Ever wonder, while you’re filling up your car with gasoline, about all the supply chain steps involved in getting fuel to that pump? The petroleum supply chain (which includes not just gasoline, but all sorts of petroleum-based products) is not something most people think about, and it doesn’t get much attention in the trade press, at least not as much as CPG-Retail supply chains.
My colleague Paul Miller recently wrote a report (“Terminal Automation Strategies,” available to ARC clients only) that highlights some of the supply chain complexities associated with petroleum supply chains, including petroleum terminal operations, which can be viewed as specialized warehouses. He also highlights the myriad business, safety, and regulatory factors that must be considered in building an advanced Terminal Automation System that meets all requirements: control, safety, regulatory, and supply chain. What follows is an excerpt from Paul’s report to give you a sense of how complex petroleum supply chains are.
The tank truck loading rack represents just one functional area at a typical petroleum product terminal. Here, the truck driver pulls into the loading rack, inserts the nozzle, and pumps until the storage tank is full. Sounds pretty straightforward, right? But, in reality, this fundamental operation is not nearly this simple.
Before the driver can even be allowed to enter the terminal to get to the loading racks, there has to be some way to verify that they are authorized to do so, are authorized and qualified to accept terminal products, and the tank truck itself is certified to handle the specific products in question. The driver must be directed to the correct loading rack slot in the correct order. The specific customer order, or ticket, must be communicated; the order components evaluated for availability and customer allocation; and – if accepted – made available at the designated loading rack(s). In addition to specific quantities, the order ticket often involves a specific product recipe that may or may not call for ethanol to be blended in or special additives to be injected at the loading point. It may also involve products (such as ultra low sulfur diesel), that require special handling.
Before loading can commence, the customer’s credit status must first be verified, a filling advice notice (FAN) for the vehicle in question must be generated, the truck must be correctly positioned in the rack, and the swing arm or other loading equipment correctly positioned relative to the truck to minimize any chance of spillage. The truck must be properly grounded to prevent sparks and both the vapor recovery and overfill protection units must be in place. Only then will the electronic preset or other automation controller activate the proper valves and pumps to commence the appropriate product transfer. This often involves demanding, multi-component, inline ratio blending and/or precise additive injection.
The transfer must be performed quickly to speed turnaround (remember that other trucks may be queued up), but not so quickly that excessive static electricity is generated. This is particularly problematic with higher quality petroleum products that have low conductive properties and thus are more susceptible to static buildup. Since a business transaction between two or more parties is often taking place, the custody transfer approach (meter, weigh bridge, etc.) must be mutually acceptable to all parties involved and the accuracy of the metering equipment or weigh bridge must be periodically verified by a third party.
Once the tank truck is filled and the loading equipment, ground connection, and vapor recovery and overfill protection equipment is removed from the truck, an accurate bill of lading (BOL) and appropriate material safety data sheet (MSDS) must be generated for the driver. The driver must then be given clearance to leave the terminal, an invoice generated and sent to the driver’s headquarters, terminal inventories adjusted, and the transaction accurately logged for internal and external reporting purposes. This can include reports to state, and/or federal environmental, homeland security, and tax agencies. In many cases, transactions also must be uploaded to the corporate ERP system and/or an industry data exchange. To complicate matters further, in some cases, the product might be supplied from storage tanks in which product ownership is co-mingled among multiple parties.
If you consider that the tank truck loading rack function is just one of several critical operations that take place within the typical petroleum product terminal, you can begin to get an idea of the overall complexity and precision required [to successfully manage a petroleum supply chain].