Enhancing Crude Oil Inventory Management: A Modified Wagner-Whitin Algorithm Approach Considering Storage Tank Capacity Constraint
Nur Indrianti (a*), Raden Achmad Chairdino Leuveano (a), Salwa Hanim Abdul-Rashid (b), Andreas Mahendro Kuncoro (a), Yuli Liestyana (c)

(a) Industrial Engineering Department, Universitas Pembangunan Nasional Veteran Yogyakarta, Jalan Babarsari 2, Tambakbayan, Daerah Istimewa Yogyakarta 55281, Indonesia
*n.indrianti[at]upnyk.ac.id
(b) Centre of Product Design and Manufacturing, Department of Mechanical Engineering, Faculty of Engineering, University of Malaya, 50603 Kuala Lumpur, Malaysia
(c) Management Department, Universitas Pembangunan Nasional Veteran Yogyakarta, Jalan Padjajaran No.104, Condongcatur, Daerah Istimewa Yogyakarta 55283, Indonesia

Abstract

Crude oil inventory control is a critical aspect of the operational management of the oil and gas industry. Fluctuating demand, high price volatility, supply uncertainty, and storage tank capacity can increase the complexity of crude oil inventory management. This study aims to develop a modified Wagner-Whitin algorithm (WWA) that considers storage tank capacity constraints in the context of crude oil inventory management. The problem of controlling crude oil raw material inventory from an oil refinery unit in Indonesia was used as a case study. Model validation was carried out by comparing the calculation results of the modified WWA with the calculation results of other inventory models, including Periodic Order Quantity, Silver-Meal Algorithm, Least Unit Cost, Part Period Algorithm (PPA), and Incremental PPA. The validation results show that the modified WWA provides the smallest variable inventory costs. It is concluded that the modified WWA has the potential to improve operational efficiency and substantially reduce inventory costs in the oil and gas industry.

Keywords: inventory management, crude oil, Wagner-Whitin algorithm, capacity constraint

Topic: Engineering