The encyclopedia · Software & IT · Operational decision · 1984–1986
Citgo wrapped an optimizer in a knowledge base so managers could ask why
Citgo paired a supply, distribution and marketing optimizer with an expert system, adding about $70m a year in profit.
Citgo Petroleum Corporation · Southland Corporation
the move
Citgo Petroleum, the nation's largest independent downstream marketer of refined products with about $3.8 billion in 1985 sales, faced short-term planning and operational problems spanning supply, distribution and marketing.
The firm built SDM, an intelligent decision-support system that combines an optimization-based model, a state-of-the-art database and a modeling language with a knowledge-base component that uses artificial intelligence and expert-system techniques.
The knowledge base lets analysts and managers verify and modify inputs and explore what-if and why questions about the solution, and the deployed system helped produce a profit improvement documented at roughly $70 million a year and changed how the company did business.
why it works
- The supply-distribution-marketing problem crosses too many functions to solve by hand.
- A bare optimizer gives an answer with no way to question it.
- A knowledge base makes the solution explainable and testable, so it is trusted.
- Measured: about $70 million a year of profit improvement.
what transfers
An optimization model is adopted only if the people who must trust it can ask why it says what it says; pair the optimizer with a knowledge base that explains, verifies and stress-tests its answers.
what came after
The SDM system became central to Citgo's planning and was recognized with the 1986 Franz Edelman Award; the project showed how an expert system can make an optimization model usable in practice rather than remain a desk study.
references
- Intelligent decision support systems: A unique application in the petroleum industry
- The Successful Deployment of Management Science Throughout Citgo Petroleum Corporation
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