This case features Isabella Couchet, the chief operations officer of CaLNG, a company that planned to sell liquefied natural gas (LNG) to help California utilities better match supply and demand through peak shaving. The price of natural gas drawn from the California pipeline infrastructure increased with sudden huge demand spikes during the summer and winter peaks, so the ability to use LNG to fulfill demand during peak periods would be a significant financial benefit to utilities. CaLNG planned to receive LNG at its Coos Bay terminal in Oregon and then transport it to California using specialized trailers. It had to design its LNG supply chain while considering the costs of storage facilities and transportation. CaLNG could build a centralized tank farm at Coos Bay and, from there, use a large number of trailers for on-demand delivery. Alternatively, the company could build satellite tanks at utilities, an option that would require fewer trailers because the satellite tanks could be filled during off-peak periods.

Spreadsheet Supplement for Case KE1189

Companies that experience big fluctuations in demand can incur significant costs: overtime and lost sales when demand is too high, and idle capacity and excess inventory when demand slumps. But it's possible to better manage this variability by looking at one's customer list as a portfolio and targeting new customers whose demand patterns are complementary to those of existing customers.