Chemical Processing - January 2008 - (Page 25) With this growing importance of the supply chain in mind, the “2007 Global Chemical Industry Supply Chain Best Practices Study” looked at a broad range of supply chain topics, including several that are especially relevant to chemical manufacturing operations. These include demand planning, supply and materials planning, demand/supply balancing, production scheduling, and inventory target setting and deployment. Demand planning. Like the 2005 study, the 2007 research found that chemical companies are using a wide variety of tools to perform demand planning, and are seeing varying degrees of effectiveness. Nine percent of respondents said their firms rely on basic rules of thumb to plan, while 36% cited simple models that extrapolate historical demand, and 40% legitimate forecasting techniques. In terms of technology used, demand planning is frequently performed as a spreadsheet exercise. Fortysix percent of the participants indicated that they manage demand planning using tools such as Excel or Access, while another 24% rely on off-line forecasting tools that draw on structured, downloaded Enterprise Resource Planning (ERP) data. Twenty-seven percent said that their demand planning tools are fully integrated with their ERP. The study also looked at planning accuracy at various levels of detail, such as product family, product and location. Not surprisingly, the research found that the ability to forecast accurately falls off quickly below the product level, with error levels of 25% to 35% at the product/customer, product/package and product/package/supply-point levels. Nevertheless, more than 85% of respondents said that they are attempting to forecast at the product/customer level. A better approach would be to use the more-accurate aggregate forecast and then www.chemicalprocessing.com apply business rules to that forecast to develop lowerlevel demand plans. Collaboration gets a lot of attention in the supply chain arena but 16% of respondents indicated that they don’t collaboratively plan with their customers at all. More than three-quarters of those who said they do plan collaboratively with customers also said that they don’t have any means of measuring the benefit of such collaboration. The variety of tools and approaches used for demand planning points to a range of sophistication and effectiveness — and indicates that there’s often an opportunity for improvements that could have significant benefits. As many in the chemical industry know, weak demand planning ripples throughout manufacturing and the supply chain and ultimately makes the achievement of superior performance a challenge. Supply and materials planning. Chemical companies continue to make progress in the effort to bring increased flexibility to manufacturing through two fundamental practices: the standardization of formulations across facilities, and the retention of decision-making about what facilities to use to produce particular customer orders (as opposed to having the customer make that determination), the research shows. In the 2007 study, 60% of respondents said formulations are consistent across all plants, and 22% said sourcing decisions are handled by the producer. Thirtyseven percent noted that formulations are consistent across some but not all locations, and 67% indicated that they control some but not all sourcing decisions. And on the low end of the flexibility spectrum, 3% of respondents said that their formulations aren’t consistent across facilities, and 11% indicated that their customers determine production locations. Overall, this picture shows progress since the 2005 study, in which only 45% of participants reported consistent formulations were used across all plants only and 20% indicated that sourcing decisions were at their discretion. Demand/supply balancing. In this area, often known as supply and operations planning (S&OP), chemical companies have seen some improvements in the last two years. For example, in terms of collaboration, 53% of respondents in 2007 said that related business units routinely share demand/supply data, up from 41% in 2005. Thirty-seven percent indicated that they share such data periodically, and only 10% said that there’s no such communication between business units. The breadth of participation in the S&OP process also has increased since 2005, with more than 70% of all respondents indicating broad functional representation on the S&OP team. Team members are coming from areas such as customer service, comJanuary 2008 • 25 http://www.chemicalprocessing.com
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