Post on 03-Nov-2014
description
SOLVAY
Logichem 2010
« Improving profitability
Through cost-to-serve
Analysis »Christian BackaertEuropean Supply Chain
Manager Solvin
SOLVAY
C2S : presentation topics
� Who is Solvin?
� Introduction to C2S
� How to put in place & Solvin experience
� Let’s share our experience
SOLVAY
C2S : Introduction
SolVin is a leading European manufacturer of PVC and associated products.
Foundation : January first 1999 by merging the vinyls activity of BASF and Solvay in Europe
Ownership : Solvay 75%; BASF AG 25%
Employees : around 2000
Products : Cl2, NaOH, EDC, VCM, PVC-S PVC-E, VDC, PVDC, PVC Copolymers, R-PVC
Figures
SOLVAY
Lillo
PARIS
Milan
Barcelone ROME
BERLIN
Jemeppe
Martorell
Tavaux
Lillo
Zandvliet
Jemeppe
Rheinberg
Rheinberg
Tavaux
Fos/Berre
Martorell
Zandvliet
Company ProfileSolVin production sites
Ferrara
C2S : Introduction
SOLVAY
PVC Supply 2008Europe
Source: Solvay (Business Intelligence)
1600
660
460400
480
1300
1050
750
330400
0
200
400
600
800
1.000
1.200
1.400
1.600
1.800
Ineos Vinyls SolVin Arkema Vinnolit Shin-Etsu LVM Anwil Vestolit Borsodchem Oltchim
kt/y
Total : 8.9 Mt/y
C2S : Introduction
SOLVAY
PVC World Market
50 2201500
6000
11400
17500
25000
34500
0
5000
10000
15000
20000
25000
30000
35000
40000
1945
1950
1960
1970
1980
1990
2000
2010
32000
C2S : Introduction
SOLVAY
EU 27 Consumption of PVC2009
Source : SolVin (vision)
5.880 mt
RIGID FILM
8%CABLES & WIRES
8%
PLATES
2%
PIPES FITTINGS
26%
OTHERS
10%
PROFILES
29%
TUBES PROFILES
3%
FLOORING
5%
FLEX. FILM SHEETS
6%
COATED FABRIC PAPER
3%
C2S : Introduction
SOLVAY
C2S : presentation topics
� Who is Solvin?
� Introduction to C2S
� How to put in place & Solvin experience
� Let’s share our experience
SOLVAY
Introduction to C2S
� Study from IBM
SOLVAY
Introduction to C2S
� Customers have not been created equal and all requires
different level of services.
• Do you know your customersexpectations in terms of service?
• Do you measure the cost of delivering the expected level of service?
� Cost-to-serve is about both
• Control of all the costs
• Segmenting the customerportfolio to maximize the revenu
Sales & Mkting
Customer
service costs
Distribution costs
Production &
Procurement costs
C2
S
Appro
ach
SOLVAY
Introduction to C2S
Sales & Mkting
Customer
service costs
Distribution costs
Production &
Procurement costs
C2
S
Appro
ach
� Frequency & cost of commercial support
� Promotions
� Transport� Warehousing
� Packaging
� Claims management
� Management of documents
� Multisourced or dedicated to a plant
� Flexibility in delivery accuracy
� Technical requirements
� Terms of sales
� Yearly discounts� Value of accounts receivables
� Security stocks
� ….
To grasp the expectedresults from a cost-to-serve analysis it isessential to collect all « hidden costs »
customer A
customer B
customer C
Revenues
Costs
Apparent
Profit
customer A
customer B
customer C
Traditional analysis Accurate C2S
� All production costs
� At the lowest level of SKU� All raw materials
SOLVAY
Introduction to C2S
� Working with real figures instead of averages
Impact of Averaged figures
-20
-15
-10
-5
0
5
10
15
20
25
30
01.2
005
04.2
005
07.2
005
10.2
005
01.2
006
04.2
006
07.2
006
10.2
006
01.2
007
04.2
007
07.2
007
10.2
007
01.2
008
04.2
008
07.2
008
10.2
008
01.2
009
04.2
009
07.2
009
10.2
009
GROSS MARGIN Monthly
Gross Margin Average 3 Months
Working withaverages leads
to short termmistakes in operationaldecisions
Negative gross
margin, reduce
production and
sales
Excellent growth
margin, extend
production, room for
price negociations
SOLVAY
Introduction to C2S
� The closest possible to current figures• Quicker deviations in raw materials
• Quicker deviations in tranport costs (energy & competition)
• Fierce competition put pressure on sales prices and priceevolution are no longer only a trend
Sold quantities deviations
0
20
40
60
80
100
120
01.2
00504
.2005
07.2
00510
.2005
01.2
00604
.2006
07.2
00610
.2006
01.2
00704
.2007
07.2
00710
.2007
01.2
00804
.2008
07.2
00810
.2008
01.2
00904
.2009
07.2
00910
.2009
01.2
010Sold quantities
SOLVAY
Introduction to C2S
� The deepest possible: customer level
Analysis of Margin: detailed by geographical zone
-15
-10
-5
0
5
10
15
20
25
30
35
01.2
00504
.2005
07.2
00510
.2005
01.2
00604
.2006
07.2
00610
.2006
01.2
00704
.2007
07.2
00710
.2007
01.2
00804
.2008
07.2
00810
.2008
01.2
00904
.2009
07.2
00910
.2009
Gross Margin Country One
Gross Margin Country 2
Average Gross margin
While the
average remains
positive, one
coutry delivers
much bigger
Gross Margin
than the other.
Treatment should
then be
differentiated
SOLVAY
Introduction to C2S
� Control the data in your C2S analysis
A n a ly s is o f m a rg in e v o lu tio n
-5 0
0
5 0
1 0 0
1 5 0
2 0 0
2 5 0
3 0 0
02.2
005
05.2
005
08.2
005
11.2
005
02.2
006
05.2
006
08.2
006
11.2
006
02.2
007
05.2
007
08.2
007
11.2
007
02.2
008
05.2
008
08.2
008
11.2
008
02.2
009
05.2
009
08.2
009
11.2
009
02.2
010
a vg (a l l c u s t . ) n t v ve n te via re f
Tra n s p . a n d ta k e a w a y € / t
ra w m a t e ria l c o s t
T ran sp o rt co st evo lu tio n fo r o n e sp ecific cu s to m er
0
20
40
60
80
100
120
1 2 3 4 5 6 7 8 9 10 11 12
M on th s
Eu
r/T
S um of Trans p. and tak e away €/t
A verage on y ear bas is for the c us tom er
A verage on y ear bas is for the c ountry Mastering yourdatabase is key to ensure success of
C2S approach. This is however not the easiest task and is
resourcesconsuming
SOLVAY
C2S : presentation topics
� Who is Solvin?
� Introduction to C2S
� How to put in place & Solvin experience
� Let’s share our experience
SOLVAY
C2S within Solvin : how we put C2S into practice
� Data collection
Fix production cost / product
Month 1 Month 2 …
Product A 100 107
Product B 100 98
Product C 99 88
Product D 97 105
Product E 102 103
…
Variable Product Cost/Month
Month 1 Month 2 …
Product A 100 107
Product B 100 98
Product C 99 88
Product D 97 105
Product E 102 103
…
- raw materials
- energy costs
- 'by-products' selling prices
- transport cost of raw material
between plants
- ...
BOM
- fixed production costs
- administration costs
- commercial costs Plant
frm
deliv.ite
m
Shippin
g
conditio
ns
Shipme
nt type
Gross wght per
stage
Net Weight
Transported
Loading
costs
7DYN 33 Road container 30ftZ3C0 ROAD standard2.469.100,000 KG 2.469.100,000 KG
Result 2.469.100,000 KG 2.469.100,000 KG
Result 2.469.100,000 KG 2.469.100,000 KG
7E9A 30 Road Z3C0 ROAD standard326.820,000 KG 326.820,000 KG
Result 326.820,000 KG 326.820,000 KG
Result 326.820,000 KG 326.820,000 KG
892P 30 Road Z3C0 ROAD standard753.290,000 KG 753.290,000 KG
Result 753.290,000 KG 753.290,000 KG
Result 753.290,000 KG 753.290,000 KG
8BWV 12 Road -> Sea ctn 20ftZ1B1 SEA booking main leg1.466.329,500 KG 729.680,000 KG 6.857,50 EUR
Z1F0 SEA FOB. 565.040,000 KG 280.000,000 KG 3.400,00 EUR
Z3P0 Road-Preliminary leg914.820,000 KG 907.680,000 KG
Result 2.946.189,500 KG 1.917.360,000 KG ############
14 Road -> Sea ctn 40ftZ1B1 SEA booking main leg############### 8.489.365,000 KG ############
Z1F0 SEA FOB.6.367.777,600 KG 3.099.150,000 KG ############
Z3P0 Road-Preliminary leg############### ###############
Result ############### ############### ############
30 Road Z3R0 ROAD returns1.410,750 KG 1.375,000 KG
Warehousing & Transportation costs
central DB for
analysis
Query tool
Ship-to party
Q ty in
R U
Av g.
NTV
Price
in RU
Trans
p. and
take
away
€/t
C redit
C ost
€/to
Net &
Cash
price
for
cust
€/to
A ll v bl .
m anuf.
costs
A verage
per ton
Contribut
ion
(Solv in) -
Av erage
per ton
Fix.
manuf .
costs -
Av erage
per ton
TOTAL
P rod.
Costs -
A verage
per ton
Contribut
ion
(solv in)
GROS S
MARGIN
COP A -
Av erage per
ton
53340 1275748 5038,5 385,3 10,5 4642,6 4227,8 383,7 778,0 5005,8 67058,1 -394,2
53345 170637,5 5329,0 309,2 66,7 4953,2 4443,1 445,5 976,3 5419,4 10414,7 -530,8
53459 171404 5219,5 434,3 44,4 4740,7 4480,8 260,0 638,3 5119,1 6104,0 -378,3
53508 178704 5402,0 402,2 45,1 4954,8 4158,4 796,4 778,8 4937,2 19496,2 17,6
53511 682550 5394,7 309,2 4,2 5081,3 4443,1 573,7 976,3 5419,4 53641,6 -402,6
54902 100375 9855,0 934,0 82,2 8838,8 4820,2 4176,4 1417,8 6238,0 57425,7 2758,6
55647 170637,5 5292,5 309,2 22,1 4961,3 4434,2 462,6 845,6 5279,8 10812,2 -383,1
56933 341275 5329,0 309,2 22,2 4997,6 4347,4 585,6 778,8 5126,3 27377,9 -193,2
80088 356824 5329,0 386,1 44,4 4898,4 4158,4 740,1 778,8 4937,2 36174,2 -38,8
80411 170637,5 5475,0 309,2 45,7 5120,2 4442,3 613,4 869,0 5311,3 14337,2 -255,6
80832 717152 5824,8 394,2 24,8 5405,8 4440,2 965,5 719,8 5160,1 94853,9 245,7
Resul t 4335944,5 5465,4 380,8 24,1 5060,5 4347,2 685,5 825,5 5172,6 409049,7 -140,0
SOLVAY
C2S within Solvin : how we put C2S into practice
� Not a perfect C2S approach as:
•Need to align commercial coststo customers
•Systematic cost of product to customer (new packaging)
• reverse logistics & cost of claims at customer level
• warehousing cost at customerlevel
•Some wrong data in system
SOLVAY
� The vision from the sales team : importance of your customer
70% of volumes are strategic. Shouldn’t it
be revised/refined?
C2S within Solvin : how we put C2S into practice
SOLVAY
C2S within Solvin : how we put C2S into practice
� Some differentiators for a segmentation
�sensitive for on-time delivery
�sensitive for exclusiveness Part of it is applied in a
differentiated supply
chain approach
-Security stocks
-Dedicated transport
-Customized
packaging
SOLVAY
Exclusives
C2S within Solvin : how we put C2S into practice
SOLVAY
C2S Conclusions
� Control your data
� Working with averages is not appropriate
� Keep a light system
� Do it
SOLVAY
Any question?