Chemical Supply Chain

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Supply Chain ModelingMore than a Sophisticated Toy?By Dr. Georg MogkLogiChem 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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<ul><li> 1. Supply Chain ModelingMore than a Sophisticated Toy?Dr. Georg MogkLogiChem 201022nd April 2010, Dsseldorf</li></ul> <p> 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. Bayer Technology Services a Bayer Group CompanyHolding CompanyGroup Management Board Corporate Center Bayer AGBusiness Areas Service Areas Bayer BayerBayer Bayer Business HealthCareCropScienceMaterialScience ServicesBayer TechnologyServicesCurrenta Mogk 2010-04-22 Page 3 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 andProducts andManageProcesses Investments Services Optimize throughout the Facilities andPlant Life CycleProductsMogk2010-04-22 Page 4 5. Bayer Technology Services is a global companyHeadquarters Berlin BergkamenRegional Office Europe DormagenBenelux Leverkusen/Germany ElberfeldAntwerp/Belgium 1,300 employees (*)Leverkusen Regional Office Regional Office70 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 industriesRegional OfficeRussia Health Careopens 2010 Crop Science Regional Office Material Science/PolymersIndiaRegional OfficeRegional Office ChemicalsMumbai/IndiaLatin America Middle East 10 employees(*)Mexico City Dubai/UAE360 employees(*)5 employees(*) Regional Office SingaporeRegional Officeopens March 1st, 2010BrazilOffers services onOffers services onopens 2010 external market Headquarters external marketMogk2010-04-22 Page 5(*) 31-Dec-09 Regional Offices 6. Network Optimization Projects Executed by BTS 2008 Specialty20062007 ChemicalsPolymersBasicChemicals 2005 Chemicals 2009 Food 2007 IndustryJapan Chemicals 2008 ChinaPharma2007-2008 PolymersMogk2010-04-22 Page 6 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 aggregationRegional 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 localproduction sites Optimal use of locallogistics equipment andproductions capacity Use of simulationtechniquesMogk2010-04-22 Page 7 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 aggregationRegional 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 localproduction sites Optimal use of locallogistics equipment andproductions capacity Use of simulationtechniques Mogk 2010-04-22 Page 8 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 SolutionProject targetsIdentification of optimal sources to deliverpolymer 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. 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 AsiaRelative logistics costsControversial Objectives103.5 %Minimum cost considering duty an taxes102.5 % Minimum CO2-emissions by local101.5 %sourcing (30% CO2-reduction,increase of 3.5% Supply Chain Costs)100.5 % Compromise: 99.5 %20% CO2-emission reduction, 0.5% 7,500 8,5009,500 10,500 11,500cost increase as effective solution CO2 emission (t)Sensitivity analysis helps to reach cost-effectively additional supply chainobjectives like reduction of CO2-emissons.Mogk2010-04-22 Page 10 11. Project Example 2 - Network optimization in JapanHandling of different supply chain targetsProject targets Before Optimization:Reduction of Logistics Cost All Potential WarehousesImprovement of service time tocustomersReduction of greenhouse emissionscaused by logisticsOptimize number and location of theWarehousesOptimization of transport mode Five New WHs:Yellow Triangle: Potential Warehouses One Additional WH: Red Triangle:Existing WarehousesScenario 2Scenario 1 Estimated Av. Distance to Logistics Customer Costs[Km]AS-IS: Optimaluse of existing 100,0%444WHOne Additional443WH100,2%Five new WHs44488,7%Mogk2010-04-22 Page 11 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. 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 markeddevelopments (geographical andtime)Flexible Production of small batchsizes (customer specific products)Mobile, distributed production nearcustomers and near row materialsources is flexible and saves money The ability of dynamic networkadjustments is one of the key factors of a successful modular production concept.Mogk2010-04-22 Page 13 14. Modular chemical production leading to a continuousnetwork optimizationWhat is the right design of the Site Logistics logistics processes on site?Where are theHow does anideal locationsoptimized supply Modular chain for mobilein aProductiondistributedproduction unitsproduction look like?network forSupply ChainMobilethe modularNetwork Productionproduction Designunits?Mogk2010-04-22 Page 14 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. The biggest optimization potential can be achieved byefficient communication. Thank you for your Attention!Mogk2010-04-22 Page 16 17. info@bayertechnology.comwww.bayertechnology.com </p>

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