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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 :
�
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.
�
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
�
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.
�
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
�
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.
�
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.
1�
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.
1�
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.
1�
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
www.epca.beEPCA - a.i.s.b.l. The European Petrochemical Association i.v.z.w.
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