Chemical Supply Chain


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Supply Chain Modeling
More than a Sophisticated Toy?

By Dr. Georg Mogk

LogiChem 2011 will be the event's tenth anniversary and an opportunity for the most senior chemical supply chain & global logistics directors from the European chemicals community to come together once again share experiences, make new contacts and benchmark the latest chemical supply chain initiatives.

Not only will LogiChem 2011 be a chance for the chemical industry to reminisce about the last ten years but an opportunity to shape the next decade. To celebrate a decade of LogiChem, there will be an exciting three day programme filled with networking opportunities in our new location, Antwerp.

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Chemical Supply Chain

  1. 1. Supply Chain ModelingMore than a Sophisticated Toy?Dr. Georg MogkLogiChem 201022nd April 2010, Düsseldorf
  2. 2. Contents Bayer Technology Services Project Example Network optimization – handling conflicting supply chain targets Future Challenges – SCM challenges of modular chemical production ConclusionMogk2010-04-22 • Page 2
  3. 3. Bayer Technology Services – a Bayer Group Company Holding Company Group Management Board Corporate Center Bayer AGBusiness Areas Service Areas Bayer Bayer Bayer Bayer Business HealthCare CropScience MaterialScience Services Bayer Technology Services Currenta Mogk 2010-04-22 • Page 3
  4. 4. Bayer Technology Services provides services along theentire process and plant lifecycleInitiate, implement and support technological innovations over the longterm. From product and process development through the planning andconstruction of plants to the automation and optimization of processes. Develop Design and Products and Manage Processes Investments Services Optimize throughout the Facilities and Plant Life Cycle ProductsMogk2010-04-22 • Page 4
  5. 5. Bayer Technology Services is a global company Headquarters Berlin Bergkamen Regional Office Europe Dormagen Benelux Leverkusen/Germany Elberfeld Antwerp/Belgium 1,300 employees (*) Leverkusen Regional Office Regional Office 70 Uerdingen North America Wendelsheim Asia Baytown, TX/USA Shanghai/PR China 230 employees(*) 610 employees(*) Regional Office worldwide(*) 375 EUR mill. Turnover Switzerland Employees worldwide(**) 2,600 Witterswil (*)2009 (**)Dec 31, 2009 10 employees(*) Client industries Regional Office Russia • Health Care opens 2010 • Crop Science Regional Office • Material Science/Polymers IndiaRegional Office Regional Office • Chemicals Mumbai/IndiaLatin America Middle East 10 employees(*)Mexico City Dubai/UAE360 employees(*) 5 employees(*) Regional Office Singapore Regional Office opens March 1st, 2010 Brazil Offers services on Offers services on opens 2010 external market Headquarters external market Mogk 2010-04-22 • Page 5 (*) 31-Dec-09 Regional Offices
  6. 6. Network Optimization Projects Executed by BTS 2008 Specialty 2006 2007 Chemicals Polymers BasicChemicals 2005 Chemicals 2009 Food 2007 Industry Japan Chemicals 2008 China Pharma 2007-2008 Polymers Mogk 2010-04-22 • Page 6
  7. 7. There are different motivations for a networkoptimization project … Global strategic network optimization • global sourcing optimization • long-term market penetration strategies • rough modeling of global material flows • high level of demand aggregation Regional optimization • optimize regional sourcing • optimize regional logistics locations • detailed Modeling of demand and sourcing structures • no detailed modeling of activities inside the knots Local site design • Design of local production sites • Optimal use of local logistics equipment and productions capacity • Use of simulation techniquesMogk2010-04-22 • Page 7
  8. 8. Different tasks require different approachesDivide and conquer Global strategic network optimizationNo supply Chain Model • global sourcing optimizationcan solve all optimization • long-term market penetration strategiestasks in detail. • rough modeling of global material flows • high level of demand aggregation Regional optimization • optimize regional sourcing • optimize regional logistics locations • detailed Modeling of demand and sourcing structures • no detailed modeling of activities inside the knots Local site design • Design of local production sites • Optimal use of local logistics equipment and productions capacity • Use of simulation techniques Mogk 2010-04-22 • Page 8
  9. 9. Project Example 1 - For delivery of South Asia market the global network have to be considered.The cost-optimal solution contains some unexpected results. Cost Optimal Solution Project targets Identification of optimal sources to deliver polymer customers in South Asia. The cost-optimal solution (4 production sites available) is suboptimal in respecting It is cheaper to source Chinese Save logistics costs. gas emissions greenhouse customers from Thailand than and robustness of the India is mainly sourced fromChinese from Shanghai ( outside Source of Asia. supply chain. Considering of greenhouse gas Tax policy) Material emissions caused by logistics. Shanghai Europe Thailand NAFTA Mogk 2010-04-22 • Page 9
  10. 10. Supply Chain Models help to handle conflicting targetsComplex network of production sites may take other parameters ongreater importance: e.g. taxation aspect for deliveries to and from Asia Relative logistics costs Controversial Objectives 103.5 % Minimum cost considering duty an taxes 102.5 % Minimum CO2-emissions by local 101.5 % sourcing (30% CO2-reduction,increase of 3.5% Supply Chain Costs) 100.5 % Compromise: 99.5 % 20% CO2-emission reduction, 0.5% 7,500 8,500 9,500 10,500 11,500 cost increase as effective solution CO2 emission (t) Sensitivity analysis helps to reach cost-effectively additional supply chain objectives like reduction of CO2-emissons. Mogk 2010-04-22 • Page 10
  11. 11. Project Example 2 - Network optimization in Japan Handling of different supply chain targetsProject targets Before Optimization: Reduction of Logistics Cost All Potential Warehouses Improvement of service time to customers Reduction of greenhouse emissions caused by logistics Optimize number and location of the Warehouses Optimization of transport mode Five New WHs: Yellow Triangle: Potential Warehouses One Additional WH: Red Triangle: Existing WarehousesScenario 2 Scenario 1 Estimated Av. Distance to Logistics Customer Costs [Km] AS-IS: Optimal use of existing 100,0% 444 WH One Additional 443 WH 100,2% Five new WHs 444 88,7% Mogk 2010-04-22 • Page 11
  12. 12. Network optimization project save money and improvethe public company image. The Japanese Bayer affiliate was able to increase the share of railway transportation up to 30%, which provide a significant contribution to CO2 reduction. The results were recognized by Japanese Ministry of Land, Infrastructure, Transport and Tourism in 2008. Eco Rail Mark The Bayer affiliate is the first company in the polyurethane industry awarded with the Eco Rail Mark.Mogk2010-04-22 • Page 12
  13. 13. Future Challenges in Supply Chain management: Modular Chemical ProductionSmall, flexible and modularproduction units enable the chemicalindustry to setup new supply chainconcepts for customer focused andclose to the market production.Benefits of modular production: Numbering up instead of scaling up: Fast adaptation on marked developments (geographical and time) Flexible Production of small batch sizes (customer specific products) Mobile, distributed production near customers and near row material sources is flexible and saves money The ability of dynamic networkadjustments is one of the key factors of a successful modular production concept. Mogk 2010-04-22 • Page 13
  14. 14. Modular chemical production leading to a continuous network optimization What is the right design of the Site Logistics logistics processes on site?Where are the How does anideal locations optimized supply Modular chain for mobilein a Productiondistributed production unitsproduction look like?network for Supply Chain Mobilethe modular Network Productionproduction Designunits? Mogk 2010-04-22 • Page 14
  15. 15. Conclusion Supply Chain models have to be created task orientated Supply Chain models helps in handling target conflicts Supply Chain settings have to be adjusted continuously Modern production concepts, like modular production, lead to a very intensive interaction of logistics and production planning Modular production allows continuous adaption of the Supply Chain NetworkMogk2010-04-22 • Page 15
  16. 16. The biggest optimization potential can be achieved by efficient communication. Thank you for your Attention!Mogk2010-04-22 • Page 16
  17. 17.