Unlock profits using enterprise optimisation across the commodity value chain

Achieving maximum operating profitability and the ability to make sound long term strategic decisions might sound like tricky business but by harnessing optimisation techniques it can be done. By modelling the key activities that drive profit across the different parts of the commodity business and optimising along the value chain you can use the right information, make optimal decisions and maximise the use of the talents of your people.

There is significant pressure on commodity businesses today

Whether a producer, processor or consumer of commodities, businesses are under increasing pressure to improve margins, across the commodity price cycle. As they become larger or more complex, interdependencies and constraints across the value chain are growing. More and more, management can profit from new analytical techniques to help make the right decisions across their commodity exposures in volatile markets of varying degrees of liquidity, complex organisational structures and widespread geographies.

To maximise value, decisions should take into account the overall business

Effective decision making is impossible when you make key decisions within parts of the business without a clear understanding of the impact of those decisions on the overall enterprise. Some businesses continuously restructure and change performance measures in order to drive better performance within silos, but this is only papering over the cracks.

You can only manage your business effectively when all decisions lead to an optimisation of the overall enterprise. An example would be a mid-ized industrial commodity consumer, who by optimising its operations across its manufacturing, supply chain and marketing divisions, generated an additional profit of over £5 million per annum.

Analytics combining optimisation techniques with financial analysis are now easily accessible

The use of prescriptive analytics techniques is no longer restricted to very complex and capital intensive industries. You can now use cost effective, manageable enterprise optimisation techniques in various commodities and diverse sectors across the value chain, such as oil refining and sales, new mine planning or voyage optimisation in liquefied natural gas (LNG) and dry bulk. The output of the optimisation tool can be directly linked to financial statements so the impact on your whole business can be easily understood.

Who can profit the most?

Every business with some complexity along the value chain or embedded optionalities can profit from optimisation techniques. However, the highest value can be created when you have run out of “easy wins” and “low hanging fruit”. For instance, a global oil company has used optimisation tools to make a strategic decision to close one of its oil refineries by evaluating the financial impact under multiple scenarios across the whole value chain from refinery feedstock supply to oil product marketing. In either case, it’s worth exploring the possibilities of enterprise optimisation to boost the profitability of your business.

We welcome your thoughts on our blog and we are happy to discuss how enterprise optimisation can be used along the commodity value chain.