on the petroleum industry
Petroleum industry
The petroleum industry includes the global processes of exploration, extraction, refining, transporting , and marketing petroleum products. The largest volume products of the industry are fuel oil and gasoline...
.
Petrolsoft Corporation was founded at Stanford University
Stanford University
The Leland Stanford Junior University, commonly referred to as Stanford University or Stanford, is a private research university on an campus located near Palo Alto, California. It is situated in the northwestern Santa Clara Valley on the San Francisco Peninsula, approximately northwest of San...
in 1989 by Bill Miller and David Gamboa as Petrolsoft Software Group. It was later incorporated
Incorporation (business)
Incorporation is the forming of a new corporation . The corporation may be a business, a non-profit organisation, sports club, or a government of a new city or town...
in 1992. Petrolsoft introduced demand
Demand forecasting
Demand forecasting is the activity of estimating the quantity of a product or service that consumers will purchase. Demand forecasting involves techniques including both informal methods, such as educated guesses, and quantitative methods, such as the use of historical sales data or current data...
-driven inventory management to the petroleum industry.
History
The initial idea for Petrolsoft's inventory management product came from founder David Gamboa family's cash flow problems at their chain of retail gasoline stations. Mr. Miller's analysis showed that it was being caused by an inventory imbalance of gasoline stocks.When they approached Chevron
Chevron Corporation
Chevron Corporation is an American multinational energy corporation headquartered in San Ramon, California, United States and active in more than 180 countries. It is engaged in every aspect of the oil, gas, and geothermal energy industries, including exploration and production; refining,...
with their solution, they discovered this was more than just a family problem, rather an industry-wide problem. The software solution to this problem became Petrolsoft's initial product, based on inventory proportionality.
Gordon Hartogensis, a Stanford computer science graduate, joined the company in 1993 as the third partner to lead product development. Petrolsoft's products grew to include sales forecasting, inventory management, demand aggregation, remote inventory and sales reporting, and transportation optimization for the downstream petroleum supply chain and other bulk liquid supply chains.
Technology
Tank trucks in the oil industry are typically divided internally into 3 to 6 compartments of various sizes. Service stationsFilling station
A filling station, also known as a fueling station, garage, gasbar , gas station , petrol bunk , petrol pump , petrol garage, petrol kiosk , petrol station "'servo"' in Australia or service station, is a facility which sells fuel and lubricants...
typically sell three or four different grades of motor fuel. Each delivered grade of motor fuel must have a dedicated underground storage tank. For example, a four compartment truck bringing up to four different products can be filled in 256 (44) different ways. Petrolsoft’s technology would choose the optimal way to restore inventory proportionality to the station based on its forecasts of sales by product grade.
The technology would accurately forecast
Forecasting
Forecasting is the process of making statements about events whose actual outcomes have not yet been observed. A commonplace example might be estimation for some variable of interest at some specified future date. Prediction is a similar, but more general term...
hourly demand for each grade of motor fuel at each service station, enabling it to determine when the first product would run out, the amounts of other products that would be left at that time, and when the optimal load chosen would fit in the underground storage tanks. The period of time from the forecasted time of fitting in the tanks to the point of product run out was called the “delivery window”. The delivery window represented the delivery flexibility of when the load could arrive at the service station so that it would fit in the tanks, and arrive prior to first product run out.
Based on all of the delivery windows for all of the forecasted deliveries for all of the stations in an oil company’s directly supplied service station network, Petrolsoft’s technology would optimize the distribution of motor fuel by scheduling fleets of tank trucks to meet the demand across the distribution network. This optimal
Optimization (mathematics)
In mathematics, computational science, or management science, mathematical optimization refers to the selection of a best element from some set of available alternatives....
automation of the replenishment process led to lower average inventories, better utilization of tank truck fleets, lower overall distribution costs, and reduced manpower requirements. This type of time-based demand-balanced replenishment (just-in-time) was extended up the supply chain from the filling stations to the bulk terminals, where finished product was stored and then to the refinery where the product was made from crude oil feedstocks.
Influence
Initial customers for the product included SunocoSunoco
Sunoco Inc. is an American petroleum and petrochemical manufacturer headquartered in Philadelphia, Pennsylvania, United States, formerly known as Sun Company Inc. and Sun Oil Co. ....
, ARCO
ARCO
Atlantic Richfield Company is an oil company with operations in the United States as well as in Indonesia, the North Sea, and the South China Sea. It has more than 1,300 gas stations in the western part of the United States. ARCO was originally formed by the merger of East Coast-based Atlantic...
, Mobil
Mobil
Mobil, previously known as the Socony-Vacuum Oil Company, was a major American oil company which merged with Exxon in 1999 to form ExxonMobil. Today Mobil continues as a major brand name within the combined company, as well as still being a gas station sometimes paired with their own store or On...
, Exxon
Exxon
Exxon is a chain of gas stations as well as a brand of motor fuel and related products by ExxonMobil. From 1972 to 1999, Exxon was the corporate name of the company previously known as Standard Oil Company of New Jersey or Jersey Standard....
, and Tosco
Tosco Corporation
Tosco was an independent US based petroleum refining and marketing corporation. It was founded in 1955 in Santa Monica, California by A&P heir Huntington Hartford, and originally focused on extracting oil from oil shale and developing alternative energy sources.-Oil shale operations:In 1964...
, expanding to many of the major oil companies in the United States, and eventually world-wide at companies such as YPF (Argentina) and Ampol
Ampol
Ampol, the Australian Motorists Petrol Company, was incorporated by Sir William Gaston Walkley in 1936 in New South Wales. This was in response to Australians' concerns about perceived inequitable petrol pricing, and allegations of transfer pricing by foreign oil companies to limit their tax...
(Australia). Petrolsoft grew quickly, eventually making the Inc. 500 list of America's fastest growing private companies in both 1998 and 1999. By this time, Petrolsoft had about 50 specialized employees working in three global offices: San Diego, London and Singapore and had released multi-lingual versions of their software for use worldwide. In September of 2000, following an extended sales effort, on-site pilot program and the acquisition of Petrolsoft by Aspen Technology, Chevron
Chevron Corporation
Chevron Corporation is an American multinational energy corporation headquartered in San Ramon, California, United States and active in more than 180 countries. It is engaged in every aspect of the oil, gas, and geothermal energy industries, including exploration and production; refining,...
became one of the largest US customers. The Chevron contract was executed on September 30, 2000 and announced on November 16, 2000. In May of 2001, Petro-Canada
Petro-Canada
Petro-Canada was a crown corporation of Canada in the field of oil and natural gas. It was headquartered in the Petro-Canada Centre in Calgary, Alberta. In August, 2009, Petro-Canada merged with Suncor Energy, a deal in which Suncor investors received approximately 60 per cent ownership of the...
became the largest Canadian customer, utilizing the software to manage the majority of their company-owned sites located in Ontario and Quebec. In 2003, Petro-Canada extended the solution nationwide. Irving Oil
Irving Oil
Irving Oil is a gasoline, oil, and natural gas producing and exporting company. It is also one of the few energy companies in Canada to publicly support the Kyoto Accord. Irving Oil operates one large oil refinery...
became the next largest Canadian customer, also executing a contract in 2001. Savings for these companies as a result of using Petrolsoft's solutions was in the millions of dollars each year.
Prior to the implementation of Petrolsoft's technology, the petroleum industry functioned as a "push" manufacturing system. That is, product was manufactured based on current market prices without regard to actual branded demand. Once Petrolsoft's demand forecasting based inventory management system was implemented, oil companies were able to track and aggregate demand from their end customers on a real time basis. This allowed them to optimize transportation resources such as tank trucks and pipelines
Pipeline transport
Pipeline transport is the transportation of goods through a pipe. Most commonly, liquids and gases are sent, but pneumatic tubes that transport solid capsules using compressed air are also used....
, and to inform how much of their daily demand was constant branded demand versus spot price
Spot price
The spot price or spot rate of a commodity, a security or a currency is the price that is quoted for immediate settlement . Spot settlement is normally one or two business days from trade date...
-driven demand. This real-time information flow changed the way the downstream
Downstream (oil industry)
The petroleum industry is usually divided into three major components: Upstream, midstream and downstream. Midstream operations are usually included in the downstream category....
petroleum industry operated and increased profitability across all adopters. Additionally, the technology prevented service stations from running out of gasoline, lowered inventory carrying costs, and lowered the cost per gallon delivered to the customer.
Acquisition
On June 1, 2000, Petrolsoft Corporation was acquired by Aspen Technology, Inc.Aspen Technology
Aspen Technology, Inc. is a provider of software and services for the process industries. Headquartered in Burlington, Massachusetts, USA, Aspentech has 34 offices in 27 countries, spanning 6 continents.- History :...
(AZPN), a public software company focused on the process manufacturing software space in an all-stock transaction valued at approximately $60 million at the time of acquisition. Over a several month period, Petrolsoft's Supply Retail software suite was integrated with Aspen Technology's PIMS crude selection and refinery operations planning and execution software. Petrolsoft's suite of supply chain management tools completed Aspen's fully integrated petroleum offering from the sourcing of crude oil, through the manufacturing process, and down to the end customer putting gasoline into their vehicle.
Further reading
- Crama, et al.; A Discussion of Production Planning Approaches in the Process Industry CORE Discussion Paper, 2001.
- Ronen, David, Dispatching Petroleum Products Operations Research, May-Jun. 1995, vol. 43, No. 3, pp. 379–387.
- Lason, Leon S. et al., Survey of Nonlinear Programming Applications Operations Research, Sep.-Oct. 1980, pp. 1029–1073.
- Enterprise Profit Management for the Chemical Value Chain Accenture, Dec. 6, 2001.
- Korzeniowski, Paul et al., Trading Exchanges Have the ‘Big mo’, But Users Should Proceed with Caution SupplyChainBrain.com, Jun. 2000.
- Fransoo, Jan Cornelis, Production control and demand management in capacitated flow process industries Technishe Universiteit Eindhoven, 1993, AAT C320771, Abstract.
- Petroleum Refinery Planning and Optimization Using Linear Programming Jan. 31, 2007.
- OSHA Technical Manual—Petroleum Refining Processes Section IV: Chapter 2
- Supply chain technology Hydrocarbon Processing, vol. 80, No. 9, Sep. 2001.
- Weitzel, Dale, How to manage your refining supply chain from E-to-E World Refining, vol. 10, No. 10, Dec. 31, 2000.
- Supply chain technology (refining), Hydrocarbon Processing, vol. 80, No. 9, Sep. 2001.
- Dempster Mah et al., Planning Logistics Operations in the Oil Industry Journal of the Operational Research Society, 2000, pp. 1271–1288.
- Escudero, L.F. et al., CORO, a modeling an alogrithmic framework for oil supply, transformation and distribution optimization under uncertainty, European Journal of Operations Research, Vo. 114, 1999, pp. 638–656.
- Loos, P. et al., Application of Production Planning and Scheduling in the Process Industries Computers in Industry, vol. 36, 1998, pp. 199–208.
- Bolander, S. et al., System framework for process flow industries Production & Inventory Management Journal, vol. 34, No. 4, 1993.
- So what does make MRP II software suitable for process industries? Control and Instrumentation, Oct. 1991.