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Supply Chain Modeling

More than a Sophisticated Toy?


Dr. Georg Mogk
LogiChem 2010
22nd April 2010, Düsseldorf
Contents

 Bayer Technology Services


 Project Example Network optimization – handling
conflicting supply chain targets
 Future Challenges – SCM challenges of modular chemical
production
 Conclusion

Mogk
2010-04-22 • Page 2
Bayer Technology Services – a Bayer Group Company

Holding Company

Group Management Board


Corporate Center
Bayer AG

Business Areas Service Areas

Bayer Bayer Bayer Bayer Business


HealthCare CropScience MaterialScience Services

Bayer Technology
Services

Currenta

Mogk
2010-04-22 • Page 3
Bayer Technology Services provides services along the
entire process and plant lifecycle

Initiate, implement and support technological innovations over the long


term. From product and process development through the planning and
construction of plants to the automation and optimization of processes.

Develop Design and


Products and Manage
Processes Investments

Services Optimize
throughout the Facilities and
Plant Life Cycle Products

Mogk
2010-04-22 • Page 4
Bayer Technology Services is a global company

Headquarters Berlin
Bergkamen
Regional Office Europe Dormagen
Benelux Leverkusen/Germany Elberfeld
Antwerp/Belgium 1,300 employees (*) Leverkusen
Regional Office Regional Office
70 Uerdingen
North America Wendelsheim Asia
Baytown, TX/USA Shanghai/PR China
230 employees(*) 610 employees(*)

Office worldwide(*) 375 EUR mill.


RegionalTurnover
Switzerland
Employees worldwide(**) 2,600
Witterswil (*)2009 (**)Dec 31, 2009
10 employees(*)
Client industries
Regional Office
Russia • Health Care
opens 2010 • Crop Science Regional Office
• Material Science/Polymers India
Regional Office •Regional Office
Chemicals Mumbai/India
Latin America Middle East 10 employees(*)
Mexico City Dubai/UAE
360 employees(*) 5 employees(*)
Regional Office
Singapore
Regional Office opens March 1st, 2010
Brazil Offers
Offers services
services on
on
opens 2010 external
external market
market Headquarters
Mogk
2010-04-22 • Page 5 (*)
31-Dec-09 Regional Offices
Network Optimization Projects Executed by BTS

2008
Specialty
2006
2007 Chemicals
Polymers
Basic
Chemicals
2005
Chemicals

2009
Food
2007
Industry
Japan
Chemicals

2008
China
Pharma
2007-2008
Polymers

Mogk
2010-04-22 • Page 6
There are different motivations for a network
optimization project …

Global strategic network optimization


• global sourcing optimization
• long-term market penetration strategies
• rough modeling of global material flows
• high level of demand aggregation

Regional 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 local
production sites
• Optimal use of local
logistics equipment and
productions capacity
• Use of simulation
techniques
Mogk
2010-04-22 • Page 7
Different tasks require different approaches

Divide and conquer Global strategic network optimization


No supply Chain Model • global sourcing optimization
can solve all optimization • long-term market penetration strategies
tasks in detail. • rough modeling of global material flows
• high level of demand aggregation

Regional 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 local
production sites
• Optimal use of local
logistics equipment and
productions capacity
• Use of simulation
techniques
Mogk
2010-04-22 • Page 8
Project Example 1 - For delivery of South Asia market
the global network have to be considered.
The cost-optimal solution contains some
Cost unexpected
Optimal Solutionresults.

Project targets
 Identification of optimal sources to deliver
polymer customers in South Asia.
The cost-optimal solution
(4 production sites available)
is suboptimal in respecting
It is cheaper to source Chinese
greenhouse gas emissions
 Save logistics costs.
customers from Thailand than
and robustness of the
from sourced
India is mainly Shanghaifrom
(Chinese
outside
Source of  Considering
Asia. supply chain.
Tax policy) of greenhouse gas
Material emissions caused by logistics.
Shanghai
Europe
Thailand
NAFTA

Mogk
2010-04-22 • Page 9
Supply Chain Models help to handle conflicting targets

Complex network of production sites may take other parameters on


greater importance: e.g. taxation aspect for deliveries to and from Asia

Relative logistics costs Controversial Objectives

103.5 % Minimum cost considering duty an


taxes
102.5 %
Minimum CO2-emissions by local
101.5 % sourcing
(30% CO2-reduction,increase of 3.5%
Supply Chain Costs)
100.5 %

Compromise:
99.5 % 20% CO2-emission reduction, 0.5%
7,500 8,500 9,500 10,500 11,500 cost increase as effective solution

CO2 emission (t)

Sensitivity analysis helps to reach cost-effectively additional supply chain


objectives like reduction of CO2-emissons.

Mogk
2010-04-22 • Page 10
Project Example 2 - Network optimization in Japan
Handling of different supply chain targets
Project targets Before Optimization:
 Reduction of Logistics Cost All Potential Warehouses

 Improvement of service time to


customers
 Reduction of greenhouse emissions
caused by logistics
 Optimize number and location of the
Warehouses
 Optimization of transport mode
Five New WHs: Yellow Triangle: Potential Warehouses
One Additional WH: Red Triangle: Existing Warehouses
Scenario 2
Scenario 1
Estimated Av. Distance to
Logistics Customer
Costs [Km]
AS-IS: Optimal
use of existing 100,0% 444
WH
One Additional
443
WH 100,2%

Five new WHs 444


88,7%

Mogk
2010-04-22 • Page 11
Network optimization project save money and improve
the 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.
Mogk
2010-04-22 • Page 12
Future Challenges in Supply Chain management:
Modular Chemical Production
 Small, flexible and modular
production units enable the chemical
industry to setup new supply chain
concepts for customer focused and
close to the market production.
 Benefits of modular production:
 Numbering up instead of scaling up:
Fast adaptation on marked
developments (geographical and
time)
 Flexible Production of small batch
sizes (customer specific products)
 Mobile, distributed production near
customers and near row material
sources is flexible and saves money

The ability of dynamic network


adjustments is one of the key factors of a
successful modular production concept.
Mogk
2010-04-22 • Page 13
Modular chemical production leading to a continuous
network optimization

What is the right design of the


Site Logistics logistics processes on site?

Where are the How does an


ideal locations optimized supply
Modular chain for mobile
in a Production
distributed production units
production look like?
network for
Supply Chain Mobile
the modular
Network Production
production
Design
units?
Mogk
2010-04-22 • Page 14
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 Network

Mogk
2010-04-22 • Page 15
The biggest optimization potential can be achieved by
efficient communication.
Thank you for your Attention!

Mogk
2010-04-22 • Page 16
info@bayertechnology.com
www.bayertechnology.com