Shell's Road to Supply Chain Excellence

Forecast Accuracy

When you think of Shell, consumer products may not be the first thing that comes to mind, but the company’s branded lubricants business shares much in common with the fast-moving consumer goods supply chain. Its market-leading brands such as Pennzoil, Quaker State and Rimula are distributed globally through large retailers and contribute to a complex supply chain — 60,000 SKU/location combinations distributed in more than 150 countries, to be exact.

Historically, this business was organized by country, with decentralized planning and few standard processes. Shell’s on-time in-full measure of customer service relied on inventory to cover inefficiencies.

In 2005, Shell embarked on a supply chain excellence journey to significantly improve its planning capabilities by putting demand-driven best practices front and center.

However, improving demand accuracy would need to be tackled on many fronts. First, Shell centralized, becoming a global business with standard processes and organizational design supported by regional teams. Next, it adopted SAP APO as its single platform for supply chain planning.

By 2011, Shell was ready for the next step toward supply chain excellence, improving forecast accuracy to enable greater reductions in inventory. It established a global forecasting center of excellence, embraced segmentation by demand planning characteristics, and initiated an indirect collaboration program to work with distributors. These steps improved forecast accuracy, but Shell was just getting started.

“We continually challenge our process and system capabilities along with our planning teams’ competencies as part of our ‘Journey to Excellence’,” says Nick Lynch, Global Planning Excellence Manager in the Lubricants Supply Chain within Shell’s Downstream business.

As a visionary in its industry, Shell was the first oil and gas company to recognize that it could sense demand much like a pure-play consumer products company, creating daily forecasts that reflect current market conditions by using demand signals from across the supply chain.

To that end, Shell purchased Terra Technology’s Demand Sensing and Multi-Enterprise Inventory Optimization after a successful pilot in Western Europe and South East Asia delivered significantly positive results. Using a single-instance ERP system enabled Shell to globally implement Demand Sensing and Multi-Enterprise Inventory Optimization relatively quickly. This means the vast majority of its finished product portfolio is now demand sensed, while users can go about their daily and weekly planning tasks without disruption.