Ici Supply Chain Management Report by Ali Raza

Imperial Chemical Industries PLC 

REPORT ON

BY: -

ALI RAZA----------------------------------------1390 AYESHA CURMALLY--------------------------1188 SYED SABIH AHMED-------------------------1303 SHOMAILA MALLICK-------------------------1185 FAIZAN SHEIKH--------------------------------1309

SUBMITTED TO:- RANA MUHAMMAD IDREES COURSE: - SUPPLY CHAIN MANAGEMENT

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ACKNOWLEDGEMENTS

Our all ackno acknowle wledgm dgment ents s and regard regards s to ME MERCI RCIFUL FUL ALL ALLAH, AH, Wh Who o blessed us with courage and enhanced our skills in formation of the report. In lasts but of course not the least We show homage and all gratitude to our honorable teacher MR. RANA MUHAMMED IDREES, who supported us and shared his great professional experience and knowledge with us and the management management of ICI for sharing very very comprehensive comprehensive information information about about their production and transportation from raw material to finished goods and whole process of supply chian.

DATED: 10-MAY -2010 -2010

TABLE OF CONTENT

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ICE’S VISION-----------------------------------------------------------------------------------------------------------------------------------------------------------------------1 ICI GROUP IN BRIEF--------------------------------------------------------------------------------------------------------------------------------------------------------1 INTRODUCTION------------------------------------------INTRODUCTION------------------------------------------------------------------------------------------------------------3 COMPETIVE AND SUPPLY  CHAIN STRATEGIES---------------------------------------------------5 AN INTRODUCTION TO SUPPLY  CHAIN MANAGEMENT ---------------------------------------6 DIRVERS AND SUPPLY CHAIN PERFORMANCE---------------------------------------6 MODE OF TRANSPORTATION ------------------------------------------------------------------8 SUPPLY  CHAIN DECISIONS------------------------------------------------------------------------------------------------------------------------ 10 DESIGNING DISTRIBUTION NETWORK  IN A SUPPLY  CHAIN NETWORK -----------------10 SUPPLY  CHAIN MODELING APPROACHES-------------------------------------------------------------------------------12 CREATING CREATING VALUE VALUE BY ALIGNING ALIGNING SUPPLY SUPPLY CHAIN-----CHAIN----------------------------------------------- 13 EFFICIENT CONSUMER RESPONSE (ECR (ECR)) -----------------------------------------------------------------------13 ------------------------------------------------------------ 15 PLANNING DEMAND AND SUPPLY  IN SUPPLY  CHAIN---------S YNCHRONIZATION OF PRODUCTION TO CONSUMER DEMAND-----------------------15 DEMAND AND SUPPLY  CHAIN S YNCHRONIZATION--------------------------------------------------------------------- 16 DEMAND FLOW MANAGEMENT -------------------------------------------------------------------------------------------------------16 SUPPLY  FLOW MANAGEMENT ---------------------------------------------------------------------------------------------------------17 AGGREGATE PLANNING IN SUPPLY  CHAIN-----------------------------------------------------------------------------19 PLANNING AND MANAGING INVENTORIES---------------------------------------------------------------------------21 MANUFACTURER------------------------------------------------------------------------------21 PRODUCTION DECISIONS -------------------------------------------------------------------------------------------------------------------------- 22 INVENTORY  DECISIONS ----------------------------------------------------------------------------------------------------------------------------------------- 23 PRODUCT AND PROCESS INNOVATION--------------------------------------------------------------------------------24 24 CREATING CUSTOMER VALUE BY ALIGNED PACKAGING SUPPLY CHAIN OPERATIONS------PACKAGING SUPPLY  CHAIN BENEFITS------------------------------------------------------------------------------25 SOURCING TRANSPORTING AND PRICING PRODUCTS------------------------------------------------------- 26 LOCATION DECISIONS ------------------------------------------------------------------------------------------------------------------------------------------- 26 TRANSPORTATION DECISIONS-------------------------------------------------------------------------------------------------------27 INFORMATION TECHNOLOGY  AND SUPPLY  CHAIN-------------------------------------------------------------------- 27 ELECTRONIC DATA INTERCHANGE --------------------------------------------------------------------------------------27 MASTER DATA MESSAGES------------------------------------------------------------------------------------------------------------------------ 28 COMMERCIAL TRANSACTIONS MESSAGES-------------------------------------------------------------------------------------------- 28 REPORT AND PLANNING MESSAGES---------------------------------------------------------------------------------29 BENEFITS OF ICI S YSTEM APPLICATION---------------------------------------------------------------------------29 E-BUSINESS AND SUPPLY  CHAIN BUSINESS PROCESS REENGINEERING------------- ----------30 E-BUSINESS IMPLEMENTATION------------------------------------------------------------------------------------------------------- 30 BUSINESS PROCESS AUTOMATION------------------------------------------------------------------------------------31 STANDARDIZATION--------------------------------------------------------------------------------------------------------------------------------------------------- 31 K EY  -------------------------------------------------------------------32 EY  BENEFITS OF ICI S YSTEM APPLICATION---FORWARD-LOOKING STATEMENTS--------------------------------------------------------------------------------------33 BIBLIOGRAPHY -------------------------------------------------------------------------------------------------------------------------------------------------------------34

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ICI’S • • • •

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VISION

To become the leader in formulation science. Outstanding customer and consumer understanding. Leading edge technology platforms. Products that provide superior performance.

ICI GROUP

IN BRIEF

ICI Pakistan Limited (Imperial Chemical Industries) is located in Karachi, Karachi, United Kingdom Kingdom but with Pakistan. Pakistan. The company was subsidiary of  ICI Plc United

worldwide takeover of ICI PLC by AKZO NOBEL now AKZO NOBEL is 75.81% stake holder of ICI PAKISTAN. It was set up as a public limited company in Pakistan in 1952. ICI’s presence in this part of the world, however, predates the formation of  the public limited company and indeed, Pakistan itself. The Khewra Soda Ash Company, a predecessor of ICI Pakistan Limited, set up a soda soda ash ash manufacturing facility in Khewra in 1944 with a capacity of 18,000 tonnes per annum. This facility was sited next to the salt range as rock salt and limestone; limestone; two two key key raw raw mate materi rial als s for for manu manufa fact ctur urin ing g Soda Soda ash ash were were avai availa labl ble e here here in abundance. Akzo AkzoNo Nobe bell is the the larg larges estt glob global al pain paints ts and and coat coatin ings gs comp compan any y and and a majo majorr producer of specialty chemicals. It is a Fortune 500 company, and is listed on the Euro Eurone next xt Amst Amster erda dam m stoc stock k exch exchan ange ge as well well as bein being g incl includ uded ed on the the FTSE4Good Index, and is also a leading company in the Chemicals Industry sector on the Dow Jones Sustainability Sustainability Indexes. AkzoNobel is a dynamic, forward-looking forward-looking company that strives to deliver only the best of products and solutions to its customers and that is driven by a set of  valu values es gear geared ed towa toward rd chal challe leng ngin ing g the the futu future re,, thin thinki king ng with with cour courag age, e, and and delivering tomorrow’s answers today, all to benefit the customer by maintaining competitiveness and anticipating future needs before they arise. a rise.

ICI Pakistan today : -Looking ahead to tomorrow We now operate as an independent business unit within AkzoNobel and as a part of its specialty chemicals portfolio, known as Chemicals Pakistan. Legally we remain ICI Pakistan Limited until such time as the transition phase is completed.

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We are one of the largest quoted companies on the Karachi, Lahore and Islamabad Stock Exchanges We have a paid up share capital of Rs 1.39 billion. Our turnover in 2008 was Rs 31.92 billion and profit before tax crossed Rs 3.13 billion. Our company employs around 1300 permanent staff members.

Our Our five five busin business esses, es, Polye Polyeste ster, r, Soda Soda Ash, Ash, Paints Paints,, Chemic Chemicals als and Life manufa fact ctur ure e and and sell sell a wide wide rang range e of indu indust stri rial al and and cons consum umer er Sciences, manu products. These include:

A bit of history ICI Pakistan Limited was set up as a public limited company in Pakistan in 1952. However, ICI was an active presence in this part of the world well before the formation of the public limited company and indeed, even before Pakistan itself  was created.

1944  The Khewra Soda Ash Company, a predecessor of ICI Pakistan Limited, set up a soda ash manufacturing facility in Khewra with a capacity of 18,000 tonnes per annum. This facility was sited next to the salt range as rock salt and limestone, two key raw materials needed for manufacturing soda ash, were available here in abundance.

1953  The Khewra Soda Ash company was incorporated as a public limited company.

1966  The Khewra Soda Ash Company changed its name to ICI Pakistan Manufacturers Limited. Over the next few decades, major changes took place in the company as our Specia Specialty lty Chemi Chemical cals s and Polyes Polyester ter plant plants s were were commi commissi ssione oned, d, and Imperi Imperial al Chemical Industries (Pakistan) Private Limited and Paintex Limited both merged into ICI Pakistan Manufacturers Limited.

1987 We changed our name to ICI Pakistan Limited

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We launch our Seeds business as well as the Dulux range of coatings. We also also esta establ blis ishe hed d ICI ICI Paki Pakist stan an Powe PowerG rGen en and and set set up the the ICI ICI Paki Pakist stan an Foundation as a charitable trust.

1995 We set up a USD 490 million PTA manufacturing facility at Port Qasim, near Karachi.

1998 PTA manufacturing facility commissioned. commissioned.

2000   The business was de-merged to form Pakistan PTA Limited, which was at the time a subsidiary of ICI Plc UK.

2007 We completed 50 years of continuous listing on the Karachi Stock Exchange.

2008 We formally became part of the AkzoNobel Group, bringing us under the banner of one of the largest coatings and chemicals companies in the world

Businesses & Products Diversity at every step One One of the the most most uniq unique ue thin things gs abou aboutt ICI ICI Paki Pakist stan an is the the wide wide spec spectr trum um of  products we offer and the varied industries that we service through our five diverse businesses.

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From From home home and and auto auto pain paints ts to esse essent ntia iall phar pharma mace ceut utic ical als s and and agri agricu cult ltur ural al products, to chemicals for use in every major industry, and polyester for the textile sector to soda ash for glass and detergents we have something to offer everyone. Our five businesses are:

About Polyester Weaving our way forward We manufacture and market Polyester Staple Fibre (PSF) , a man made fibre and a key substitute and complement for cotton. In a textile intensive country like Pakistan, it is a highly critical raw material that is spun into yarn, which is then woven or knitted into fabric used to make shirts, shalwar kameez, bed sheets etc. that each one of us uses. It is hard to comprehend thus that this fibre, which so closely resembles cotton in its applications, is not grown in the fields but is a part of the petrochemicals chain, and the shirt that you wear has actually been derived from crude oil! We introduced this wonderful product to this country as far back as the early 80’s. As pioneers of the polyester staple fibre technology in Pakistan, we enabled the cotton rich textile industry to diversify their products and be more competitive in the international arena where the growth of man made fibres has been phenomenal.

About Paints Coloring Pakistan for 44 years We know from years of experience that our customers expect nothing short of  the best from us. Delivering results is a part of our DNA; it’s how we do business. And so, we launch innovative products, train our teams, continuously improve our processes, and invest in research to make sure our customers have access to a wide range of high quality products, paint solutions and services. In Pakistan, the latest surveys indicate that 97 out of 100 people know who we are! Our huge distribution setup across the country makes sure our products are available to all these potential customers.

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Of course, we now have an added advantage; the world’s largest decorative and performance coatings company is backing us. With AkzoNobel and its global reach and expertise, we have lots of exciting opportunities for growth and to enter new fields. We realize that a sustainable sustainable business needs to be responsible. While we provide leading innovation and services, we also make sure that our premium quality paint doesn’t harm our consumer or damage damage the environment. Additionally, Additionally, we help our communities through volunteer programs and development initiatives. Put together, all of this makes us the leading paints company in Pakistan.

About Soda Ash Delivering reliability for decades Did you know that every time you pick up a glass, read a newspaper or do your laundry, you experience the use of soda ash? We are market leaders for this key ingredient in the manufacture of glass, paper and detergents. detergents. Soda ash is an essential essential commodity commodity and we’re proud to be the largest producers of it in the country. Our Soda Ash Plant in Khewra was established in the 1940s, even before the creation of Pakistan! Since then, we have seen tremendous growth; we currently have an annual production of 350,000 tons. Our plant is the largest of its kind in Pakistan. We use indigenous raw materials to ensure substantial foreign exchange savings through input substitution. Over the years we have also done our bit for the locality of Khewra; we provide employment to a large number of residents of this relatively impoverished area, and we run community welfare and development initiatives initiatives to benefit the people.

About Life Sciences Committed to improving lives

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We’re We’re in the business business of improvin improving g quality quality of life. life. We have a strong portfolio portfolio of  well-researched leading brands, and we keep diversifying our product range so that whether you need advanced pharmaceuticals for your healthcare needs, or superior seeds to improve the quality of essential crops, we can ensure that you get the best. Our business is diverse and we are proud of the important role we play in help helpin ing g to enha enhanc nce e live lives; s; for for exam exampl ple, e, we mark market et some some of the the lead leadin ing g pharmaceutical brands today such as drugs to fight life-threatening life-threatening diseases like cancer. Because of this, we are even more committed to innovation and keeping ahead of the curve with products and services that draw on the newest research and latest advances. We want to make sure our customers trust in us remains solid and that our brands remain synonymous with quality and consumer confidence.

About Chemicals Turning the wheels of industry We’re not stretching the truth when we say we service practically every industry in the the coun countr try! y! Our Our prod produc ucts ts are are esse essent ntia iall in all all kind kinds s of manu manufa fact ctur urin ing g proce processe sses s and in produc products ts from from adhesi adhesives ves to paint, paint, and from from insul insulati ation on for housing and refrigeration to textile auxiliaries that determine the finish of fabrics we use. We enjoy the benefit of global insights, and knowledge amassed from a long history of serving our customers’ needs. We don’t just manufacture and market essent essential ial ingred ingredien ients ts for today’ today’s s demand demanding ing indust industri rial al world world,, we also also offer offer technical solutions, and we’ve begun exporting into the region. Where chemicals are involved, we know we have to be extra careful about our impact on people and the world around us. Our strong emphasis on health, safety, and environment means we incorporate the best practices from around the world, providing full safety information to customers, a safe workplace for employees, and care for the environment through many of our projects focusing on sustainability

OUR BRANDS:

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Dulux Dulux is a renowned brand the world over, and here in Pakistan it’s no exception.

Wherever you travel in the country, you are likely to see our premium paint brand brand at work work beauti beautifyi fying ng and protec protectin ting g peopl people’s e’s homes homes and workpl workplace aces. s. As a brand Dulux has been known and trusted for generations. We are proud of  that, and work hard to ensure not only that we give our consumers the same top quality products they have grown to rely on, but also that we keep innovating to create new products for the ever-evolving paint market. Whatever your paint needs, we’re sure you will find something in our Dulux range to give you the results you want.

ICI Soda Ash ICI Soda Ash is widely used in several industries Soda ash is an essential ingredient in the manufacture of glass, paper and detergents. We produce and market two different varieties of soda ash under the ICI brand name: • •

Dense Soda Ash Light Soda Ash

International International Paint is part of AkzoNobel, the world’s largest coatings supplier. Our unrivalled investment in product development leads us to provide you with high quality protective coating products. When uncoated carbon steel structures come into contact with the environment, the usual result is corrosion. Protective coatings are essentially designed to help prevent and seriously slow down the corrosion process. In addition, protective coatings can also be used to provide passive fire protection for structural steel. We prov provid ide e prot protec ecti tive ve solu soluti tion ons s to seve severa rall mark market ets s incl includ udin ing g chem chemic ical al,, infrastructure, mining and metals, oil and gas, power, port machinery, and rail. Our Our sub sub busi busine ness ss unit units s incl includ ude e Prot Protec ecti tive ve Coat Coatin ings gs,, Mari Marine ne and and Yach Yachtt businesses. Our technical sales representatives are always available to provide technical supp suppor ort, t, and and reco recomm mmen end d coat coatin ing g syst system ems s best best suit suited ed to each each cust custom omer er’s ’s individual needs

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Paintex We all want the best quality but we also want it at a reasonable price.

Paintex, our mid-tier paint brand, provides you with an opportunity to enjoy the finer things in life while still spending your money sensibly. Paintex gives you a comp comple lete te range ange of exci exciti ting ng colo colorr and and high high qual qualit ity y fini finish shes es for for all all your your requirements, at an affordable price that lets you enjoy color without worrying about costs. Our Paintex range includes the following products: • • •

Paintex Emulsion Paintex Hi-Gloss Paintex Putty

Sikkens Sikkens, a world-reknowned brand, is now available across Pakistan.

At Sikkens it all starts with ideas. We use innovative R&D to produce our range of professional coating systems. Then we make them to the highest standards. And if customers have something specific in mind, they can always call on our experts for personal support. High performance, low maintenance; our products will do everything you need them to. Plus they’re long-lasting and easy to maintain. We now supply premium Sikkens refinish products for the automobile industry to the best dealerships and garages across Pakistan.

Terylene Weaving our way ahead with Terylene, our synthetic Polyester Staple Fiber (PSF) brand.

We manufacture and market Terylene Polyester Staple Fibre (PSF) on a large scale. Terylene is a key substitute and complement for cotton and is used widely in the textile sector where it is spun into yarn, which is then woven or knitted into fabric.

COMPETIVE AND SUPPLY  CHAIN STRATEGIES

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Imperial Chemical Industries PLC 

Top 10 customers as a % of sales of  division Major customers (alphabetical)

Major competitors (alphabetical)

Nationa l starch

Quest

Uniqema

Paints

c. 7.5%

c. 33%

c. 25%

c. 30%

General mills Kimberly -Clark P&G Unichar m Unilever

General mills PepsiCo

Akzo Nobel

B&Q

BP Castrol

Crown Cork

P&G Sara lee

Henkel Sygenta

Focus home base

Unilever

Unilever

Firmenich

BASF

Home depot Akzo nobel

Givaudan

Cognis

BASF

IFF Symrise

Croda Degussa

Takasago

Olean

PPG Sheriwin Williams Valspar

A.E staley Air products Fuller Hekel Rohm & hass

AN INTRODUCTION

TO

SUPPLY  CHAIN MANAGEMENT

  Traditi Traditional onally, ly, marketin marketing, g, distribu distribution tion,, plannin planning, g, manufac manufacturi turing, ng, and the purchasing organizations along the supply chain operated independently.   The These se orga organi niza zati tion ons s have have thei theirr own own obje object ctiv ives es and and thes these e are are ofte often n conflicting. Marketing's objective of high customer service and maximum sales sales dollar dollars s confli conflict ct with with manu manufac factu turin ring g and and distr distribu ibutio tion n goals goals.. Many Many manufacturing manufacturing operations are designed to maximize throughput and lower costs costs with with littl little e consi consider derati ation on for the impac impactt on invent inventory ory levels levels and distribution capabilities. Purchasing contracts are often negotiated with very very little little infor informat matio ion n beyond beyond histo histori rical cal buyin buying g patter patterns. ns. The The resul resultt of  thes these e fact factor ors s is that that ther there e is not not a sing single le,, inte integr grat ated ed plan plan for for the the organization---there were as many plans as businesses. Clearly, there is a need for a mechanism through which these different functions can be

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integ integrat rated ed toget together her.. Supply Supply chain chain manag manageme ement nt is a strate strategy gy throu through gh which such an integration can be achieved.

DIRVERS AND SUPPLY CHAIN PERFORMANCE FACILITIES ICI ICI uses uses faci facili liti ties es deci decisi sion on s to be more more resp respon onsi sive vene ness ss to thei theirr customers. customers. ICI has an end goal of opening manufacturing facilities in every major market that they enter. While there are other benefits to opening local local facil faciliti ities es such such as prote protect ction ion from from curr currenc ency y fluct fluctuat uation ion and trade trade barriers, the increase in responsiveness plays a large role in ICI’s decision to locate in their local market.

INVENTORIES ICI’s competitive targets upper-end customers with high resp respon onsi sive vene ness ss requ requir irem emen ents ts.. Thes These e cust custom omer ers s are are will willin ing g to pay pay a prem premiu ium m to have have the the prod produc ucts ts they they want want wh when en they they want want them them.. To support this competitive strategy. ICI uses inventory the industry stocks a large variety and quantity of products to ensure a high level of availability. In fact ICI stocks a significantly larger amount of inventory. It incurs higher costs because of their large inventory but they gain extra margin fro their customers.

TRANSPORTATION IDENTIFICATION

OF

LOCATIONS

Loca Locati tion ons s are are iden identi tifi fied ed by ICI ICI Glob Global al Loca Locati tion on Numb Number ers s (GLN (GLN). ). Locati Location on numbe numbers rs are are a key conce concept pt in supply supply chain chain manage managemen ment. t. A location number is a numeric code that identifies any legal, functional or physical entity within a business or organization. Each location is allocated a unique number. The identification of locations is required to enable an effic efficien ientt flow flow of goods goods and and infor informat matio ion n betwee between n partn partners ers throu through gh EDI EDI messages to identify the parties involved in a transaction (e.g. buyer, supplier, place of delivery, place of departure).

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Combined with EDI, the SSCC provides a link between the information flow and the physical flow of goods

 To date, it has developed 47 standard messages in its standard. They cover the transmission of master data, commercial transactions, report and planning, transport, financial and general messages.

MODE

OF

TRANSPORTATION

 There are six ways to move products produce by: air, truck, rail, ship, pipeline and electronic transportation. transportation. The farm or market location largely determines which modes of transportation are available. The buyer usually selects the type of transportation and pays for it directly. In some cases, you might pay the transportation cost and include it in the final product selling price.

AIR Airlines are used exclusively to ship a few high-value and extremely perishable products to domestic and export markets. Air freight accounts

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for no more than 10 percent of all chemical shipped from the Pacific Northwest. It is the most expensive mode of transportation. transportation. Produce is loaded in containers containers for placement placement in the aircraft. Precooling the product and the container helps ensure lower arrival temperatures and lengthens the product's shelf life. Using disposable insulation and dry ice inside the container also can help maintain lower transit temperatures. Be sure sure to chec check k with with the the airl airlin ine e for for regu regula lati tion ons s on the the use use of dry dry ice. ice. Permanently insulated containers also are available for produce shipping.

TRUCK   The most widely used means of transporting paints is truck trailer. This method has grown in importance as the national highway system has expanded. Products Products can be shipped by truck from any growing area to any marke markett in the costa costall areas areas aroun around d the world. world.Tra Transp nsport ortati ation on by truck truck usually is more expensive than by rail or ship but less expensive than by air.

RAIL Five percent or less of all produce shipments are by rail. Rail service is used primarily. Destinations usually are major eastern cities. Full carloads almost always are necessary. Product groups move large volumes into large markets on a steady basis. Trailer-on-flat-car Trailer-on-flat-car service is increasing, while straight railcar service is declining.The shipper or the buyer books directly with the originating railroad company. The railroad assigns a nearby loading facility and handles the billing.

SHIP  Total worldwide shipments by sea account for 50 percent or greater of  the chemical transported. Refrigerated containers and each unit has its own own elec electr tric ic refr refrig iger erat atio ion n unit unit powe powere red d by the the ship ship's 's engi engine nes. s. Some Some containers can use modified atmosphere to protect produce better. Dry containers often are used for long-lived.

ELECTRONIC

TRANSPORTATION

All the orders are received by fax, telephone and on the internet and payments are received from banks of the world within the industry .

PIPELINE

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ICI ICI uses uses uniq unique ue kind kind of pipe pipes s to tran transp spor ortt the the chem chemic ical al in the the indust dustrry which ich are are in the for form of liquid quid like ike pet petroleu oleum m and other ther dangerous chemicals which effect the environment and transported with the help of pipes.

INFORMATION ICI is a major manufacturing manufacturing of chemical worldwide worldwide and invested in an information system that enables them to rapidly get customized products to the market. This system allows distribution and customers to actually design windows to custom-fit their needs. Users can place the order and can get price quotes and automatically sends the order to the factory if the customers decide to buy.

SUPPLY  CHAIN DECISIONS We class classify ify the the decisi decisions ons for supply supply chain chain manage managemen mentt into into two broa broad d cate catego gori ries es -- stra strate tegi gic c and and oper operat atio iona nal. l. As the the term term impl implie ies, s, strategic decisions are made typically over a longer time horizon. These are closely linked to the corporate strategy (they sometimes {\it are} the corp corpor orat ate e stra strate tegy gy), ), and and guid guide e supp supply ly chai chain n poli polici cies es from from a desi design gn perspective. On the other hand, operational decisions are short term, and focus on activities over a day-to-day basis. The effort in these type of  decisions is to effectively and efficiently manage the product flow in the "strategically" planned supply chain. DESIGNING DISTRIBUTION NETWORK  IN A SUPPLY  CHAIN NETWORK 

NETWORK  DESIGN METHODS As the very name suggests, these methods determine the location of  production, production, stocking, and sourcing sourcing facilities, and paths the product(s) take through them. Such methods tend to be large scale, and used generally at the inception of the supply chain. The earliest work in this area, although the the term term "sup "suppl ply y chai chain” n”.. They They intr introd oduc uce e a mult multic icom ommo modi dity ty logi logist stic ics s network design model for optimizing annualized finished product flows from plants to the DC's to the final customers. later give a review of the evolution of distribution strategies over the past twenty years, describing how how the the desc descen enda dant nts s of the the abov above e mode modell can acco accomm mmod odat ate e more more echelons and cross commodity detail.

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It attempt to provide a framework for a comprehensive model of a production-distribution system, "PLANETS", that is used to decide what products to produce, where and how to produce it, which markets to pursue and what resources to use. Parts of this ambitious project were succ success essful fully ly imple implemen mente ted d at Genera Generall Motors Motors.. It devel develop op a conc concept eptua uall framewor framework k for manufac manufacturi turing ng strategy strategy analysis analysis,, where where they describe describe a series of stochastic sub- models, that considers annualized product flows from from raw raw mate materi rial al vend vendor ors s via via inte interm rmed edia iate te plan plants ts and and dist distri ribu buti tion on echelons to the final customers. They use heuristic methods to link and optimize these sub- models. They later give an integrated and readable exposition of their models and methods. It present a normative model for resource deployment in a global manufacturing manufacturing and distribution network. Global after-tax profit (profit-local (profit-local taxes) is maximized through the design of facility network and control of  material flows within the network. The cost structure consists of variable and fixed fixed costs costs for material material procurem procurement, ent, producti production, on, distribu distribution tion and trans transpor portat tatio ion. n. They They valid validate ate the model model by applyi applying ng it to analy analyze ze the global manufacturing strategies of a personal computer manufacturer. It provide the most comprehensive deterministic model for supply chain management. The objective function minimizes a combination of  cost and time elements. Examples of cost elements include purchasing, manufacturing, pipeline inventory, transportation costs between various sites, duties, and taxes. Time elements include manufacturing lead times and transit times. Unique to this model was the explicit consideration of  duty and their recovery as the product flowed through different countries. Implementation of this model at the Digital Equipment Corporation has produc produced ed specta spectacu cular lar resul results ts --- savin savings gs in the order order of $100 $100 mill million ion dollars. Clearly, these network-design based methods add value to the firm in that they lay down the manufacturing and distribution strategies far into the future. It is imperative that firms at one time or another make such integrated decisions, encompassing production, location, inventory, and transportation, transportation, and such models are therefore indispensable. Although the above review shows considerable potential for these models as strategic determinants in the future, they are not without their shortcomings. Their very nature forces these problems to be of a very large scale. They are often difficult to solve to optimality. Furthermore, most of the models in this category are largely deterministic and static in nature. Additionally, those that consider stochastic elements are very restrictive in nature. In sum, sum, ther there e does does not not seem seem to yet yet be a comp compre rehe hens nsiv ive e mode modell that that is representative of the true nature of material flows in the supply chain.

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SUPPLY  CHAIN MODELING APPROACHES Clearly, each of the above two levels of decisions require a different perspective. The strategic decisions are, for the most part, global or "all encompassing" in that they try to integrate various aspects of the supply chain. Consequently, the models that describe these decisions are huge, and require a considerable amount of data. Often due to the enormity of  data data requ requir irem emen ents ts,, and and the the broa broad d scop scope e of deci decisi sion ons, s, thes these e mode models ls prov provid ide e appr approx oxim imat ate e solu soluti tion ons s to the the deci decisi sion ons s they they desc descri ribe be.. The The operational operational decisions, meanwhile, address the day to day operation of the supply chain. Therefore the models that describe them are often very specific in nature. Due to their narrow perspective, these models often consider great detail and provide very good, if not optimal, solutions to the operational decisions.  To facilitate a concise review of the literature, and at the same time attempting attempting to accommodate accommodate the above polarity in modeling, we divide the modeling approaches into three areas --- Network Design, ``Rough Cut" methods, and simulation based methods. The network design methods, for the most part, provide normative models for the more strategic decisions.   Thes These e model models s typic typicall ally y cover cover the four four major major decis decision ion areas areas descr describe ibed d earlier, and focus more on the design aspect of the supply chain; the establishment of the network and the associated flows on them. "Rough cut" methods, on the other hand, give guiding policies for the operational decisions. These models typically assume a "single site" (i.e., ignore the netwo network rk)) and and add suppl supply y chain chain chara characte cteris ristic tics s to it, such such as expli explicit citly ly considering the site's relation to the others in the network. Simulation methods are a method by which a comprehensive supply chain model can be anal analyz yzed ed,, cons consid ider erin ing g both both stra strate tegi gic c and and oper operat atio iona nall elem elemen ents ts.. Howe Howeve ver, r, as with with all all simu simula lati tion on mode models ls,, one one can can only only eval evalua uate te the the effectiveness of a pre-specified policy rather than develop new ones. It is the traditional question of "What If?" versus "What's Best?".

CREATING VALUE BY ALIGNING SUPPLY CHAIN STRATEGY WITH BUSINESS STRATEGY  Supply Supply chain chain strate strategy gy has has evolve evolved d from from integr integrati ating ng logis logistic tics s and and lowering costs to working together with customers and suppliers to fulfill consumers’ wishes better, faster and at less cost. The need to reduce supply chain assets and costs, while at the same time increase customer service and company growth is driving the application and development of  common standards. Recognizing the strategic importance of the supply chain, companies across the world have implemented ICI standards. The Supply Chain Management Report  KASBIT (University (University With a Difference) Difference )

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ICI System enables efficient supply chain management and international trade by providing standard tools that allow all supply chain participants to communicate in one global language of business. Because supply chain capabili capabilities ties are related related to financi financial al performa performance nce,, aligning aligning supply supply chain chain stra strate tegy gy with with busi busine ness ss stra strate tegy gy has has beco become me a top top prio priori rity ty for for many many companies. By uniting corporate and supply chain objectives, they can boost profitability and growth, and therefore increase shareholder value.

EFFICIENT CONSUMER RESPONSE (ECR) Implementing strategic initiatives, such as ECR, could result in total supply chain cost reductions as high as a 6.5% reduction in consumer pric prices es.. Even Even wh when en taki taking ng the the aver averag age e 5.7% 5.7% figu figure re (con (consi sist stin ing g of a reduction in operating costs of 4.8% and reduction in inventory costs of  0.9%), this translates into over $ 33bn worth of savings across the entire industry. Manufacturers, with or without ECR programmes, do not ignore the role of packaging suppliers since they account for 30% to 50% of total costs costs and and freque frequentl ntly y dictat dictate e downs downstre tream am servic service e level levels. s. Under Under these these strategic alliances, ECR places a high priority on joint efforts that address repl replen enis ishm hmen entt conc concep epts ts,, wh whic ich h comp compre ress ss cycl cycle e time times s and and impr improv ove e deman demand d visi visibil bility ity.. Resea Researc rch h under undertak taken en by An Ander dersen sen Consu Consulti lting ng for for a consumer goods manufacturer shows that reducing the selling price by 1% requires a 5% cut in supply costs to avoid a profit shortfall, which usually has has a furth further er negat negativ ive e impac impactt on custo custome merr servi service. ce. This This is havin having g an enormous effect on the packaging industry and is considered one of the driv driver ers s behi behind nd its its cons consol olid idat atio ion. n. Rela Relati ting ng to pack packag agin ing g mate materi rial als. s. Nonetheless, given that the manufacturers spend the largest amount of  their their costs costs on ingred ingredien ients ts and packa packagin ging g (46.4 (46.4% % of all all their their exter external nal costs costs), ), and and that that they they repre represen sentt a substa substant ntial ial porti portion on of the consu consumer mer price, packaging material buyers cannot ignore them. Many manufacturers’ first reaction is to eliminate high inventories due to poor communication communication of actual consumer demand. When this process is taken to its logical extreme, it will result in synchronization of production to retail sales. MANFATURER SOURCS OF COST – EXPRESSED AS % OF CONSUMER PRICE

Advertisement Consumer promotion funds Ingredients and packaging Introduce products Merchandise products Promote product

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13.9% 11.3% 46.4% 2.6% 2.7% 1.8%

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Replenish products

21.3%

 There is no doubt that the synchronization of production to retail sales will have a profound impact on packaging companies. companies. They will have to be highly efficient to remain in business. However, efficiency alone will not not be a sust sustai aina nabl ble e sour source ce of comp compet etit itiv ive e adva advant ntag age. e. Not Not only only to facilitate and satisfy their customers with additional levels of service and supply chain integration, but also to stimulate and inspire demand for their their own products products and services services.. Ultimate Ultimately, ly, packagin packaging g compani companies es will evolve evolve from from measu measuri ring ng perfor performan mance ce in terms terms of mark market et and catego category ry share, to measuring performance in terms of overall consumer spending.

•

Cost Reduction - Total Supply Chain

PLANNING DEMAND AND SUPPLY  IN SUPPLY  CHAIN

S YNCHRONIZATION

OF

PRODUCTION

TO

CONSUMER DEMAND

Retailers and consumer goods manufacturers, were first to increase shareholder value by improving inventory and logistics management by means of ICI standards. Daily deliveries from regional distribution centers to points of sale eliminated the need for most of the backroom stock. Instore inventories were even further reduced by electronic point of sale data capture, combined with automated store level, sales-based ordering.  Just-in-time supplier delivery and optimized order sizes kept distribution centre stock to a minimum. The future source of inventory reduction and supp supply ly chai chain n opti optimi miza zati tion on is the the sync synchr hron oniz izat atio ion n of pro produc duction tion to consumer demand. Packaging suppliers are increasingly asked by their custo customer mers s to apply apply leadin leading g edge edge manage managemen mentt method methods s and and availa available ble technologies technologies to reduce costs costs and response times. times. According According to the study,

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raw materials and packaging suppliers receive on average 32.8% of the consumer price in revenue from the manufacturers. Since the study did not closely examine suppliers, we do not have a detailed cost structure

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The Key Enabler of Efficient Supply Chain Management Management Is the Establishment of International Business Standards

DEMAND

AND

SUPPLY  CHAIN S YNCHRONIZATION:

Comp Compan anie ies s that that wish wish to achi achiev eve e stat statee-of of-t -the he-a -art rt supp supply ly chai chain n management should look for a holistic strategy and a supply chain model that not only accounts for both supply and demand management, management, but also supports the shift from supply chain integration towards synchronization. While the demand chain includes processes, such as product develop development ment,, marketi marketing, ng, sales sales and category category managem management, ent, the supply supply chai hain flo flow cover overs s purc urchasin sing, manu anufac facturi uring, ware arehou housin sing and and Distribution. Distribution. Each of these processes consists of numerous sub-processes, sub-processes, which all provide opportunities to improve efficiency and effectiveness of  packaging supply chain operations. Traditional supply chain management has focused on improvements in the supply-side processes. However, the relat relation ionshi ship p betwee between n supply supply and dema demand nd is one of inter interdep depen enden dency. cy. Companies need to understand customer demand in order to manage it, create future demand, and meet the level of desired customer satis satisfac factio tion. n. Dema Demand nd defin defines es the supply supply chain chain-ta -targe rget. t. The The suppl supply y side side capab capabil iliti ities es suppo support, rt, shape shape and susta sustain in deman demand. d. ICI standa standards rds play play a crucial role in these processes. The overall financial success of a company is determined by how it responds to its customers. Demand flow strategy defi define nes s the the link linkag age e betw betwee een n a comp compan any’ y’s s cust custom omer ers s and and sour source ces s of  products and services it provides. In order to understand the demand-side demand-side proc proces esse ses, s, pack packag agin ing g comp compan anie ies s incr increa easi sing ngly ly focu focus s on coor coordi dina nate ted d improvements in two spheres of activity - movement of information and movement of goods and services. This translates into: Supply Chain Management Report  KASBIT (University (University With a Difference) Difference )

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• “Demand flow management”, which involves communicating demand from the point of sale, back-up the supply chain; • “Supply flow management”, which involves shortening the time it takes to produce and deliver a product from the point at which the demand is communicated to until it reaches the end-user.

DEMAND

FLOW MANAGEMENT

Most Most com compani panies es fore foreca cast st futu future re dema deman nd base based d on hist histor oric ical al customer order patterns. However, actual consumer demand is often very different from the stream of orders. Each member of the supply chain observes the demand patterns of its customers and in turn produces a set of demands for its suppliers. The further a company is upstream in the suppl supply y chain chain,, or in other other words words furthe furtherr from from the consu consumer mer,, the more more distorted is the order stream relative to consumer demand. Forecasts are inevitably more accurate when they are based on actual consumerdemand, such as point of sale data. The supply chain begins with the end-customer.

•

Linking Point of Sale Data with the Ordering Process by Means of ICI System Tools

SUPPLY  FLOW Supply through the trad tradit itio iona nall lly y Nowadays,

MANAGEMENT

flow management is centered on the delivery of products supply chain to the end-customer. Inventory planning was confi onfine ned d to the the down downst stre ream am end end of the the supp supply ly chain hain.. retailers have started to push inventory-planning

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responsibilities back to manufacturers of finished products. Increasingly, packaging companies are expected to perform logistics functions for their customers (the manufacturers). Some packaging suppliers are doing this befo before re cust custom omer ers s ask, ask, wh whil ile e othe others rs are are bein being g forc forced ed alon along g by thei theirr custo customer mers’ s’ requi requirem rement ents. s. Un Under dersta standi nding ng the princ principl iples es of inven inventor tory y planning and the ICI standards used in it is valuable for all partners in the supply chain, packaging companies and their own suppliers included. Point of sale scanning of goods identified by ICI numbers and bar codes allows retailers to track exactly what is being sold and operate computerized perpetual inventory systems.

•

•

Examples of ICI Messages Used in “Demand Flow” Management

ICI System Tools Used in “Supply Flow” Management

It is the critical link between the chain’s supply and demand sides: • From the demand side, the distribution centre must meet all customer specific requirements with maximum responsiveness; • From the supplier’s viewpoint, it focuses on efficient handling, inventory management, product flow, transportation and delivery.

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Example of ICI Messages used in "Supply flow" Management

Linking Linking orders orders with inventories inventories and invento inventories ries with purchasing purchasing and production provides a leap forward in improving customer responsiveness and and effic efficien ientt reple replenis nishme hment. nt. ICI Syste System m tools tools enabl enable e the distri distribut bution ion centr entre e to effic ficien iently tly perfo erforrm its its four four basic sic fun function tions s: rec receiv eiving, ing, replenishment, picking and shipping.

•

ICI Standards drive the Warehouse Management System

 The WMS responds to relayed data by information triggering the next task. ICI numbers and bar codes and ICI messages drive the WMS. They replace manual processes, inclusive of confirmation and validation of all product movement.

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AGGREGATE PLANNING IN SUPPLY  CHAIN DELIVERING SIGNIFICANT AND SUSTAINED

PERFORMANCE

IMPROVEMENT

• Four year Group targets announced in October 2003 • Substantial bottom line improvement from greater emphasis on: - Differentiated resource allocation - Cost and capital effectiveness - Effective execution facilitated by new organization model • Stronger cash generation over time: - Refocusing ICI’s businesses - Reducing legacy cash flows • Improved balance sheet flexibility

ICI’S STRATEGY : DIFFERENTIATED RESOURCE

ALLOCATION

• Basic strategies will differ in each segment • Resources for top line growth will be allocated preferentially to businesses in the” grow aggressive” quadrant • In some cases divestment will be considered for “maintain selectively” businesses where value- adding

  e   e   c   v   n    i   a   s    t   s   s   e   c   r    i   g   g   g   e    t    A   a   e   r   v    t    i    t    S   c   e    l   e    S

 



Paint N America Pan – Atlantic (European and North American Adhesives) Pan – Atlantic Starch

     

  

Packaging coatings Base oleo chemicals Base surfactants

 

Fragrances Flavors Electronic materials Starch Asia Adhesives Asia Paints Asia Paints Europe Paints L America

Maintain Grow Strategic Approach

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PLANNING AND MANAGING INVENTORIES

MANUFACTURER Automated store ordering relies on the ICI System to record product movem movement ent (inven (inventor tory) y) and autom automati atica cally lly gener generate ate a store store order. order. The The order is sent electronically to the distribution centre. A similar ordering process is repeated between the product manufacturer manufacturer and his supplier of  packaging materials, and between the packaging company and its own suppliers. The companies that have adopted this best practice benefit through lower inventories and higher product availability allowing for more accurate synchronized production forecasting, planning and execution.  The ICI System enables suppliers of packaging materials and their customers to share information that allows both to exercise judgment on the quantities and timing of deliveries and production. Responsibility for the management and ownership of inventory is agreed upon between trading partners. “Vendor managed inventory” requires more knowledge and and tota totall cont contro roll over over the the logi logist stic ical al proc proces esse ses s invo involv lved ed.. It enab enable les s supp suppli lier ers s to make make bett better er deci decisi sion ons s on how how to repl replen enis ish h cust custom omer ers’ s’ warehouses with the input of necessary product movement information from their customers. The concept of self-billing is also enabled by ICI standards. In essence, it allows the customer to pay for the actual goods received. The price, delivery and payment terms are previously agreed on between the trading partners. Self billing is often applied in tandem with vendor managed inventory.  The  s reason for using these concepts is to ensure that materials are RAW MATERIALS    t   s   o Petrochemical ~40%   c

  e    l    b   a    i   r   a   v    l ~70   a    t %   o    T

E,g vinyl acetate monomer Ethylene oxide Acrylic monomers Resins/solves Renewable resources

e.g. Com/tapica/potato Com/tapica/potato citrus derivation vegetable oils tallow Other

 Thousands of products as varied as T 1O2 and China clay

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~30%

~30%

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PRODUCTION DECISIONS  The strategic decisions include what products to produce, and which plants to produce them in, allocation of suppliers to plants, plants to DC's, and DC's to customer markets. As before, these decisions have a big impact on the revenues, costs and customer service levels of the firm.  These decisions assume the existence of the facilities, but determine the exact path(s) through which a product flows to and from these facilities. Another critical issue is the capacity of the manufacturing facilities--and this largely depends the degree of vertical integration within the firm. Operat Operation ional al decisi decision ons s focus focus on detai detailed led produc productio tion n schedu schedulin ling. g. These These decisions include the construction of the master production schedules, scheduling production on machines, and equipment maintenance. Other considerations include workload balancing, and quality control measures at a production facility.

INVENTORY  DECISIONS  These refer to means by which inventories are managed. Inventories exist at every stage of the supply chain as either raw materials, semifinished or finished goods. They can also be in-process between locations.  Their primary purpose to buffer against any uncertainty uncertainty that might exist in the supply chain. Since holding of inventories can cost anywhere between 20 to 40 percent of their value, their efficient management is critical in supply chain operations. It is strategic in the sense that top management sets goals. However, most researchers have approached the management management of inventory from an operational perspective. These include deployment strategies (push versus pull), control policies --- the determination of the optimal levels of order quantities and reorder points, and setting safety stock levels, at each stocking location. These levels are critical, since they are primary determinants of customer service levels.

PRODUCT STEWARDSHIP Commitment to product stewardship is one of the core elements of  ICI’s Responsible Care Management Management System. This encompasses protecting our our custo customer mers s and the the publi public c by the assess assessmen mentt and manag managem emen entt of  potential risk from our products throughout their life cycle: research and development, raw material sourcing, manufacture, storage, distribution,

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Applications, reasonably foreseeable uses, including the proper handling by customers, distributors and other companies. Our product stewardship system applies five global standards: design and development; product mana manage geme ment nt;; dist distri ribu buti tion on and and use; use; supp suppli lier ers s and and othe otherr purc purcha hase sed d services services;; material material hazards; hazards; and resource resource conserv conservatio ation. n. We have made good progress in the coverage of product stewardship assessments, with improving performance in the majority of businesses. In one business the compliance levels are below expectations: there is a focused drive to improve understanding and performance. There has been a significant reduction in distribution incidents, incidents, mainly due to improved performance in our Paints business. Our procurement procurement and safety, health and environment environment professionals have carried out in excess of 300 assessments of priority suppl supplier iers s using using our integ integrat rated ed asses assessm sment ent proce process: ss: of these, these, 69 have have incl includ uded ed a veri verifi fica cati tion on visi visitt to disc discus uss s the the asse assess ssme ment nt resu result lts s and and improvement plans. The assessments have helped us to identify areas where we can work together to improve performance.

PRODUCT

AND PROCESS INNOVATION

We made progress in strengthening the way we integrate sust sustai aina nabi bili lity ty issu issues es into into the the inno innova vati tion on proc proces esse ses s used used acro across ss the the company. company. Both Uniqema and National Starch have carried out a full review of their stage-gate processes and formalised formalised their use across the business. Processes are developed to reduce the impact of both operations and products. These improvements include reduced use of energy, water and raw raw mate materi rial als; s; redu reduce ced d wast waste; e; and and raw raw mate materi rial al subs substi titu tuti tion ons. s. Our Our scientists and engineers are also developing products and services that give social and environmental benefits in use.

CREATING CUSTOMER VALUE BY ALIGNED PACKAGING SUPPLY CHAIN OPERATIONS Different customers customers have different product flows through a variety of  downstream supply chain channels. All these supply chain flows require tailored logistic responses. Proprietary item numbering structures and bar code symbologies, and proliferation of different pallet labels, were set to

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meet the needs of packaging material suppliers’ operations and not the need needs s of thei theirr cust custom omer ers. s. The The key key to buil buildi ding ng cost cost-e -eff ffec ecti tive ve tail tailor ored ed logistics logistics services is to satisfy different customer requirements by applying the same global multi-industry multi-industry standards. For these packaging companies, which do not use global business standards, providing customized services coul could d resul resultt in additi additiona onall cost cost to serve serve their their custo customer mers. s. An Any y compa company ny could ould easi easily ly endend-up up inve invest stin ing g in seve severa rall diff differ eren entt bar bar codi coding ng and and infor informat matio ion n syste systems ms in an effor effortt to satis satisfy fy variou various s identi identific ficati ation on and and communication requirements by its customers.

•

Applying EAN•UCC Standards Is the Key to Building Cost Effective Tailored

For most customers the additional cost cannot be recovered from the margins associated with them. Aligning internal logistics operations with custo ustome merr logist gistic ics s by means eans of ICI ICI stan stand dards ards ena enable bles pac packaging ging companies to satisfy the variability in services their customers require. As well as their own internal needs, such as to improve the return on assets and funds employed on logistic activities. By deciding to implement ICI stan standa dard rds, s, comp compan anie ies s are are able able to cost cost-e -eff ffec ecti tive vely ly deve develo lop p logi logist stic ics s operations that are aligned to their customer requirements. This provides a new competitive advantage for packaging companies that are able to conv conver ertt thei theirr logi logist stic ics s stra strate tegy gy from from comp comple lexi xity ty redu reduct ctio ion n and and cost cost-efficiencies to revenue and margin enhancement. Preferred supplier status and increased margins are the rewards that await suppliers of packaging materials that master the alignment of the supply chain.

PACKAGING SUPPLY  CHAIN BENEFITS

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 The benefits for suppliers of packaging materials are obvious. They are now able to follow their products by scanning them and save on administration costs by automating the link between the physical flow of  goods and the information flow. Furthermore, they can safely invest in new procedures and equipment in the knowledge that they now use a globa globall busin business ess stand standard ard inste instead ad of bilate bilatera rall soluti solutions ons forced forced by one trading partner on another. Their customers benefit because warehouse and inventory administration is now done simply by scanning the pallet and and thei theirr orde orders rs are are auto automa mati tica call lly y fulf fulfil ille led. d. Both Both part partie ies s bene benefi fitt by comm commun unic icat atin ing g by mean means s of ICI ICI stan standa dard rds s - the the glob global al lang langua uage ge of  business, thus providing an optimal control of the flow of goods, services and and info inform rmat atiion. on. The The appl applic icat atio ion n of inte intern rnat atio iona nall lly y stan standa darrdize dized d autom automate ated d data data captu capture re techno technolog logy y provi provides des a solid solid basis basis for furthe furtherr autom automati ation on by intro introduc ducing ing EDI-b EDI-base ased d order orderin ing g and invoic invoicin ing. g. Smurfi Smurfitt Stone Container Corporation is the world leader for packing cardboard. It is the number one for corrugated paper and cardboard, collapsible boxes, paper bags and recuperation of used paper. Globally, Smurfit makes 10% of all cardboard boxes. With 564 company sites, Smurfit is present in 33 countries.

SOURCING TRANSPORTING AND PRICING PRODUCTS

LOCATION DECISIONS  The geographic placement of production facilities, stocking points, and sourcing points is the natural first step in creating a supply chain. The location of facilities involves a commitment of resources to a long-term plan. Once the size, number, and location of these are determined, so are the the poss possib ible le path paths s by wh whic ich h the the prod produc uctt flow flows s thro throug ugh h to the the fina finall customer. These decisions are of great significance to a firm since they repre represen sentt the the basic basic strat strategy egy for acces accessin sing g custo custome merr mark markets ets,, and and will will have a considerable impact on revenue, cost, and level of service. These

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decisions should be determined by an optimization routine that considers production costs, taxes, duties and duty drawback, tariffs, local content, dist distri ribu buti tion on cost costs, s, prod produc ucti tion on limi limita tati tion ons, s, etc. etc. (See (See Arnt Arntze zen, n, Brow Brown, n, Harrison and Trafton [1995] for a thorough discussion of these aspects.) Alth Althou ough gh loca locati tion on deci decisi sion ons s are are prim primar aril ily y stra strate tegi gic, c, they they also also have have implications on an operational level.

TRANSPORTATION DECISIONS   The mode choice aspect of these decisions is the more strategic ones. These are closely linked to the inventory decisions, since the best choic hoice e of mode mode is ofte often n foun found d by trad tradin ingg-of offf the the cost cost of usin using g the the particular mode of transport with the indirect cost of inventory associated with that mode. While air shipments may be fast, reliable, and warrant lesser safety stocks, they are expensive. Meanwhile Meanwhile shipping by sea or rail may may be much much chea cheape per, r, but but they they nece necess ssit itat ate e hold holdin ing g rela relati tive vely ly larg large e amounts of inventory to buffer against the inherent uncertainty uncertainty associated with them. Therefore customer service levels and geographic location play vital roles in such decisions. Since transportation is more than 30 percent of the logistics costs, operating efficiently makes good economic sense. Shipment sizes (consolidated bulk shipments versus Lot-for-Lot), routing and scheduling of equipment are key in effective management of the firm's transport strategy.

INFORMATION TECHNOLOGY  AND SUPPLY  CHAIN

ELECTRONIC DATA INTERCHANGE ICI messages are used for EDI communications. EDI is the communication communication of standardized standardized information information between organizations organizations by way of info inform rmat atio ion n tech techno nolo logy gy.. In othe otherr word words, s, comm commun unic icat atio ion n betw betwee een n compu ompute terr appl applic icat atio ions ns.. The The idea idea behi behind nd EDI EDI is to mini minimi mise se huma human n intervention in this exchange and allow employees to focus on business processes rather than administrative functions.

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Standard messages are divided into four categories

MASTER DATA MESSAGES   These These conta contain in data data that that rarely rarely chang changes es (produ (product ct measu measure remen ments, ts, names and addresses,etc.): • The The Part Party y Info Inform rmat atio ion n mess messag age e is used used to iden identi tify fy all all the the loca locati tion ons s (Globa (Globall locati location on number numbers: s: name, name, addre address ss,, contac contactt person persons, s, financ financial ial account accounts, s, etc.) etc.) associa associated ted to subseque subsequent nt commerc commercial ial transact transactions ions and their related operational information. • The The Produ Product ct Inform Informati ation on messa messages ges provi provide de partie parties s with with infor informat matio ion n containing the descriptive, logistical and financial details of a product or

•

Data Alignment

COMMERCIAL TRANSACTIONS MESSAGES  These messages cover the general trading cycle from quotation request to remittance advice.

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AND

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PLANNING MESSAGES

  The These se mess messag ages es prov provid ide e valu valuab able le and and up-t up-too-da date te repo report rts s and and foreca forecasts sts conce concerni rning ng delive delivery, ry, sales sales and inven inventor tory, y, thus thus enabli enabling ng the the partners involved to plan their activities and marketing strategies.

BENEFITS

OF

ICI S YSTEM APPLICATION

  The The appl pplicatio ation n of sta statete-of-t of-th he-ar e-artt pack ackagi aging supp supplly chai hain manag manageme ement nt suppo support rted ed by ICI System System-t -tool ools, s, enable enables s more more econom economic ic capac capacity ity plann planning ing,, more more flexi flexibil bility ity in produc productio tion n (faste (fasterr reacti reaction) on) and optimization of articles to be produced, less production runs (reduction of  capa apacity ity down downttime ime and and set up wasta stage), ge), and impro proved qua qualit lity. Improvements were made in raw material disposition and availability, as well well as logis logistic tics. s. Work Working ing capit capital al was reduc reduced ed by more more effic efficien ientt stoc stock k control, and so was the administration. In concrete terms, the new ebusiness process resulted in overall savings between 7 and 8%. Production and delivery forecasts, inventory reports, dispatch and remittance advices are exchanged exchanged with the suppliers suppliers of packaging packaging materials. materials. Administrative Administrative savings from a streamlined procurement process and self-billing, reduction of inventory, out-of-stock and write-offs are the key benefits achieved by ICI. In tangible terms, its supply chain security level now stands at 99%. Packaging Packaging material costs are reduced by 5-10%, and so are the packaging material stocks, by nearly 30%. In view of the positive results will extend the application of the reengineered business process and ICI standards to all of its supplier suppliers s of raw and packaging packaging material materials, s, while it will extend extend them to other customers. Over the years Kappa Packaging has grown to become one of largest producers of recycled paper, graphic and specialty boards, and “performance packaging” solutions. Today, it is the largest producer of recycled paper and solid board based on waste paper. With some 8,000 employees at 50 paper, board, and packaging companies in 12 countr countries ies,, it provi provides des its custo customer mers s with with a mix of opport opportuni unitie ties s in corru orruga gate ted d and and soli solid d boar board. d. The The comp compan any’ y’s s visi vision on is to supp supply ly its its custo ustome mers rs with with cost cost effe effec ctive tive,, high highly ly prot protec ecti tive ve pack packag agin ing g with with a maximum of service. Knowing that packaging plays an important role in logis logistic tical al proce processe sses, s, it has acqui acquired red exper experti tise se not only only in packa packagin ging, g, tran transp spor ort, t, unpa unpack ckin ing g and and recy recycl clin ing, g, but but also also in cust custom omer er serv servic ice. e. it includes as many aspects as possible of the total logistical process in its packaging packaging solutions. This creates extra advantages at many stages of this process, both with regard to the sender and the recipient.

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Imperial Chemical Industries PLC 

E-BUSINESS AND SUPPLY  CHAIN

BUSINESS PROCESS

REENGINEERING  The two trading partners decided to optimize their entire business process by abandoning the classic procurement process. It relied on the customer, first specifying its packaging material requirements, searching for suppliers and receiving their offers, identifying the best, and only then proceeding to order the materials. Once they were received, would then verify their quality and the invoice before proceeding to pay it. The main weakness of this process was that it had too many steps that did not add valu value e (e.g (e.g.. supp suppli lier er sele select ctio ion n and and pric price e nego negoti tiat atio ion n per per each each item item,, chec checkin king g of quali quality ty of incomi incoming ng goods goods and invoi invoice ces) s) and encour encourage aged d safety stocks along the supply chain. The changing business environment rende rendered red this this procu procurem rement ent pract practice ice obsol obsolete ete.. Du Duri ring ng the the last last decade decade,, product life got shorter while flexibility requirements increased prompting frequent packaging design changes. The cost of buffer stocks became unsus unsustai taina nable ble,, and and at the the same same time, time, sales sales and and produc productio tion n forec forecast asts s continued continued to fluctuate. In response, a new optimized business process process was developed and enabled by e-tools based on ICI standards.

E-BUSINESS IMPLEMENTATION ICI ICI deci decide ded d to form form stra strate tegi gic c busi busine ness ss alli allian anc ces for for long long term term cont contra ract ctua uall co-o co-ope pera rati tion on with with its its pack packag agin ing g supp suppli lier ers. s. It dema demand nded ed delivery delivery of quality quality material materials s from control controlled led (ISO certifie certified) d) product production ion processes, processes, switched price agreements to product lines and embarked on a partner selection based on quality, reliability, reliability, flexibility, and cost criteria.It would would comm commun unic icate ate to them them its produc productio tion n requi requirem rement ents, s, such such as the the quality, quantity and timing of deliveries of packaging materials. This was tran transl slat ated ed into into deli delive very ry,, prod produc ucti tion on,, and and info inform rmat atio ion n wind window ows, s, as illus illustra trated ted in table table below. below. The selec selected ted packa packagin ging g suppli suppliers ers had had to be ready ready to progr progress ess to e-busi e-busines ness s by being being ICI System System compet competent ent.. The The chosen communication technology was EDI - because of the speed and security of communication, as well as allowing for a standard interface between IT applications by means of ICI messages. Another requirement was the ability to provide accurate and timely product movement data and impleme lemen nt the the conc oncept of self self--bill illing. ing. Theref erefo ore, tra trade item tem numbering and bar coding was another pre-requisite.

BUSINESS PROCESS AUTOMATION

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 The main purpose of the application was to record packed production and to indicate when orders were complete and ready for dispatch. The finished goods warehouse at a corrugated factory is essentially a holding area where the pallets making up an order are assembled, immediately prior to dispatch. The norm for Packaging is for goods to be manufactured to meet specific orders rather than being manufactured for future dispatch from stock.

STANDARDIZATION Once this system was operational, operational, a number of customers requested the addition of further bar coded information to the pallet labels on loads deli delive vere red d to thei theirr fact factor orie ies, s, so that that they they coul could d reco record rd the the pall pallet ets s automatically into their computerized warehouse stock control systems. Each of these customers required different information to be added to their labels and used a variety of bar code symbologies. symbologies. Because the label printing system was written in-house, including the control of the printers, it was possible to accommodate these disparate requirements, but it did complicate the software involved. To cater for the requirement an area of  the the label label was reserv reserved ed for this this inform informati ation. on. Becaus Because e of the poten potentia tiall night nightmar mare e scena scenario rio wh where ere every every custo customer mer would would eventu eventuall ally y reque request st a special unique label and the benefits of using a standard packaging label became became quite quite clear clear.. Packagi Packaging ng saw that the ICI ICI Logisti Logistics cs Label, Label, apart apart from being a global standard, provided a number of other advantages. The use of bar code increased the readability of the label in less friendly environments. The use of a range of ICI Application Identifiers provided the flexibility needed to cater for variability in customer requirements with withou outt nece necess ssar aril ily y prej prejud udic icin ing g the the stan standa dard rd.. The The Seri Serial al Ship Shippi ping ng Container Code (SSCC) provided a facility for the automatic traceability of  loads.

K EY  EY  BENEFITS

OF

ICI S YSTEM APPLICATION

A first analysis of the process has produced three key benefits: • This partnership allows both companies to know and understand each other's constraints; • This system speeds up the process; •Cutting non-value-adding activities has reduced costs. For Smurfit, the key benefits are mainly qualitative.  The entire staff responded to the goals, the factory planning and manufacturing improved and the safety stocks disappeared. ICI standards application helped everyone in the logistics operations to become more precise. precise. Now, Now, only full pallets pallets are deliver delivered. ed. For the benefits benefits are more more

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quan quanti tita tati tive ve.B .Bef efor ore, e, the the aver averag age e deli delive very ry time time was was two two week weeks. s. So, So, customers had to order three weeks in advance, generating three weeks of stocks. Now, with the application of SMI, decisively supported by ICI standards, the delivery is always done in one week. Furthermore, Smurfit’s servic service e rate rate is now now incre increase ased d to 99%. 99%. Benefi Benefits. ts. The The other other qualit qualitati ative ve benefits and changes in working methods are summarized below.

•

Supplier Managed Inventory: Major changes in working methods

Because SMI has proved to be efficient, the two companies now plan to set up the same kind of collaboration with other trading partners. Migration to the daily flow is their other objective. It will surely be the year of SMI rollout throughout our factories and with strategic suppliers.

FORWARD-LOOKING

STATEMENTS

  Thi This s docu docume ment nt cont contai ains ns stat statem emen ents ts conc concer erni ning ng the the Grou Group’ p’s s busine business, ss, financ financia iall condi conditio tion, n, resul results ts of operat operatio ions ns and and certa certain in of the Group’s plans, assumptions, or expectations with respect to these items.  These statements are intended as forward-looking statements within the meaning of the US Private Securities Litigation Reform Act of 1995. These statem statement ents s includ include, e, withou withoutt limi limitat tation ion,, those those conce concerni rning: ng: the Group Group’s ’s strat trateg egy y and its abil bility to achiev ieve it, the benefi nefits ts of the the Group’ up’s restructuring programmes, the Group’s disposals plans, the implementation of new systems, the Group’s possible or assumed future results of operations, trends in raw material costs, the Group’s views on improvements in markets and trading conditions and those preceded by, followed by, or that include the words ‘‘believe’’, ‘‘expect’’, ‘‘intend’’,‘‘plan’’, ‘‘anticipate’’ or similar expressions. Actual results may Supply Chain Management Report  KASBIT (University (University With a Difference) Difference )

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differ from those expressed in such statements, depending on a variety of  factors including, among other things, the impact of competitive products and pricing, adverse macro economic factors, changes in the price of raw materials, the occurrence occurrence of major operational problems, the loss of major custo customer mers, s, limit limitati ations ons impos imposed ed by the Compan Company’s y’s indebt indebted ednes ness s and and leverage, a credit rating downgrade by the rating agencies, contingent liabilit liabilities, ies, includin including g those those arising arising in connecti connection on with recently recently disposed disposed businesses, risks associated with the Company’s international operations, risks of litigation, and other factors described in the Company’s filings with the Securities and Exchange Commission.  You should read the Company’s Annual Report and Accounts and Form 20F, which is available without charge at the internet site of the Securities and Exchange Commission for more information regarding factors that could ould caus cause e actu actual al resu result lts s and and deve develo lopm pmen ents ts to diff differ er from from thos those e expressed or implied by the forward-looking statements in this document.   You You shou should ld also also read read the the Comp Compan any’ y’s s rela relate ted d quar quarte terl rly y resu result lts s pres press s release that is included in these presentation materials and is also located at the Internet site of the Securities and Exchange Commission.

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BIBLIOGRAPHY  BOOKS:

SUPPLY CHAIN MANGEMENT By: BURT, DOBLER, STARLING SUPPLY CHAIN MANGEMENT By: SUNIL CHUPRA, PETER MEINDL WEBSITES:

http://en.wikipedia.org/wi http://en.wikipedia.org/wiki/ICI_Paki ki/ICI_Pakistan stan http://www.akzonobel.com/pk

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