An Optimization Based Integrated Short-Term Refined Petroleum Product Planning System

This paper contains a new and very successful application of mathematical programming in the petroleum industry. Specifically, the paper describes the design and implementation of a model and computer system to address the complex short-term planning and operational issues associated with the supply, distribution, and marketing of refined petroleum products. This system has been successfully implemented at Citgo Petroleum Corporation. The benefits include a $116 million reduction (based on historical inventory-to-sales ratios) in product inventories resulting in a $14 million per year reduction in working capital costs and an additional $2.5 million per year estimated contribution to bottom line profits due to multiple supply, distribution, and marketing insights provided by the system.