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.
Ofwat allows retailers to raise prices from April
Retailers can recover a portion of excess bad debt by temporarily increasing prices from April 2022, according to an Ofwat statement.
The regulator confirmed its view that levels of bad debt costs across the business retail market are exceeding 2% of non-household revenue, thereby allowing "a temporary increase" in the maximum prices. Adjustments to price caps will apply for a minimum of two years to reduce the step changes in price that customers might experience.
Measures introduced since March 2020 to contain the spread of Covid-19 could lead to retailers facing higher levels of customer bad debt. Retailers’ abilities to respond to this are expected to be constrained by Ofwat strengthening protections for non-household customers during Covid-19 and the presence of price caps.
In April last year, Ofwat committed to provide additional regulatory protection if bad debt costs across the market exceeded 2% of non-household revenue.
Georgina Mills, Business Retail Market Director at Ofwat said: “These decisions aim to protect the interests of non-household customers in the short and longer term, including from the risk of systemic Retailer failure as the business retail market continues to feel the impacts of COVID-19. By implementing market-wide adjustments to price caps, we aim to minimise any additional costs for customers in the shorter term by promoting efficiency and supporting competition.”
There are also three areas where Ofwat has not reached definitive conclusions and is seeking further evidence and views from stakeholders:
- Pooling excess bad debt costs – Ofwat proposes that the recovery of excess bad debt costs is pooled across all non-household customers, via a uniform uplift to price caps.
- Keeping open the option of not pursuing a true up – For example if outturn bad debt costs are not materially higher than the 2% threshold.
- Undertaking the true up – If a 'true up' is required, Ofwat has set out how it expects this to work in practice.
Further consultation on the proposed adjustments to REC price caps can be expected by December.
"While it’s great that regulators are helping the industry deal with bad debt in the wake of the pandemic, raising prices only treats the symptoms. Instead, water companies should head upstream, using customer data to identify and rectify the causes of bad debt, stop it at source and help prevent it from occurring in the first place," she said.
"While recouping costs is a must, water companies shouldn’t just rely on the regulator. Data can help companies segment customers, identify and assist customers that are struggling financially, avoiding penalising the entire customer in tackling the cause of the issue."
United Utilities picks up pipeline award
A race-against-time plumbing job to connect four huge water pipes into the large Haweswater Aqueduct in Cumbria saw United Utilities awarded Utility Project of the Year by Pipeline Industries Guild.
The Hallbank project, near Kendal, was completed within a tight eight-day deadline, in a storm and during the second COVID lockdown last November – and with three hours to spare. Principal construction manager John Dawson said the project helped boost the resilience of water supplies across the North West.
“I think what made us stand out was the scale, the use of future technology and the fact that we were really just one team, working collaboratively for a common goal," he said.
Camus Energy secures $16m funding
Camus Energy, which provides advanced grid management technology, has secured $16 million in a Series A round, led by Park West Asset Management and joined by Congruent Ventures, Wave Capital and other investors, including an investor-owned utility. Camus will leverage the operating capital to expand its grid management software platform to meet growing demand from utilities across North America.
As local utilities look to save money and increase their use of clean energy by tapping into low-cost and low-carbon local resources, Camus' grid management platform provides connectivity between the utility's operations team, its grid-connected equipment and customer devices.