Optimized supply chain planning—adding value in specialty chemicals
9:14 AM MDT | October 8, 2012 | By LAURA ROKOHL, CHEMICALS SUPPLY CHAIN MANAGER, ASPENTECH
Specialty chemicals are used to create products that touch all aspects of our lives. Produced in lower volume than bulk chemicals, they can be found in numerous forms ranging from adhesives, additives, antioxidants, corrosion inhibitors, cutting fluids, dyes, lubricants, paints, pigments and much more.
The nature of the market is highly fragmented and growth initiatives tend to come from acquisition, mergers and product differentiation. Many companies now maintain broad product portfolios to safeguard against fluctuations in demand and have geographically diversified operations.
The industry has to tackle complex manufacturing processes involving tightly coupled multi-step batch processing with mixing and blending operations. The key to addressing these challenges successfully is the ability to optimally plan and schedule production processes while engaging with the continuously shifting customer demands and operating constraints. It is the role of the planner and scheduler that drives priorities, plans support for uninterrupted production and minimizes impact to the operation.
Managing Supply Chain Complexity
Complexity is the primary characteristic that drives the need for planning and scheduling solutions for specialty chemicals companies. Complexity comes in two main forms: complexity of the actual manufacturing process and complexity associated with the degrees of freedom in the supply chain network, such as available transportation options and dynamic sourcing decisions. The more complexity in the supply chain, the greater the need for planning and scheduling technology to guide companies to make the most profitable decisions.
Integration between planning and scheduling provides even greater value. The goal of the production plan is to assign production quantities for each asset while taking into account asset capacities, recipe unit ratios, raw material and transportation costs and product prices. The goal of the production schedule, however, is to determine the timing of and the material produced by each batch run on a reactor, as well as cleaning tasks, while taking into account inventory replenishment needs and inventory capacities. Ideally, the two should work together to deliver operational efficiencies and achieve optimization across the production process.
Visibility and Flexibility
Harnessing the sea of data and transforming into a usable form is a requirement to manage the complex supply chains of the specialty chemicals industry. Data availability and quality are crucial to provide the visibility planners need to identify and resolve the inevitable supply chain upsets that will occur. Companies need to understand that their enterprise resource planning (ERP) system is not set up for optimisation purposes, but rather financial accounting purposes. Quickly identifying errors in the data that need to be fixed leads to better and more profitable decisions.
Most specialty chemicals producers have some inherent flexibility related to the locations where they decide to make products. Supply chain planning models should consider system-wide supply chain costs and constraints when generating an optimal plan and have enough flexibility to include most, if not all, of the client-specific characteristics, business policies, and constraints. Sometimes it may return an answer that the planner did not expect. Assuming that the underlying data inputs are right, that means that the model is finding better ways of doing things than in the past, helping them challenge traditional “rules of thumb” for managing the supply chain. This is where value is established and can make a tremendous difference in how the customer manages its business.
So, the potential benefits specialty chemicals manufacturers could achieve from process industry software planning and scheduling solutions are clear. There is enormous value in having software models that realistically represent the complex production environment and associated constraints with enough fidelity to make profitable decisions and accurately evaluate alternatives. Additionally, supply chain planning models that have the visibility and flexibility to capture all of the degrees of freedom in the supply chain instead of relying on “rule of thumb” business policies have the potential to reap significant financial savings.
Rokohl is the chemicals supply chain Manager for Aspen Technology, a provider of specialized supply chain solutions for the process industries. With AspenTech for 13 years, she is responsible for supply chain market research, and helping chemicals, polymers and process consumer product goods (CPG) clients define and improve their supply chain business processes.