RESILIENT AND SUSTAINABLE SUPPLY CHAINS
According to Professor Yossi Sheffi at MIT, supply chain resiliency is “the ability of a company to quickly respond or bounce back from a significant disruption.” Supply chain resiliency has, in fact, become a priority for some governments.
At the same time, a renewed focus on sustainability has emerged in many chemical companies as they set new targets to reduce energy use, emissions, and waste while governments include green energy policies in economic recovery packages. The lesson from the past year is that sustainability and resiliency are two sides of the same coin.
(IMAGE)The Aspen Supply Chain Management (SCM) planning and scheduling system used by FPCO to optimize its extensive supply chain.
Supply chain digital twins can help manufacturers achieve their resiliency and sustainability goals. For example, AspenTech’s work with FP Corporation (FPCO), along with Time Commerce (an Aspen Implementation Services Partner), was recently recognized with a 2020 Green Supply Chain Award from Supply and Demand Chain Executive. FPCO is the largest maker of plastic food containers and related packaging materials in Japan.
FPCO utilized Aspen Supply Chain Management (SCM) planning and scheduling to economically optimize its extensive supply chain on an ongoing basis and consistently supply more than 10,000 types of food containers to supermarkets across Japan, support food infrastructure, and build a recycling-oriented supply chain with the goal of a sustainable society.
MANAGING CHANGE THROUGH SALES & OPERATIONS EXECUTION (S&OE) DIGITAL CAPABILITIES
As every manufacturing company knows, things do not always go as planned. Supply and demand uncertainty brings forth inevitable daily events and disruptions that must be managed. This can include production quality issues, logistics delays, lastminute changes to customer orders, etc. For most organizations, the pandemic amplified supply-and-demand disruptions to a whole new level.
We are seeing a trend in the market related to manufacturers wanting to become much more agile. This is driving numerous customers to implement Sales and Operations Execution (S&OE) processes and related digital solutions. S&OE is a process that allows manufacturers to align their day-today activities on an ongoing basis to achieve their longer-term Sales & Operations Plans (S&OP) while also improving agility.
The October 2020 Forbes article Hexion Is Blazing New Trails in Improving Profitability, authored by Steve Banker from ARC Advisory Group, focuses on how Sales & Operations Execution helps Hexion specialty chemicals improve profitability through high operating leverage and increased productivity. The article provides some insights into how “AspenTech’s collaborative platform allows the demand, inventory, production planning, capacity planning, and quality teams to interact and create better production schedules based on the inevitable disruptions that are occurring.
EXTENDED VALUE CHAIN INTEGRATION AND END-TO-END (E2E) OPTIMIZATION
Transportation fuels have historically been the biggest demand and end-use for crude oil. With the energy transition underway, demand for transportation fuels is expected to peak, driven by
more efficient combustion engine technologies and the transition to electrical vehicles. As this happens, refiners will shift their attention from transportation fuels demands to chemical demands as a target area for future growth. This megatrend is referred to as crude-to-chemicals (CTC).
When looking at the CTC extended value chain, there are two key areas with integration opportunities. The first is the integration of the oil refining supply chain and the base petrochemicals supply chain. The opportunities here relate to exploiting process and molecular synergies to shift from producing fuels to chemicals. The second is the integration of the base petrochemicals supply chain (e.g. olefins) with the downstream derivative chemicals (e.g. polyolefins) supply chain. The opportunity here is linked to being more agile and specific in the monomers and polymers value chain planning integration and optimization to best respond to changing supply / demand economic conditions across the extended olefins-to-derivatives value chain.
(IMAGE)Sales and Operations Execution (S&OE) capabilities are vital because things don’t always go as planned.
Managing and optimizing a crude/olefins-to-polymers extended value chain is challenging, as it spans supply chains that have very different characteristics. The upstream refining and bulk chemicals businesses are margin-driven supply chains in which the optimization opportunity consists of optimizing the operating conditions of complex continuous production processes, as well as exploiting feedstock supply and associated economics optionality.
The downstream polymers business is a demand-driven supply chain in which the optimization opportunity consists of looking at the broader business system (including changing demands for hundreds to thousands of individual finished products with unique characteristics, the distribution network and associated modes of transportation, inventories optimized according to demand patterns and production cycles of different grades, and semi-continuous/batch/continuous production units) and determining the best way to balance supply/demand while maximizing the profitability of this overall system.
(IMAGE) The intersection of Bulk Chemicals and Polymers is where the demand-driven and the margindriven sides of the value chain meet and interact.
Many companies are already working on or prioritizing initiatives related to extended value chain integration and end-to-end optimization. Repsol Chemicals is one of them. Repsol Chemicals recently provided an overview of its “Control Tower endto- end supply chain optimization” project at the November 2020 European Refining Technology Conference (ERTC). The AspenTech value chain optimization solution will support Repsol Chemicals in achieving its customer service objectives and becoming more agile to respond to market and operational changes, while doing so with full visibility into the endto- end integrated margin across the olefins-to-polymers value chain with the required accuracy and granularity.
WHAT-IF SCENARIOS ANALYSIS LEVERAGING MATHEMATICAL OPTIMIZATION AT SCALE
At the core of a supply chain digital twin there needs to be a representation of the manufacturing process. Multiple complexities may need to be factored into this model, such as production switching costs, utilities, minimum run sizes, and so on. Modeling becomes even more challenging when you factor in other production or tolling sites, as well as the dependencies across sites. As you extend backwards from production into suppliers, there are aspects that should be modelled here as well including different purchase minimums, costs, and lead times varying by supplier.
Finally, you have the downstream supply chain consisting of warehouses, distribution centres and customer shipto locations. Things get complicated when you try to factor in duties and tariffs or product substitution options. As you can imagine, it can be very challenging to model these interrelated elements in a spreadsheet-rather than using a solution designed specifically for that purpose.
The other big limitation of a spreadsheet is that it wasn’t designed to do mathematical optimization at scale to solve real-world problems-taking into consideration anywhere from tens of thousands to millions of variables and constraints. Using a solution designed specifically to do mathematical optimization at scale such as Aspen Supply Chain Management (SCM) is extremely valuable because:
An optimizer will find the best answer automatically, whether the goal is to maximize profit or minimize costs across the end-to-end system.
An optimizer will recommend options that a person or business wouldn’t normally consider or didn’t know were even possible. That’s because it can easily deal with complexity in a way that a human mind cannot.
