CASE STUDY

Price Forecasting: An Effective Tool for Companies to Identify Profitable Products and Predict Fluctuating Oil Prices – A SpendEdge Case Study

Mar 6, 2019

The Business Challenge

The client, one of the leading oil and gas companies in the United States, was facing predicaments in forecasting the fuel price spreads and crack spreads for a variety of products. This was hindering the production and refinery planning for the company. Also, with the increase in oil prices and volatility, business strategies and supply chain were getting negatively impacted. This created the demand for a dedicated manufacturing environment and price forecasting solutions for the oil company.

The ability to perform an oil price forecast is vital for companies to implement their business strategies effectively. Get in touch with our experts and know how our price forecasting solutions can help your company in making informed business decisions.

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Solutions Offered

To improve the supply chain flexibility, the oil company decided to collaborate with SpendEdge. The supply chain experts at SpendEdge conducted a comprehensive market research, comprising of qualitative and quantitative assessments, to determine how volatile oil prices affect supply chain ?exibility and dedicated manufacturing environment.

Since the implementation of transportation strategies and utilization of dedicated manufacturing are based on oil prices, the price forecasting solution helped the client to determine when to reduce inventory levels.  Price forecasting also predicted the appropriate time for the client to shift from just-in-time delivery to better use of transportation capacity. Additionally, the oil price forecast provided necessary insights for the company to switch to shared resources such as third-party logistics carriers and consolidated warehouses.

Key Findings

In a span of two months, our price forecasting solution enabled the company to predict the fluctuation in oil prices and identify the most profitable products in the near term. Reducing the price forecasting error by more than 50% helped the client to precisely position their inventory in the supply chain and address customer demands. Moreover, price forecasting helped the client to reduce inventory levels, expediting costs, and transportation costs.

Why Price Forecasting Is Important in Supply Chain?

As price forecasting helps predict short- and long-term prices of products, companies can accurately analyze the demand and supply of their products. They can shift from quick delivery to cheaper and sometimes slower transportation modes to cut fuel consumption and reduce transportation costs. Also, with the help of price forecasting solutions, they can increase total safety stock in the supply chain and leverage economies of scale.

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