Proceedings of the 2014 Industrial and Systems Engineering Research Conference

Y. GuanandH.Liao, eds.

Multi-Commodity Network Methodology for Single-Pipeline

Distribution of Refined Products

Rolando José Acosta-Amado

Grupo de Investigación MyOS, Facultad de Ingeniería Industrial
Universidad Pontificia Bolivariana Seccional Bucaramanga
Autopista Piedecuesta Km 7, Floridablanca, Santander, Colombia

Alberto Garcia-Diaz
Department of Industrial and Systems Engineering
The University of Tennessee
Knoxville, TN37996-2315

Andrés F. Acevedo
Facultad de Ingeniería Industrial
Universidad Pontificia Bolivariana Seccional Bucaramanga
Autopista Piedecuesta Km 7, Floridablanca, Santander, Colombia

Abstract
The distribution and mixing of various types of crude oils and other raw materials in a timely and sequential manner
to process several types of gasoline and other refined products is widely recognized as one of the most critical
operational problems in the petroleum industry. Of particular interest is the distribution of the refined products to
market zones to satisfy given product demands. The determination of the best sequence of products to satisfy given
product demands subject to time-window and order-of-arrival constraints, along with capacity and flow conservation
restrictions, pose an increasingly significant challenge to the effective and efficient operation of pipelines, one of the
most reliable and efficient transportation modes available. Due to the complex nature of the operation and marketing
requirements, finding just a feasible schedule for a mid-size scenario for a single pipeline becomes a very challenging
problem. A multi-commodity network flow model with additional side constraints is formulated to represent the
distribution problem. A branch-and-bound solution procedure is studied aiming to find the best scheme to assign
priorities for branching and the best node selection strategy. Available computational results using GAMS/CPLEX
for a sample of mid-size scenarios are presented.

Keywords
Refined products distribution, network formulation, scheduling pipeline systems

1. Introduction
One central problem of particular interest in the petroleum industry is the distribution of refined products using
pipeline systems. This undertaking has received much attention over the past ten years due to its very significant
economic impact. A network of pipelines spanning more than 500,000 miles of interstate pipelines transport more
than 70% of the crude oil and petroleum products manufactured in the U.S. [1]. Pipelines are an efficient and safe
distribution mode for these products, as large amounts of oil and refined products can be transported over long
distances at competitive costs with nearly zero accidents. The optimization of this operational problem in the oil
industry has raised an increasingly important challenge due to the striking features and the very complex nature of the
distribution system.

Despite the significant number of studies undertaken to address this important problem, still more work is needed to
develop new modeling approaches and solve this problem in a way that will address in an efficient manner the
 Acosta-Amado and Garcia-Diaz

computationally-intensive combinatorial nature of a medium-scale and large-scale application. The increasing

number of mathematical programming applications in this area address not only several configuration of the systems
but also the solution approaches adopted in each case [12]. The rapid growth of fuel consumption on a worldwide
basis [11] and the proliferation of new products in the biofuels industry require large and flexible distribution systems.
Consequently, there is currently an urgent need to develop new modeling approaches to represent the system
effectively for larger scenarios.

Little research work has been done using network flow models to represent the system dynamics from an operational
perspective to optimize its performance. In this paper, a multi-commodity network flow model is proposed to represent
and solve a refined-products distribution problem using pipeline systems. The proposed modeling approach takes into
consideration the evolution of the system through a given period of time and has capabilities to trace each batch
pumped into the system. The model portrays the behavior of the system at an operational level in a discretized time
horizon. Partial results suggest that this problem can be modeled and solved with this approach for all the system
configurations or topologies considered in the surveyed papers. Furthermore, the approach allows the generation of
feasible solutions in larger scenarios.

The body of this paper is organized into seven sections, including this introduction. Section 2 presents a review of the
relevant related work. Section 3 provides a concise problem definition. Section 4 outlines the model formulation to
be discussed in this paper. Section 5 focuses on the proposed solution procedure. Section 6 summarizes relevant
results regarding the computational requirements of the solution procedure. Conclusions and recommendations are
presented in Section 7.

2. Relevant Literature Review

The problem of distributing refined products using pipelines has been intensively investigated in the last 20 years or
so using different approaches. There are diverse optimization criteria for this problem in the literature. One way to
model this system is by using Mixed Integer and Linear Programming (MILP) or Mixed Integer and Non Linear
Programming (MINLP) mathematical formulations with discrete and continuous time approaches.

Rejowski and Pinto proposed MILP formulations for a system with one refinery, five depots with demands four
products, and a single pipeline [2–4], [11]. The same system topology or configuration was studied by Cafaro and
Cerda [5, 6] with alternative mathematical modeling approaches to consider additional features of the system’s
operation, such as dynamic scheduling. Magatao et al. [7] also formulated an MILP model with uniform time
discretization to address a different system topology consisting of one refinery, eight products, and a harborl connected
with a single pipeline. Other system configurations include features such as multisource pipeline systems [8], tree-
structured pipelines [14], and network-structured pipeline systems [15]. Measures of effectiveness used as
optimization criteria include pumping costs, transition costs, inventory costs, and backordering costs. In addition to
these, other criteria related to operational objectives have been considered [12]. Besides the pumping and interface
costs, in reference [13] the sum of penalties for unsatisfied demands are also considered.

A significant number of contributions to this problem has sought the minimization of pumping, inventory and
transition costs, while all relevant constraints are satisfied [2]–[5], [11]. Also, the cost of product backorders being
tardily delivered to their destinations [9,10] and the cost of underutilizing pipeline transportation capacity [6] have
been considered in the objective function. Operational objectives have also been studied. For example, in reference
[10] the objective function considers two alternative problem goals: to complete pipeline operations as soon as possible
and to minimize transition, pumping and backorder costs. The minimization of tank changeovers is also considered
in reference [7] as part of the objective function.

A significant challenge posed by the solution to this problem emerges from the need for a model that is able to
represent effectively large scale systems with complex configurations, coupled with procedures able to provide
realistic solutions in a timely manner.

Although mathematical modeling has played a key role in the contributions to this problem, other approaches have
proven to be successful, such as simulation, meta-heuristic and intelligent systems. For a comprehensive research
perspective on this field, the interested reader can refer to reference [16].
 Acosta-Amado and Garcia-Diaz

3. Problem Definition
The system considered in this article is composed of a refinery, a single multiproduct pipeline, a set of refined products
available at the refinery for distribution, and a set of depots connected to local consumer markets where the
corresponding demand for each refined product is known. The refinery must distribute 𝑃 refined products among the
𝐷 depots connected to a pipeline which is divided into 𝐷 segments. The depots have to satisfy requirements
determined by local consumer markets as considered in references [2], [4], and [11]. A network flow model is
formulated to represent the refinery and pipeline distribution system, and to minimize pumping costs subject to time
window product delivery. In this approach, other operational objectives can also be considered, with some
modifications of the objective function, to study the soft time window version of the model which is equivalent to the
minimization of time window delivery violation.

4. Model Formulation
The proposed model is based on a multi commodity network flow structure with side constraints. The formulation
represents the dynamic evolution of the system by discretizing the planning period into uniform stages or periods. The
solution of the model reasonably represents the pipeline evolution through time.

Under the assumption that there are 𝐷 depots in the system, one refinery, and a single pipeline connecting the refinery
with the depots, the pipeline is divided into 𝐷 segments and each segment is divided in several batches; as many as
the volume capacity of each segment measured in batches. Figure 1 provides a general illustration of the system
considered in this article.

Refinery Segment 1 Depot 1 Segment 2 Depot 2 Segment D Depot D

Figure 1: System Representation

Notation

𝑃: Number of products to be pumped through the pipeline

𝐷: Number of depots
𝑏𝑖 , 𝑖 = 1,2, ⋯ , 𝑃: Number of batches of product 𝑖 available at the refinery
𝜇 = ∑𝑃𝑖=1 𝑏𝑖 : Number of batches in the final sequence of products
𝑈𝑇𝑊𝑖𝑑 , 𝐿𝑇𝑊𝑖𝑑 : Upper/lower time window for product 𝑖, 𝑖 = 1,2, ⋯ , 𝑃 at depot 𝑑 = 1,2, ⋯ , 𝐷
𝐶𝑆𝑑 : Capacity of pipeline segment d, given in batches, 𝑑 = 1,2, ⋯ , 𝐷
𝜋𝑖,𝑗,𝑜,𝑙 : Cost of pumping 1 batch of product 𝑖 from position 𝑗 to position 𝑜 in the pipeline at time 𝑙
𝜌
𝜋𝑖,𝑙 : Cost of injecting 1 batch of product 𝑖 into the pipeline from the refinery at time 𝑙
𝑅𝑖𝑑 :Demand, in batches, of product 𝑖 in depot 𝑑 = 1,2, ⋯ , 𝐷
𝑇: Number of discrete points in the time horizon
𝜓: Total capacity of the pipeline in number of batches
𝑇𝑊𝑖𝑑 = {𝑙: 𝐿𝑇𝑊𝑖𝑑 ≤ 𝑙 ≤ 𝑈𝑇𝑊𝑖𝑑 }: set of indexes 𝑙 corresponding to the time window for product i at a given depot
𝛼𝑗 : Set of nodes that can be visited from node 𝑗
𝜕𝑗 : Set of depots that can be visited from node 𝑗
𝛽𝑗 : Set of nodes from which node 𝑗 can be visited
 Acosta-Amado and Garcia-Diaz

Graphical representation

The decision variables for each product involved in the proposed formulation can be classified into three types. Figure
2 provides a graphical representation of the possibilities for the system evolution between times t-1 and t+1. The red
arrows correspond to variables 𝑥𝑖,𝑙 representing the injection of product 𝑖 into the pipeline at time 𝑙; the orange arrows
correspond to variables 𝑦𝑖,𝑗,𝑜,𝑙 that represent the movement of batch of product 𝑖 from position 𝑗 to position 𝑜 between
points in time 𝑙 and 𝑙 + 1 and the green arrows correspond to variables 𝑧𝑖,𝑑,𝑙 that represent the receiving operation of
batch of product 𝑖 at depot 𝑑 at point in time 𝑙, 𝑡 ≤ 𝑙 ≤ 𝑡 + 1.

Time

1 2 D1 3 4 5 6 D2 t-1

1 2 D1 3 4 5 6 D2 t

1 2 D1 3 4 5 6 D2 t+1

Figure 2: Network description for the system state between times t-1 and t+1

Decision variables

1 if product i is assigned position l in the sequence

xi ,l  
0 otherwise

1 if product i goes from batch k to batch l from time l to l  1

yi , j ,o ,l  
0 otherwise

1 if a batch of product i entersdepot d at time t

z i , d ,l  
0 otherwise
P
i, q  1,2,...,P; j  1,2,..., bi ; j  1,2,...,CP; l  0,1,...,T
i 1

Objective function

The two components of the objective function are the inventory and pumping costs, defined as shown in (1) and (2):
P T
CInventory    i (l  1)xil (1)
i 1 l 1
 Acosta-Amado and Garcia-Diaz

P T 1  P T 1
CPumping     i , j , o,l yi , j , o,l    i,l xi ,l (2)
i 1 l  0 j 1 o j i 1 l  0
The model formulated for solving the problem is formulated in (3)-(9):

Minimize Z  CPumping  CInventory (3)

subject to


x
l 1
i ,l  bi , i  1,2,..., P (4)

 yi ,1,o,l   z i ,d ,t  yi ,1,1,l  xi ,l  RHSi ,1,l (5)

o1 d 1

 y i , j ,o ,l   z i , d ,t   y i ,o , j ,l  RHS i , j ,l (6)
o j d  j o j

 z i ,d ,l  Ri ,d ; i  1,2,..., P; d  1,2,..., D (7)

lTWid
P P
  yi ,o,1,l   xil 1  1; l  1,2,...,T (8)
i 1 o1 i 1
P
  y i ,o, j ,l  1; j  2,..., ; l  1,2,...,T (9)
i 1 o j

Equations (1) and (2) account for inventory and pumping costs respectively. Equation (3) corresponds to the objective
function of the model. Equation (4) enforces that the amount available in the refinery of each product has to be sent
through the pipeline. Sets of constraints (5), (6) and (7) enforce the conservation of flow in the network. They include
the initial, intermediate and final states of the pipeline, through the horizon planning period. Demand and time window
constraints are enforced using set of constraints (7). The condition that only one product can be received in only one
depot downstream the pipeline at any given point in time is enforced by constraints sets (8) and (9).

5. Solution Procedure
5.1 Preprocessing
If batch B is injected after batch A in the refinery, this set of constraints guarantees that at a later point in time that
sequence will be preserved. The logic says that batch B cannot show up downstream batch A at some point in time if
it was injected after batch A.

1 2 D1 3 4 D2 t

Figure 3: Only one batch of product can occupy a batch position inside the line.
 Acosta-Amado and Garcia-Diaz

We consider nodes 1 and 3 in Figure 3 to provide two examples of this set of constraints. In both cases, only one bold
arc can enter the node. This is modeled nodes 1 and 3, respectively, as follows:

P P

 xit   yi,1,1,t 1  1
i 1 i 1
(10)

P P

 yi,2,3,t 1   yi,3,3,t 1  1
i 1 i 1
(11)

Equations 10 and 11 enforce, in both cases, that only one batch of product can occupy each batch position inside the
pipeline. Although perhaps at first sight it is not evident, they also imply that if the optimal integral values of 𝑥 and 𝑧
are available, then the optimal values for 𝑦 will be integral without enforcing this condition.

Figure 4 provides an illustration of the dramatic impact in the total number of discrete variables when the integrality
constraint of variables 𝑦 is relaxed.

12000
10000
8000 Total Number of Discrete
6000 Variables
4000
2000
0 Total Number of Discrete
Variables Excluding
1-2-2-u-s-10
1-2-2-u-s-16
1-2-2-u-s-20
1-2-2-u-s-28
1-2-3-u-s-40
1-2-5-u-s-40
1-2-6-u-s-40
1-4-2-u-s-50
1-3-4-u-s-40
1-3-4-u-s-50
1-4-3-u-s-50
1-3-6-u-s-50
1-4-5-u-s-50
1-2-2-u-s-6

Variables y

Figure 4: Reduction in the total number of discrete variables relaxing integrality constraints for variables 𝒚

5.2. Schemes to Assign Priorities for Branching

Based on the logic of the operation of the system, four strategies to assign priorities for branching were studied and
their computational performance compared. The four schemes to assign priorities for branching are defined below:
1. For 𝑙 = 1,2, ⋯ , 𝑇, the set of variables 𝑥𝑖𝑙 is given the highest priorities and then the set of variables 𝑧𝑖,𝑑,𝑙 are
assigned decreasing priorities in an order determined chronologically and based on the location of depots
downstream the line.
2. Selects as branching variables the set 𝑥𝑖𝑙 in chronological order from the first to the last point in the horizon
planning period. Once the integral values for the 𝑥𝑖𝑙 variables are determined, branching on the 𝑧𝑖,𝑑,𝑡
variables starts in chronological and depot location order, given higher priorities at earlier points in time and
depots with closer locations to the refinery.
3. This scheme operates in the opposite way to branching scheme 2. Branching on the 𝑧𝑖,𝑑,𝑡 variables occurs
first on a chronological and depot location basis, assigning higher priorities to the 𝑧𝑖,𝑑,𝑡 variables
corresponding to earlier points in time and depots with closer locations to the refinery and considering those
with later points in time and away locations from the refinery in the last stages of the optimization process.
Once the integral values for the 𝑧𝑖,𝑑,𝑡 variables are determined, branching on the 𝑥𝑖,𝑙 variables starts assigning
priorities for branching from highest to lowest in chronological order.
4. This scheme operates in an opposite way in which the first branching scheme does. In chronological order
for each discrete point in the horizon planning period, it first determines the integral values of the 𝑧𝑖,𝑑,𝑡
variables and then it establishes the values of the 𝑥𝑖,𝑙 variables. The integral values for 𝑧𝑖,𝑑,𝑡 are determined
 Acosta-Amado and Garcia-Diaz

in the same order in which the depots are located downstream the line in chronological order. Once the
process finishes determining the 𝑧𝑖,𝑑,𝑡 , the values for the 𝑥𝑖,𝑙 variables are then determined in a chronological
order.
6. Computational Experiments
All branching schemes are compared with the default settings of the MIP CPLEX solver using GAMS without the
relaxation of the integrality of the 𝑦 variables. The computational time was limited to a maximum of five hours and
a solution within a two percent optimality gap was set acceptable to stop the search process. For each branching
scheme, several instances of the problem were solved with topologies ranging from 1/2/2/u/s/6 to 1/5/3/u/s/50. The
parameters of the objective function as well as the different product demands were determined randomly by GAMS.
Wall clock time was employed in the measurement of the computational effort. Three figures are presented for a
selected set of random instances used to prove all the four schemes to assign priorities for branching and the GAMS
default settings for comparative purposes.

20000000
15000000
10000000
5000000
0

Default Settings
Branching Scheme 1
Branching Scheme 2
Branching Scheme 3
Branching Scheme 4

Figure 5: Number of iterations for solving each instance by each scheme

Figure 5 provides a graphical representation of the number of iterations necessary to solve each instance for all tested
solution schemes. Scheme 3 shows a superior performance compared to the other four solution approaches.

80000
60000
40000
20000
0 Default Settings
1-2-2-u-s-6
1-2-2-u-s-14
1-2-2-u-s-20
1-2-2-u-s-34

Branching Scheme 1
1-2-5-u-s-40
1-2-8-u-s-50
1-3-3-u-s-50
1-3-6-u-s-50
1-4-5-u-s-50

Branching Scheme 2

Branching Scheme 3

Branching Scheme 4

Figure 6: Number of nodes generated until stopping criteria is met

Figure 6 plots the number of nodes generated to reach a solution within a time span of five hours or until a solution
within a two percent optimality gap is found. Scheme 3 has a superior performance compared with the other three
 Acosta-Amado and Garcia-Diaz

schemes. Scheme 4 had the poorest performance regarding both the number of iterations and the number of nodes
generated. In all instances considered, it always required more than the other three approaches in both measures. This
scheme, in chronological order, first finds the depot that accepts product and then it determines the product that has
to be pumped in the refinery at that point in time.

The computational time required by each solution scheme to reach a solution within a two percent optimality gap is
plotted for a selected set of instances of the problem in this case. It is clear that scheme 3 has the best performance in
terms of number of iterations, number of nodes and computational time. In contrast, Scheme 4 has the poorest
performance requiring the highest number of iterations, the highest number of nodes and the highest computational
time to reach a solution with the same level of quality of those reached by the other three schemes to assign priorities
for branching. Scheme 3 also outperformed the default settings of GAMS to solve this problem as illustrated in Figures
5, 6 and 7.

20000.000
10000.000
0.000

1-2-2-u-s-16
1-2-2-u-s-20
1-2-2-u-s-34
1-2-2-u-s-10
1-2-2-u-s-6
1-2-3-u-s-40
1-2-4-u-s-40 Default
1-3-2-u-s-40
1-3-3-u-s-50

BS1
1-5-2-u-s-50
1-3-6-u-s-50

BS2
BS3
BS4

Figure 7: Computational time of each solution scheme to solve each instance

7. Concluding Remarks
A new mathematical representation for the RPDPPS based on a 1-0 multi-commodity network flow formulation and
an additional set of constraints was formulated and discussed in this article. The integrality conditions of an important
number of decision variables were relaxed due to the problem structure, and four priority-assignment schemes for
branching for a selected set of variables were explored based on the logic of operation of the system.

Computational experiments were run for a selected set of random instances modeled in GAMS using the MIP CPLEX
solver and assigning priorities for branching. The computational time and near optimality of solutions, for the four
different schemes to assign priorities for branching, were compared with those obtained using the default settings of
GAMS.

The best performance of the model was achieved by the priority scheme that first chooses the depots accepting batches
of product in chronological order and then decides the sequence in which batches have to be pumped through the
pipeline. The number of nodes, number of iterations and computational time of this scheme were significantly smaller
than those for the other four solution approaches, including the default settings of GAMS. In contrast, the fourth
priority scheme had the poorest performance. Scheme 2 exhibited the second best computational performance. In
this scheme, which is the opposite of scheme three, the sequence of products to be pumped is first determined and
then the depot accepting product is identified in chronological order for the entire horizon planning period.

The difference in the performance among all solution schemes becomes more evident when big scenarios for the
problem are being considered. Having identified the best two schemes, performance wise, to assign priorities for
branching, is the first step to consider more aspects of the problem; such as product contamination, that complicate
both the model and the solution procedure.
 Acosta-Amado and Garcia-Diaz

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