Logistical Challenges in the Oil Derivatives Distribution Sector and Opportunities for Optimization Using Quantitative Methods

Abstract

 Introduction: The control of energy resources has become a focal point for global powers, making the 21st century a period defined by efficient energy management. While a transition to renewable energy sources is both required and necessary, the world will not be able to function without oil and its derivatives for a long time. The safe delivery of petroleum products to end-users 
is an obligation for companies in the oil industry. Companies that perform this task most efficiently achieve greater profits and stand out from the competition. The application of quantitative methods can play a significant role in these companies.

 Aim: This paper aims to connect theory with practice and academia with the real sector through the application of a center-of-gravity method, an inventory model, and a transportation model.

 Materials and Methods: Qualitative and comparative methods were used to analyze publicly available data, as well as quantitative methods, specifically the center-of-gravity method, the inventory model, and the transportation model.

 Results: Economic-mathematical models and methods make it possible to determine the optimal location of storage quantities, as well as the associated costs. The application of the transportation model and inventory model showed the optimal location for a warehouse in Herzegovina and the capacity that this warehouse should have to efficiently serve this region.

 Conclusion: Companies in the energy sector of Bosnia and Herzegovina, especially oil companies, face numerous macroeconomic constraints, such as geographical location, infrastructure, and legal regulations, which dictate the method of transporting petroleum products. To ensure continuity and prevent the risk of supply chain disruption, a warehouse/storage facility in Herzegovina is necessary. The application of economic-mathematical models and methods in the system not only of this type of enterprise but also of other enterprises can bring significant savings.