bill stankiewicz scope 2010 supply chains for the 21st century

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Scope Conference Presentation

April 2010

Market Centric Industrial Supply

Chains for the 21st Century

Scott Mason

Exec. Vice President – Global Supply Chain; Stepan Co.

Sr. Vice President- Global Supply Chain and SHE; Nalco Co.

President – Institutional Division ; Nalco Co.

Exec. VP & President ; Graftech International Ltd.

Vice President Global Supply Chain; Union Carbide Corp.

29 years leading industrial businesses and

supply chains

1

e-mail : [email protected]

Presentation Topics

1. GENERAL INTRODUCTION

2. MARKET CENTRIC SUPPLY CHAINS

3. INTIMACY

4. OPERATIONAL EXCELLENCE

5. INNOVATION

6. CLOSING

7. Q&A

2

Market Centric Industrial Supply Chains for the 21st

Century

The development of internally supplied and externally

sourced solutions to manage industrial supply chains

accelerated in the last decade. This presentation will

focus on the use of these advancements and the

interconnectivity of strategy, systemic analysis, lean,

external service company capabilities, and IT

technology in solving several real-world industrial supply

chain challenges. We will look at the critical factors

that led to the selection and implementation of these

solutions.

3

Business

Strategy

WHAT DOES IT MEAN TO BE MARKET CENTRIC ? 4

Business

Policy’s

Supply Chain

Design

CostC

om

ple

xity

Customer Intimacy

Low cost

producer

Innovation

Starts with Understanding the

Business Strategy

Market

Needs

Supply Chain Challenges for the

Coming Decade

5

Globalization Growth

Changing

Regulations

Logistics

Disruptions

Pressures to

Reduce costs

Volatility in

key inputs

Product

quality

Collaboration

with External

Partners

Environmental

sustainability

Personnel

Skills and

Turnover

Companies are

searching for a

coherent strategy to

integrate the critical

elements

Supply Chain Strategy and Function Excellence

have become Synonymous

All Plants U.S. Canada

Sample 927 787 140

Continuous Improvement Program 73.0% 72.9% 73.6%

Quality Certifications 52.5% 50.6% 63.6%

Customer Satisfaction Surveys 45.3% 45.9% 42.1%

Benchmarking 34.8% 35.2% 32.9%

Environmental Management 31.8% 32.4% 28.6%

Total Productive Maintenance 24.8% 24.5% 26.4%

Energy Management 23.2% 23.2% 22.1%

None of These 10.0% 10.3% 9.3%

Industry Week/MPI 2007 Census of Manufactures

Industry Response on Strategic Focus of Industrial Supply Chains

Supply Chain Executives Reflect a Strong Internal Focus Yet

Business Leaders See Growth and Customer Interaction as the

Key Demands for the New Decade

Why Incorporate a Market Centric Approach in

Your Supply Chain Strategy?

OUTSIDE-IN VIEWINSIDE-OUT VIEW

What are our deficiencies?

What are the priorities?

What are the resource constraints?

What should our goals be?

What are our customers/market needs?

What value impact do they have?

What solutions are possible?

What should our goals be?

Resets priorities around the customer

Opens new needs and novel ways to create value

Do you know what demands your system

must serve ?

Understanding the requirements of the system is a

necessary first step to aligning the system to meet the

business needs

Common Challenge: Cultural Change to

External Centricity

9

Experienced Planned Predictive Managed

Graphite Electrodes

Water Treatment & Oil Field

React to

Incoming

Orders

Material

Resource

Planning

System

Dynamic

Patterns

From First

Principals

Creating

Demand

Patterns

Desired

Petrochemicals

Reaction to

PlanningReceiving Orders

To Taking Orders

External focus

on demand

determinants

Presentation Topics



3. CUSTOMER INTIMACY


5. INNOVATION

6. CLOSING

7. Q&A

10

Customer Intimacy11

• Discreet demand

• High demand

volatility (+300)%

• Typically VMI

• Wide variety of

consumption rates

• High relative cost

to ship

• Numerous line

items in an order

Business Strategy Business Requirements

Back Ground

Market Needs

• Unique solutions for

each customer

• High component of

service in offering incl.

VMI & CPU

• Limited

standardization either

by product or market

segment

• Have customer “out

source” this need to

supplier

• Strong sustainability

elements, i.e. recyclable

containers, etc.

• Service levels > 97%

and for many

customers 99%

• Numerous container

types to serve many

demand levels and

unique customer needs

• Ability to “rush”

delivery in under 3

days

• Large multi-sized

returnable container

fleet management

• Many unique delivery

requirements

Step 1- Implement Demand Sensing12

Acquire and

aggregate Point

of Use (POU)

demand

information for

integration

throughout the

supply chain

Critical Factors Selected Solutions

Demand volatility and complexity is increasing. By becoming

closely linked to our customers supply needs and rate of change,

we can ensure a response capability to support the business

strategy and satisfy customers needs.

Concept

• Capable of acquiring

10’s of thousands of

data points

• Multiple materials and

container types

• Intelligent system to

analyze & predict

demand patterns

• Connect into order

entry & production

management systems

• Internally developed sonic

level sensors integrated

with existing field process

controllers

• Industry available

equipment for

telecommunications

• Web-based data hub

• World Telemetry

monitoring intelligence

software

• Integrate with 6.0 SAP

ERP backbone

Step 1- Implement Demand Sensing13

Acquire and

aggregate Point

of Use (POU)

demand

information for

integration

throughout the

supply chain


Demand volatility and complexity is increasing, by becoming

closely linked to our customers supply needs and rate of change

we can ensure a response capability to support the business

strategy and satisfy customers needs.

Concept



data points

• Multiple materials and

container types


analyze & predict

demand patterns

• Connect into order

entry & production

management systems

• Internally developed sonic

level sensors integrated

with existing field process

controllers

• Industry available

equipment for

telecommunications

• Web based data hub

• World Telemetry

monitoring intelligence

software

• Integrated with 6.0 SAP

ERP backbone

Use Information and Speed

To Combat Complexity

Demand Sensing 14

Technology has reached the point of cost-

effective solutions for point of use “demand “

sensing in Industrial Supply Chains

Tracking, predicting,

and alarming smart systems Liquid level

and solid Wt.

Sensors

Insitu cell

transmitters

Cheap data

bandwidth

Production

Planning

Order Management

SAP - ERP

Step 2 - Integrate Material Management Process to

Achieve Real Time Connectivity

15

Recognition that

numerous supply

chains existed

Manual hand-offs

were slowing the

flow of critical

information

through the

different supply

chain elements


Coupling real time demand data with predictive capability and

communicating this information automatically through the entire

supply chain enabled a cost-effective, time-effective response

Concept



data points

• Demand analysis to

establish MTO products

vs. MTS products


analyze changing

demand patterns

• Connect into

production and logistics

systems and partners

• Intense multi-year focus on

automation

• Integrated order entry with

SAP ERP

• Detailed analysis of demand

patterns for supply strategy –

hybrid MRP & production

planning

• Upgraded internal warehouse

system

• Integrated supplier order

exchange – Ariba

• Integrated logistics carrier

management - Odyssey

Step 2 – Extended Connectivity16

Extending the Technology Solutions across virtually all

supply chain interfaces

Tracking, predicting,

and alarming smart

systemsLiquid level

and solid Wt.

Sensors

Insitu cell

transmitters

Cheap data

bandwidth

Logistics Optimization

Software

Transportation

Consolidation

Production

Planning &

Warehouse mgt.

e-Procurement

Private Fleet Mgt

Export Order Mgt

Odyssey Overview and Capability

Transport Supply Chain Business Process Services

Large Transport Network

•$42 Billion cargo value moving

•Greater than 1000 transport providers

•Over $1 Billion in transportation spend

Single Point of Contact

• All Modes of Transportation – Marine (Parcel, Container, Barge), Rail (Tank, Box, Intermodal) and Truck (Pack, Bulk, Hopper)

• Warehouse & Terminal Management

• All Logistics Services

Technology

•Automate “low cost” decisions

•Execution, monitoring performance

•Data driving continuous improvement

•Lower costs & enhanced capability

Benefits Achieved

High service levels achieved with very high response to short

lead time orders

Better manufacturing capacity utilization

Reduced company finished goods inventory

Largely eliminated sales time in on site inventory management

Improved route optimization and delivery load maximization

Eliminated “tank too full” returns – Reduced transportation

costs and restocking work

Eliminated “tank run dry” events – Additional Sales

18

Presentation Topics





5. INNOVATION

6. CLOSING

7. Q&A

19

Operational Excellence20

• Customers have

global networks

• Consolidation in

supplier base has

created stronger

competitors

• Business bid in

period increments

• Required product

interchangeability

from all suppliers


Back Ground

Market Needs

• Global one stop supplier

• High quality, standardized

& consistent product

supplied to all locations

• Low cost producer

strategy

• Global supply

capability with

flexibility to react to

currency fluctuations

• Raw material supply

critical in maintaining

consistency &

competitiveness

• High structural

overhead leads to high

facility utilization

necessary for cost

dilution

Maximizing Asset Utilization 21

Extending the supply

chain through the

sales and marketing

processes.

Establishing policies

and decisions to

support combined

outcomes.


Customer needs and high asset utilization are often not aligned. By

focusing on supply chain reliability and managing demand through

customer-centric policies, significant opportunity exists to maximize

profits.

• Decision Tool: Multi-node

integrated supply chain

optimization model

• Commercial and supply

chain goals aligned - Free

Cash Flow

• Play Book: S&OP

interactive process

designed to drive demand

management decisions

• Redesigned assets to

single constraint system

Concept

• Long manufacturing

cycles +45 days

• Requires highly

predictable supply system

• Operational scale and

turn-down limitations

• Global commercial

market

• System to balance

multiple segment demand

vs supply capability

• Annual commercial

bidding process

Maximizing Asset utilization 22

Extending the supply

chain through the

sales and marketing

processes.

Establishing policy’s

and decisions to

support combined

outcomes.


Customer needs and high asset utilization are often not aligned. By

focusing on supply chain reliability and managing demand through

customer centric policy’s, significant opportunity exits to maximize

profits.

• Decision Tool: Multi-node

integrated supply chain

optimization model

• Commercial and supply

chain goals aligned - Free

Cash Flow

• Play Book: S&OP

interactive process

designed to drive demand

management decisions

• Redesigned assets to

single constraint system

Concept

• Long manufacturing

cycles +45 days

• Requires highly

predictable supply system

• Operational scale and

turn down limitations

• Global commercial

market

• System to balance

multiple segment demand

vs supply capability

• Annual commercial

bidding process

Using Optimization technology

coupled with Lean process

designs and sales strategies

to achieve enhanced

system efficiencies

Optimization Model

The process of constructing an optimization model

forces a full and frank assessment of the systems real

capabilities and economic trade-offs

Plant

Plant

PlantPlant

PlantPlant

Plant WH

WH

WH

WH

Improvement Methods and Best Practices

Industry Week/MPI 2007 Census of Manufactures

Demand Management Integrated System 25

Sales Logistics

Machining

Production

A single constraint or bottle neck

• Spot sales to

transactional

customer or

market segment

• Commercial contracts with specific times

• 100% contracts

• Segment pricing strategies tied to throughput

Traditional Planning Scope

Demand Management Planning Scope

Customer

GraphBakeFormingRM Output

Benefits

High Asset Utilization & Operating rates + 95%

End-to-End Cycle Times Reduced >20% with

Corresponding Capacity Increase

Reduced Inventory Required for Demand Levels

– finished product inventory virtually eliminated

Total Free Cash Flow $ Maximized

26

Presentation Topics





5. INNOVATION

6. CLOSING

7. Q&A

27

Innovation - Delivery28

Customers

constantly look for

additional value

from suppliers


Back Ground

Market Needs

• Deep understanding

of customer issues

and changing needs

• Flexibility and

adaptability to allow

for unique solutions

for each customer

• Leverage the

elements of

technology & service

in offering

• Compete on value

creation beyond

targeted offering

scope

• Delivery system

performance that meets

Department of Home Land

Security requirements

• Delivery system that

manages low customer

impact in complex multi-

stop deliveries

• Ability to “rush” or

respond with product

delivery on short notice

• Many unique delivery

requirements

Delivery “Not an exciting area, Think again !”29

A delivery program which

reduced error rate of all

aspects in complicated

deliveries

Goal: “100/100” standard

or a Zero Defect Delivery


Federal mandated DHS rules changed the standards for entering many

industrial sites. Customers struggled with these changes while at the same

time delivery driver quality dramatic changed with new regulations on

driving hours and increasing transport demand.

Concept

• Business strategy

supported customer

segment

• Meet DHS requirements

• Meet individual site

requirements

• Reproducible in multiple

sites and industry settings

• Limited increase in total

cost

• Site audit and

compliance team to

establish delivery

requirements

• New delivery process

aligned with carrier

partner

• Redundant

verification pre-delivery

• Dedicated carrier

driver for last mile

Delivery “Not an exciting area, Think again !”30

A delivery program which

reduced error rate of all

aspects in complicated

deliveries

Goal: “100/100” standard

or a Zero Defect Delivery


Federal mandated DHS rules changed the standards for entering many

industrial sites. Customers struggled with these changes while at the same

time delivery driver quality dramatic changed with new regulations on

driving hours and increasing transport demand.

Concept

• Business strategy

supported customer

segment

• Meet DHS requirements

• Meet individual site

requirements

• Re-producible in multiple

sites and industry settings

• Limited increase in total

cost

• Site audit and

compliance team to

establish each delivery

requirements

• New delivery process

aligned with carrier

partner

• Redundant

verification pre-delivery

• Dedicated carrier

driver for last mile

Using external changes

or changing customer needs

as opportunities for innovation

31

Zero Defect Delivery Process Flow

Customer

Service

Bulk

Planning

2.Advise availability

1. Create delivery

3.Create shipment & release for dispatch4. Plant schedules w/

carrier 3 days prior to p/u

Logistics

Coordinator

• Proactive call to carrier

to confirm requirements

• Proactive call to field

sales if delivery is

delayed

Logistics

Coordinator

• Review all

open orders

Dedicated

Driver

Carrier

Operations

• Dispatch dedicated

driver program

• 100% check call

Logistics Field

Auditor

Surveys, Audits

& Training

Reduced delivery events to nearly zero. Capability integrated

into offering with significant market share improvements

Benefits

Eliminated carrier failed deliveries

Eliminated delivery complaints

Created new “premium” service offering;

logistics leaders became part of selling

team

Open new access point to customer

through logistics audits

Significantly increased market share in

high security end market segments

Significantly increased service image

32

Customer risk,

time and resources

Innovation - Supplier Collaboration33

• Customers have

global networks

• Consolidation in

supplier base has

created stronger

competitors

• Business bid in

period increments

• Required product

interchangeability

from all suppliers


Background

Market Needs

• Global one stop supplier

• High quality, standardized

& consistent product

supplied to all locations

• Low cost producer

strategy

• Global supply

capability with

flexibility to react to

currency fluctuations

• Raw material supply

critical in maintaining

consistency &

competitiveness

• High structural

overhead leads to high

facility utilization

necessary for cost

dilution

Supplier Collaboration34


Raw material attributes directly impact the cost,

performance, and effectiveness of the end product.

Concept

• Selecting a supplier

and designing the

relationship to align for

cost and value sharing

through combined

optimization

• Elements of the supply

chain where throughput

or cost impact of current

standards is high, i.e.

“specifications”

• Exclusive technology

sharing arrangement

• Margin sharing

agreement with coke

supplier based on end

product selling price

• Combining supply

chain productivity

programs to select

high return

opportunities

• Utilization of material

science impact on end

product with process

technology to optimize

combined supply chain

Customers

constantly look for

additional value

from suppliers

Looking across

longer elements of

the supply chain

provides additional

optimization

opportunities

Significant Capacity Increase Achieved by

Changing Processing Conditions In Multiple Steps

of the Combined Process

35

MachiningGraphBake ImpregnationFormingSolid Coke Electrodes

Petroleum

Heavy Feed

Lights

Liquids

Solid Coke

Processing Time

Qu

ali

ty

BeforeAfter

Raw Material Processing Time

was Driven by Market

Specification on Impurities

Bake.

Modified Impregnation and Baking Step

Benefits

Productivity reduced total cost by >12%

Additional capacity increased

throughput of assets at time when

demand peaked

Combined processing knowledge

opened path to new cost effective

material technology for high

performance products that reduced

customer consumption rates by 15%

Unique supplier relationship expanded

into other value creating opportunities

36

Supply reliability

and reduced cost

at peak customer

operating periods

Presentation Topics





5. INNOVATION

6. CLOSING

7. Q&A

37

SummaryBusinesses need more than functional excellence from supply

chains in the next decade; they need a market-centric approach to

support their growth objectives and to ensure the finite resources

available are employed to create maximum value.

SummaryBusinesses need more then functional excellence from supply

chains in the next decade; they need a market centric approach to



A market-centric supply chain’s priorities will be defined by the

business strategy and will focus externally to ensure business

alignment and to identify partners and solutions to meet the

business requirements.

SummaryBusinesses need more then functional excellence from supply

chains in the next decade; they need a market centric approach to



A market centric supply chain priorities will be defined by the

business strategy and will focus externally to ensure business

alignment and to identify partners and solutions to meet the

business requirements.

Supply Chain leaders that:

- understand and engage in development of the Business

Strategy

- communicate the choices that align the supply chain with the

strategy and market needs

- deliver the necessary capability

- and look for unique ways to meet customer needs

Will find success no matter what industry !

bill stankiewicz scope 2010 supply chains for the 21st century

Documents

supply chain strategy

market centric supply

market centric approach

market ability

customer intimacy4

business needs

customer interaction

interconnectivity of