chemical supply chain
DESCRIPTION
Working closely with your logistics providers to ensure the provision of optimum capacity ( in the short, medium and long term)By Roger MooreLogiChem 2011 will be the event's tenth anniversary and an opportunity for the most senior chemical supply chain & global logistics directors from the European chemicals community to come together once again share experiences, make new contacts and benchmark the latest chemical supply chain initiatives. Not only will LogiChem 2011 be a chance for the chemical industry to reminisce about the last ten years but an opportunity to shape the next decade. To celebrate a decade of LogiChem, there will be an exciting three day programme filled with networking opportunities in our new location, Antwerp.TRANSCRIPT
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Working closely with your logistics providers to ensure the provision of optimum capacity
( in the short, medium and long term)
Logichem 2010
Dusseldorf
Roger Moore
Supply Chain & Customer Services Manager
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Leading questions
� Who is Ineos Nova ?
� Am I clear about my service and capacity requirements ?
� Sourcing strategy –what are my options to secure capacity?
� Do I have the right portfolio of LSPs ?
� What is the right type of relationship for me?
� What might we expect ? – the Ineos Nova experience
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INEOS NOVA
� Business:
� Global manufacturer of styrene and styrenic polymers
� History:
� Formed in October 2005 through merger of BP and Nova European styrenic polymer businesses,
� Expanded in October 2007 to include North American assets – 50/50 JV between Nova (IPIC) and Ineos
� Headquarters: Joliet, Illinois; Fribourg, Switzerland for Europe
Shared service centre in Breda NL
� Revenue:
� Approximately €2.7 billion ($3.8 billion )
� Employees: Approximately 1150
� Sites: 11 manufacturing plants in 6 countries
� Volume:
� Styrene monomer– 1,675 KT
� Polystyrene – 1262 KT
� Expandable Polystyrene – 410 KT (all in Europe)
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Working Together
What do service partners say about our industry?
� Heavily regulated by external / internal controls
� ADR / IMO etc SQAS / CDI / EN norms/ site rules
� Inflexible in general : slow to change and risk averse
� Low levels of outsourcing / lack of trust
� Relatively low levels of vendor loyalty
� Tendering processes
� Cost driven despite insistence on quality / safety standards
� Unwilling to support (re) investment in new equipment
� Use volume as a lever to reduce costs
Horizontal collaboration not widely adopted
� Operational constraints limit asset utilization
� Plant loading hours
� Customer unloading windows
How do we become the customer of
choice?
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Some impacts of recession-What we see in the market
� Service providers downsized / restructured
� Once gone drivers are lost to the industry
� Aggressive and non sustainable pricing policies
� Significant imbalance and changes in traffic flows
� Marginal intermodal services withdrawn ( rail & ferry)
� Significant unavoidable cost increases not fully recovered
•Maut increases
•Fuel price volatility
Net result
- capacity ero
sion !
..and n
ow we are
moving to
a selle
rs mark
et!
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How do we secure capacity for the future
in a sellers market ?
� More carriers / fewer carriers: portfolio management
� Cross regional vs local / niche players
� Time and mileage agreements / dedicated fleet
� Look for productivity / efficiency gains: maximize utilization
� Maximise inter-modal volumes = increase driver output
� Stand by commercial agreements - esp. payment terms
� Look for more flexibility on transit times / delivery dates
� Manage the order profile – demand smoothing
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Developing a logistic sourcing strategy –
3 step approach to securing capacity
Understand own capabilities / attributes
Own marketing / selling strategies
Organizational capabilities / resources
Distribution cost or supply chain management ?
Achieve internal / external alignment…..
Critical performance criteria – what do we need from our carriers
‘Rules of engagement’ – customers and LSPs
Establish clear SLA terms and conditions
Measure performance
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Logistics Landscape-important in defining requirement
� A mature commodity business - mainly repeat FTL business
� Simple mode / product mix
� Dry Bulk / 1000kg IBC (octabins) / 25 kg bags
� ADR adds complexity
� Compact logistical footprint
� Europe wide markets
� Av. Delivery -1000km
� Small / medium size buyer
� 800kt / € 32m spend
� Small central procurement and planning team
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Business characteristics- what is the service need ?
Niche purchases
one-off discrete items high cost / low support
Commodity Purchase
high volume / repetitive transactions
Leveraged volume
Combining service needs
Speciality servicesSector/product/customer
needsCritical service element
Co
st / s
erv
ice le
vel
Service level / SRM support
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Service providers……choose your partner with care !
‘I want to speak with the man who pays the driver’ = asset owning
Sub contracting is OK …. to a certain level
Chemicals require a particular mind – set
Customer segmentation is a fact of life
Is my service provider a true partner ?
Does the LSP REALLY understand my business ?
How much can I afford to invest in this relationship ?
Look for ‘best fit’ synergies
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Commercial relationships – what are the options?
Long term partnershipsLower cost of maintenance
Low risk / high quality
Often based on ‘ cultural alignment’
Value proposition is acknowledged
Flexible to respond to market changes
Periodic tenderingTypical procurement strategy
Relatively high implementation effort
Start up risk – change management
Used when capacity exceeds demand
May not be sustainable
Value added logisticsHigh level of integration between parties
Sustainable relationship
Investments / binding contracts
Win – Win
Performance incentives /benefit sharing
Open book / cost plus structure
Spot purchaseHigher risk of failure
Sub-contracted?
Lack of customer loyalty
High cost of ownership for shipperMargins
Business continuitylimited extended
high
low
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The Ineos Nova experience
Time spent in strategy definition is time saved in execution !
(but we still made mistakes )
Be prepared to make changes – ethically.
Mix of pan European – regional – local carriers
Bulk and packaged goods freight markets very different - demand different approaches
Added value is for all – if it isn’t it isn’t added value
Put energy into strengthening relationships……….not building new ones