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Improving Profitability Through Cost-to-Serve Analysis
- 1. Logichem 2010 « Improving profitability Through cost-to-serve Christian Backaert European Supply Chain Analysis » Manager Solvin SOLVAY
- 2. C2S : presentation topics Who is Solvin? Introduction to C2S How to put in place & Solvin experience Let’s share our experience SOLVAY
- 3. C2S : Introduction Figures SolVin is a leading European manufacturer of PVC and associated products. Foundation : January first 1999 by merging the vinyls activity of BASF and Solvay in Europe Ownership : Solvay 75%; BASF AG 25% Employees : around 2000 Products : Cl2, NaOH, EDC, VCM, PVC-S PVC-E, VDC, PVDC, PVC Copolymers, R-PVC SOLVAY
- 4. C2S : Introduction Company Profile SolVin production sites Rheinberg Zandvliet BERLIN Zandvliet Lillo Rheinberg Lillo Jemeppe PARIS Jemeppe Tavaux Fos/Berre Milan Tavaux Martorell Barcelone ROME Martorell Ferrara SOLVAY
- 5. C2S : Introduction kt/y PVC Supply 2008 1.800 Europe 1.600 Total : 8.9 Mt/y 1.400 1.200 1.000 800 1600 1300 600 1050 400 750 660 480 460 200 400 400 330 0 Ineos Vinyls SolVin Arkema Vinnolit Shin-Etsu LVM Anwil Vestolit Borsodchem Oltchim Source: Solvay (Business Intelligence) SOLVAY
- 6. C2S : Introduction PVC World Market 40000 35000 34500 32000 30000 25000 25000 20000 17500 15000 11400 10000 6000 5000 1500 50 220 0 5 0 0 0 0 0 0 0 4 5 6 7 8 9 0 1 19 19 19 19 19 19 20 20 SOLVAY
- 7. C2S : Introduction EU 27 Consumption of PVC 2009 COATED FABRIC PAPER 3% TUBES PROFILES RIGID FILM 3% CABLES & WIRES 8% 8% FLEX. FILM SHEETS 6% PROFILES 29% FLOORING 5% OTHERS PLATES 10% 2% PIPES FITTINGS 26% 5.880 mt Source : SolVin (vision) SOLVAY
- 8. C2S : presentation topics Who is Solvin? Introduction to C2S How to put in place & Solvin experience Let’s share our experience SOLVAY
- 9. Introduction to C2S Study from IBM SOLVAY
- 10. Introduction to C2S Customers have not been created equal and all requires different level of services. Sales & Mkting • Do you know your customers Production & Approach expectations in terms of service? Procurement costs C2S • Do you measure the cost of delivering the expected level of Distribution costs service? Cost-to-serve is about both Customer service costs • Control of all the costs • Segmenting the customer portfolio to maximize the revenu SOLVAY
- 11. Introduction to C2S Frequency & cost of commercial support To grasp the expected Promotions results from a cost-to- All production costs At the lowest level of SKU serve analysis it is Sales & Mkting All raw materials essential to collect all « hidden costs » Production & Approach Transport Procurement costs Warehousing C2S Traditional analysis Accurate C2S Packaging Claims management Distribution costs Apparent Management of documents Profit Multisourced or dedicated to a Revenues customer B plant customer B customer C customer A customer A Customer Flexibility in delivery accuracy Costs customer C Technical requirements service costs Terms of sales Yearly discounts Value of accounts receivables Security stocks …. SOLVAY
- 12. Introduction to C2S Working with real figures instead of averages Impact of Averaged figures Working with 30 averages leads Excellent growth GROSS MARGIN Monthly margin, extend to short term 25 Gross Margin Average 3 Months production, room for 20 mistakes in price negociations 15 operational 10 decisions 5 0 -5 04 05 07 05 10 05 01 05 04 06 07 06 10 06 01 06 04 07 07 07 10 07 01 07 04 08 07 08 10 08 01 08 04 09 07 09 10 09 09 Negative gross .20 .20 .20 .20 .20 .20 .20 .20 .20 .20 .20 .20 .20 .20 .20 .20 .20 .20 .20 .20 -10 01 margin, reduce -15 production and -20 sales SOLVAY
- 13. Introduction to C2S The closest possible to current figures • Quicker deviations in raw materials • Quicker deviations in tranport costs (energy & competition) • Fierce competition put pressure on sales prices and price evolution are no longer only a trend Sold quantities deviations 120 100 80 60 40 Sold quantities 20 0 04 05 07 5 10 05 01 5 04 6 07 6 10 06 01 6 04 7 07 7 10 07 01 7 04 8 07 08 10 8 01 08 04 9 07 09 10 9 01 9 0 00 00 00 00 00 00 00 00 00 00 00 00 00 01 0 0 0 0 0 0 0 .2 .2 .2 .2 .2 .2 .2 .2 .2 .2 .2 .2 .2 .2 .2 .2 .2 .2 .2 .2 .2 01 SOLVAY
- 14. Introduction to C2S The deepest possible: customer level Analysis of Margin: detailed by geographical zone While the 35 Gross Margin Country One 30 Gross Margin Country 2 average remains 25 Average Gross margin positive, one 20 coutry delivers 15 much bigger 10 Gross Margin 5 than the other. 0 -5 Treatment should 04 5 07 5 10 5 01 5 04 6 07 6 10 6 01 6 04 7 07 7 10 7 01 7 04 8 07 8 10 8 01 8 04 9 07 9 10 9 9 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 then be .2 .2 .2 .2 .2 .2 .2 .2 .2 .2 .2 .2 .2 .2 .2 .2 .2 .2 .2 .2 -10 01 -15 differentiated SOLVAY
- 15. Introduction to C2S Control the data in your C2S analysis T ra n s p o rt c o s t e v o lu tio n fo r o n e s p e c ific c u s to m e r 120 S u m o f Tran s p . an d t a k e aw a y € /t 100 A vera ge on y e a r b as is fo r th e c u s to m e r 80 A vera ge on y e a r b as is fo r th e c o u n try Mastering your Eur/T 60 40 database is key to 20 ensure success of 0 1 2 3 4 5 6 7 8 9 10 11 12 C2S approach. This M o n th s is however not the A n a ly s is o f m a r g in e v o lu tio n easiest task and is 300 250 a vg (a ll c u s t . ) n t v ve n t e via re f resources T ra n s p . a n d t a k e a w a y € / t 200 ra w m a t e ria l c o s t consuming 150 100 50 0 05 05 05 05 06 06 06 06 07 07 07 07 08 08 08 08 09 09 09 09 10 -5 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 .2 .2 .2 .2 .2 .2 .2 .2 .2 .2 .2 .2 .2 .2 .2 .2 .2 .2 .2 .2 .2 02 05 08 11 02 05 08 11 02 05 08 11 02 05 08 11 02 05 08 11 02 SOLVAY
- 16. C2S : presentation topics Who is Solvin? Introduction to C2S How to put in place & Solvin experience Let’s share our experience SOLVAY
- 17. Q ty in Av g. T rans C redit Net & A ll v bl . Contribut Fi x. T O T AL Contri but G RO S S C2S within Solvin : how we put C2S into practice NT V p. and Cash price m anuf. ion m anuf . P rod. M ARG I N Ship-to party take C ost costs (Solv i n) - costs - Costs - ion CO P A - f or Price Data collection RU in RU away €/t €/to cust €/to A v erage per ton Av erage per ton Av erage per ton A verage per ton Warehousing & (solv i n) ton Av erage per 53340 1275748 5038,5 385,3 10,5 4642,6 4227, 8 383,7 778,0 5005,8 67058,1 -394,2 53345 170637, 5 5329,0 309,2 66,7 4953,2 4443, 1 445,5 976,3 Transportation costs 5419,4 10414,7 -530,8 - fixed production costs 53459 171404 5219,5 434,3 44,4 4740,7 4480, 8 260,0 638,3 5119,1 6104,0 -378,3 - administration costs178704 53508 5402,0 402,2 45,1 4954,8 4158, 4 796,4 778,8 4937,2 19496,2 17,6 - commercial costs 682550 53511 5394,7 309,2 4,2 5081,3 4443, 1 573,7 Plant Shippin 976,3 5419,4 Shipme 53641,6 per Net Weight Gross wght -402,6 Loading 54902 100375 9855,0 934,0 82,2 8838,8 4820, 2 4176,4 frm g 1417,8 6238,0 57425,7 2758,6 55647 170637, 5 5292,5 309,2 Query tool 22,1 4961,3 4434, 2 deliv.ite conditio 845,6 462,6 5279,8 10812,2 -383,1 56933 341275 5329,0 309,2 22,2 4997,6 4347, 4 m 585,6 ns 778,8 nt type 5126,3 stage 27377,9 Transported -193,2 costs 7DYN 33 Road container 30ft Z3C0 ROAD standard 2.469.100,000 KG 2.469.100,000 KG Fix production cost / product 80088 356824 5329,0 386,1 44,4 4898,4 4158, 4 740,1 778,8 4937,2 Result 36174,2 KG 2.469.100,000 KG 2.469.100,000 -38,8 80411 170637, 5 5475,0 309,2 45,7 5120,2 4442, 3 613,4 Result 869,0 5311,3 14337,2 KG 2.469.100,000 KG 2.469.100,000 -255,6 80832 Month 1 Month 2 … 717152 5824,8 394,2 24,8 5405,8 4440, 2 7E9A965,5 30 719,8 Road 5160,1 Z3C0 94853,9 KG 326.820,000 KG ROAD standard 326.820,000 245,7 ProductResul t A 100 4335944, 5 107 5465,4 380,8 24,1 5060,5 4347, 2 685,5 825,5 Result 5172,6 409049,7 KG 326.820,000 KG 326.820,000 -140,0 Result 326.820,000 KG 326.820,000 KG Product B 100 98 892P 30 Road Z3C0 ROAD standard 753.290,000 KG 753.290,000 KG Product C 99 88 Result 753.290,000 KG 753.290,000 KG Product D 97 105 Result 753.290,000 KG 753.290,000 KG 8BWV 12 Road -> Sea ctn 20ft Z1B1 SEA booking main leg KG 729.680,000 KG 1.466.329,500 6.857,50 EUR Product E 102 103 Z1F0 SEA FOB. 565.040,000 KG 280.000,000 KG 3.400,00 EUR … Z3P0 Road-Preliminary leg KG 907.680,000 KG 914.820,000 Result 2.946.189,500 KG 1.917.360,000 KG ############ central DB for 14 Road -> Sea ctn 40ft Z1B1 SEA booking main leg ############### 8.489.365,000 KG ############ Variable Product Cost/Month analysis Z1F0 SEA FOB.6.367.777,600 KG 3.099.150,000 KG ############ Z3P0 Road-Preliminary leg ############### ############### Month 1 Month 2 … Result ############### ############### ############ Product A 100 107 30 Road Z3R0 ROAD returns1.410,750 KG 1.375,000 KG Product B 100 98 Product C 99 88 Product D 97 105 Product E 102 103 … - raw materials BOM - energy costs - 'by-products' selling prices - transport cost of raw material between plants - ... SOLVAY
- 18. C2S within Solvin : how we put C2S into practice Not a perfect C2S approach as: •Need to align commercial costs to customers •Systematic cost of product to customer (new packaging) • reverse logistics & cost of claims at customer level • warehousing cost at customer level •Some wrong data in system SOLVAY
- 19. C2S within Solvin : how we put C2S into practice The vision from the sales team : importance of your customer 70% of volumes are strategic. Shouldn’t it be revised/refined? SOLVAY
- 20. C2S within Solvin : how we put C2S into practice Some differentiators for a segmentation sensitive for on-time delivery sensitive for exclusiveness Part of it is applied in a differentiated supply chain approach -Security stocks -Dedicated transport -Customized packaging SOLVAY
- 21. C2S within Solvin : how we put C2S into practice Exclusives SOLVAY
- 22. C2S Conclusions Control your data Working with averages is not appropriate Keep a light system Do it SOLVAY