Chemical Supply Chain


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Competitive Differentiation through Supply Chain

By Klaus Venus

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. Competitive Differentiation through Supply ChainManagement gKlaus Venus, Head of Supply Chain ManagementMondi EM di Europe & International I t ti l21st of April 2010
  2. 2. Agenda Mondi Uncoated Fine Paper – Supply Network 2003 Supply Chain Analyse – Vision & Program Key Initiatives implemented Business Case – Service Improvements Discussion Wettbewerbsdifferenzierung über SCM 2009/06/17 Seite 1
  3. 3. Mondi GroupKey Figures Mondi Group Mondi is an international paper and packaging group and had revenues of EUR 2009 2008 5.3 billion in 2009. Its key operations and interests are in western Europe, emerging Europe, Russia Revenue € 5,257M € 6,345M and South Africa. EBITDA1 € 645M € 814M Mondi has production operations in around 31 countries and about 31,000 employees. EBITDA 12.3% 12.8% Return Mondi is a dual-listed company at the Capital London Stock Exchange (LSE) and € 4,314M € 4,367M Employed Johannesburg Stock Exchange (JSE). ROCE2 7.6% 9.5% The corporate headquarters are located in Johannesburg.1 EBITDA is operating profit of subsidiaries and joint ventures before special items, depreciation and amortisation.2 Group ROCE is the underlying operating profit including share of associates’ net earnings divided by average trading capital employed (excluding capital employed on the major strategic expansion projects in Russia and Poland). February 23, 2010 Europe & International Presentation Page 2
  4. 4. Business Structure Mondi Group Merebank Europe & Richards Bay South AfricaInternational (E&I) ForestsUncoated Fine Paper Corrugated Bags & Specialities Uncoated Fine Paper Containerboard Kraft Paper Corrugated Packaging Bag Converting 50% Aylesford Newsprint Coatings 100% Europapier Mondi Shanduka 50% Consumer Flexibles Newsprint 70% Mondi Packaging South Africa February 23, 2010 Europe & International Presentation Page 3
  5. 5. Around 80 Production Sites in 30 countriesUncoated Fine Paper Uncoated fine paper mill Newsprint millCorrugatedContainerboard Recycled containerboard mill Virgin containerboard millCorrugated Packaging Corrugated box plantBags & SpecialitiesKraft Paper Kraft paper millBag Converting Bag converting plantCoatings Release liner plant Extrusion coating plantConsumer Flexibles Specialty plastic fil S i lt l ti films plant l t Converted flexible packaging plant Wettbewerbsdifferenzierung über SCM 2009/06/17 Seite 4
  6. 6. The Mondi DiamondOperational Excellence Sustainable Development p● Continuous productivity increases ● Health and safety● High OEE and machine efficiency ● Protection of environment● Waste reduction ● Sustainable forestry● Low working capital ● Social responsibility● Low overheadsCustomer Focus People Development● Flawless service ● Development and● Delivery accuracy training of employees● Market and customer intelligence ● Talent management● CRM ● Leadership ● Employer brand Cutting Edge Products ● Building brand awareness ● Incremental product development ● Highest quality and functionality February 23, 2010 Europe & International Presentation Page 5
  7. 7. Uncoated Fine Paper ProductsMultifunctional Paper Colour Laser Paper Our office paper meets Color Copy guarantees brilliant colour all demands of modern copies and perfect print results. office communication – Color Copy is the number 1 colour py whether for laser, inkjet laser laser brand in Europe printing. or copy applications.Pre-PrintPre Print Offset Our pre-print paper fits the needs of Our offset paper exhibits very good different printing technologies. surface characteristics to ensure a perfect print result. result Available in all standard formats. Available in folio & reels in a wide range of grammages. December 1, 2009 Europe & International Presentation PAGE 6
  8. 8. Agenda Mondi Uncoated Fine Paper – Supply Network 2003 Supply Chain Analyse – Vision & Program Key Initiatives implemented Business Case – Service Improvements Discussion Wettbewerbsdifferenzierung über SCM 2009/06/17 Seite 7
  9. 9. What about is Supply Chain Management? Production & Consumer Catalogue Order Inventory Delivery Supplier Customer Warehouse Supplier Management Management Management Management Management Management Management Money flow M fl e.g. Customer payment, transaction accounting, supplier settlement Information flow e.g.Customer forecast, delivery to address, product availability promise Physical flow e.g. Manufacture, store, pick, pack, ship, deliver, return
  10. 10. The Dynamics of a Supply ChainOrder size End User Trade Order Distributor Distrib tor Order Production Order time Quelle: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998 Wettbewerbsdifferenzierung über SCM 2009/06/17 Seite 9
  11. 11. Trends in Supply Chain ManagementSupply Chain Management has evolved rapidly over recent years and Supply ChainPioneers are starting to move towards a synchronised supply chain Across Alliance Synchronised y Partners With hip Customers elationsh & Suppliers Step 3: Synchronisation of Process, Technology & Organisation with an Orchestrated Vision Between cope of Re Business Functions Step 2: Collaborate with key suppliers and customers Within Withi Sc Step 1: Integrate functions of Business the internal supply Activities chain Optimised Integrated Collaborative Synchronised Nature of Relationship
  12. 12. Mondi Uncoated Fine Paper Supply Chain Sourcing Production Finishing Distribution Formates Wood Pulp Paper mill Reels Merchants, Distributors, Finished Reels Customers Wettbewerbsdifferenzierung über SCM 2009/06/17 Seite 11
  13. 13. Mondi UFP Supply Chain Organization Supply Chain Management Sales & Supply & Demand Supply Chain Supply Chain Operations- O ti Planning - Pl i Management Processes Planning Operative Wettbewerbsdifferenzierung über SCM 2009/06/17 Seite 12
  14. 14. 2003 Supply Chain Analysis Output Interviewed key supply chain personnel t h i l to Quantitative & QualitativeInterviews Assessment understand current Benchmark vs. NAG issues Channel Strategy & Management (CS&M) 7,00 6,00 5,00 00 Developed and distributed Save Supply Chain Value Assessment Print 4,00 Supply Chain Capability Assessment Order Fulfillment Operations Strategic Customer Managemen Company / Division: Current Client 3,00 Supply Chain Process: Strategic Customer Management supply chain & customer Sub-process: 1.0 Strategic Customer Service 2,00 Enable Practice 1,00 The locations do not have a Customer service focuses on the Operating locations engage in Strategic account management strategic perspective on customer service; customer service simple administration of accounts with emphasis on completing order standard maintenance of customer accounts and some tailoring of principles are applied, such as tailoring service offerings based on 0,00Surveys surveys to understand operations are informal with no clear transactions; service is largely services to meet requirements; profitability and criticality of supporting organizational structure, reactive to service complaints or dedicated service resources are customer segments; key Non-existent / poor Common Practice Progressive Practice Pioneering Practice current performance and Criticality Score (0-9): 9.00 Highly Critical Practice Enabled Practice Score (0-9): 9.00 Pioneering Operations Planning, Execution Supply Chain Configuration Enable Practice Control C t l Customer service operations are Customer service processes / Customer service is viewed as a Customer service operations act as identify gaps often relegated to secondary status resources are viewed as a necessity critical internal function and link in external collaborative supply at operating locations; no formal but not part of core operations, and coordinates resolution on service chain for company; data on training or development processes are often excluded from planning issues; still seen as staff function performance is gathered, used in are in place to support the service processes, budget development and and not given leadership role with customer financial analysis, Non-existent / poor Common Practice Progressive Practice Pioneering Practice Neusiedler AG Supply Chain Planning Benchmark Conducted to quantify as- Business Case &DataD t Recommendations is performance and majorAnalysis gaps Cumulated Net Supply Chain Benefits (€ `000) Main Initiatives Identified • Implement Integrated Supply/Demand Planning 70.000 Process & Asset Allocation 60.000 62.991 • Supply Chain Network Optimisation • VMI with Key Pulp & Packaging Suppliers 50.000 • Roll-out VMI to Key Customers 40.000 43.456 • Mill Direct Value V 30.000 30 000 26.879 • Rationalisation of Logistics Providers 20.000 • Warehouse Structure Optmisation • Product Basket Optimisation Conducted workshops to 10.000 11.781 7.969 0 2.065 • Pilot VMI with 1-2 Key Customers 1 2 3 4 5 6 • Align Supply Chain Organisation Year • Shift smaller Customers to Merchants/OPEC verify data analysis, • Implement ABC (Activity Based Costing) Tool to Support Supply Chain InitiativesWorkshop discuss best practices and • Eliminate Fill Orders with Negative Contribution • Reduce Production Cycle Times • Delivery Accuracy Improvement through better Time Slot Management identify i id tif improvement t • Define & Implement Supply Chain Wide Performance Measures • Improve Forecast Accruacy opportunities Wettbewerbsdifferenzierung über SCM 2009/06/17 Seite 13
  15. 15. Importance Factors for Customers Source: EMGE-Survey 2008 – Mill importance factors Supply Chain related factors Wettbewerbsdifferenzierung über SCM 2009/06/17 Seite 14
  16. 16. Mondi UFP Supply Chain Vision Demand High Flexible, Cost Driven Performing Responsive Effective• Accurate forecasts at • Supply Chain • Majority of orders • Integrated appropriate level used organization and processed and supply/demand to minimize lead times performance dispatched within 48-72 planning process and reduce inventory measures aligned to hours to support used and supported levels optimize Supply Chain alternative sales channels with planning tools to• Forecasting process performance • 2 3 regional warehouses provide optimum supply 2-3 supported through • Detailed ABC used across Europe to plan to maximize profits demand planning tool (Activity Based improve customer service • Key suppliers to improve accuracy Costing) tool levels while minimizing integrated in planning and reduce manual implemented and used Finished Goods inventory process (e.g. VMI, effort to support decision • Effective postponement collaborative planning)• Collaborative making processes strategy enables short processes with key about product and lead times and reduced customers used (e.g. customer portfolio stock levels, e.g. 100% VMI) mother reel strategy• Alternative sales implemented channels used
  17. 17. Supply Chain Strategy Sheeting Timber Pulp Mill Paper Mill Rewinding Merchants / Roll Distributor Di t ib t Finishing s/ PUSH PULL Customer s Halbfertigfabrikat Fertigware Sourcing Production Finishing Distribution Low High Uncertainty Uncertainty Wettbewerbsdifferenzierung über SCM 2009/06/17 Seite 16
  18. 18. Benchmarking 2003 – Gap Evaluation Best-in-Class 2003 KPI (multiple GAP Performance companies) 1. Order Lead Time (days) 2. Availability/Order Success Rate (%) 3. Forecast Accuracy (%) (by SKU/Volume) 4. Production Schedule Adherence (%) 5. Inventory Finished Goods (days) 6. Semi-finished Goods in (days) 7. Order fulfill rate (delivery in full on time) (%) Wettbewerbsdifferenzierung über SCM 2009/06/17 Seite 17
  19. 19. Tactical vs. Strategic ApproachThere is a growing gap in how companies think about their supply chains. Tactical Approach Strategic Approach • Supply Chain is a cost center • Supply Chain used to: – grow revenues – increase market share • Focus on operational cost – create competitive advantage control and reduction • Target opportunities for new value added services • Perceive operating efficiency as • Invest in VERY specific capabilities excellence -- “efficiency trap” • Create a distinct business model • Lean to the point of starvation • Use new capabilities to change the customer relationship
  20. 20. Supply Chain Management ....need to be considered across the full range of people, processes and enabling systems Comprehensive, Flexible, Strategy End-to-End approach Cross Functional Teams with People Clear A Cl Accountabilities t biliti Process Common Processes Standardised Reports & Metrics & KPIs Metrics Alignment of KPI’s KPI s Information & Systems y Integrated Systems(Cohen, Roussel, 2004, p. 230) Strategic supply chain management: the five disciplines for top performers
  21. 21. Agenda Mondi Uncoated Fine Paper – Supply Network 2003 Supply Chain Analyse – Vision & Program Key Initiatives implemented Business Case – Service Improvements Discussion Wettbewerbsdifferenzierung über SCM 2009/06/17 Seite 20
  22. 22. The supply chain excellence programTo close the gap between our vision and the analysis a program was initiatedconsisting of 8 projects Vendor Network Supplier Transportation Managed M d Distribution Di t ib ti Managed M d Consolidation Inventory Strategy Inventory SPEED - Production Product Integrated Performance Cycle Time Basket Supply and Organization Reduction Optimization Demand D d Planning
  23. 23. Paradigm shift from PUSH to PULL Push Principle – sell what you make! Old Way W Supply driven – production focus Locally optimized machine efficiency NEW Model Pull Principle – make what you sell! Demand driven – customer focus Group-wide optimized costs p p
  24. 24. Where and when to produce what for whom.. … to achieve minimized costs AND increased customer service!Warehouses South Africa Russia Slovakia Israel Austria Austria Allocation Planning Forecasting Customer A Customer B Customer C Customer X Customer Y / Customer Z / … / Products / Products / Products / Products Products Products Service Level Agreements
  25. 25. Forecasting & Planning- Processes Der Supply Chain steers and chairs the monthly meeting withSales, Marketing, Finance and all Production sites System Check System Forecast Forecast Logistics & O de p ocess og st cs Orderprocess Key in Customer demand Develop final Control forecast and finalize Forecast Master Plan and Consolidation release it for Control forecast execution and finalize Weekly Weekly Weekly Weekly forecast forecast forecast forecast Supply & Demand Master Plan Planning InventoryReplenishment Block Scheduling Wettbewerbsdifferenzierung über SCM 2009/06/17 Seite 24
  26. 26. Performance Indicators Semi- Transport. Transport finished Costs Inventory Costs C t Finished Goods Inventory Success of Sales Mondi Forecast Production Accuracy Shipment Scheduling Accuracy y Production Adherence Accuracy A Service Delivery Accuracy Finishing AccuracyySuccess ConstrainedFactors Fill Rate Un- Finishing constrained Scheduling KPI’s Fill Rate Adherence
  27. 27. SC-Improvement processStep I Scheduling Adherence Step II - Delivery Accuracy ex Mill Fineplanning PM and Paper availability FL Material availability Sequencing Stabile aggregates Frozen periode Capacity planning Mill Supply Chain Processes: I tA h Improvement Approach Safety stock Finishing cycle times g y Dispo stock PM cycle times Replenishment cycles Pot closure timesStep IV – Reduce Inventories Step III – Reduce Cycle Times
  28. 28. Wettbewerbsdifferenzierung über SCM 2009/06/17 Seite 27
  29. 29. Collaboration across Business PartnersDeeper collaborative partnerships in order to compete at the supply chain level 1. Supplier Collaboration 2. L i ti 2 Logistics Collaboration Stores Suppliers S li Raw M t i l R Materials Material Product Retail Converters Inbound Manufactur Outbound Supply Distribution ers Consumers 3PL Direct Di t Transport 3pl Transport Transport Exchanges Exchanges Services Services 3. Customer Collaboration Links with other B2B exchanges, e.g.: g g • Transport exchanges 4. Exchange Collaboration 5. Industry y Standardisation Leverage Wettbewerbsdifferenzierung über SCM 2009/06/17 Seite 28
  30. 30. Key to implementing an effective VMI..….solution is to create a win-win relationship where both the customer and Mondibenefits. ILLUSTRATIVE Improved customer service Incr. revenue (price) Incr. revenue (quantity) Customer Reduced working Reduced capital Net Benefit inventory Customer WIN Overall - Reduced internal Transportation Net Benefit WIN transportation Admin VMI Reduced process costs Increased Net Benefit Improved customer service revenue Mondi Mondi (quantity) Production M Improved production planning I d d ti l i Reduced working capital Reduced Implementation VMI implementation costs inventory Admin Admin Replenishment planning effort Automated order management Admin Transportation Increased transportation effort Benefits B fit Costs C t
  31. 31. VMI – Example out of our Web-based tool Positive downward s trend
  32. 32. Agenda Mondi Uncoated Fine Paper – Supply Network 2003 Supply Chain Analyse – Vision & Program Key Initiatives implemented Business Case – Service Improvements Discussion Wettbewerbsdifferenzierung über SCM 2009/06/17 Seite 31
  33. 33. Project Structure 2003 (Level 1) 2004 (Level 2) 2005 (Level 3) 2006 (Level 4) Q3 - Q4 Q1 - Q4 Q1 - Q4 Q1 Q2 Q3 Q4 S Pilot VMI with Key Roll out VMI to Key U Customers VMI 1 Customers (Design & Build) and Pilot / Implement with P Key Suppliers Strategic Issu Select P Transportation Consolidation 2 Sourcing e Providers and L Approach RFP Implement Network Dist. Rationalize Develop Supply Chain Implement Supply Chain Y Strategy 2 external Network Distribution Distribution Network Strategy Delayed due to later warehouse Strategy start Reduce s Improve change I h C Production Cycle 3 over Time Optimization production cycle times times and H processes Detaile Product A Complexity d cost Complexity Management Management 4 analysi basket optimization I s N Implementation of real time costing for product basket to optimize contr. changed into sales strategy Detail SC Implement Balanced Scorecard & L Performance 6 Scorecard Align SC Organization E Organization Integrated Planning Solution A Process Demand & Supply Chain Process & Planning Tool Implementation* Demand & Supply 7 Design Selection D Program g E Program Management Set-up Ongoing Resource Planning & Program Management RAssumptions: No further mill integrations requiring IP resources
  34. 34. Development of selected Indicators Delivery Accuracy Inventory Inventorydays Mondi / CEPI CEPI Mondi UFP 35 30 25 20 15 10 5 0 200401 200403 3 200405 5 200407 7 200409 9 200411 200501 200503 3 200505 5 200507 7 200509 9 200511 200601 200603 3 200605 5 200607 7 200609 9 200611 200701 200703 3 200705 5 200707 7 200709 9 200711 200801 200803 3 200805 5 200807 7 200809 9 200811 Leadtimes Cost Improvements 2003-2008 Total Improvements SC-Program 2003-2008 60000 50000 48.568 40000 TS EURO O 30000 28.768 20000 18.526 12.943 10000 4.616 848 0 1 2 3 4 5 6 Years Wettbewerbsdifferenzierung über SCM 2009/06/17 Seite 33
  35. 35. Supply Chain Management Awards Mondi s Mondi’s remarkable value creation On October 28th, 2008 Mondi Uncoated Fine Paper was awarded in London with the esteemed European Supply Chain Excellence Award, Award which is organised by Supply Chain Standard in partnership with PRTM Management Consultants, for the best end-to-end Supply Chain industrial sector solution. In September 2008 Mondi had also been distinguished with the Supply Chain Management Award for the best value chain 2008 from PRTM in cooperation with LOGISTIK HEUTE and the Supply Management Institute ( g (SMI) of the European Business School in ) p Wiesbaden. Wettbewerbsdifferenzierung über SCM 2009/06/17 Seite 34
  36. 36. The best Supply Chain companies aregetting better… better Lead of Best in Class Companies Best-in-Class over Average Performing Companies 35 30+ 30 25+ 25+ 25 20+ 20 Performance Advantage for 15 Each Area (%) E hA 10 5 0 Supply Chain Inventory Fulfillment Fill Rates Cost* Levels Cycle TimeSource: PRTM/AMR Supply Chain Reference* Based on the difference in supply chain cost as a % of revenue … while the rest are falling farther behind.
  37. 37. Agenda Mondi Uncoated Fine Paper – Supply Network 2003 Supply Chain Analyse – Vision & Program Key Initiatives implemented Business Case – Service Improvements Discussion Wettbewerbsdifferenzierung über SCM 2009/06/17 Seite 36
  38. 38. Discussion Competitive differentiation through... Supply Chain Management Wettbewerbsdifferenzierung über SCM 2009/06/17 Seite 37
  39. 39. Our Website: Wettbewerbsdifferenzierung über SCM 2009/06/17 Seite 38
  40. 40. FORWARD - LOOKING STATEMENTSIt should be noted that certain statements herein which are not historical facts, including, without limitation those regarding expectations of market growth and developments;expectations of growth and profitability; and statements preceded by “believes”, “expects”, “anticipates”, “foresees”, “may” or similar expressions, are forward-looking statements.Since these statements are based on current knowledge plans estimates and projections they involve risks and uncertainties which may cause actual results to materially differ from knowledge, plans, projections,those expressed in such forward-looking statements. Various factors could cause actual future results, performance or events to differ materially from those described in thesestatements. Such factors include in particular but without any limitation: (1) operating factors such as continued success of manufacturing activities and the achievement of efficienciestherein, continued success of product development plans and targets, changes in the degree of protection created by Group’s patents and other intellectual property rights, theavailability of capital on acceptable terms; (2) industry conditions, such as strength of product demand, intensity of competition, prevailing and future global market prices for theGroup’s products and raw materials and the pricing pressures thereto, financial condition of the customers, suppliers and the competitors of the Group, potential introduction ofcompeting products and technologies by competitors; and (3) general economic conditions, such as rates of economic growth in the Group’s principal geographical markets orfluctuations of exchange rates and interest rates rates.Mondi does nota) assume any warranty or liability as to accuracy or completeness of the information provided hereinb) undertake to review or confirm analysts’ expectations or estimates or to update any forward-looking statements to reflect events that occur or circumstances that arise after the dateof making any forward-looking statements. Wettbewerbsdifferenzierung über SCM 2009/06/17 Seite 39