The document discusses developing an integrated chemical supply chain. It recommends segmenting the supply chain based on customer needs to improve profitability. It also recommends configuring an agile supply chain organization model with end-to-end planning capability and competence to respond quickly to customers. Automating decision making across the supply chain with intelligence can help manage new complexity at scale and speed. Developing an integrated approach in a phased manner with training and simulation ensures the capability is developed within each region or business unit.

1. Frank Jenner, EY Global Chemical Industry Leader
Scott Chen, Integrated Digital Planning Lead, EY
Supply Chain & Operations, Greater China
Paradigm shift in supply chain
management towards differentiation
and segmentation based on multiple
operating models

2. EY is a global digital supply chain leader in China with extensive capabilities
Source: ALM Intelligence 2019
Provided SC&O advisory services to
3,000+
clients in the last 5 years
>Worked with
more than half
of the Fortune 50
and Fortune 100
Global presence of
3,600+
SC&O people across
Americas, Asia-Pacific,
EMEIA and Japan
We have 150+supply
chain & operations professionals
across Greater China
Leading supply chain & operations
consulting team in Greater China
1
#
Leader in IDC MarketScape of Worldwide Business
Consulting Services Vendor 2019
Leader in ALM Vanguard of Logistics Consulting
Providers 2018
Leader in ALM Vanguard of Production Operations
Consulting Providers 2018
Leader in ALM Vanguard on Supply Chain Planning 2019
World’s Best Outsourcing Advisor 2017 by IAOP
ALM Vanguard of supply chain planning consulting providers
A.T.Kearney
Capgemini
Oliver Wyman
Argon
Oliver Wight
Accenture
EFESO
PA Consulting
Roland Berger
Chainalytics
Barkawi
Alix Partners
Hitachi Consulting
Bearing Point
IBM
Camelot Management Consultants
Crimson & Co
McKinsey & Company
Boston Consulting Group
Bain &
Company KPMG PwC
Deloitte
EY
DepthofconsultingcapabilitiesLowHigh Breadth of consulting capabilitiesLow High
Leaders
Challengers
Contenders
Page 2

3. Geography shifts from West to East both in capacity and chemical sales
11% 9%
4% 8%
27% 22%
1% 2%
10%
36%
21%
11%
26%
12%
1,186 (2000) 2,276 (2017)
North America
Europe
China
India
Rest of Asia
Middle East
Rest of the World
Source: The Evolving Chemicals Economy, UN Press, 2019, EY analysis. Source: The Evolving Chemicals Economy, p.28, UN Press, 2019; EY analysis.
Global chemical industry capacity growth
(million tonnes), 2000-2017
Global chemical sales (excluding pharmaceuticals)
are projected to grow from US$3.82 trillion in 2018
to US$7.27 trillion by 2030. Asia is expected to
account for almost 70% of sales by then.
37.3%
20.1%
15.6%
14.9%
4.4%
3.1%
3.2% 1.4%
49.9%
14.7%
10.7%
13.8%
3.2%
4.0%
2.7% 1.0%
China
Rest of Asia
EU
North America
Japan
Latin America
Rest of Europe
Rest of the World
US$7.27
trillion by 2030
$3.82
trillion in 2018
Page 3

4. The chemical supply chain journey from feedstock to end products
Naptha and natural gas
(ethane, propane)
Bio-based
Organic
Organic/
petrochemicals
Aromatics
Organic/
petrochemicals
Olefins Plastic resins and
synthetic rubber: PS,
PP, PVC, PE
Organic/
oleochemicals
Fatty acids, alcohols,
methyl ester
Inorganic Inorganic
Minerals
Brine and rock salt
Air
Sulphur Sulphur derivatives
Chlorine
Caustic soda
Titanium oxides
Select products
Oils
Pigments and dyes
Key end markets
Agriculture
Automotive
Construction
Consumer products
Electronics
Manufacturing
Packaging
Pulp and paper
Pharmaceutical
Textile and apparel
Water treatment
Surfactants:
ethoxylates
Starches and glues
Activated charcoal
Industrial gases
Explosives
Paints, coating and
surface treatments
Fine chemicals
Advanced polymer,
adhesives and sealants
Personal care
preparations
Other additives
R&D and engineering in technology process Formulation Branding
Feedstock Basic chemicals Commodity chemicals Specialty chemicals
Intermediate
chemicals
Page 4

5. Notes: 1. Syngenta was acquired by ChemChina in 2017. Source: various company websites; annual reports if listed company for FY2018; EY analysis 2019. Not exhaustive
Feedstock Basic chemicals Commodity chemicals End MarketsSpecialty chemicalsIntermediate chemicals
The chemical industry landscape, 1990 and today
Page 5
SinoChem
Shell
ICI
BASF
Dow
1990s
High level of
vertical integration
across the value
chain Bayer
Hoechst
AkzoNobel
LyondellBasell
Covestro
Wanhua
Clariant
Bayer
Today
More complex
landscape,
emergence of
more focused, as
well as diversified,
solution-based
players
Shell
SinoChem
Dow
ChemChina/Syngenta1
Sinopec
PetroChina
SABIC
BASF
Celanese
Givaudan
Huntsman
LANXESS
Corteva

6. Clear focus drives value creation: focus on commodities generates higher
margin, solution providers rewarded by greater multiplies
12
28
18
16
26
10
14
34
20
22
24
30
32
36
38
Rongsheng Petrochemical
EV/EBITDA
EBITDA
margin (%)
Enterprise value vs. profitability of major chemical companies
Commodity players area
Solution ProvidersIndustrial Gases
Commodity Chemicals
Diversified Chemicals
Specialty Chemicals1. High valuation driven by one-off shareholder equity effects and EBITDA adjustment in 2018. Source: Capital IQ; EY-Parthenon analysis.
Note: EBITDA (earnings before interest, taxes, depreciation, amortization value) for FY 2018, EV=Market Capitalization by 31 Dec 2018.
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 39 40
4
Christian Hansen
SABIC
Air Liquide
Air Products
Shin-Etsu
Wanhua
Petronas
Novozymes
FMC
CF
Sasol
W. R. Grace
Nutrien
Celanese
Eastman
Covestro
Dow
DSM
Solvay
Lyondell-
BasellAsahi Kasei
Evonik
BASF
LG
Toray
Mitsubishi
Chemical
Formosa
Chemicals
Yara
Hengli
RPM
PPG
Nan Ya
Ecolab
Symrise
IFF
Umicore SA
Nippont Paint
Sherwin-
Williams
Sika PT Chandra Petrochemical
Givaudan
Formosa
Plastics
AkzoNobel1
Linde
Ems
Solution providers area
Asian
Paints
Pidilitei Industries
PetroChina
SinoPec
Not exhaustive
Page 6
Specialty and integrated players area

7. Different key success factors for commodity players, specialty and solution
providers
1
EBITDA
margin
Key success factors in chemicals
EV/EBITDA
Rigorous
efficiency focus
drives success
in commodity
business
Cost Capital
Service KSF commodity players
• Focus on assets, costs and utilization
• Increase customer service levels with fewer standardized offerings to meet
customer needs
• Dominator culture, functional excellence
Cost Capital
Service KSF specialty and solution providers
• Differentiation of products and services, customer specific solutions priced
for value, lower asset intensity, greater ability to deal with complexity
• Establish cross-functional teams to serve clients to balance business
complexity and standardization of products and services
Understanding of customers’ business enables better service and
transformation of specialties into solutions providers yielding higher
multiples
Cost Capital
Service
Page 7

8. Leading specialty and integrated players transform their supply chain to meet
customer demands with end-to-end planning capability
Drive customer distinction with supply chain
segmentation to improve profitability by responding
to unique customer needs in each segment
Configure an agile and responsive future supply
chain organization/model to uplift competence and
efficiency with integrated business planning & what-
if simulation capability
Automate and add intelligence in the decision
making process across the end-to-end supply chain
in order to manage the new complexity at speed and
scale
Page 8
Digital
twin
Deliver Make
Design
Marketing
Service
Deploy
Buy
Sell

9. Robust supply chain management leads to increased revenues, asset
productivity reducing supply chain and working capital costs
Supply chain levers
• Supply chain segmentation to improve service levels to meet unique
customer needs
• End-to-end planning capability to allocate supply constrained
products with what-if simulation capability for internal and external
customers
• Standardized S&OP/IBP process for faster decision making
• Reduction in lost sales and rush orders
• Collaborative and optimized new production
• Accurate forecasting & planning due to segmentation
• Increased inventory management skills due to real-time visibility
• Standardized S&OP/IBP process for faster decision making
• Standardized S&OP/IBP process for fast decision making
• Alignment of planning and manufacturing
• Process standardization with regional centralization & consolidation
• Competency center drives continuous improvement
• Lower rush shipments
• Transportation consolidation with re-negotiated rates
• Warehouse consolidation with smart tank/terminal management
Business impact
Improved service levels
Increased revenues
Inventory reduction
OEE improvement
Effective supply chain planning
Greater efficiency across logistics
and transportation
Improved warehousing
Revenues
Supply chain costs
Asset productivity
Net working capital
Notes:
IBP = Integrated Business Planning I S&OP = Sales & Operation Planning I OEE = Overall Equipment Effectiveness
Page 9

10. Drive customer distinction with supply chain segmentation
to understand real customer needs
Customers may have different requirements by product; with deep dives on real customer needs, set up different KPIs
for different customer segments
Direct
Distributor
Inventory
Production
Inventory
Drop-ship
Product enters inventory and customer
has some storage space
JIT – product is feedstock, customer has
no storage space
Product enters inventory, distributor has
large storage space
JIT – product is feedstock, customer has
some storage space
Product enters inventory and customer
has some storage space
Operational situation
Production
Inventory
Sales
channel
Real case study
Sample distribution
of delivery dates
Page 10
-3 -2 -1 0 1 2 3
Delivery day
-3 -2 -1 0 1 2 3
Delivery day
-3 -2 -1 0 1 2 3
Delivery day
-3 -2 -1 0 1 2 3
Delivery day
-3 -2 -1 0 1 2 3
Delivery day

11. Configure supply chain segmentation to distinguish strategy
to increase profitability with lower supply chain costs
Supply chain segmentation framework Supply chain segmentation definition
Customer required lead time
CustomerrequiredOTIF
70%100%
0 100
80%90%
30 50
1 3
4
2
5
Real case study
Guaranteed stock. Critical products need to be
available and delivered immediately.
1
Fast moving. Standard products with short lead times.
Predictable sales volumes and stock levels.
2
Expedited. Configurable products for customers with
specified delivery timeframes.
3
Baseline. Configurable products for customers who
accept a longer lead time.
4
Projects. Projects that require delivery of multiple
configurable products in large quantities.
5
Page 11

12. Configure an agile and responsive future supply chain organization/
model to uplift competence and efficiency
Demand planning Materials planning Supply planning
Logistics planning (inc.
control tower)
Sync
center of
excellence
Analytics and data
Global S&OP and global
process ownership
Regional S&OP and
RCCP
FG inventory policy
and management
Replenishment
model management
Best practice build and
implementation
Policy definition and
ownership
Logistics strategy
Network design and
optimization
Transportation
planning
KPI definition, monitoring
and reporting
Master data
management
End markets (Commercial) Factories Global shared service center
3PL optimization
and contracting
Backhauling / spot
market tendering
Customs
management
Inventory SS and CS
parameter setting
Long term materials
planning
Production schedule
execution
Continuous
improvement
Promotion event
management
Market S&OP
Factory footprint
Specification
management
RM inventory policy
and management
End-to-end synchronization
Analytics support
Global/Regional
Local/Region Global
Best practice systems
and tools
Plant and line
scheduling
Net requirement
Management and
call off
Statistical
forecasting
Demand sensing
Demand planning
oversight and
collaboration
Promotional
planning event
management
Master data
management
Demand planning
Regional DCs
Warehouse
execution
Transport execution
Market cluster Market cluster
FG inventory
management
(for end market)
Real case study
• Mobilize with centralization and standardization – Focus on people and transform around customer
• Improve through automation, digitalization and optimization – Drive ecosystem platform with technology enablers
• Transform to a globally end-to-end vision state – Integrate seamlessly in technology, process, data and organization
Page 12

13. Automate and add intelligence in decision making process across the
end-to-end supply chain
Benefits of
AI and automation
More efficient,
volume and value-
oriented planning
processes across the
supply chain to drive
reactivity and focus
on value-add
Planning
flow
Segmentation Demand planning Supply planning
Production
planning
Materials
resource planning
• Conduct
segmentation
• Identify machine
planning candidates
• Conduct forecasting
segmentation
• Determine optimal
forecast model and
parameters
• Update demand
forecasts for
Commercial input
• Update master data
planning parameters
• Review and update
master data (lead
times, safety stock
levels, MOQ, EOQ
etc.)
• Manage routine
planning exceptions
• Run Supply Plan
creating versions for
service, inventory,
utilisation
• Manage plan
exceptions
• Create alerts for
remaining exceptions
• Review and update
master data (lead
times, safety stock
levels, MOQ, EOQ etc)
• Review supplier
availability and refine
production plans for
realistic availability
EY’scognitive
automation
Harnessing robotic process automation (RPA) or AI and
machine learning to digitize the process
Applications of RPA and AI technologies in typical planning processes
AI or machine learningRPA
Page 13

14. AI-based planning drives smart automation and optimization across the entire
value chain
Feedstock
suppliers
Aggregated
planning
Pipeline
monitor
Campaign
planning
Production
planning
Commodity
chemicals player
Transportation
planning
EHS2
monitoring Smart replenishment
& allocation
Warehouse/
terminal/tank
Real-time
tracking
Differentiated
solution offering
Pick & Pack
optimization
Specialty
chemicals player
Real-time
tracking
Truckload
optimization
Warehouse/
terminal/tank
Intelligent
scheduling
Smart
ATP
End-use
industry
Transportation
planning Demand
sensing & shaping
Promotion
planning
Distributors
Dynamic
pricing
End
customers
Personalized
couponing
Customer
behavior
analytics
Cloud-based
ecosystem
Real time
visibility
DG1
monitoring
Notes:
1. DG: Dangerous goods
2. EHS: Environment, Health and Safety Last-mile
Delivery
Last-mile
Delivery
Page 14

15. Develop a project plan with transition phases by investing in training
and simulation to ensure integrated capability within region/BU
• Data modeling & statistical model parameter
tuning
• Disaggregation logic development
• Machine learning applied in demand sensing or
shaping
• Outlier correct algorithm development
• Value-add analysis for statistical model
• Statistical model simulation for other segmens
• Promotion analysis
• Continus improvement on forecast accuracy
• Outlier correction
• Sales history cleansing
• Sales history analysis with XYZ-ABC
• Statistical model selection for high runner
• Customer segments with demand analysis
• Provide input for customer segmentation
Level 3
Level 2
Level 1
Optimization
analysis
Fundamental analysis
Advanced
analysis
Key Activities in Demand Planning
High
Low
Phase I Phase II Phase III
Globaldemand
analyticsCoE
Globaldemand
analyticsCoE
Regional/BU
demandexpert
Globaldemand
analyticsCoE
Regional/BU
demandexpert
Demand planning and analytics can be grouped into key activities in different phases to achieve a seamless transition
Real case study
Page 15

16. Develop an integrated chemical supply chain with the
right approach and mindset
Drive customer distinction with supply chain segmentation to
improve profitability by responding fast to unique customer
needs in each segment1
Configure an agile and responsive future supply chain
organization/model to uplift competence and efficiency with
integrated business planning and what-if simulation capability2
Automate and add intelligence in decision making process
across the end-to-end supply chain in order to manage the new
complexity at speed and scale3
Page 16

17. Key contacts
Visit ey.com/chemicals and ey.com/china to learn how EY is helping chemical companies to transform.
Scott Chen
Mobile: +86 156 1890 9217 Email: scott.c.chen@cn.ey.com
Mobile: +49 172 9450920 Email: frank.jenner@de.ey.com
Frank Jenner
Managing Partner, Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft
EY Global Chemical Industry Leader
Director, Ernst & Young (China) Advisory Limited
Integrated Digital Planning Lead, EY Supply Chain & Operations
Page 17

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