M. Kannegiesser

Value chain management for commodities: a case study from the chemical industry

We present a planning model for chemical commodities related to an industry case. Commodities are standard chemicals characterized by sales and supply volatility in volume and value. Increasing and volatile prices of crude oil-dependent raw materials require coordination of sales and supply decisions by volume and value throughout the value chain to ensure profitability. Contract and spot demand differentiation with volatile and uncertain spot prices, spot sales quantity flexibility, spot sales price–quantity functions and variable raw material consumption rates in production are problem specifics to be considered. Existing chemical industry planning models are limited to production and distribution decisions to minimize costs or makespan. Demand-oriented models focus on uncertainty in demand quantities not in prices. We develop an integrated model to optimize profit by coordinating sales quantity, price and supply decisions throughout the value chain. A two-phase optimization approach supports robust planning ensuring minimum profitability even in case of worst-case spot sales price scenarios. Model evaluations with industry case data demonstrate the impact of elasticities, variable raw material consumption rates and price uncertainties on planned profit and volumes.

An integrated optimization model for managing the global value chain of a chemical commodities manufacturer

The realization of supply chain management concepts goes along with the introduction of comprehensive software systems for supporting decisions at the strategic, tactical, and operational planning level. Moreover, in industry the focus has shifted from a pure logistics-oriented view towards the integration of pricing and revenue issues into cross-functional value chain planning models. This paper presents a practical decision support tool for global value chain planning in the production of chemical commodities. The proposed linear optimization model consists of various modules that reflect sales, distribution, production, and procurement activities within a company-internal value chain. The objective of the model is to maximize profit by coordinating all activities within the supply chain. The model formulation is related to a real industry case. It is shown how the model can be used to support decision making from sales to procurement by volume and value.

Performance Management in the Value Chain

Performance management in the value chain is a critical task for companies confronted with increasingly complex global value chain networks. Managing global material flow and shipments between continents, tracking prices and volumes in global customer and supplier markets, and ensuring reliable and timely delivery of orders are only a few issues that can benefit from professional value chain management concepts. Performance management, one management concept in the value chain, includes strategic, tactical and operative concepts to measure and monitor as well as ensure performance and stability in the value chain. Value chain performance should be tracked regularly and measured transparently, and exceptions and unplanned events should be proactively identified and managed. The objective of this article is to provide a practice-oriented view of performance management in the value chain as well as current frameworks and industry case examples.

An MILP model application for supply network planning in the production of chemical commodities

A global supply network planning model for application in the production of chemical commodities is presented. Major modules of the model formulation reflect sales, distribution, production, and procurement activities. The objective of the model is to maximize profit by coordinating all activities within the supply chain. The model formulation is related to a real industry case.