Dr. Georg Mogk presented on supply chain modeling and its applications. Bayer Technology Services provides supply chain optimization services throughout a plant's lifecycle. Network optimization projects balance objectives like cost, emissions reductions, and supply chain robustness. Future challenges include optimizing modular chemical production networks, which require continuous network adjustments. Modular production allows dynamic adaptation of supply chain design based on market changes.

1. Supply Chain Modeling
More than a Sophisticated Toy?
Dr. Georg Mogk
LogiChem 2010
22nd April 2010, Düsseldorf

2. Contents
Bayer Technology Services
Project Example Network optimization – handling
conflicting supply chain targets
Future Challenges – SCM challenges of modular chemical
production
Conclusion
Mogk
2010-04-22 • Page 2

3. Bayer Technology Services – a Bayer Group Company
Holding Company
Group Management Board
Corporate Center
Bayer AG
Business Areas Service Areas
Bayer Bayer Bayer Bayer Business
HealthCare CropScience MaterialScience Services
Bayer Technology
Services
Currenta
Mogk
2010-04-22 • Page 3

4. Bayer Technology Services provides services along the
entire process and plant lifecycle
Initiate, implement and support technological innovations over the long
term. From product and process development through the planning and
construction of plants to the automation and optimization of processes.
Develop Design and
Products and Manage
Processes Investments
Services Optimize
throughout the Facilities and
Plant Life Cycle Products
Mogk
2010-04-22 • Page 4

5. Bayer Technology Services is a global company
Headquarters Berlin
Bergkamen
Regional Office Europe Dormagen
Benelux Leverkusen/Germany Elberfeld
Antwerp/Belgium 1,300 employees (*) Leverkusen
Regional Office Regional Office
70 Uerdingen
North America Wendelsheim Asia
Baytown, TX/USA Shanghai/PR China
230 employees(*) 610 employees(*)
Regional Office worldwide(*) 375 EUR mill.
Turnover
Switzerland
Employees worldwide(**) 2,600
Witterswil (*)2009 (**)Dec 31, 2009
10 employees(*)
Client industries
Regional Office
Russia • Health Care
opens 2010 • Crop Science Regional Office
• Material Science/Polymers India
Regional Office Regional Office
• Chemicals Mumbai/India
Latin America Middle East 10 employees(*)
Mexico City Dubai/UAE
360 employees(*) 5 employees(*)
Regional Office
Singapore
Regional Office opens March 1st, 2010
Brazil Offers services on
Offers services on
opens 2010 external market Headquarters
external market
Mogk
2010-04-22 • Page 5 (*)
31-Dec-09 Regional Offices

6. Network Optimization Projects Executed by BTS
2008
Specialty
2006
2007 Chemicals
Polymers
Basic
Chemicals
2005
Chemicals
2009
Food
2007
Industry
Japan
Chemicals
2008
China
Pharma
2007-2008
Polymers
Mogk
2010-04-22 • Page 6

7. There are different motivations for a network
optimization project …
Global strategic network optimization
• global sourcing optimization
• long-term market penetration strategies
• rough modeling of global material flows
• high level of demand aggregation
Regional optimization
• optimize regional sourcing
• optimize regional logistics locations
• detailed Modeling of demand and
sourcing structures
• no detailed modeling of activities
inside the knots
Local site design
• Design of local
production sites
• Optimal use of local
logistics equipment and
productions capacity
• Use of simulation
techniques
Mogk
2010-04-22 • Page 7

8. Different tasks require different approaches
Divide and conquer Global strategic network optimization
No supply Chain Model • global sourcing optimization
can solve all optimization • long-term market penetration strategies
tasks in detail. • rough modeling of global material flows
• high level of demand aggregation
Regional optimization
• optimize regional sourcing
• optimize regional logistics locations
• detailed Modeling of demand and
sourcing structures
• no detailed modeling of activities
inside the knots
Local site design
• Design of local
production sites
• Optimal use of local
logistics equipment and
productions capacity
• Use of simulation
techniques
Mogk
2010-04-22 • Page 8

9. Project Example 1 - For delivery of South Asia market
the global network have to be considered.
The cost-optimal solution contains some unexpected results.
Cost Optimal Solution
Project targets
Identification of optimal sources to deliver
polymer customers in South Asia.
The cost-optimal solution
(4 production sites available)
is suboptimal in respecting
It is cheaper to source Chinese
Save logistics costs. gas emissions
greenhouse
customers from Thailand than
and robustness of the
India is mainly sourced fromChinese
from Shanghai ( outside
Source of Asia. supply chain.
Considering of greenhouse gas
Tax policy)
Material emissions caused by logistics.
Shanghai
Europe
Thailand
NAFTA
Mogk
2010-04-22 • Page 9

10. Supply Chain Models help to handle conflicting targets
Complex network of production sites may take other parameters on
greater importance: e.g. taxation aspect for deliveries to and from Asia
Relative logistics costs Controversial Objectives
103.5 % Minimum cost considering duty an
taxes
102.5 %
Minimum CO2-emissions by local
101.5 % sourcing
(30% CO2-reduction,increase of 3.5%
Supply Chain Costs)
100.5 %
Compromise:
99.5 % 20% CO2-emission reduction, 0.5%
7,500 8,500 9,500 10,500 11,500 cost increase as effective solution
CO2 emission (t)
Sensitivity analysis helps to reach cost-effectively additional supply chain
objectives like reduction of CO2-emissons.
Mogk
2010-04-22 • Page 10

11. Project Example 2 - Network optimization in Japan
Handling of different supply chain targets
Project targets Before Optimization:
Reduction of Logistics Cost All Potential Warehouses
Improvement of service time to
customers
Reduction of greenhouse emissions
caused by logistics
Optimize number and location of the
Warehouses
Optimization of transport mode
Five New WHs: Yellow Triangle: Potential Warehouses
One Additional WH: Red Triangle: Existing Warehouses
Scenario 2
Scenario 1
Estimated Av. Distance to
Logistics Customer
Costs [Km]
AS-IS: Optimal
use of existing 100,0% 444
WH
One Additional
443
WH 100,2%
Five new WHs 444
88,7%
Mogk
2010-04-22 • Page 11

12. Network optimization project save money and improve
the public company image.
The Japanese Bayer affiliate was
able to increase the share of railway
transportation up to 30%, which
provide a significant contribution to
CO2 reduction.
The results were recognized by
Japanese Ministry of Land,
Infrastructure, Transport and
Tourism in 2008. Eco Rail Mark
The Bayer affiliate is the first
company in the polyurethane
industry awarded with the Eco Rail
Mark.
Mogk
2010-04-22 • Page 12

13. Future Challenges in Supply Chain management:
Modular Chemical Production
Small, flexible and modular
production units enable the chemical
industry to setup new supply chain
concepts for customer focused and
close to the market production.
Benefits of modular production:
Numbering up instead of scaling up:
Fast adaptation on marked
developments (geographical and
time)
Flexible Production of small batch
sizes (customer specific products)
Mobile, distributed production near
customers and near row material
sources is flexible and saves money
The ability of dynamic network
adjustments is one of the key factors of a
successful modular production concept.
Mogk
2010-04-22 • Page 13

14. Modular chemical production leading to a continuous
network optimization
What is the right design of the
Site Logistics logistics processes on site?
Where are the How does an
ideal locations optimized supply
Modular chain for mobile
in a Production
distributed production units
production look like?
network for
Supply Chain Mobile
the modular
Network Production
production
Design
units?
Mogk
2010-04-22 • Page 14

15. Conclusion
Supply Chain models have to be created task orientated
Supply Chain models helps in handling target conflicts
Supply Chain settings have to be adjusted continuously
Modern production concepts, like modular production,
lead to a very intensive interaction of logistics and
production planning
Modular production allows continuous adaption of the
Supply Chain Network
Mogk
2010-04-22 • Page 15

16. The biggest optimization potential can be achieved by
efficient communication.
Thank you for your Attention!
Mogk
2010-04-22 • Page 16

17. info@bayertechnology.com
www.bayertechnology.com