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Chemical Supply Chain
- 1. Logichem April 21, 2010 Development of a global Supply Chain Network Strategy Roger Bloemen V.P. Global Supply Chain 1
- 2. Agenda Solutia Introduction Business Strategy Supply Chain Strategy Implementation of Global Supply Chain Network Strategy 2
- 3. Solutia history Pre 1997 Today Monsanto as a chemical conglomerate Spin off of chemical activities in Plastic and 1997 Agricultural (Solutia) chemical division division Pharmaceutica NutraSweet l division 3
- 4. Solutia’s situation in 2003 The leadership team inherited an unfocused Portfolio analysis - 2003 High portfolio of businesses Saflex tilted toward Structural attractiveness commodity fibers & Specialty Nylon Intermediate Chemicals Fluids CPFilms Nylon Plastics chemicals… Industrial Astaris Fiber Phosphorous JV Basic chemicals At spin-off, Solutia was Axio Research Nylon Fibers Dequest Phosphonate Water Treatment assigned significant L Aspartic Acid Chlorobenzenes Pharma Services legacy liabilities Acrylic Fiber High Business position Note: Size of globe represents relative size of business Consequence: Chapter 11 filing in Dec. 2003 Out of Chapter 11, Q1 4 2008
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- 6. Saflex – The Key Ingredient in Laminated Glass Key Product features Safety and security Quiet Design characteristics Application Segments Automotive Architectural 6 Photovoltaic
- 7. Core Market: Automotive Asia market driven by Chinese growth European market is driven by Eastern European growth North American auto builders are under severe pressure Regional Autom otive Dem and Asia Automotive 200 60 50 150 40 M Sqm Msm 100 30 20 50 10 0 0 2007 2008 2009 2010 2011 2012 2013 2007 2008 2009 2010 2011 2012 2013 Europe North America South America Asia Pacific China Other Asia Asia Automotive Means China 7
- 8. Core Market: Architectural Asia growth concentrated in lower- specification China market European market growth focused on 3.2 meter wide product North American market driven by hurricane belt applications and commercial construction Architectural Market Growth 2008-2013 4% Regional Architectural Dem and 15% 23% 250 200 M Sqm 150 100 7% 50 0 2007 2008 2009 2010 2011 2012 2013 Europe North America South America Asia Pacific 51% Europe North America China Other Asia South America 8
- 9. New, Fast-Growing Market: Photovoltaic Photovoltaic: Turning sunlight into energy Application: thin-film solar panels (used in solar farms) Role of Saflex: encapsulates (protects) electrical components Small base Regional Photovoltaic Dem and Rapid growth-especially in 120 100 Asia and Europe M Sqm 80 60 Driven largely by energy 40 policy 20 0 2007 2008 2009 2010 2011 2012 2013 Europe North America South America Asia Pacific 9
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- 11. Strong but regional growth, market moves East, fast ! Global PVB Demand Key Growth Area's Photovoltaic China Automotive Architectural China Architectural Automotive Europe Architectural Photovoltaic 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 • Photovoltaic will be fastest growing segment New applications could increase •China will generate majority of market market growth: growth. •Trilayer acoustic products will become (e.g. automotive side laminates, an increasingly important segment of the automotive roofs) automotive market. 11
- 12. First step: develop the business strategy Clear objective “Saflex will grow with the market while increasing margins so as to create sustainable and attractive returns on future capital investments.” 4 pillars to support this strategy Achieve lowest delivered cost by maximizing service levels as a key pillar 12
- 13. Supply Chain Strategy Optimize with constraints - Logistics tendering Two ways to Release constraints class A - MRP2 - Advanced planning-systemsS&OP Global achieve lowest - People developmentCollaborative forecasting - Service level - Asset strategy delivered costs Day-to-day actions on ati (optimize within itia ls itu In constraints) Long-term Cost / sqm PVB film actions (release 13 constraints)
- 14. Global Market mismatch supply / demand on mid-term Regional Sheet Supply/Demand Balance MM m2 North America Europe 124 104 93 109 Asia Pacific 53 59 66 2004 2008 49 2004 2008 37 Global 2004 2008 Legend 259 South America 2004 213 243 Capacity MM m2 Demand 2004 2008 7 10 4 2004 2008 14 2004 2008 Implied Operating Rate 88% 94% 1
- 15. Global Sheet Asset Infrastructure Ghent, Belgium Bor (5) Roermond (26) Kentucky (9) Trenton, MI Uentrop (22) Ulsan (22) Indian Orchard, MA (IO) Frankfurt (52) Suzhou, China Cuernavaca(4) Fayetteville (10) Shiga (45) Santo Toribio, Mexico Rayong (6) Solutia 140 Sao Jose dos Campos Sekisui 107 DuPont 47 Kuraray 57 15
- 16. Inter area shipments do not add value, have unpredictable pricing, unreliable leadtime Europe: 2300 Cont . . . 120+580 100+86 Americas: . 1800 TEU . . Asia / Pacific: 100+71 413+242 500 TEU Saflex : 4600 Solutia : 36000 containers/year 176+50 16 USA : 65; Lat:34; Be : 46; Asia : 20
- 17. Conceptualisation of Saflex SC network Raw materials Intermediates Extrusion Interleaving Finishing Ghent, Belgium Newport (UK) (1961) TEG Antwerp, Belgium Ghent (BE) 2EHA Antwerp (BE) Wales Newport, (1991) Plasticizer (1998) ETHANOL Trenton, MI Indian Orchard, MA (IO) Indian Orchard (US) (1955) VAM (1927) Suzhou, China (2007) Trenton (US) Contractor (US) BUTCHO Santo Toribio, Mexico Santo Toribio (MX) (1996) PVOH San Jose Dos Campos (BR) Sao Jose dos Campos, Brazil (1989) Suzhou (CN) Singapore Singapore (SG) 1 Finishing Center (1998) 17
- 18. Capacity and capability needs Global PVB Demand PVB market growth will require Saflex to invest in new capacity Photovoltaic Architectural Automotive Growth will be strong in Asia and Europe 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Saflex will require more Key Growth Area's capability in strategic product categories – 3.2m billet China Automotive architectural, three-layer co- China Architectural Europe Architectural extruded acoustic Photovoltaic 18
- 19. Asset strategy: where to start? Many questions and potential options… Shall we integrate backwards? If yes, how far and with which technology? Where shall we extend our Where and when shall we install resin capacity first? product specific equipment? Shall we expand or close our South American extrusion line? When shall we expand our ? Where shall we invest? What is the ROI? What is the immediate next step to reduce capacity unbalance? What do we do if the dollar lines in China? falls under 0.6 EUR? Shall we open a line in India? If yes, with what specs? …which are interdependent (how can we model this with spreadsheets?) 19
- 20. Methodology Multidisciplinary Supported by team, coordinated universities for by supply chain modeling and and including scenario analysis Manufacturing Technology Purchasing Sales Business management 20
- 21. Asset strategy is developed using an optimization model …instead of spreadsheet simulations Conceptual framework Excel template Mathematical model Investment plan presented to board & shareholders 21
- 22. Building a holistic model is time consuming and complex Organisation Need internal OR knowledge Data, data and data • Forecast data, by month/sku • Costing data by plant • Freight data, by leg • Duty data, by country Data issues • Integrity • Availability Modeling Objective function • Profit maximisation • Cost minimisation Variables • Mixed Integer vs Linear Aggregation level 22
- 23. Value of the model NOT Absolute truth It remains a model -> hence abstraction of reality BUT Insight generation Scenario comparison using same baseline 23 Speed
- 24. Saflex convinced shareholders to invest In the past 4 years, despite Chapter 11, Saflex managed to invest more than 200 M$ Acquisition & expansion in Mexico New plant in Suzhou Third line in Ghent New resin plant in Antwerp Expansion of resin plant 24 in Indian Orchard US