Chemical Supply Chain

A competitive distribution network strategy
April 22, 2010
Dusseldorf, Germany Breaking political & operational barriers

GW ref. 9026X069/AB/it initial version 1.0

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

Supply chains costs trends & benchmark
April 22, 2010
Dusseldorf, Germany


Supply chains costs
Trends

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


Supply chains costs
Chemicals 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%


Supply chains costs
Recommended supply chains strategies

1. Consolidate in regional network structures
- Regionalization of supply chains footprint
- Declined number of storage locations

2. Control net working capital
- Active management of inventories

3. Enhance flexibility
- Reaction capability to fluctuating demand
- Replenishment on customer specific basis

4. Apply stringent risk management
- Mitigate payment & credit risks


Distribution network consolidation & regionalization
April 22, 2010
Dusseldorf, Germany


The supply chain trade-off

Flexibility Oper ational Costs

• tr anspor t
• war ehousing
Reliability • handling

Supply Chains
Responsiveness
Asset efficiency


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 transport
Total costs – inbound transport

vs. warehouses

No. of warehouses No. of warehouses No. of warehouses


The 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


The supply chain trade-off – supply chains assets (inventory)

Inventory vs. warehouses

Total costs – inventory

No. of warehouses


The 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


Distribution 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


Distribution 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
density density


Distribution strategy – viable solutions

reliable SC responsive, flexible SC
Service
Focus
market requirements

operational efficient SC asset efficient SC
focus
Price

density density


Warehouse & transport collaboration
April 22, 2010
Dusseldorf, Germany


Stages of capability

across
supply chains
Integration of business functions

within one
supply chain

between
business
functions

within
business
function

alignment optimization integration alliance networks

stages of operational capability


Stages of capability - Stage 1: functional focus

across
supply chains

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




Stages of capability - Stage 2: internal integration

across
supply chains

• 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




Stages of capability - Stage 3: external integration

across • Strategic partners
supply chains throughout the
global supply

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




Stages of capability - Stage 4: cross collaboration network

across
supply chains - CPFR • Establish a full
collaborative

- 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




Chemicals positioning

across
supply chains

within one Automotive
supply chain

High-Tech cross-network
collaboration
FMCG
between
business Chemicals external
functions
integration
internal
integration
within
business functional
focus Healthcare




Chemicals 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.)


Benefits – 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)


Benefits – 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


Benefits – example TO-BE

Manufacturer A Manufacturer B

Shared Warehouse A & B

26+ pallets 1 delivery / 4 days

Warehouse Customer C


Benefits – business examples cross chain collaboration

Northern France

The Netherlands

The Netherlands


Stakeholders

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


Summary & conclusions
April 22, 2010
Dusseldorf, Germany


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


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4800 DG Breda
The Netherlands
Tel: +31 (0)76 5330440
Fax:+31 (0)76 5310191
Visit us at www.groenewout.com

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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


Groenewout
Our 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.


Groenewout
Our 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.


Chemical Supply Chain

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