Applying a combination of ChemLogix’ expertise in Category Management and in-depth chemical industry knowledge together with the extensive expertise of Automated Decisions, LLC (ADC) in optimization through a strategic alliance, the Network Optimization service is focused on providing insights that lead to higher profits and cash flows in chemical supply chains.
Ted Newton, principal of ADC, has used award winning methodologies to generate strong supply chain improvements over the past 25+ years. The top tier operations research modeling capability is led by Dr. Jeff Camm, Professor and Department Head, Department of Quantitative Analysis and Operations Management at the University of Cincinnati. Dr Camm is also the Editor-In-Chief of Interfaces, the Informs journal on the practice of operations research.
The dynamics of the chemicals industry require a rigorous but comprehensive process and toolkit to evaluate efficiency and effectiveness of the supply chain. Typical unconstrained potential supply chain optimization impact is often over 3% of Sales. The ChemLogix Optimization and Simulation process consists of four steps:
1. Define the SCOPE & MEASURES – The first step in the process is to define the scope of optimization and simulation; there are three levels:
The Logistics Network – “Service vs. Cost” – This is the traditional definition of the network where the key economic metric is logistics cost, specifically the cost of inbound and outbound freight and distribution expenses. Typical savings potential is 10 to 20% of logistics costs which is equivalent to over 1% of Sales.
The Supply Chain Network – “Service vs. Profit” – This type of analysis is a much more comprehensive view of the economics of the business unit. In addition to the costs of the logistics network, the economic metric is profit or contribution. In this type of modeling the economic potential impact is also well over 2% of sales. Inventory reductions of over 20% are not uncommon.
The Business Unit - “Service vs. Profit AND CASH” – In the post 2008 (new world) operating environment many companies are focused on optimization of Service vs. Profit vs. Cash. In this type of modeling the potential economic impact is also well over 3% of sales. OWC (overall working capital) reductions of over 30% are common.
2. Develop the BASELINE – In this effort, roughly 1 year of supply chain and related logistics data is entered into the models to replicate the “as is” historical performance. After optimization is completed, ChemLogix will often complete “optimization updates” as business conditions change.
3. Apply the ANALYTICS – Analysis can be completed at two levels of detail;
a. Level I Analysis – This is high level, quick analysis used to define preliminary optimization benefits from changes to plant configurations – product assignments, distribution locations, supplier source points, customer or supplier service levels, etc.
b. Level II Analysis – This is much more detailed analysis (often at a product family/customer ship-to level detail) used to provide more rigorous definition of improvements and required service, sourcing, production and distribution operating and financial parameters. Optimization uses Linear Program tools to address the linear and mixed stochastic mathematics of sourcing, production and distribution alternatives. Simulation tools are used to characterize the non linear elements of the supply chain which include production sequence and switchover protocol and the dynamics of inventory levels with replenishment lead times and service.
4. UPDATE & ADAPT – A unique feature of our simulation and optimization services is the ability to retain data and model “solution sets” (which includes the solutions of the optimized network cases) for quick updates driven by business changes. Once the basic data and solution set is created updates can be completed in 4 to 6 weeks depending on complexity. Updates may be required for several business changes ranging from mergers and acquisitions to business unit changes including:
Customers
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Gain (or loss) of Customers
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Volume Changes (Same Customers with Seasonal or Industry Change)
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Price Thresholds by Service Level
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Changes in Terms and Conditions
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Customer Alignment or Integration Economics
Suppliers
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Change in Raw Materials Suppliers
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Cost Breakpoints by Service Level
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Changes to Terms and Conditions
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Supplier Alignment or Integration Economics
Production
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Plant production configuration or tolling changes.
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Changes to sequence and switchover protocol.
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Variable Cost Impact – Steam, Power, Fuel, Water, Catalyst, etc.
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Semi Variable Cost Impact – Operations and Maintenance
Distribution
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Changes in Channels / Distributors.
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Changes in Costs (freight, working capital carry or distribution).
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Revisions to the Use of Import or Export Gates
Finance
For a no-obligations discussion of how ChemLogix can deliver value to your company through our Network Optimization services call 215-461-3805 or email information@chemlogix.com.