chemical supply chain

Dr. Jörg Schmid, Christoph Lieth

Lean E2E Supply Chain PlanningMeeting the Paradigm Change in the Chemical Industry

Logichem 2010, Düsseldorf

Camelot IDPro AG 2

AGENDA

4 Your way forward

1 Camelot – Thought Leader in LEAN SCM

2 21st Century Supply Chain Planning Paradigm

3 Lean Planning & Scheduling for Chemical Champions

Camelot IDPro AG 3

Camelot IDPro – Your partner of choice

Camelot – Thought Leader in LEAN SCM

Who we areWho we are

�Management Consulting from strategies to results

�Established 1996 in Germany

and the US. Now top ranking for the following industries:

� Chemicals & Petrochemicals

� Pharmaceuticals & Healthcare

� Consumer Products

�Operating worldwide, with an

international network of more

than 320 consultants in Europe

and 1.200 consultants within the

Camelot International Group

Where we areWhere we are

�Camelot / Bristlecone(Santa Clara, USA)

�Camelot / Profit Point(Wynnewood, Philadelphia, USA)

�Camelot / enowa Services

(Exton, Philadelphia, USA)

�Camelot / Bristlecone(Santa Clara, USA)

�Camelot / Profit Point(Wynnewood, Philadelphia, USA)

�Camelot / enowa Services

(Exton, Philadelphia, USA)

Camelot Group USA

Camelot Group Europe

�Camelot / IDPro Asia(Singapore)

�Camelot / ISS Consulting(Kuala Lumpur, Malaysia

�Camelot / IDPro Asia(Singapore)

�Camelot / ISS Consulting(Kuala Lumpur, Malaysia

Camelot Group Asia

�Camelot / Spain(Barcelona)

�Camelot / Trilog(Milan)

�Camelot / Coffra

(Paris)

�Camelot / Spain(Barcelona)

�Camelot / Trilog(Milan)

�Camelot / Coffra

(Paris)

�Camelot / BPS (Helsinki)

�Camelot / BPS (Oslo)

�Camelot / BPS (Budapest)

�Camelot / BPS(Tallinn)

�Camelot / BPS (Helsinki)

�Camelot / BPS (Oslo)

�Camelot / BPS (Budapest)

�Camelot / BPS(Tallinn)

�Cologne�Mannheim (HQ)�Munich

�Zürich �Basel

�Cologne�Mannheim (HQ)�Munich

�Zürich �Basel

Camelot IDPro AG

Camelot IDPro is an international consulting organization with leading expertise in the Chemical, Pharmaceutical and Consumer Goods Industry

Camelot IDPro is an international consulting organization with leading expertise in the Chemical, Pharmaceutical and Consumer Goods Industry

Camelot IDPro AG 45/5/20104

We provide holistic consulting services along the entire Value Chain

What we offer

Operations

Managem

ent

StrategyProcess & Organization

IM / Systems

Classic strategicconsultancy

Process and IT consultancy

Subcontractor

Camelot IDProCamelot

ITLab

Camelot Core Competences

Strategy & Operations Strategy Implementation

Process & Value Chain Management

Organization & Business Transformation

A full-service consultancy – with core competences in operations strategy implementation, holistic reengineering of Value Chains, as well as organizational alignment and business transformation.

A full-service consultancy – with core competences in operations strategy implementation, holistic reengineering of Value Chains, as well as organizational alignment and business transformation.

Operations &

SCM

Sourcing &

Procurement

Logistics &

Transportation

Sales &

Customer Service


Camelot IDPro AG 5

Camelot addresses the critical value chain levers of the process industry with its key-services

Strategy to results… and …Innovation to solution! Strategy to results… and …Innovation to solution!

KPIKey

Performance

Indicators

KPIKey

Performance

Indicators

BPI

Business Unit

Performance Indicators

BPI

Business Unit

Performance Indicators

PPIProcess Performance

Indicators

PPIProcess Performance

Indicators

Vision,

Mission,CorporateStrategy

StrategicPlanning

OperationalPlanning

Strategy moni to ring

Target va lues

Strategic

action plann ing

Stra tegy upda te

Detai ledoperational plann ing

PerformanceMeasurement

Plan executionProcessoptimization

Stra tegic learning

& feedback

Define & cascade

objectives

Vision,

Mission,CorporateStrategy

StrategicPlanning

OperationalPlanning

Strategy moni to ring

Target va lues

Strategic

action plann ing

Stra tegy upda te

Detai ledoperational plann ing

PerformanceMeasurement

Plan executionProcessoptimization

Stra tegic learning

& feedback

Define & cascade

objectives

�EBIT

�ROI / ROCE

�EVA

�Sales

�CM�Costs

�COGS

�Forecast Accuracy

�Cycle times

�Activity costs

Portfolio Management�SKU Management

�SC Customer Service Configuration

�Supplier Management & Development

Network Optimization & Working Capital Mgt�Value Based Network Design

�Active Asset Management

�Advanced Inventory Management

Operational Strategy�SC Strategy Development and

Alignment�SC Model Design

Business Transformation & Organization�Organizational Alignment �Change Management

Performance Management�Business Planning

�Business Performance Management

Process Improvement�SC Planning Processes (S&OP)

�Harmonization & Consolidation

�Logistics & Transportation Mgmt.

�SC Collaboration

Segmentation & Classification�SCM Segmentation

�Process Classification

Lean Operations�Lean SCM

�Operational Excellence

Information Technology�Software Evaluation

�Blueprinting & Implementation

A B C

X

Y

Z

Data Quality�Master Data Management (Process & Organization)

�Data Quality Evaluation & Improvement

SCM APOSCM APO

APO 5.0APO 5.0 ICH ICH

R/3 4.6

Inter-company

R/3 4.6

Inter-

company

ECC 5.0

Inter -company

ECC 5.0Inter-

company

R/3 4.7Supplier/

Customer

R/3 4.7Supplier/

Customer

BW 3.5BW 3.5

XIXI

ALE

ALE

CIFCIF

Source Make De liver

Plan

Systems & Data

Systems & Data

Flow design

Flow design

Organizat ion

Organizat ion

Processes

Processes

Strategy

Strategy

x

xStrategy

Processes

Systems & Data

Flow

designOrganizat ion

x

x

x

x

x

x

Management & Business Processes & Information

WorkingCapital

Costs

Service

Value Chain

Excellence

Triangle WorkingCapital

Costs

Service

Value Chain

Excellence

Triangle

SC Compliance� Sustainability

� Risk Management

Assess Design Implement Sustain

WorkingCapital

Costs

Service

Value Chain

Excellence

Triangle

SC Performance Assessment� Benchmarking

� Opportunity

Identification


Camelot IDPro AG 6

We have a profound industry expertise with strong focus on the process industry

Camelot IDPro AG - a fully committed partner to make effective and efficient Value Chain Management for the Process Industry happen. Strategy to results. Innovations to solutions.

Camelot IDPro AG - a fully committed partner to make effective and efficient Value Chain Management for the Process Industry happen. Strategy to results. Innovations to solutions.

Op

era

tio

ns

Man

ag

em

en

t

Strategy Process & Org.

ImplementationIM / Systems

Process and IT consultancy

Strategic and

process consultancy

Classicstrategic

consultancy

Where we work

Camelot IDPro

Subcontractor


Camelot IDPro AG 7

AGENDA

4 Your way forward




Camelot IDPro AG 8

Lean Planning and Scheduling

ProcessesProcesses OrganizationOrganization

Information Systems

Information Systems

• Easy planning concept

• Low inventory levels

• Stable cap. utilization

• Reduced lead times

• Less planning effort

Current challenges in the chemical industry

Lean Thinking

LPS

How do Lean Principles shape planning

and scheduling processes?

How can the planning

approach

dramatically increase

customer service and

reduce working capital

and costs?

Modern production systems

What are the

requirements of Lean

Manufacturing to an

appropriate planning

approach?

21st Century Supply Chain Planning Paradigm

Camelot IDPro AG 9

Planning Loop Trap

LPS

Classic forecast-based planning often ends in the planning loop trap

Forecast

required

Forecast

requiredLead timeLead time

ε

t

Forecast deviation

The longer the forecast horizon, the higher the

forecast error

• Safety stock required

• Short term production adjustments

• Variability of capacity utilization

Impact of forecast deviation

Longer lead time

Think lean and avoid the planning loop trapThink lean and avoid the planning loop trap


Camelot IDPro AG 10

Classic planning approach

Production

Inventory

Inventory

Capacity utilization

Forecast

Customer

Consumption

In classic planning, demand variations are translated into productionwhile inventories are hardly utilized and kept untouched

In classic planning, demand variations are translated into productionwhile inventories are hardly utilized and kept untouched


Camelot IDPro AG 11

Lean Planning & Scheduling

Production

Inventory

Inventory

LPS actively uses inventories to manage demand variability while keeping capacity utilization constantLPS actively uses inventories to manage demand variability while keeping capacity utilization constant

Consumption trigger

Customer

Consumption

Capacity utilization

Order


Camelot IDPro AG 12

LPS: Paradigm change

Main Characteristics:

• Asset reacts to demand variability

• Floating production quantities

• Inventory is hardly touched

• Sub-optimal capacity utilization

0

20

40

60

80

100

120

140

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Consumption Make Capacity usage Inventory

Period:

Capacity is target (LPS)

Main Characteristics:

• Inventories address demand variability

• Repetitive production cycles

• Inventory actively used

• Stable capacity utilization

0

20

40

60

80

100

120

140

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24Period:

Stock is target (Classic planning)

Project Example

Consumption Make Capacity usage Inventory

The lean planning & scheduling approach has clear benefits for not too volatile high-volume productsThe lean planning & scheduling approach has clear benefits for not too volatile high-volume products


Camelot IDPro AG 13

Tactical parameter

driven

Leveledcapacity

utilization

ConsumptionPull

Active use of inventories

E2E segmentation & synchronization

LPS

Benefits of LPS at a glance:

• Simplified planning

• Planning is reduced to few

parameters


• Stable asset usage

• Smaller batches & shorter lead times

• Repetitive production patterns with

stable make quantities

• Learning effects

• Quality improvement

• Easier supply chain collaboration

• More transparency facilitates E2E SC

coordination

To adopt lean thinking in planning, various principles need to be followed to realize a wide range of benefitsTo adopt lean thinking in planning, various principles need to be followed to realize a wide range of benefits

No forecast trigger

Lean SCM & LPS principles and benefits


Camelot IDPro AG 14

AGENDA

4 Your way forward




Camelot IDPro AG 15

Intermediates Finished GoodsFinished Bulks CustomerDC

Lean SCM & Global LPS

Renewal

Segmentation TacticalParameterization

StrategicSC Configuration

E2E SC Planning Monitoring

Form. Comp. Pack

FGIWIPWIP

B

D

F

H

I C

E

G

Production Cards

L K J A

L

A

Form. Comp. Pack

FGIWIPWIP

B

D

F

H

I C

E

G

Production Cards

L K J A

LL

A

Form. Comp. Pack

A

B

C

D

E

FGH

I

J

K

L

MN O

A

BC

D

E

F

A

BC

D

E

F

WIP WIP FGI

Form. Comp. Pack

A

B

C

D

E

FGH

I

J

K

L

MN O

A

B

C

D

E

FGH

I

J

K

L

MN O

A

BC

D

E

F

A

BC

D

E

F

A

BC

D

E

F

A

BC

D

E

F

WIPWIP WIPWIP FGIFGI

A

BC

D

E

F

Working Stock

Safety Stock Supply

Other Cycle Time Stock

Policy Stock

Safety Stock Demand

The LPS process is an end-to-end methodology, enabling the coordination and organization of the entire supply chain in an efficient and lean way

The LPS process is an end-to-end methodology, enabling the coordination and organization of the entire supply chain in an efficient and lean way

RW

cycle time

IRL

S&OP

Lean Planning & Scheduling for Chemical Champions

Volumelow medium high

low

medium

high

Variability

IRL / RW/ Kanban

Flow

Make to order

CampaignPlanning

Make to forecast

Camelot IDPro AG 16

Define decoupling points and allocate inventory within the global supply

chain

• Inventory in the regional distribution centres is replenished in line with actual consumption

• Postponement of outer packaging enables optimization of FG inventory

• Decoupling inventories for intermediates stage reduces the planning complexity

• To minimize the “bullwhip effect”, the actual customer demand is communicated using consumption pull

Long Lead Time

Materials

Short Lead Time

Materials

SynthesisMilling &

Inner Packing

Outer Pack To Order

Mid Term Forecast Customer

Order

Customer Order

Raw

Materials Intermediates

FG Inner

Pack

Regional

Distribution Centre

FIFO

Push

Consolidated FG Operation

Call Off Signal Pull Signal Replenishment OrderConsolidated Pull Signal

Transparency and clarity in the E2E value streams regarding lead times, decoupling and inventory tactics is key

Transparency and clarity in the E2E value streams regarding lead times, decoupling and inventory tactics is key

Working Stock

Safety Stock Supply


Policy Stock

Safety Stock Demand

Working Stock

Safety Stock Supply


Policy Stock

Safety Stock Demand

Working Stock

Safety Stock Supply


Policy Stock

Safety Stock Demand

Working Stock

Safety Stock Supply


Policy Stock

Safety Stock Demand

IM Production


Camelot IDPro AG 17

Segment the portfolio to determine the best fitting supply mode

Volumelow medium high

low

medium

high

Variability

IRL / RW/ Kanban

Flow

Make to order

CampaignPlanning

Make to forecast

The inventory and decoupling tactics as well as the supply mode set the framework for E2E lean planning The inventory and decoupling tactics as well as the supply mode set the framework for E2E lean planning


Camelot IDPro AG 18

Simulation B: To-Be modes

Supply mode simulationSimulation A: As-Is modes

Best supply modes

OEE Service-level Cost

OEE Service-level Cost

Volume

Variability

Simulation based analysis supports the optimal segmentation and allocation of supply modes regarding KPI trade-offs

Simulation based analysis supports the optimal segmentation and allocation of supply modes regarding KPI trade-offs

MTF


MTO

Volume

Variability

Flow

RWMTF

MTO

Camelot IDPro AG 19

Global Supp

ly Chain Plan

ning

Network planning

and capacity

alignment

Segmentation and

SC planning modes

Optimization of tactical

SC parameters

Forecast and product

life cycle management

- Rhythm time

- Sequence

- Behavior

- Capacity

usage

Rhythm Wheel Scheduling

Rhythm Wheel Controlling

Rhythm Wheel Design CTR

make skip

IRL

OrderCI

Pull

PO

RW Attainment

RW As-Designed

RW As-Designed

Renewal

RW As-Is

The rhythm wheel process is an integral part of global lean SCMThe rhythm wheel process is an integral part of global lean SCM


Camelot IDPro AG 20

IRL RW

Flow

MTO

Kanban

Supply Modes

Value Chain DC Customer

The better the production levelling, the higher the performance of the production system The better the production levelling, the higher the performance of the production system

Rhythm Wheel leveled asset

A

D

E

F

B

C

• Allocate products on the

wheel

• Define optimal sequence

• Define production quantities

based on reference demand

• Define planned cycle time &

upper / lower boundary

• KPI-based evaluation

(utilization, service level,

OEE, etc.)

Rhythm Wheel Design

Inter-mediates

Finishedbulks

Finished goods


Camelot IDPro AG 21

IRL RW

Flow

MTO

Kanban

Supply Modes


The production decisions are based on a simple rule and purely consumption pull drivenThe production decisions are based on a simple rule and purely consumption pull driven

A

BC

D

E

F


Current Inventory < IRL ?

MAKE

Current Inventory > IRL ?

SKIP

Working Stock

Safety Stock Supply

Other Cycle Stock

Policy Stock

Safety Stock Demand

I nventory

R eplenishment

L evel

Stock


Inter-mediates

Finished bulks

Finished goods


Camelot IDPro AG 22

Working Stock

Safety Stock Supply

Other Cycle Stock

Policy Stock

Safety Stock Demand

Working Stock

Safety Stock Supply

Other Cycle Stock

Policy Stock

Safety Stock Demand

IRL RW

Flow

VMI

Demand

IRL

A

BC

D

E

F


Cycle time

12d

8d

Cutting of outliers moves variability of response from production to inventory Cutting of outliers moves variability of response from production to inventory


IRL RW

Flow

MTO

Kanban

Supply Modes

IRL

Stock


Inter-mediates

Finished bulks

Finished goods


Camelot IDPro AG 23

IRL RW

Flow

VMI

Measurable and comprehensible KPIs enable effective planning process managementMeasurable and comprehensible KPIs enable effective planning process management

Inter-mediates

Value Chain Finished bulks

Finished goods DC Customer

IRL RW

Flow

MTO

Kanban

Supply Modes

Rhythm Time Attainment (RTA)

• Tracks cycle length over time

• Evaluates the difference between the planned and actual cycle time

• Shows variations in capacity utilization

Run To Target (RTT)

• Shows required and actual production quantities in every cycle

• Tracks order fulfillment

• Evaluates the efficiency of the chosen cycle length boundaries

A

BC

D

E

F

0 1 2 3 4 5 6 7 cycles

Process Behavior Chart RTA

10

12

8

qty RTT Quantities

20

30

10

Total orders

1 3 4 5 6 7 cycles

0

Total qty

Lean KPIs

2


Camelot IDPro AG 24

CustomerDC

The configuration of the few LPS parameters enables the synchronization of the global supply chainThe configuration of the few LPS parameters enables the synchronization of the global supply chain

Intermediates Finished

Goods

Finished

Bulk

A

BC

D

E

FA

BC

D

E

FA

BC

D

E

F

Calibrate synchronization

via parameter setting


E2E Supply Chain synchronization with LPS

Working Stock

Safety Stock Supply

Other Cycle Stock

Policy Stock

Safety Stock Demand

IRLtmax

APIA

BC

D

E

F

APIA

BC

D

E

F

tmin

RW

Cycle

length

Camelot IDPro AG 25

tmaxtmin = tmax

Smooth SCFlexible response

tmin

SC responseSC response

A

BC

D

E

FA

BC

D

E

F

Trade-off


E2E Supply Chain synchronization with LPS

Finished GoodsFinished BulkIntermediatesVolume

Variability? A

BC

D

E

F?A

BC

D

E

F?A

BC

D

E

F

Adjust the parameters and balance response and flexibility to synchronize your supply chainAdjust the parameters and balance response and flexibility to synchronize your supply chain

Camelot IDPro AG 26

Lean Planning process aligned organization

• Total

• SC cost-to-serve

• SC Continuity

• Responsiveness

• Total

• Inventories

• Capacity util.

• Service level

• Process stability

• Equipment avail.Execution

Teams

LPS enables an agile planning organisation with clearly defined roles and responsibilities LPS enables an agile planning organisation with clearly defined roles and responsibilities

Performance

Total

• Inventories

• Capacity util.

• Service level

• Process stability

• Equipment avail.

Total

• SC cost-to-serve

• SC Continuity

• Responsiveness

Strategic SCM Board

Site TacticalPlanning

Department

Global Tactical SC Planning Committee

Process

Segmentation

Execution Teams

Site TacticalPlanning

Department

Parameterization

E2E LPS

S&

OP

/ R

en

ew

al

Monitoring

Configuration

Site

• Inventories

• Capacity util.

• Service level

• RTA, RTT,…


Camelot IDPro AG 27

Demand Planning

Master Planning

Fine Planning & Scheduling

Network Planning

Global Components

Reporting

S&OP

Demand Planning

Master Planning

Fine Planning & Scheduling

Network Planning LEAN planning methods

configuration

Lean planning methods application

MDMEAI…

Planning System

The Lean Planning IT implementation extends organically the existing landscape and enables full leverage of common components

The Lean Planning IT implementation extends organically the existing landscape and enables full leverage of common components

Monitoring

IT landscape for lean supply chain planning & scheduling

LEAN parameter planning and optimization


Camelot IDPro AG 28

AGENDA

4 Your way forward




Camelot IDPro AG 29

Benefits of LPS at a glance:

• Simplified planning

• Planning is reduced to few

parameters


• Stable asset usage

• Smaller batches & shorter lead times

• Repetitive production patterns with

stable make quantities

• Learning effects

• Quality improvement

• Easier supply chain collaboration

• More transparency facilitates E2E SC

coordination

Adopting lean thinking in planning, various principles need to be followed to realize a wide range of benefitsAdopting lean thinking in planning, various principles need to be followed to realize a wide range of benefits

Summary

Lean Planning & Scheduling (LPS) – Your way forward

Tactical parameter

driven

Leveledcapacity

utilization

ConsumptionPull

Active use of inventories

E2E segmentation & synchronization

LPS

No forecast trigger


The journey to world class end-to-en value chain management

Benefits do not need to occur in area of implementation, but will materialise in the end-to-end process

Data & IT

Lean Supply Chain Planning

Lean Scheduling

Lean Logistics

Organization & Change Management

Monitoring & Reporting

Lean Administration

Lean Manufacturing

Vendor Integration

Source

Production Planning

Procurement Planning

Make Deliver InvoiceWarehousing

Pla

nn

ing

Exec

uti

on

Inventory Planning

Distribution Planning

Demand Planning

Supply Chain Configuration

Supply Chain Configuration



Camelot offers the full toolset for lean SCM achieving operational excellence

Waste elimination

Respect the individual

Customer first

Ap

pr-

oa

ch

Continuous Improvement

FlowStandar-dization

PullTakt

Pri

nc

i-p

les

To

ols

Lean Planning & Scheduling

Simulation & Parameter-

optimizationSegmentation

Event Management

5S KaizenVisualization KPIs

VMI / SMI(Vendor / supplier

mgd inventory)Gemba

TPM (Total Productive

Maintenance)

Rhythm WheelIRL

(Inventory Target Setting)

Leveled Flow Design

Kanban

SMED (Single Minute

Exchange of Dies)

OEE (Overall Equipment

Effectiveness)

Flexibility / Complexity

Design

JiS / JiT(Just in

Sequence / Time)

VSM(Value Stream

Mapping)

DMAIC (problem solving)

S&OP and Parameter Renewal

Perfect Plant (Shop-Floor Integration)

PCO(Process Centric

Organization)

Data Quality Management

All tools contribute to the overall approach and principles on the journey to lean SCM


Camelot IDPro AG 32


As Lean Thought Leader we continuously explore the topic further

t

TRW cycle length

t

TRW cycle length

t

TRW cycle length

Global service level

Required IRL

Prof. RehofFraunhofer Institut für Software und

Systemtechnik ISST

Prof. Fleischmann Universität Mannheim, Lehrstuhl für ABWL und Logistik

Prof. Pfohl Technische Universität Darmstadt, Fachgebiet Unternehmensführung u. Logistik

Prof. Thonemann Universität Mannheim,

Seminar für SCM und Management Science

Multi-Stage LPS :

• SC topology optimization

• Global parameter optimization

• Synchronization of lean planning instruments over entire SC

• Analytical multi-stage variation

analysis

Linkage: LPS and other areas:

• Root-cause analysis of

deviations

• Mapping to financial KPIs

• Collaboration business models across the value chain

• Organizational deployment

LPS Tools:

• ERP / APS extensions

• Cloud computing

• Advanced planning methods

• Simultaneous optimization

engines

Thank you for your attention!

chemical supply chain

Education

camelot idpro ag44

camelot thought leader

germany camelot idpro

lean scmcamelot idpro

entire value chain

holistic consulting

x strateg yx value chain

critical value chain