Process Industry Supply Chains: Advances and Challenges

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Computers and Chemical Engineering 29 (2005) 1225–1235

Process industry supply chains: Advances and challenges
Nilay Shah
Centre for Process Systems Engineering, Department of Chemical Engineering, Imperial College London, London SW7 2AZ, UK Available online 12 April 2005

Abstract A large body of work exists in process industry supply chain optimisation. We describe the state of the art of research in infrastructure design, modelling and analysis and planning and scheduling, together with some industrial examples. We draw some conclusions about the degree to which different classes of problem have been solved, and discuss challenges for the future. © 2005 Published by Elsevier Ltd. Keywords: Network design; Supply chain modelling and planning; Future challenges

1. Introduction The EU has a strong position in the process industries, which constitute a significant proportion of its manufacturing base. The chemicals sector (excluding pharmaceuticals, food and drink and pulp and paper) contributes 2.4% of EU GDP. Process companies often sit in the middle of wider supply chains and as a result traditionally perform differently to companies operating at the final consumer end of the chain. Fig. 1 indicates where the products of the European chemical (i.e. excluding pharmaceuticals, food and drink, etc.) industry end up. In our experience, supply chain benchmarks for the process industries do not measure up well when compared with other sectors (e.g. automotive). Examples of such benchmarks are: (i) stock levels in the whole chain (“pipeline stocks”) typically amount to 30–90% of annual demand, and there are usually 4–24 weeks’ worth of finished good stocks; (ii) supply chain cycle times (defined as elapsed time between material entering as raw material and leaving as product) tend to lie between 1000 and 8000 h, of which only 0.3–5% involve value-adding operations; (iii) low material efficiencies, with only a small proportion of material entering the supply chain ending up as product (particularly fine chemicals and pharmaceuticals, where this figure is 1–10%).

Process industry supply chains, involving manufacturers, suppliers, retailers and distributors, are therefore striving to improve efficiency and responsiveness. For “world class” performance, both the network and the individual components must be designed appropriately, and the allocation of resources over the resulting infrastructure must be performed effectively. The process industries have been hampered in this quest by both intrinsic factors (e.g. the need to influence processes at the molecular level, and wide distributions of asset ages) and technological factors (e.g. availability of tools for supply chain analysis). There are a number of reasons for this, many of which relate to details of process and plant design, and to the prevailing economic orthodoxies when key decisions were taken. It is often difficult to effect large improvements simply by changing logistics and transactional processes—fundamental changes at the process and plant level and at the interfaces between the different constituents of the value-chain from product discovery to manufacture and distribution are often required. The process industries will face new challenges in the future. These include: • a desire to move from a product-oriented business to a service-oriented business, providing life-cycle solutions for customers; • more dynamic markets and greater competition, with shorter product life-cycles; • mass customisation (trying to deliver “specialty” products at “commodity” costs);

0098-1354/$ – see front matter © 2005 Published by Elsevier Ltd. doi:10.1016/j.compchemeng.2005.02.023

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N. Shah / Computers and Chemical Engineering 29 (2005) 1225–1235

Fig. 1. Products of the EU chemical industry (source: CEFIC).

tablishing the best way to configure and manage the supply chain network. The last involves deciding how to operate the network to respond best to the external...
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