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How oil companies use BI to maximize profits

Kim S. Nash | June 8, 2008
No one argues that oil isn't one heck of a lucrative industry. And all those profits don't come from good business intelligence practices alone. But it's a powerful notion to run a company with the mind-set that virtually every employee is a data analyst.

Market analysts run inventory reports "a few hundred times a day," says Kirk Hewitt, vice president of accounting processing optimization . As the cost of crude fluctuates during trading hours, Valero sales and marketing staff want frequent updates so they can sell products at the most profitable price and buy crude to feed their refineries at the best price.

"We're dealing with a commodity whose price changes every second," Hewitt explains. "So our margins change every minute. Our costs change every minute."

Companywide, Valero employees generate more than 20,000 reports per month. These range from gas station profit-and-loss statements to the status of payable invoices to telecommunications charges.

Valero uses WebFocus tools from Information Builders for nearly all its BI reporting, but not for inventory reporting, which has to be quick and dirty. For that, users query Valero's SAP Business Warehouse system, which collects operations data from the SAP R/3 system at Valero's refineries. Data includes items such as the volume of crude processed and the amount of products made from it. The information is presented in an Excel spreadsheet, he says, because "it's a fast way to get a snapshot."

Valero wants to make its BI faster overall. Now most reports use information from data warehouses populated each night with batch updates from SAP. But Hewitt says moving to a service-oriented architecture will enable more frequent updates, so the analysts can query more current data throughout the day. The company is working with SAP to implement SAP Exchange Infrastructure, or XI, to make that happen. Valero will still use WebFocus for what-if analysis and report presentation, he says.

Though the technology is changing, the purpose of the analysis isn't. Valero monitors the value of its inventory, along with sales and efficiency at its gas stations, to make adjustments to the price of its products as it watches demand and supply shift. Just because gas prices are soaring doesn't mean Valero has an easy ride. Aside from gasoline, the company makes asphalt, sulfur and other secondary products. These prices haven't increased as much as gasoline has, or in proportion to the rise in the cost of crude needed to make them. Valero has to balance its dependencies.

Data Analysis Can Help Cut Fuel Costs, Too
UPS crunches information from its trucks to improve efficiency and save money

At UPS, there's data everywhere: on the packages, on the drivers carrying handhelds to record customer interactions, even inside those ubiquitous brown trucks. UPS vehicles contain a wealth of data drawn from more than 200 sources inside the trucks. And last year, the company found a way to cut its fuel costs, among other efficiencies, by putting this data together using telematics technology.


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