Business and Digital Trends in the Chemical Industry: Supply Chain Planning
In this blog, we discuss specific topics in supply chain planning associated with and derived from major business trends affecting the value chain in chemicals. For details, we refer you to the initial blog where we introduced the overall value chain. We concentrate on the following areas in which we address those challenges in relation to both business considerations and SAP solutions:
- Margin pressure and supply chain resilience as a top priority topic, especially in volatile times
- Needs and benefits of business networks to enable you to achieve the next level in supply chain integration
- Sustainability considerations of global relevance for all enterprises
These areas require specific supply chain planning processes that can cope with the challenges involved. In this blog, those supply chain planning megatrends are explained and considered from the perspective of the following enterprise-wide planning and exeuction capabilities offered by SAP solutions:
- Touchless planning and seamless planning
- Synchronized planning and planner workspaces
- Holistic planning
- Planning the carbon footprint
1.1 Touchless Planning and Seamless Planning
Time is a constraint for a planner in the chemicals industry. We no longer live in an era in which planners review system-driven planning proposals or even fully loaded tabular planning sheets with all items. Planning proposals are now so close to reality that manual intervention is not needed – and they can be adopted by the planner without alteration. These kinds of planning flows are already possible in, for example, the demand planning domain. In this domain, all planning steps (historical data load, cleansing data, segmentation, automatic forecast model selection, and forecast generation and release) are automated without any intervention by the planner. Then a forecast is delivered with a best-in-class forecast accuracy. An illustrative picture of fully automated process steps (in blue) is shown in the table and supported by the SAP Integrated Business Planning for Supply Chain (SAP IBP) solution.
Source: Course material for the SAP IBP application for demand
1.2 Synchronized Planning and Planner Workspaces
The planning flow is usually split into operational, tactical, and strategic windows. Every horizon normally serves different key performance indicators, such as balanced asset utilization, labor capacity checks, supply capacity feasability, and material component availability checks. Increasing the frequency of refreshing the plans in all windows improves the quality of the final plan. Specific process models are required to facilitate the refresh interaction between the tactical and operational supply chain windows. The chemicals planner needs not only clear demarcation of responsibility of plans but also refresh capabilities. A closed-loop process of tactical supply chain planning and execution working seamlessly across different planning horizons (from sales and operations planning to manufacturing operational planning) and time buckets is called synchronized planning. This can be seen in Figure 1, below.
Figure 1 Source: Strategic Synchronized Planning Facilitated by SAP IBP, S/4HANA, and Intelligent Visibility
Capabilities that are leveraged for the the life sciences industry in SAP IBP and SAP S/4HANA for advanced planning to support synchronized planning are:
- Planning modes (SAP IBP delegating scheduling to SAP S/4HANA (advanced planning also known as PPDS), or SAP IBP and SAP S/4HANA for advanced planning having a dual staged planning responsibility); see example in Figure 2
- Handover of tactical plan orders to detailed scheduling plan orders for advanced planning and scheduling in operative planning
Figure 2: Master Production Scheduling Product Management Production Planning Integration Mode 1
1.3 Planner Workspaces
The former division of the total planning window into strategic, tactical, and operational planning is now blurring, with planning becoming a total-value-chain process. As a result, the planner is now responsible for the quality of the plan across the entire spectrum and therefore requires a different set of planning tools than in the past. Planners previously switched between various planning tools, such as Microsoft Excel, operational planning screens in ERP systems, operational reports for alerts, and so on. However, this fragmented planning process cannot keep up with the speed of changes in today’s dynamic and challenging planning departments. In order to bring data sources together and present them in one flexible user experience, companies can benefit from using the planner workspace functionality within SAP IBP. Such a planner workspace¹ combines several essential data sources into one experience and comprises alerts, planning views, analytics, planning notes, detailed scheduling charts, and collaborative task capabilities.
The planner workspace from SAP IBP provides a personalized, intuitive digital workplace experience with easier access to relevant planning information – with the planner at the front and center.
Figure 3: Using Planner Workspaces from SAP Product Management IBP
1.4 Holistic² Planning in the Chemicals Industry
The chemicals value chain contains an extensive number of planning segments, from raw-based feedstock materials to semi-finished and finished products in many industries. The relatively straightforward optimization of the downstream value chain (procurement, packaging, discrete production, transportation, and storage) can be covered by standard integrated business planning software from SAP (SAP IBP and SAP S/4HANA). Only recently have large chemical enterprises started to work on the coverage of a comprehensive planning solution on one platform, including feedstock and conversion.
Source: SAP Advisory Council
The conversion step in the chemicals value chain involves complex nonlinear models that are not covered by the standard optimization models in SAP solutions. Consider cracker installation with furnaces that only operate under specific preconditions relating to factors such as temperature, feedstock, pressure, product mix, and operation duration. Finding the optimum parametrisation of such an asset is an extremely difficult nonlinear exercise that is now supported with an SAP IBP extension in SAP Business Technology Platform (SAP BTP), which offers an extension of the SAP IBP solution space. The holistic planning approach embeds the downstream market-demand product mix into the upstream conversion operations. The multiple parametrization simulations finally reach an optimum setting for the given case, and these are fed back to the downstream supply chain planning segment.
² DC Manufacturing Insights defines holistic supply chain planning as the broad process by which supply chain organizations anticipate demand for their products and services, ensure that the supply of components and materials is adequate to meet that demand, ensure that inventory levels at all points of the supply chain are optimized, and then develop a consensus plan that balances demand and supply through sales and operations planning. IDC MarketScape: Worldwide Holistic Supply Chain Planning 2022 Vendor Assessment Industry
Figure 5: Illustration of Cracker Planning Architecture Supported by SAP Solutions
1.5 Planning the Carbon Footprint
As stated earlier in this blog, the holistic planning scope in the chemicals industry spans the total value chain, increasing the total carbon footprint of the enterprise. Immediate insight into the carbon footprint based on tactical and operational enterprise planning processes is key in today’s executive boardrooms. By running multiple holistic scenarios, from cracker process till filled tanks vessels of end product, immediate carbon footprint projection can be analyzed and a new planning business process is born³. Stepwise expansion insight into the carbon footprint based on ERP data – and with the help of analytical tools – is becoming a top priority for supply chain planning processes at big enterprises across the globe. This initiative is called Climate 21 and can be found on the learning platform OpenSAP.
³ SAP Product Footprint Management https://help.sap.com/docs/SAP_BTP_PFM/b3e39aed098c41a2b0d49db0caf80711/5290fd9c63f4488bb194c6eddd9fb718.html
Figure 6 Source: The Learning Material for the Climate 21 Initiative on openSAP
1.6 CONCLUSION AND OUTLOOK
In this blog, we discussed specific trends in major supply chain planning processes in the chemicals industry. We explained how specific planning processes help chemical companies to manage challenges regarding margin and cost pressures, participate in business networks, and draw positive effects from sustainability aspects. We plan to show the impacts of those major business and digital trends in the areas of research and development in the next blog.