time, they began the development of a geographic information system (GIS) based softwareprogram titled "Integrated Logistics Management System" (ILMS) for managing shore bases andmarine vessels. ILMS would be a critical component for integrating both the information andphysical flows associated with establishing coordinated logistic services.AOC expressed early interest in the shared resource concept and met with CLI'smanagement several times to explore its potential benefits and how it might be implemented.Where traditionally each oil company provided its own logistics services at low capacity utilization,CLI proposed that AOC turn over its shore bases and marine assets to CLI. In tum, CLI would usethese assets to provide logistics services for AOC and other platform operators in the region. Thiswould expand the customer base using the assets and lower the logistics costs. CLI and theplatform operators would share the logistics savings associated with the increased efficiencies. Inaddition, the oil companies would be relieved from managing their own logistics activities,permitting them to focus on their core competencies in exploration and production.The proposalfollowed the general concepts implemented by Aberdeen Service Company Ltd. in the North Sea.By mid 1996, AOC and CLI formed a research team to validate the economic feasibility ofthe resource sharing concepts. At their first meeting, the team decided to study the shore baseoperations in Morgan City, Louisiana as a test case. In addition to AOC, several other major andindependent platform operators maintained shore bases there and had expressed an interest in theproject. In particular, two independent operators, Petroleum Resources (PR) and Gulf EnergyInc.(GEI), had previously contacted CLI about the need to lower their logistics costs andencouraged CLI to establish third party operations in their production areas: Both firms pledged toparticipate in the task force's feasibility study.6
BUSINESS SITUATION: LOGISTICS ACTIVITIES IN MORGAN CITYFigure 1 shows the geographic area served by the Morgan City shore bases and the mannedproduction platforms operated by AOC, PR and GEI. The platforms represent less than fivepercent of the total number of production platforms in the region. Each oil platform is identifiedwith a geographic area prefix and a sequence number. In addition to production platforms, eachfirm operates several drilling platforms that are not identified in Figure 1.Production platforms are either manned or unmanned. Manned platforms are staffed by acrew size ranging from 2 to 10 workers.The platform crew provides all the activities necessary toextract oil and gas from the ground and route it to onshore facilities for processing.These activitiesinclude controlling the production processes and maintaining capital intensive productionequipment. Unmanned platforms are serviced from the nearest manned platform.Platfom crewswork a variety of shift schedules. A typical work shift is 7 days on and 7 days off working 12 hoursper day. Crew changes are performed by helicopter or boat shuttle to and from the shore base.Production platforms generate demand for a variety of products. These include potablewater, fuel, lubricants, equipment, spare parts, and groceries, among others.Due to the limitedstorage space on the platform, weekly replenishments of many items are necessary. In addition,emergency shipments of spare parts are sometimes required. All production byproducts (e.g., usedparts, trash and broken tools) are transported back to the shore base for disposal. Table 1 providesthe boat cargo capacities needed to support the average weekly requirements of AOC's, PR's andGEI's production platforms. The data indicates the square feet of outbound boat deck spacerequired for platform delivery, inbound deck space required for returning byproducts to the shorebase, and the outbound bulk capacities required for the delivery of potable water and diesel fuel tothe platforms. In the table, outbound refers to shipments originating at the shore base, and inbound7