Oil, gas, and utilities inventory management study results

ScottMadden Inc., an energy consulting firm in North America, and Oniqua, a provider of analytics-based optimization solutions for asset-intensive organizations, recently announced the 2013 Inventory Management and Optimization Benchmark study is now available.

The two companies recently partnered to conduct the global, cross-industry inventory management and optimization benchmark study on behalf of the Utility Materials Management Benchmarking Consortium (UMMBC).

This report finds that two leading practices that contribute most to improved inventory management efficiency across oil and gas, utilities and mining companies include a greater integration of inventory management and asset management systems; and the use of inventory optimization solutions.

The survey was designed to: 1) provide up-to-date information regarding the application of inventory optimization practices and performance results within the utilities industry; 2) compare changes in utilities practice usage and performance since the prior UMMBC survey in 2009; and 3) compare utility practices and results to other asset-intensive industries with similar MRO inventory environments.

Specifically, the report examines how leading asset-intensive organizations are handling the challenges associated with inventory management and optimization, including:

• Inventory visibility levels and segmentation approaches
• Stocking level criteria assignment practices
• How safety stock levels are determined
• Inventory optimization measures currently in use
• Types of tools used for inventory optimization
• Current integration practices between materials management systems and asset management systems

“We have been benchmarking materials management performance metrics and leading practices for the electric and gas utility industry for many years. We have always wondered how this asset-intensive industry compared to others that maintain MRO inventory in support of large capital plant and equipment. With the results from this survey, now we know,” stated Andy Flores, partner and supply chain practice leader at ScottMadden.

The survey includes responses from a wide range of asset-intensive industries, which were grouped into four industry categories: Electric and Gas Utilities; Mining, Metals Processing and Fabrication; Oil, Gas and Petrochemicals; and Suppliers and Support Services.

Some key findings include:

• Both Suppliers and Support Services and Mining, Metals Processing and Fabrication companies reported the highest Inventory Turns Ratio, while Utilities and Oil, Gas and Petrochemical industries report the lowest;
• Utilities reported the worst Inventory Optimization performance for all four measures of efficiency outlined in the study; however, they reported the best inventory optimization performance for four of the five effectiveness measures;
• Mining, Metals Processing and Fabrication and Suppliers and Support Services have moved the fastest in adopting advanced statistical models;
• 67 percent of the Mining, Metals Processing and Fabrication companies, 35 percent of Oil, Gas and Petrochemical companies, and only 18 percent of Utilities report using specialized inventory optimization tools;
• Oniqua is the dominant inventory optimization software provider for Utilities; Mining, Metals Processing and Fabrication; and Oil, Gas and Petrochemicals industries, being used by 75 percent of the companies reporting the use of such software.

“This is the most comprehensive and rigorous inventory benchmark study I've seen for asset-intensive industries to date,” stated Andy Hill, co-founder and CEO, Oniqua.

“It provides a very interesting, instructive and detailed perspective of how adjacent industries are managing and optimizing their inventories, and illuminates the practices that separate the high performers and those who have room for improvement. What readers do with the information and how they respond is quite important, as even a small improvement in inventory management efficiency and effectiveness can mean millions of dollars to a company's bottom line.”

ScottMadden and Oniqua co-presented summary results from the study during a recent session at the Utility Purchasing Management Group's (UPMG) annual conference that took place Sept. 15-17 in Austin, Texas.

A complimentary copy of a high-level summary of the study can be accessed free at www.scottmadden.com andwww.oniqua.com.