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Improving inventory management for Methanex Fenske, Russell Dean

Abstract

Methanex is a global leader in the production, distribution and sale of methanol. Their extensive supply chain services customers in all parts of the world. Intimately tied to their ability to service customers is their management of inventory. By storing methanol in regional distribution centers, Methanex is able to limit their global shipping costs by transporting methanol in larger ships, while improving their agility in responding to customer demand. This paper examines the issues surrounding inventory management for Methanex. The goal is to define a methodology to identify target inventory levels for all of their major global inventory storage locations. It also discusses recommendations for changes in current levels of storage capacity. The feasibility of applying standard inventory control approaches such as the EOQ model and the Newsboy model is discussed. Two hybrid approaches involving simulation, combining mathematical techniques and business practices to model the global supply chain, are also discussed. The Waterfront Inventory Simulation Engine (WISE) model is based one of these hybrid approaches. It is a decision support tool that enables the testing and analysis of a myriad of potential sourcing and inventory scenarios. This paper demonstrates that though supply chain planning for Methanex may be complicated and does not lend itself well to the standard inventory control techniques, there are still many ways in which operations research techniques can be used to conduct useful inventory analysis that will improve efficiency and have a positive impact on bottom line results.

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