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Evaluating the efficiency of different distribution hub setups for Nynas using simulation

Andersson, Erik and Lönn, Oskar (2008) MIO920
Production Management
Abstract
Nynas Petroleum is one of the world´s largest producers of naphthenic specialty oils.
They have refineries in several parts of the world and their largest production facility
is situated in Nynäshamn, Sweden. They also have oil depots in all continents and
their largest depot is located in Antwerp, Belgium.
In the beginning of 2007 Nynas introduced a new type of transformer oils, called
Nova grades, to the market. Nova grades consisted of oils produced both in
Nynäshamn and at other refineries around the world. This forced Nynas, who had
previously blended these oils in Nynäshamn, to blend the nova grades at the central
hub in Antwerp.
This change complicated the handling of the depot in Antwerp as some of these oils
needs to be... (More)
Nynas Petroleum is one of the world´s largest producers of naphthenic specialty oils.
They have refineries in several parts of the world and their largest production facility
is situated in Nynäshamn, Sweden. They also have oil depots in all continents and
their largest depot is located in Antwerp, Belgium.
In the beginning of 2007 Nynas introduced a new type of transformer oils, called
Nova grades, to the market. Nova grades consisted of oils produced both in
Nynäshamn and at other refineries around the world. This forced Nynas, who had
previously blended these oils in Nynäshamn, to blend the nova grades at the central
hub in Antwerp.
This change complicated the handling of the depot in Antwerp as some of these oils
needs to be oxidation tested, a process that can take up to 23 days. They realized
that they did not have control of their hub in Antwerp and how much tank volumes
that were needed to fulfill their customers´ service expectations.
This thesis maps the factors that are crucial for the hub in Antwerp and from this
knowledge a simulation model was built using the simulation software Extend. The
model was built up around a number of logical blocks, which makes decisions
depending on different criteria.
The model was then used to simulate a number of different scenarios. A total of 15
different scenarios were simulated where the tank setup, the demanded volumes,
the quarantine times and the number of boats transporting oil to Antwerp were
altered. Each run generated a report consisting of average inventory levels, service
levels, average service level, filling station utilization, and more.
With help from the reports we were able to examine the performance of the
Antwerp hub and how the different parameters impacted on the overall efficiency.
After running the simulations we can establish that the tank setup as it was in 2007
cannot cope with the alteration in product slate, with the introduction of the Nova
grades and especially not with the anticipated growth in sales volume. In the first
phase investments in tank capacity is needed and if the anticipated sales growth
becomes reality investments in boat capacity will also be necessary as the vessels is
the next bottleneck. Another option, which would lessen the need for investments in
tank capacity would be to drastically cut the oxidation test time. This would make
the system easier to overview and handle.
By investing in the hub in Antwerp the service level can be kept at a high level,
leading to higher customer satisfaction and increased likelihood for returning
customers. It is always hard to put a certain value on this type of investments but
our beliefs are that investments to keep service level reasonably high are needed in
a market where competition is fierce. (Less)
Please use this url to cite or link to this publication:
author
Andersson, Erik and Lönn, Oskar
supervisor
organization
course
MIO920
year
type
M1 - University Diploma
subject
other publication id
08/5309
language
English
id
1979217
date added to LUP
2011-06-17 12:47:12
date last changed
2011-06-20 11:23:12
@misc{1979217,
  abstract     = {Nynas Petroleum is one of the world´s largest producers of naphthenic specialty oils.
They have refineries in several parts of the world and their largest production facility
is situated in Nynäshamn, Sweden. They also have oil depots in all continents and
their largest depot is located in Antwerp, Belgium.
In the beginning of 2007 Nynas introduced a new type of transformer oils, called
Nova grades, to the market. Nova grades consisted of oils produced both in
Nynäshamn and at other refineries around the world. This forced Nynas, who had
previously blended these oils in Nynäshamn, to blend the nova grades at the central
hub in Antwerp.
This change complicated the handling of the depot in Antwerp as some of these oils
needs to be oxidation tested, a process that can take up to 23 days. They realized
that they did not have control of their hub in Antwerp and how much tank volumes
that were needed to fulfill their customers´ service expectations.
This thesis maps the factors that are crucial for the hub in Antwerp and from this
knowledge a simulation model was built using the simulation software Extend. The
model was built up around a number of logical blocks, which makes decisions
depending on different criteria.
The model was then used to simulate a number of different scenarios. A total of 15
different scenarios were simulated where the tank setup, the demanded volumes,
the quarantine times and the number of boats transporting oil to Antwerp were
altered. Each run generated a report consisting of average inventory levels, service
levels, average service level, filling station utilization, and more.
With help from the reports we were able to examine the performance of the
Antwerp hub and how the different parameters impacted on the overall efficiency.
After running the simulations we can establish that the tank setup as it was in 2007
cannot cope with the alteration in product slate, with the introduction of the Nova
grades and especially not with the anticipated growth in sales volume. In the first
phase investments in tank capacity is needed and if the anticipated sales growth
becomes reality investments in boat capacity will also be necessary as the vessels is
the next bottleneck. Another option, which would lessen the need for investments in
tank capacity would be to drastically cut the oxidation test time. This would make
the system easier to overview and handle.
By investing in the hub in Antwerp the service level can be kept at a high level,
leading to higher customer satisfaction and increased likelihood for returning
customers. It is always hard to put a certain value on this type of investments but
our beliefs are that investments to keep service level reasonably high are needed in
a market where competition is fierce.},
  author       = {Andersson, Erik and Lönn, Oskar},
  language     = {eng},
  note         = {Student Paper},
  title        = {Evaluating the efficiency of different distribution hub setups for Nynas using simulation},
  year         = {2008},
}