Chemical Supply Chain

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'A competitive distribution network strategy - Breaking political & operational barriers'

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. A competitive distribution network strategy April 22, 2010 Dusseldorf, Germany Breaking political & operational barriersGW ref. 9026X069/AB/it initial version 1.0
  2. 2. Agenda • Supply chains costs • General trends • Chemicals benchmarked • Recommended supply chains strategies • Consolidation of distribution structures • Logistics Collaboration • Summary & conclusions 9026X069/AB/it initial version 1.0 Page 2
  3. 3. Supply chains costs trends & benchmarkApril 22, 2010Dusseldorf, Germany 9026X069/AB/it initial version 1.0 Page 3
  4. 4. Supply chains costsTrends Logistics Costs / CoGS (% ) 14.0% 12.1% 12.0% 1.3% 10.0% 2.5% 8.6% 7.3% 8.0% 1.2% 2.4% 6.4% 6.1% 1.7% 6.0% 1.0% 0.8% 1.8% 1.0% 0.8% 4.0% 1.6% 1.4% 7.3% 5.9% 2.0% 3.9% 2.8% 3.1% 0.0% 1987 1993 1998 2003 2008 Transport Handling Inventory Administration Source: ELA 2008 9026X069/AB/it initial version 1.0 Page 4
  5. 5. Supply chains costsChemicals benchmarked Logistics costs / CoGS (% ) 2008 others 9.4% chemicals 8.5% consumer goods 7.9% automotive 5.9% retail 5.8% pharmaceuticals 3.3% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% industry avg. 7.3% 9026X069/AB/it initial version 1.0 Page 5
  6. 6. Supply chains costsRecommended supply chains strategies1. Consolidate in regional network structures - Regionalization of supply chains footprint - Declined number of storage locations2. Control net working capital - Active management of inventories3. Enhance flexibility - Reaction capability to fluctuating demand - Replenishment on customer specific basis4. Apply stringent risk management - Mitigate payment & credit risks 9026X069/AB/it initial version 1.0 Page 6
  7. 7. Distribution network consolidation & regionalizationApril 22, 2010Dusseldorf, Germany 9026X069/AB/it initial version 1.0 Page 7
  8. 8. Distribution network consolidation & regionalizationThe supply chain trade-off Flexibility Oper ational Costs • tr anspor t • war ehousing Reliability • handling Supply Chains Responsiveness Asset efficiency 9026X069/AB/it initial version 1.0 Page 8
  9. 9. Distribution network consolidation & regionalization The supply chain trade-off – transport costs Inbound vs. warehouses Line haul vs. warehouses End customer transport Total costs – customer transport Total costs – line haul transportTotal costs – inbound transport vs. warehouses No. of warehouses No. of warehouses No. of warehouses 9026X069/AB/it initial version 1.0 Page 9
  10. 10. Distribution network consolidation & regionalizationThe supply chain trade-off – warehousing & handling costs Total costs – warehouse building Building vs. warehouses Handling vs. warehouses Total costs – handling No. of warehouses No. of warehouses 9026X069/AB/it initial version 1.0 Page 10
  11. 11. Distribution network consolidation & regionalizationThe supply chain trade-off – supply chains assets (inventory) Inventory vs. warehouses Total costs – inventory No. of warehouses 9026X069/AB/it initial version 1.0 Page 11
  12. 12. Distribution network consolidation & regionalizationThe supply chain trade-off – all operational costs Total operational costs Inventory SUPPLY CHAINS TOTAL COSTS Inbound transport & Line-haul Storage & handling End customer distribution No. of stocking points supply chains optimum 9026X069/AB/it initial version 1.0 Page 12
  13. 13. Distribution network consolidation & regionalizationDistribution strategy – determining factors automotive Service Focus paper pharma spare parts apparel market requirements specialty high-tech chemicals FMCG / retail bulk chemicals consumer metals electronics Agriculture focus Price commodities Low value High value density density product characteristics 9026X069/AB/it initial version 1.0 Page 13
  14. 14. Distribution network consolidation & regionalizationDistribution strategy – market requirements & product characteristics reliable SC responsive, flexible SC Service Focus • regional warehouses in main • multiple national warehouses (or markets with operational focus air transport) set for local markets on efficiency • warehouse combined with market requirements • warehouses stock all products service organization & support short lead-times • SC costs is not a decision driver, • locations of warehouses also with low ratio of logistics in CoGs based on transport costs • focus reliability, responsiveness operational efficient SC asset efficient SC • EDC based on operational • EDC based on optimization efficiency inventory or “virtual” warehouses • lead-time is not a driver • local satellites with fast-movers • Inbound transport is an and/or local products only important factor • locations satellites based on focus Price • Outbound transport optimization customer presence through FTL’s, milk-runs Low value High value density density product characteristics 9026X069/AB/it initial version 1.0 Page 14
  15. 15. Distribution network consolidation & regionalizationDistribution strategy – viable solutions reliable SC responsive, flexible SC Service Focus market requirements operational efficient SC asset efficient SC focus Price Low value High value density density product characteristics 9026X069/AB/it initial version 1.0 Page 15
  16. 16. Warehouse & transport collaborationApril 22, 2010Dusseldorf, Germany 9026X069/AB/it initial version 1.0 Page 16
  17. 17. Warehouse & transport collaboration Stages of capability across supply chainsIntegration of business functions within one supply chain between business functions within business function alignment optimization integration alliance networks stages of operational capability 9026X069/AB/it initial version 1.0 Page 17
  18. 18. Warehouse & transport collaboration Stages of capability - Stage 1: functional focus across supply chainsIntegration of business functions within one supply chain • Discrete sc processes & between documented data business flows functions • Resources managed at department level within - APS business functional focus - work flow management alignment optimization integration alliance networks stages of operational capability 9026X069/AB/it initial version 1.0 Page 18
  19. 19. Warehouse & transport collaboration Stages of capability - Stage 2: internal integration across supply chainsIntegration of business functions • Company wide within one process & supply chain continuously measured data • Resources managed at both between functional and business cross-functional functions level internal integration - Distribution regionalization - Matrix organizations / SCO within - S&OP business functional focus - Global sourcing alignment optimization integration alliance networks stages of operational capability 9026X069/AB/it initial version 1.0 Page 19
  20. 20. Warehouse & transport collaboration Stages of capability - Stage 3: external integration across • Strategic partners supply chains throughout the global supplyIntegration of business functions chains to collaborate to: within one supply chain o Joint business objective & action plans o Enforce common process & data between sharing business external o Define, monitor functions and react to integration performance internal metrics integration within - EDI, VMI, CRP, ECR, .. business functional - Single supply chains focus alignment optimization integration alliance networks stages of operational capability 9026X069/AB/it initial version 1.0 Page 20
  21. 21. Warehouse & transport collaboration Stages of capability - Stage 4: cross collaboration network across supply chains - CPFR • Establish a full collaborativeIntegration of business functions - across multiple supply chains supply chains strategy: within one supply chain o Aligns cross-network participating companies‘ collaboration business objectives and between associated business external processes functions Results in real- integration o time planning, internal decision making and execution of integration supply chains responses to within customer business functional requirements focus alignment optimization integration alliance networks stages of operational capability 9026X069/AB/it initial version 1.0 Page 21
  22. 22. Warehouse & transport collaboration Chemicals positioning across supply chainsIntegration of business functions within one Automotive supply chain High-Tech cross-network collaboration FMCG between business Chemicals external functions integration internal integration within business functional focus Healthcare alignment optimization integration alliance networks stages of operational capability 9026X069/AB/it initial version 1.0 Page 22
  23. 23. Warehouse & transport collaborationChemicals initiatives Knowledge sharing Experience sharing • Create platforms on logistics • Select vendors based on approach (e.g. HACCP) experience in FMCG / with • Share information on food validation issues per country • If possible, purchase equipment / systems based on validated status Facility sharing Transport sharing • Share (temperature controlled) • Share (temperature controlled) storage areas transportation • Share storage facilities (also for • Combine direct distribution postponement, Value added transport etc.) 9026X069/AB/it initial version 1.0 Page 23
  24. 24. Warehouse & transport collaborationBenefits – overview Transport pooling: consists of grouping together flows (order processes, storage, handling, inbound transport, and mainly outbound deliveries) from several manufacturers who have compatible finished goods intended for the same distribution networks, with shared points of departure and receipt. Customer Service Logistics Costs Working Capital • Improving delivery • Economies-of- • Reduction of frequencies scale warehouse inventory through acceleration of • Increase reliability • Truck utilization flows throughout through risk rate improves the supply chains sharing (costs & environment) 9026X069/AB/it initial version 1.0 Page 24
  25. 25. Warehouse & transport collaborationBenefits – example AS-IS Manufacturer A Manufacturer B Warehouse A Warehouse B 30 pallets 14 pallets 1 delivery / 5 days 1 delivery / 8 days Warehouse Customer C 9026X069/AB/it initial version 1.0 Page 25
  26. 26. Warehouse & transport collaborationBenefits – example TO-BE Manufacturer A Manufacturer B Shared Warehouse A & B 26+ pallets 1 delivery / 4 days Warehouse Customer C 9026X069/AB/it initial version 1.0 Page 26
  27. 27. Warehouse & transport collaborationBenefits – business examples cross chain collaboration Northern France The Netherlands The Netherlands 9026X069/AB/it initial version 1.0 Page 27
  28. 28. Warehouse & transport collaborationStakeholders Shippers 3PLs • Operational savings • Increased assets utilization • Reduction of supply chains • Predictable efficiencies assets • Committed capacity • Risk pooling Customers Environment • Improved customer service • Reduced road congestion • Visibility in inbound • Optimization of available landplots • Reduction of the CO2 footprint 9026X069/AB/it initial version 1.0 Page 28
  29. 29. Summary & conclusionsApril 22, 2010Dusseldorf, Germany 9026X069/AB/it initial version 1.0 Page 29
  30. 30. Summary & conclusions• If chemicals wants to bring their logistics costs to reach average industry standards on the short-term it should focus on.. • .. consolidation and regionalization of warehouses • .. operate multiple, differentiated supply chains structures• Chemicals can break the mid-term barriers of stabilized logistics cost by .. • .. external collaboration by grouping transport flows (mainly outbound deliveries) • .. developing full collaborating supply chain planning strategies with supplier, competitors & clients 9026X069/AB/it initial version 1.0 Page 30
  31. 31. Nijverheidssingel 313, P.O.Box 32904800 DG BredaThe NetherlandsTel: +31 (0)76 5330440Fax:+31 (0)76 5310191Visit us at www.groenewout.com M A K I N G SU P P L Y CH A I N S YOU R COM P E T I T I V E A D V A N T A GE !
  32. 32. Profile Groenewout is an international, independent consulting company providing integrated value-added advisory and support services across all industry sectors to support our clients in achieving business process and operational improvements within supply chains and logistics. Supply chain management Assets & facilities Sourcing Customer Warehousing & Manufacturing distribution Transportation 9026X069/AB/it initial version 1.0 Page 32
  33. 33. GroenewoutOur consulting portfolio in logistics - & supply chains management Supply Chains & Logistics Consulting • Feasibility studies • Distribution • Organizational - & • Warehouse Network Studies functional design Strategical tendering for • Global sourcing • Business process building, logistics • Non Product (re-)design equipment & IT Related • Key Performance Purchasing (NPR) Indicators (KPI’s) • Warehouse (lay-out) • Transport tendering • Sales & Operations design • Service Level Planning (S&OP) Tactical • Plant (lay-out) design Agreements (SLA) • Production planning • Lean warehousing • Insourcing / out- • Collaborative Planning, • Insourcing / out- sourcing transport Forecasting & sourcing warehousing • Benchmarks Replenishment • Loss Prevention & • Location studies & • IS selection & Operational Security (LP&S) site selections implementation • Facilities electrical, (WMS/TMS/APS) HVAC & temperature • Inventory Mgt. engineering Materials Mgt. Physical Distribution Supply Chains Mgt. 9026X069/AB/it initial version 1.0 Page 33
  34. 34. GroenewoutOur methodology in logistics - & supply chains management Modeling & Simulation • Data gathering • CAST-dpm • Supply Chains • WHAT-2-STORE© Transparency • WARE-2-STORE© • Business • BUILD-2-STORE© Requirements • ABC-2-STORE© • Automod • Project mgt. • Benchmark • Tender- & contract mgt. • 2nd-opinion • Construction (site) mgt. • Audit • Process • Arbitrage improvement mgt. • Training • Transition mgt. • Change mgt. • Interim mgt. 9026X069/AB/it initial version 1.0 Page 34

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