Thesis Cranfield University

MSc in Logistics and Supply Chain Management 2006

by Gordon MacGregorTutor : Prof. John TowrissAugust 2006

Shell Chemicals Europeand Bertschi AG

a Case Study on Vertical Collaboration

an initiative by

The European Petrochemical Association

Breakthrough in Chemical Supply Chain Management

• Thelargestchemicalblockintheworld

• Generatesrevenuesof600billion€-28%ofworldtotal

• Employs3millionhighlyproductivepeople-9%oftotalemployed

inEUmanufacturing

• ServeseverysegmentoftheEUcross-sectormanufacturingand

ofdirectcustomerproducts

• Accountsfor45%ofEU’stotalmanufacturingtradesurplus

• Standsfor25%oftotalEUexport

• Hasconstantlyreduceditsrealpricessince1996

NothingishowevergrantedandtheEuropeanUnionasmajor

chemicalproductionregionmaybeatriskinthelongerterm.

TheEuropeanChemicalIndustryCouncil(Cefic)recordedin2004

thefollowingoutlookfortheEuropeanPetrochemicalIndustry:

“To secure the industry’s long-term competitiveness, decisive action by

both industry and authorities is required to steer the critical drivers

determining the future of the industry in the right direction of the next

ten years.”3

Key Points on the Chemical Industry in the European Union / 25 member states1, 2 :

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Introduction

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EPCA (the European Petrochemical

Association)andCefic(theEuropean

Chemical Industry Council) organi-

zedaseriesofthinktanksessions

in 2003, 2004 and 2005 focusing

onsupplychainimprovementchal-

lenges in the chemical industry.

The results were presented in two

reports: “Supply Chain Excellence

intheEuropeanChemicalIndustry”

(EPCA/Cefic – October 2004)1 and

“MaximisingPerformance:thePower

of Supply Chain Collaboration”

(EPCA/Cefic–October2005)2.

Commenting the 2004 think tank

report on supply chain excellence

within the chemical industry, Prof.

AlanMcKinnonandAlanBraithwaite

concludedinApril2005that‘many

of the improvement measures

identified by the think tank group

are mutually reinforcing. If imple-

mented as part of a well-conceived

package of supply chain improve-

ments, their combined effect will be

greater than the sum of their indivi-

dual impacts. The greatest efficiency

gains will accrue from changes to

the industry-wide supply network,

requiring horizontal collaboration

between major producers in the

sector. These changes will reduce

the overall transport intensity of

European chemical industry, yielding

major economic and environmental

benefits.’4

Thereareexamplesofcollaboration

inthechemicalindustry.Horizontal

collaborationbetweenproducersand

betweenLogisticsServiceProviders

(LSPs) exist, but very few is pu-

blishedonthesubject.Itishowever

recognized that innovative LSPs

mayactaskeydriversinthisfield.

Byprovidingadded-value services,

whichgofarbeyondpuretransport,

they initiate vertical collaboration

asaprecursortogreaterhorizontal

collaboration5,6. The advantages

provided by vertical integration

are illustrated in the present case

study on the collaborative venture

between Shell Chemicals and

Bertschi AG, a Swiss LSP, based in

Dürrenäsch7. It clearly shows that

verticalcollaborationbuiltupontop-

management commitment, trust,

transparency,opencommunication,

pooling of logistics expertise and

supportedbyintegratedITsystems

introducesaprocessofoperational

innovationsonall levelsofpartici-

patingcompanies.

Shell Chemicals Europe

and Bertschi AG, a Swiss

Intermodal Transport

company based in

Dürrenäsch, successfully

redesigned the supply

network of Shell’s

petrochemical plant in

Wilton/UK. The present

case study illustrates the

strong innovative impact

and benefits of integrated

vertical collaboration

based upon mutual trust

and exchange of

knowledge.

Vertical collaboration introduces a process

of operational innovations on all levels of

participating companies.

Fig.1:ShellOperationsatWiltonsitepriortoBertschiAGCollaborativeventure

Shell Chemicals at Wilton, near

Middlesbrough in North East

England, produce ethoxylates, pri-

marilyfordetergentmanufacturers.

TheplantwasoriginallyanICIsite

and is now run by Uniqema with

several major petrochemical com-

paniesproducingvariousproducts,

atthesamesite.TheShelloperation

endeavours tokeepproductionup

and running 24hours/7days, with

limitedon-sitestoragecapacity.

Products therefore have to be

removed from the site as quickly

as possible. Before starting the

vertical co-operation with Bertschi

AG, unpredictable order patterns

madeitnecessaryforShelltohold

abufferstockinstoragefacilitieson

medium/long-termcontractsatfixed

costs around the Middlesbrough/

Teessidearea.Thesestoragefacili-

tieswouldbe toppedup,butwith

about a dozen different types of

chemicals, each had to be stored

separately. These products are

ordered for delivery Europe-wide,

withcollectionssetupforworldwide

customers. Each batch had to be

certified as to its composition, to

enablethefinalcustomertoutilise

thechemicalscorrectly.Eachtimea

newbatchwasaddedtothestorage

tanks,anewcertificateofanalysis

(CofA)hadtobedeliveredforeach

individual departing load, as one

batch would not necessarily be

exactlythesameasthenext.CofA’s

had to be duplicated, each time a

new batch arrived. Some times,

thesamevehiclecollectedloadsto

bedeliveredintothestoragefacility,

at a later stage, thus doubling

handlingtheload.

Introducing

the Players

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Deliveries ex Shell Chemical Europe, Wilton site

BeforeBertschiAGCollaborativeVenture.

WiltonStorage

Off-siteStorage

75%Collections

Deliveries

DirectDeliveriestocustomer-25%

Source:ShellChemicalEuropeBV

Bertschi AG is a Swiss based

LSP mainly serving the chemical

industry. The family owned com-

panyoperates some10.000 trans-

portunitsandemploys1.600staff

membersacross35operatingunits

in 20 European countries. Bertschi

AGistheEuropeanmarketleaderin

intermodal transport of chemicals

byrail7.

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Originally,thetwocompaniescame

into contact through a director’s

meeting at a symposium. Bertschi

AGfeltthattheycouldofferaservice

toShellona totallydifferentbasis

to the current operational set-up.

Shell asked Bertschi AG to submit

aformalproposaltobeconsidered

by both companies’ management

teamsinlightofcurrentoperations.

This was the first step of sharing

A Meeting

of Minds

information to set in motion a

collaborativeeffort.

The term ‘collaboration’ needs to

be fully understood. In academic

literature, Coyle et al8 propose a

scaleofcollaborationthatstartswith

a purely transactional relationship,

i.e. arm’s length. This moves

throughthefullgambitofpartner-

ships,untilarelationalorstrategic

allianceisformed:

Fig.2:RelationshipPerspectives8

Before starting the vertical co-operation with Bertschi AG, unpredictable order patterns

made it necessary for Shell to hold a buffer stock in storage facilities on medium/long-term

contracts at fixed costs.

Christopher (2005)9 develops this

concept to set up ‘synchronous

supply networks’ and advocates

the use of new business models

toenhancethecollaborativeeffort.

Finally, Gattorna (2006)10 talks

about ‘dynamic alignment’, taking

Relationship Perspectives

Vendor

Source:Coyle,J.,Bardi,E.,Langley,C.J.Jnr.(2003)TheManagementofBusinessLogistics(7thed.)p419

Partner StrategicAlliance

TRANSACTIONAL

RELATIONAL

ArmsLength Collaborative Strategic

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all of the above elements, but

firmly imprinting thehumaneffect

ofacollaborativeeffortwithinand

acrosscompanyboundaries.

Whilst the academic definition of

collaboration is well understood,

corporate goals of each company

may detract from the overall aim

of collaboration, i.e. to share the

benefits fromaventure, according

totheamountofrisk/effortthathas

beeninput.

Inthepresentcase,theinformation

exchange and the utilisation of

focussed skill sets within each

company enabled the deal to be

proposed within a short time and

BertschiAGsucceededtoconvince

Shell that the proposal was both

workableandfinanciallyattractive.

The proposal was straightforward

and involved a commitment and

risk taking from both companies.

Shell’s risk consisted in changing

LSPand inshifting itsmentality in

supply chain management. Shell

allowed Bertschi AG to penetrate

deeperintoShell’ssupplychainand

to take over some operations that

Shell considered as critical. They

consist of loading and inventory

management operations handled

by Bertschi AG for Shell, with the

purposeofoptimising thedelivery

servicerenderedtothecustomers.

This transferofoperations implies

a risk of market reliability and

presence for the shipper. It consti-

tutes a shift from stock to flow

management in bulk chemicals as

promoted by the study performed

Shell’s risk consisted in changing LSP

and in shifting its mentality in supply chain management.

For Bertschi the risk was mainly the significant multi-client

terminal investment in Wilton and the resulting need to enlarge

the local customer-base in order to offer competitive

variable unit costs.

in 2002 with EPCA support by

the universities of Eindhoven and

Stanford5.ForBertschitheriskwas

mainly the significant multi-client

terminal investment in Wilton and

the resulting need to enlarge the

local customer-base in order to

offercompetitivevariableunitcosts

toShell.

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Implementation

Bertschi’s idea was simple. They

would acquire a site close to the

ShellplantatWilton.Thesitewould

needtoconformtoalltherelevant

healthandsafetystandards,besides

other legislative conditions. This

representedamajor investmentof

several millions of Euros and was

onlypossible inconsiderationofa

long-term contract between Shell

andBertschiAG.BertschiAGwould

load all products directly from the

production tanks into tank contai-

nersandoperatetheloading24/7,

taking the surplus into the new

BertschiAGsite–effectivelymobile

storage. Ordered product would

bedelivereddirectlytocustomers,

thus keeping the storage on the

BertschiAGsite toaminimum,re-

ducing the storage overhead and

consolidating the off-site storage,

whichwouldceasetobeused,once

it had been emptied of existing

product.Sinceeachloadwastaken

in isolation and held as one tank,

theCofA issuedat timeof loading

wouldbevalidforthetotaljourney,

throughtofinalcustomerdelivery.

Thereforetheproductanditsquali-

ty are traceable along the whole

supplychain.Inadditiontothefact

thattheproducthasbeenstoredin

atransportunitreadytobeshipped

allows to efficiently handle short

notice orders. The reduction in

product loss due to unnecessary

transhipment, in double handling

andinadministrativeoverheadwas

immense and made errors in the

finaldeliverypapershighlyunlikely.

Production Storage Loading Transport Unloading Storage Consumption

Production Loading/Storage

Transport Storage/Unloading

Consumption

Source:BertschiAG–Changeinsupplychainprocessbycuttingoutunnecessarysteps

Fig.3:ShellOperationsatWiltonsiteaftertheBertschiAGCollaborativeventure.

Deliveries ex Shell Chemical Europe, Wilton siteAfterimplementationoftheBertschiAGCollaborativeVenture.

Source:ShellChemicalEuropeBV

WiltonStorageMobileTankStorage

25%Collections

Deliveries

DirectDeliveriestocustomer

Collections75%

WhiletheBertschiAGsiteatTeesside

wasunderconstruction,amember

oftheBertschiAGstaffwas‘embed-

ded’ within the Shell operation at

Wilton.Theemployeegainedinsight

intotheoperationrunbyShelland

got familiar with their customer

base and specific delivery require-

ments.Thishastobeconsideredas

averyimportantstepincreatinga

collaborativerelationshipbasedon

mutual understanding, as Bertschi

AGstaffmembersbecame“partof”

theShellteam.Thisjointintegrated

HR approach allowedboth compa-

niestocomeupwithsupplychain

solutionsbasedonindividualcom-

panyknowledge, rather than stan-

dardpractice.

Bertschi AG was able to tailor

certain aspects of their operation

specifically toward Shell - even if

Bertschi AG eventually planned on

serving other clients through

the same site. Both parties had to

worktogethertoimplementanew

process.

Ontheonehand,Shellcouldimpro-

vetheefficiencyof thereactors to

produce 50+-ton batches rather

than the traditional 45-46-ton bat-

ches that were previously split in

23-ton loads. On the other hand

Shell had to standardize the order

weight for their customers. This

enlargedsizeofbatchwouldallow

Bertschi AG to improve transport

efficiency by loading two 25-ton

tanksuptotheirfullcapacity,rather

thanshippingsmallerbatches.

BertschiAG,inturn,triedtoimpro-

ve back loads within their tanker

fleet,collectingrawmaterialsfrom

Shell’splantinStanlow,Cheshirein

Communicating

Operational Knowledge

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theNorthWestofEngland.Whene-

ver possible, these loads would

be compatible with the outgoing

finishedgoods,toavoidemptylegs

as well as expensive and time

consumingcleaningofthetanks.

The change in the operational

statisticsbetweentheoriginalope-

rationandthenewoperationshows

ashiftfromstoredproducttodirect

deliveries from 25% to 75%, as

showninthefollowingdiagram:

This joint integrated HR approach allowed both

companies to come up with supply chain solutions based on individual company knowledge,

rather than standard practice.

This diagram substantiates that a

paradigm shift from stock to flow

effectively took place through

the vertical co-operation between

BertschiAGandShell5.

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A paradigm shift from stock to flow effectively took place.

Stepsofimplementationwereasfollows:

Q41999 Ideasexchangedatajointmeeting

April2000 Firstpresentationtobusinessmanagement

June2000 Projectagreementsigned:set-upofajoint

project team with defined optimisation

objectivesandtimelines

Q12001 Pilot project with one product grade: all

definedobjectivesmetorexceeded

Q3/42001 Limited roll-out of the pilot project, infra-

structureplanning

March2002 Long term logistics contracts signed,

constructionofstorageterminal

Q12003 Logistics outsourcing concept fully imple-

mented

The match appears to work well for the companies and perfectly

illustrates the concept of a ‘supply network’ rather

than a ‘supply chain’.

The increasedpercentageofdirect

delivery reduces tank storage and

transport costswhilst at the same

timeallowingabetterutilisationof

theBertschiAGfleet.Thisbenefits

both parties: Shell improves the

plantefficiencyandremovesunne-

cessary storage.Thefixed storage

costsarereplacedbyvariablecosts

matching daily business needs.

BertschiAGgainsbetterutilisation

of its capital equipment. Operatio-

nally, the match appears to work

wellforthecompaniesandperfect-

ly illustratestheconceptofa ‘sup-

ply network’ rather than a ‘supply

chain’,evenwithinsimpledelivery

strategies.

Baseduponasimpleletterofintent,

theprojectstartedbeforethecom-

paniessignedaformalcontract.

The case shows that Shell Chemi-

cals and Bertschi AG adopted a

highly collaborative and trustful

attitude from in the beginning,

whichisasimportanttothesuccess

oftheventureasthecapitalequip-

ment.

The following network diagram

illustrates the lack of boundaries,

both within their own organiza-

tions, as well as across company

structures:

10

The Human

Network

Fig.4:TheCollaborativeStaffNetwork

Theabilitytocommunicatenotonly

across company boundaries, but

also across traditional hierarchical

levels of management enables the

operations tobeagileand respon-

siveintheirendeavourtoofferthe

bestservicetothefinalcustomer.

In academic literature, Stank et al

(2001)11 noted that ‘internal colla-

boration significantly influences

logistical service performance’ and

that ‘collaboration with external

supply chain entities influences

increased internal collaboration,

which in turn improves logistical

service. Therefore, best practice

firms focus on both.’

They underlined that ‘managers

who adopt a collaborative perspec-

tive work to build an esprit de corps

across departments or organiza-

tions in order to unite efforts and

achieve collective goals through

synergy.’

This statement is demonstrated in

theShell/BertschiAGcollaboration,

in both the internal and external

forms.The ability to communicate

across hierarchies allowed faster

problem solving. It also enhanced

that workload is shared between

theparties,ensuringthebestuseof

available resources. The ultimate

The Collaborative Staff Network

Source:Author

Director InitalMeetingsandFormulationofConcept

Management

Operations

OperationalProcesses

DaytoDayOperations

ShellChemicals Bertschi

1 1

aimofthecompaniesistoimprove

efficiency and reduce cost, but

never at the expense of customer

service.

Bertschi AG had to face an extra

challenge by integrating the new

operation within their central

order-processing department for

bulk liquids in their head office in

Switzerland. This department co-

ordinates deliveries across the

Bertschi AG network and stays in

contact with all of Bertschi AG’s

clients, allocating vehicles where

required and ensuring that their

overall network volume is accom-

modated. This adds another link

within the collaborative enterprise

and is achieved by mirroring an

operational planner between

Switzerland and the Bertschi AG

Teessidedivisionaloperation.

The interaction between staff

membersonday-to-daybasis isof

paramount importance. Bertschi

AG’s divisional operation will deal

directly with the client at a local

level,becausetheyhavebothlocal

knowledgeandexperienceandare

closetoShell’soperation.

The interface between Shell and

Bertschi AG is technology based,

but there is still regular contact

between the personnel of the two

companies on a daily basis to

confirmproposeddelivery schedu-

lesand resolve lastminute issues.

The staff is empowered to make

decisionsinordertooptimisedeli-

veries, collections and replenish-

mentsandtomeetthedesiredlevel

of customer service. The teams in

both organizations work together,

both internally and externally, and

this operational empowerment,

again, allows for swift decision-

makingand,ultimately,thebestuse

ofresources.

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Information

Technology

System infrastructure that allows

real-time exchange of information

betweenthecollaborativeenterpri-

ses is an essential component of

thecollaborativerelationship,given

the volume of information to be

shared on planning, management,

executionandperformancemeasu-

rement.12

Using electronic interfaces to ex-

change such information reduces

theneedfortimeandlabourinten-

siveexchangemethodsandallows

thepersonnel toconcentrateupon

thephysicaloperationandtocheck

information on a ‘management by

exception’ basis. Only anomalies

areinvestigated.

InthecaseoftheShell/BertschiAG

operation, Shell Chemicals has in-

vestedinafullEnterpriseResource

Planning (ERP) systemprovidedby

SAP and called GSAP. This system

enables Shell to manage orders,

production forecasts, sales fore-

castsandcustomerdata.Anorder

received by Shell is loaded onto

GSAP and the information is then

transferred to Bertschi AG, where

the in-house order processing

system, Galaxy, downloads the

information. Bertschi AG allocates

aninternalnumbertoeachorderto

allowittobetracedthroughoutthe

BertschiAGoperationandtheorder

is transmitted to the local office.

The local office may already be

awareoftheimpendingorderdueto

thefactthattheyareinpermanent

contact with their counterparts at

Shell and know about their sales

andproductionforecasts.

ItmaybeconcludedthatITsystems

are a necessary, functional part of

the network, but do not directly

enhance the relationships built up

betweenthevariousechelonsofthe

collaborativeenterprise.ITsystems

ease the communication between

companies on a transactional and

operational level and therefore

enable the staff to focus on real

issues regarding production or

delivery.

System infrastructure that allows real-time exchange

of information between the collaborative enterprises is

an essential component of the collaborative relationship.

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Company

Cultures

Greiner (1998)13 wrote about the

fivephasesoforganizationalgrowth

and looked upon collaboration as

the fifth phase, with management

being participative and having a

focusbaseduponproblemsolving

and innovation.Theorganizational

structure,heargued,wasamatrix

ofteams.

This structure is accurately reflec-

tedinthestylesandcultureofboth

Shell and Bertschi AG and allowed

themtoadoptasuccessfulcomple-

mentaryattitude.AlthoughBertschi

AG operates across the chemical

industryinEurope,theethosofthe

companydoesnotchangeforeach

client. The interaction of staff and

their relationships may be tailored

for individuals across corporate

boundaries, but each individual as

part of a company represents and

emulatesthecultureofhiscompany.

Given that the culture at Bertschi

AG is uniform for all clients, does

thissuggest that there isasimilar

culture across the clients that it

serveswithinthechemicalindustry

inEurope?Ifsuchwasthecase,one

couldsuggestthatculturalsimilari-

ties within the industry should

allow the promotion of horizontal

collaborativeventuresaswell.This

howeveristoostrongaconclusion

to draw from the study of one

particular vertical collaborative

relationship.

In order to reach its targets, hori-

zontalco-operationhastoovercome

other barriers, not the least being

theestablishmentofacollaborative

modelrespectingcompetitionrules

andbenefitingallstakeholders.

Thedecisivefactorinthisparticular

debateisthementalityshiftopera-

tedbytheshippertoallowanLSPto

take care of certain supply chain

operationsthatwereinitiallyconsi-

deredasnotavailable foroutsour-

cing.Thestaffsofbothcompanies

really co-operate in an integrated

way in order to implement that

shift. Both organizations and the

operationthattheyareundertaking

show the classic facetsof collabo-

ration - information sharing, joint

decision-making and collective

responsibilityfortheconsequences

of those decisions. Real value is

clearly added by the human

element,aspresentedbyGattorna.10

The development of the cultural

side of the relationship over time

has mirrored the development of

thecollaborationandindicatesthat

thecultureofthecompaniesinvol-

ved isas importanttothesurvival

oftherelationshipastheinfrastruc-

ture put in place. The relationship

appearstohavebeenenhanced,as

Both organizations and the operation that they are undertaking show the classic

facets of collaboration - information sharing, joint decision-making and collective responsibility for the consequences

of those decisions.

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bothpartieshavelearntmoreabout

one another and there is evidence

ofagrowingbondoftrust.

You get what you inspect – KPI’s

(Key Performance Indicators)

lead the way

Thisoperationismonitoredbythe

use of a set of metrics that have

beenagreeduponbybothparties.

The delivery metrics used are ‘on-

time, in full’ or OTIF and, in addi-

tion,thecompletenessofdocumen-

tationismonitored.Thesemeasures

ensurethatthedesiredlevelofcus-

tomer service is being delivered.

Bertschi’s performance is also

measured by monitoring tank fill

utilisation (a function of delivered

weight), back load utilisation, in-

ventorylevelsandthetimeittakes

toclearthestoragetanksatWilton.

Financial spending is monitored

against the agreed budget. This

budgetmonitoralsoneedstobere-

viewed regularly and the resulting

‘step change’ in budgetary perfor-

mance reflects the ongoing opera-

tionalimprovements.

Finally,theaccuracyoftheforecas-

tingismonitored.Thisisanimpor-

tantprecursortobudgetpredictions

as a low accuracy will introduce

uncertainty into the operation,

whichwillimpingeuponbudgets.

The vertical co-operation contract

betweenShellandBertschiAGprovi-

desfortheabovereferencedmetrics

orKPIstobereviewedonaregular

basistoensurethatthetargetsare

beingmet.TheseKPIsareassessed

onanannualbasis toensure their

continued validity. Targeting both

companies with measures, which

are reviewed on a monthly basis

againstactualresults,guidemana-

gement decisions and give indica-

tionsoflikelyareasofconcern.

WithregardtotheEuropeanpetro-

chemical industry, EPCA and Cefic

recommend intheir reportsonthe

results of the supply chain think

tanks several strategies to be

adopted.Theseincludedeveloping

strongerrelationshipswithLSPs,re-

viewing the KPIs used to measure

theLSPrelationshipandenhancing

horizontalcollaborationbypooling

logistics resources, improving the

backloadingofvehiclesandraising

the level of supply chain skills

withintheindustry.

Thepresentcasestudyrevealsthat

these recommendations are being

broughttolife.

Targeting both companies with measures, which are reviewed on a monthly basis

against actual results, guide management decisions and give indications

of likely areas of concern.

1�

Evaluation The continuous improvement process brought about

by the regular monitoring of agreed metrics is also

of interest.

The case described is one of the

most representative vertical co-

operationventuresinchemicalbulk

liquidsinEurope.Manyotherdeals

exist in the European chemical

industry, especially in polymers,

thatrespond-moreorless-tothe

criteria as described in the Shell /

BertschiAGco-operation.

Thekeyelementsthatmake

thisShell/BertschiAGverticalco-

operationasuccessarethe

following:

•Mutualtrust

• Fullbusinessmanagement

supportfromtoplevel(top

downexercise)

• LogisticsProjectexpertiseand

resourcesavailablebothatthe

producer’sandLSP’sside

• Longtermcommitment

Openbookphilosophy–sharing

ofbenefitsandrisks

The quantifiable benefits of this

collaboration are indisputable.

Quality control savings exceeded

50%. Inventory has been reduced

by 35%, administrative overhead

hasbeenreducedby50%,theven-

turehasdrivenproductioncapacity

improvementsintheplantandthis

has, inturn,allowedbetterweight

utilisation in the loads delivered.

Additional savings in supply chain

costsexceeding35%werereached

through more efficient planning,

reduced need for external bulk

storageandbetterinventorycontrol.

Removingstoragefromtheplantlo-

cation, whilst enhancing improved

service level to end-customers, is

also perceived as an important

contribution to improve the plant

productioncapacityutilisation.

Innovationisakeymethodforboth

companies and they are always

opentofreshideas.Thecontinuous

improvement process brought

aboutbytheregularmonitoringof

agreed metrics is also of interest.

The fact that Shell has outsourced

transport and storage to an LSP,

allowing them to access the Shell

systems,showsabondoftrustthat

is an essential facet of collabora-

tion.BertschiAGareexpertsintheir

field; having recognised that ano-

ther party may be able to provide

a set of skills that are not part of

thecorecompetenciesofShellisa

major step in the direction of

outsourcing.

Themajorsuccessofthisventureis

thewayinwhichthestaffsofboth

companieshaveenabled the colla-

borative venture to succeed and,

indeed,flourish.Peoplearethekey

asset and the importance of the

relationships that they develop,

internally and externally should

1�

Looking

Beyond

It is likely that the development

of personal relationships will ulti-

mately influence the direction of

corporaterelationshipsbeyondthe

initialtermofthecontractthathas

beenconcludedbetweenShelland

BertschiAG.Contractsfocusonthe

monetary investmentmadeby the

companies and they are set up to

enshrine the legal necessities and

to protect theparties involved.As

the bond of trust grows between

thecompanies,theneedforformal

contractualendorsementdecreases.

Thesignatureofaformalcontract

will again be required at renewal,

anditmaybeupdatedtoreflectthe

evolution of the relationship over

time,butthecontractitselfhaslittle

influence on the day-to-day opera-

tionsof the companies. Indeed, in

Wilton, both Shell and Bertschi AG

relyupontherelationshipsbetween

the respective companies’ staff,

their cultural similarities and, to a

lesser extent, upon transactional

communications.

The Key Performance Indicators

(KPI)andtheirregularrevisionpro-

vided for in the contract between

ShellandBertschiAGfurtherreduce

thelikelihoodthatthisventurewill

stop at the contractually provided

term.

never be underestimated. Ultima-

tely, the benefactor is the final

customer who receives product in

thewayitisrequired,atthetimeit

isrequired.

Tobebalanced, this report should

alsolookatdownsideandareasfor

improvement. This is difficult to

assess inanoperation that is self-

regulating and looks for ways of

continuous improvement.As areas

of weakness are recognised, the

venture adapts to fill these gaps.

This enables the venture to conti-

nueinavirtuouscircleofimprove-

ment, which will, notwithstanding

fundamental changes within the

industry,enablebothcompaniesto

benefitfromtheir joint innovation.

Based on the fact that people

change jobs regularly, internally

as well as externally, it is crucial

to support continuity within the

project team in order not to loose

the dynamic and the spirit that

guideavertical integrationproject

involving different parties from

severalcountries.

People are the key asset and the importance of the relationships

that they develop, internally and externally should never

be underestimated.

1�

Conclusions

Bybuildingtrustandbyestablishing

a continuous, transparent and

effectivecommunicationflowacross

companies’ boundaries, this parti-

cular case of vertical integration

perfectly illustrates that integrated

co-operationispossibleresultingin

“1+1=5”.

It surely is difficult to draw indus-

try-wideconclusionsfromalimited

study. However one can easily

recognizebestpracticeandpromote

itsadoptionacrosstheindustry.

Thefinancialbenefits,althoughnot

fullyquantified in thispaper, arise

mainly from more efficient use of

resourcesbybothcompanies.This

allows the companies to spend

more time on planning and ulti-

matelysatisfyingcustomerdemand

in a proactive, cost effective and

efficientmanner.

Horizontal recommendations seem

more difficult to implement, but

they will be greatly facilitated by

theoutsourcingofsupplynetworks

to LSPs who have the required

supplychainskills,i.e.theabilityto

makeuseofresourcesonbehalfof

several clients, pooling resources

and improving consolidation of

loads and back loads across the

industryduetoabetteroverviewof

journeys.

Thesupplychainshouldbelooked

uponnotjustasasourceofcompe-

titive advantage in the limited

contextofasinglecompany’ssup-

plychain,butasanopportunityof

utilisingsharedresourcestoaccrue

financial benefits and to achieve a

far better, “greener” and more

environment friendly optimisation

of resources in an industry that

accounts for 1.500million tonsof

movementsperyear.2Thebenefits

to the environment of improving

capacity utilisation and the good-

will generated by this will be the

greatestprize.

The supply chain should be looked upon as an opportunity

of utilising shared resources to accrue financial benefits and to achieve a far better,

“greener” and more environment friendly optimisation

of resources.

The development of personal relationships will ultimately

influence the direction of corporate relationships beyond

the initial term.

1�

1 Supply Chain Excellence in the European Chemical Industry,reportontheEPCA-CeficSupplyChainthinktanksession,2004,EPCA,Brussels

2 Maximising Performance: The Power of Supply Chain Collaboration,reportontheEPCA-CeficSupplyChainthinktanksession,2005,EPCA,Brussels

3 Chemical Industry 2015: Roads to the Future,2004,CeficReport,Brussels

4 European Chemical Supply-Chain: Threats and Opportunities,Prof.McKinnon,A.,Braithwaite,A.,2005,LogisticsandTransportFocus,CILT,UK

5 Supply Chain Logistics in the Bulk Chemical Industry,reportbyTechnischeUniversiteitEindhovenandStanfordUniversity,sponsoredandco-ordinatedbyEPCABrussels,in2002.ThisreportwasmadewiththeactiveparticipationofseveralEPCAmembercompanies,amongstothersShellandBerschiAG

6 Co-operation and collaboration between Logistic Service Providers,ReportECTAAcademyDay,30May2006

7 www.bertschi.comaccessed25April06

8 The Management of Business Logistics: A Supply Chain Perspective(7thEd.),Coyle,J.J.,Bardi,E.J.,LangleyJr,C.J.(2003)ThomsonLearning,Canada

9 Logistics and supply chain management: Creating value-adding networks(3rdEd.),Christopher,M.(2005)PearsonEducationLtd,Harlow,UK

10 Living supply chains,Gattorna,J.(2006)PearsonEducationLtd,Harlow,UK

11 Supply Chain Collaboration and Logistical Service Performance,Stank,T.P.,Keller,S.B.,Daugherty,P.J.(2001)JournalofBusinessLogistics,Vol.22,No.1.pp29-48

12 Supply chain collaboration: Success in the new internet economy. Achieving supply chain excellence through technology,Anthony,T.(2000)MontgomeryResearchInc,SanFrancisco,Ca,Vol.2,pp41-44

13 Evolution and revolution as organizations grow,Greiner,L.E.,(1998)HarvardBusinessReview,Vol.76,No.3.p66

Photosinside:©AlfredTalke,©Accenture,©AirProducts,©Brenntag,©Copesul,©DenHartoghLogistics,©EPCA,©BASF,©BertschiAG,©GeestNorthSeaLine,©Huntsman,©LKWWalter,©Sasol©ShellChemicals,©OilTanking,©Perstorp,©UnivarEuropa

References

Dr.RodAllen–ShellChemicals,Wilton

DarinBratsman–ShellChemicalsEurope,Rotterdam

NickBrown–BertschiUKLtd,Teesside

CathyDemeestere–EPCA,Brussels

JohanDevos–BertschiBelgiumN.V.,Antwerp

DanielOmlin–BertschiAG,Dürrenäsch

AndrewPearson–BertschiUKLtd,Teesside

Rose-MariePype–ECTA,Brussels

CorinneSommer–BertschiAG,Dürrenäsch

List ofinterviewees

1�

SincerethanksgotoDrHans-JörgBertschiandhisteamofBertschiAG

aswellastotheShellteamwithEricvanderWerff,formerDistribution

ManagerEurope,nowretired,andDrIrJackEggels,hissuccessor,for

havingdedicateddata,timeandeffortstohelpcompletethiscasestudy.

OurcongratulationsandgratitudegoalsotoGordonMacgregor,student

atCranfieldUniversityintheUKandtohistutorProfessorJohnTowriss.

GordondraftedthiscasestudyaspartofathesisthatEPCAsponsored

inthescopeoftheUniversityofCranfield’sprograminMScLogisticsand

SupplyChainManagement.

Thiscasestudycameintobeingthankstotheco-operationbetween

aleadinguniversity,representativesofamajorglobalpetrochemical

producerandofatrend-settingEuropeanserviceproviderundertheEPCA

umbrella.EPCAandCefichaveexploredwaystoimprovechemicalsupply

chainmanagementandpromotecollaborativemodelstoachievesupply

chainexcellenceintwothinktankreportsthattheyjointlyproduced.

TheBertschiAGandShellverticalco-operationagreementpertainingto

theWiltonplantintheUKisoneofthemanyexamplesthatsubstantiates

howthechemicalindustrywalksthetalkandimplementssuccessfully

whatitpromotes.

Weconsiderthisalivingexampleillustratingthattrust,respect,expertise,

knowledgeandexcellencearethekeydriversthatcharacterizethe

chemicalindustryandthatkeepusgoingasoneofthemostreliable,

sustainableandinnovativeindustriesintheworld.

Acknowledgements and thanks

Avenue de Tervueren 270 Tervurenlaan – B-1150 Brussels – Belgium

Tel.: +32 (0)2 741 86 60 – Fax: +32 (0)2 741 86 80

e-mail: admin@epca.be

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