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OPTIMIZATION OF LPG CYLINDER PRODUCTION

 

Leverage barcode tracking data for the liquefied gas cylinders of Aygaz to optimize the production and understand usage patterns

 

CONTEXT

Aygaz is the 14th biggest industrial company in Turkey and is a part of Koç Group which is the biggest industrial holding in Turkey. Koc Group carries on businesses on Automotive, Energy, Consumer Durables, Finance and other sectors in Turkey.

In its core business field, Aygaz distributes Liquefied Petroleum Gas (LPG) as autogas, cylinder gas, and bulk gas; manufactures and sells LPG cylinders, tanks, valves and regulators locally and internationally. Aygaz also produces and markets LPG-operated devices, and carries out LPG marine transportation. In 2016, Aygaz generated a revenue of 6,749 million Turkish liras (EUR 1,64 Billion). Investment expenditures of Aygaz in 2016 was 99 million TL (EUR 24 million).

Aygaz carries its services and products to all corners of Turkey by means of 2,192 cylinder gas dealers and 1,750 autogas stations in 81 provinces. Thanks to this strong and broad distribution network, Aygaz cylinders enter into more than 80,000 houses/workplaces every day.

Colloquially known as “cylinder gas”, LPG (liquefied petroleum gas) is a source of energy used for cooking and heating.

LPG Cylinders produced by Aygaz

LPG Cylinders produced by Aygaz

The flow of the household cylinders is shown below. Cylinders are reusable so that each time the LPG in it is consumed, the cylinder is filled with LPG again. This flow continues until the cylinders become unusable. The flow of cylinders among filling stations, dealers and customers is shown in the picture above.

 
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Following the introduction of a new security legislation, Aygaz started to label cylinders with barcodes in 2014 at Işıkkent facility in İzmir. Mandatory labelling will be scaled up to the whole nation by mid-2018.

New barcode labelling

New barcode labelling

This new mandatory labelling introduces new opportunities for Aygaz: the company will be able to collect data about cylinder flows by scanning the barcodes with hand terminals and mobile app by customers.

The data generated is an excellent source to optimize business processes, especially the number of cylinders produced.

Ultimately, new insight on user habits will enable Aygaz to test new business models.  


CHALLENGE OBJECTIVES

Within the cylinder labelling project, Aygaz has labelled 8 million cylinders from a total of 17 million projected cylinders. Since data has been collected for 3 years and Aygaz has nearly reached the desired level in terms of # of labelled cylinders, the company is seeking external advice on this project. Aygaz expects to find a data mining solution to optimize its production plans.

 
Flow of cylinder filling

Flow of cylinder filling

 

At the moment, barcode data is available only in the processes shown above (entrance to filling station and exit from filling station). The rest of the cycle will be available in 2018.

One of the most important production costs for Aygaz comes from the production of new cylinders. In spite of a shrinking LPG sector in Turkey, the number of cylinders produced each year exceeds the number of cylinders that become unusable. Since the company does not clearly know the location and return frequency of cylinders once they exit filling stations, and is not able to guess the cylinder stock of dealers, the production plan of cylinders is based on educated guesses instead of data. Thanks to newly available data, Aygaz wishes to co-design a solution in order to optimize the production volume of new cylinders by analyzing the flow and return frequencies of cylinders.

Moreover, Aygaz expects to find new ways to use the data collected from labelling project in developing new business models for its sales & marketing department. The data will reveal new insights about the end-consumer and distributor behavior, and could be creatively translated into new business opportunities. These could be a follow-up to this challenge project.

 

DESIRED OUTCOMES

For this challenge, Aygaz wishes to collaborate with a data-science startup that will design a POC with Aygaz engineers. This first pilot will provide insightful information to optimize the production levels of cylinders. One anticipated way of achieving this is to have a prototype that:

  • Based on engineers insights, determines key parameters on current production levels
  • Would confront cylinder-tracking data to existing production data
  • Would recommend the best production scenario

A successful first collaboration on a POC could pave the way for a more in-depth collaboration in a second phase, further into 2018. In particular it could leverage the newly available data which will cover the entire lifecycle of cylinders. Aygaz’s long term objective is to get access to an algorithm that will enable the company to monitor and track cylinders and will give insights on the optimal levels of production and filling plans.

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Success indicators

  • Reduction rate of the cylinder production at constant throughput without impacting supply to costumers
  • Increased annual return frequency of cylinder
  • Insights on the user and distributor behavior

DATA

The data generated from flow of labelled cylinders has one row for each transaction. An example of data is given below. While currently only data on transactions between Aygaz and distributors is available, as explained on the previous page, soon the data will also include transactions between the distributors and end-consumers, in the same format. For Isikkent station, data is being held for approximately 3 years. Current data set includes approximately 3 million rows (transactions).

Capture d’écran 2017-09-21 à 13.17.50.png

The startup will also access production data about the production of new cylinders in Işıkkent facility (monthly, starting in January 2016). An example of data is given below.

Capture d’écran 2017-09-21 à 13.17.42.png

Aygaz will also provide information on external parameters that affects the number of cylinders produced such as :

  • Sales programme: sales to the dealers that take service from Işıkkent facility
  • Scrapped cylinders: # of cylinders scrapped in 2016 at Işıkkent facility
  • Market share estimations: market share of Aygaz in 2016 in the area where Işıkkent facility give service
  • New dealers: dealers that started to work for Aygaz in 2016
  • Sales returns: returns of extra empty cylinders from dealers to the facilities in 2016

business scenario

The startup will develop a POC with Aygaz engineers. If the experimentation is successful, Aygaz will be interested in pursuing the development of a software that will enable to predict production levels in a dynamic form and will integrate data collected during the entire sales cycle.

Should the collaboration be successful, the startup could licence this software and could discuss a possible business partnership with Aygaz.


EXPERTISE

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