Managing Automation - November 2008 - (Page 23)

people using the tools who make the difference. Having knowledgeable people using the right processes is key.” With $50 billion in 2007 revenue, Dow has invested much to obtain high-end skills for its supply chain operations, Weintritt adds. Like many chemical producers, Dow began its supply network optimization journey three years ago. It created a process methodology called Design and Modify Supply Chain and implemented Rockwell Automation’s Arena simulation tool, ILOG’s LogicTools for supply chain optimization, and iThink decision-support software. The people-process-technology strategy has paid off. For instance, as the owner of 28,000 railcars, Dow used advanced modeling techniques to cut empty car miles by several million in the last year or so. “The idea is that you take a holistic view of the railcar network. You set the car up for routing to another production location once it delivers its load. It goes from our plant to a market, to a different plant, to another market that is geographically close. You eliminate empty freight miles by triangulating rather than running back and forth in a straight line,” and that is more energy-efficient. It also reduces the number of rail cars needed, Weintritt says. Dow has been working for years to improve its carbon footprint. And it has succeeded. Since 1995, the company has managed to reduce its global energy consumption by 25%, or 1,400 trillion BTUs, which is equal to the electrical power needs of all California homes for more than a year. As a small example of how this is done, “we are now exporters of electricity from some of our major plants. We generate steam and electrical power from waste heat, and the net excess electricity gets exported back out into the grid,” he says. Don’t be too quick to congratulate Dow, however. “We had to do this,” Weintritt says. Efforts to reduce oil usage for cost reasons go hand-in-glove with the growing worldwide green imperative. Mike Romeri, partner at PRTM, a management consulting firm, expects that green regulation will play an increasingly important part in supply chain design. “That means you want to run factories that are clean, and you don’t want to move things too much. THE CHANGING LANDSCAPE The high price of oil makes the According to MIT professor Larry Lapide, six macro factors will reshape the global scene by 2020: green supply chain concept even more important,” Romeri says. 1. Aging of developed countries bigger picture FOR MANY, A NEW INVENTORY PICTURE 2. Volatility of oil prices 3. Shift of economic/military power toward the East “You cannot ignore energy costs in this industry and stay in business.” — Don Weintritt, Dow Chemical “You cannot ignore energy costs in this industry and stay in business. Even when oil was $25 per barrel, we had huge efforts around this. We’re still struggling. Our supply chain unit cost exceeds our manufacturing unit cost in some cases. A lot of heavy manufacturing companies have become uncompetitive. The ones that worried about energy use early on and worked on it are the ones that will survive.” 4. Tightly aligned trading blocs In many industries, the inven5. Global green laws tor y pendulum is swinging back. Decades of lean thinking 6. Pervasive powerful technologies, including full have reduced inventory levels supply chain visibility to where expensive expedited Source: Massachusetts Institute of Technology shipping is essential. Many manufacturers in that boat are responding by holding more inventory, which would have been anathema until ver y recently. “In the past, our large clients might have taken 15 or 25 warehouses that were located near major customers and consolidated them. That is being rethought right now.” The problem is that manufacturers have to balance the freight cost savings of holding more inventory against the cost of capital from product obsolescence. “In technology industries, the dollar shrinks on the shelf. Inventory gets stale. You have to take that into account,” Dadmun says. Clearly, even where it makes sense, increasing inventory is only a short-term crutch. A better strategy is to make your supply chain agile and resilient enough to enable you to make the best decision at the moment, whatever the conditions (see “Staying Ahead of Demand Changes,” p. 24). To Kreg Kukor, the goal is to set the company up to take advantage of smaller market opportunities. “Instead of having mega factories, let’s look at smaller scale, totally flexible facilities and move them around the world,” says Kukor, president and CEO of Vwebpartners, a supply chain consulting firm. “It’s now cheaper to move the factory than the product. [Be agile enough to] pick up the factor y and move it elsewhere rather than having to ship the product.” Building a company that is agile to this degree depends on a high level of process definition, he adds. “If your processes are extremely well-documented, you should be 23 November 2008

Table of Contents Feed for the Digital Edition of Managing Automation - November 2008

Managing Automation - November 2008 Contents Take 1 At One-Year Mark, Wonderware President Focuses on Empowering Plant Operators Oracle Demos Fusio Apps, Reveals Delays Baan Founder Says BPM Will Replace ERP Emerson Talks Wireless at Annual User Group Event Merger Complete, Intercim Focuses on Collaboration Notes Cover Story: The New Supply Chain Reality Special Report: Keep Out Integration: The On-Demand Interchange Industries: Ending the Endless Waves of Paper Product Scan Advertiser Index Next

Managing Automation - November 2008

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