4c4chem

Cross-chain collaboration in the chemical industry

Project Proposal

Proposal prepared by Prof dr ir J.C. FransooEindhoven, 14 May 2012

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Subsidy Application Form

A. Project name and durationProject name: 4c4chem

Start date: 1 September 2012

End date: 31 December 2015

B. Project applicant and project leader Company / organization: Technische Universiteit Eindhoven

Contact person: Prof dr ir J.C. Fransoo

E-mail address: j.c.fransoo@tue.nl

Phone number: 040-2472681 Mobile:06-48945790

Authorized to sign: Ir H.P.J.M. Roumen

Financial administrator: R.L. Jansen

E-mail address: r.l.jansen@tue.nl

Phone number: 040-2474818 Mobile: n/a

Applicant’s visiting address :

Den Dolech 2, Pav F 4

Postal code: 5612 AZ City: Eindhoven

Postal address: P.O. Box 513, Pav F4

Postal code: 5600 MB City: Eindhoven

Bank account number: 158249658 Bank: Rabobank City: Eindhoven

Project leaderCompany / organization: Technische Universiteit Eindhoven

Contact person: Prof dr ir J.C. Fransoo

E-mail address: j.c.fransoo@tue.nl

Phone number: 040-2472681 Mobile:06-48945790

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C. Partners in consortiumOrganization’s name Type of organization SME

Technische Universiteit Eindhoven

Knowledge Institute No

Shell Chemical Europe BV

Company No

Dow Europe GmbH Company No

Sabic Petrochemicals

Company No

Den Hartogh Logistics BV

Company No

Cargogator BV Company Yes

VNCI (Association of the Netherlands Chemical Industry)

Association No

D. Signatures

By signing this form, I certify that all the required documents are attached and that I am familiar with Dinalog´s conditions and procedures.

Applicant’s organization: Technische Universiteit Eindhoven

Authorized to sign: Ir H.P.J.M. Roumen

Position: Secretary of the University

City: Eindhoven

Date: 14 May 2012

Signature:

Submit to Dinalog:

- E-mail, all documents in PDF, but also original Word and Excel documents to tenders@dinalog.nl;

- Post, printed versions of all documents requested to Dinalog Management, Princehagelaan 13, 4813 DA Breda

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Project Plan

Summary

The chemical industry is a major industry in the Netherlands, making a positive contribution of almost € 20 billion to the balance of trade in 2010, which was 51% of the total balance of trade (goods) in the Netherlands. The chemical supply chain accounts for about 10% of the transport performance (tonkm) in the Netherlands transport flows. The far majority of these flows are international; 19% of all exported goods by weight are chemicals.

Current estimates of load carrying unit utilization are at about 60%. The causes for this less than full utilization lie in several factors, such as imbalance in location of production and consumption, empty returns, short-term focus in optimization, and limited flexibility for the carrier to plan shipments. While the first cause (imbalance) is hard to address from a supply chain and logistics perspective, the other three causes will be addressed in this project.

In this project, we will address this problem in 3 new and innovative ways along the supply chain planning process, namely in the improved forecasting and planning of transportation needs in the medium term and in better short term coordination between site logistics and off-site logistics (PLAN), in the sharing of inventory and railcar resources (COMBINE), and in the bundling of transportation flows (BUNDLE).

The design of the project is based on analysis and experimentation in parallel. Hence, we will not use a more traditional approach of first researching and then implementing, but we will build active business cases, which will be piloted if the business case is favorable. Simultaneously, a number of scientific challenges remain. These scientific contributions will need to be documented in research papers, such that also an impact on the global research community can be realized.

In the project, relevant decision support models and new operating concepts will be developed, evaluated and where applicable be tested:

1. A business model for a logistics service provider to extend services in this sector allowing the LSP to operate at a higher added value level if certain controls are transferred to the LSP, for instance in the operation of or coordination with site logistics.

2. In the framework of the competitive situation of the European chemical industry, we anticipate that the logistics capabilities and concepts are particularly relevant for the Netherlands chemical cluster due to the better opportunities to take advantage of this.

3. Building on the successful concept of pipeline management, we believe there is a basis for establishing a similar joint venture for inventory pooling related concepts.

4. An important general objective is to use this project to establish a supply chain innovation community in the Netherlands chemical industry and associated logistics services.

The project aims to realize a substantial increase in chemical bulk transport efficiency (5-10%), generate a competitive advantage for LSPs in the combination of site and offsite logistics, and provide the basis for a startup company for the management of shared inventories.

Results will be shared with the professional community through the common publications,

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but in addition, a number of best practice case studies will be made available. We will inform the academic community by a series of academic publications. The industry at large will be enthused at a concluding conference on horizontal collaboration in chemical industry logistics.

A. Orientation and Project Goals

Motivation

The chemical industry is a major industry in the Netherlands, making a positive contribution of almost € 20 billion to the balance of trade in 2010, which was 51% of the total balance of trade (goods) in the Netherlands. The chemical supply chain accounts for about 10% of the transport performance (tonkm) in the Netherlands transport flows. The far majority of these flows are international; 19% of all exported goods by weight are chemicals. Furthermore, the Netherlands accounts for 27% (63€ billion) of the total external trade of chemicals and related products from EU27 countries (235€ billion).

Due to tight margins, a lot of these transport flows have received considerable attention of shippers and carriers and hence have been optimized to a substantial extent. For instance, the share of rail and barge transportation is much higher than in other sectors. Exact numbers for the Netherlands do not exist, but in Europe, road transport represents 44% of the total chemical continental transport performance (tonkm) compared to 73% for the European average across all sectors.

Three issues drive the need to further improvement

1. Due to other sectors also moving cargo to the intermodal supply chain, capacity on intermodal links is more difficult to obtain, and further volumes need to be bundled in order to make these modes of transportation effective.

2. Due to a drive towards sustainability in the entire supply chain, and the large environmental footprint of the chemical industry, most companies in this sector have formulated explicit sustainability targets. The targets that can be affected in this project include reduction of carbon emissions by more efficient use of transportation resources and potential modal shifts, and a reduction of industrial waste due to a reduced need to clean load carrying units.

3. The thin margins in the industry have lead to considerable pressures on inventories, causing still substantial volumes to be transported via road at less than full utilization of the load carrying unit (LCU).

Current estimates of the LCU utilization are at about 60%. The causes for this less than full utilization lie in several factors:

• Imbalance in locations: producing and consuming locations may have a strategically different location, causing empty rides.

• Empty returns: due to cleaning requirements for non-identical products, there is a cleaning cost and time involved. For carriers, this may imply that it is better to return empty to the same shipper for the same product, rather than cleaning the truck and finding a return load.

• Limits to shipment optimization: due to short term changes in demand, shipments are typically optimized on a day-to-day basis, and little information is available ahead of

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time. Especially due to inventory reductions, short-term fluctuations have increased. General management of buffers tends to be short term oriented (see, e.g., Puijman, 2011, for a study on the ability to reduce short term movements by better management of buffers)

• Limited flexibility for the carrier to plan the shipments. Due to optimization of site logistics facilities, carriers are faced with very tight time windows. As a consequence, carriers have very limited ability to change and combine shipments (see, e.g., Sarikaya, 2010, for a study at Dow Chemical and Den Hartogh on short term planning requirements).

While the first cause (imbalance) is hard to address from a supply chain and logistics perspective, the other three causes will be addressed in this project.

In this project, we will address this problem in 3 new and innovative ways along the supply chain planning process, namely in the improved forecasting and planning of transportation needs in the medium term and in better short term coordination between site logistics and off-site logistics (PLAN), in the sharing of inventory and railcar resources (COMBINE), and in the bundling of transportation flows (BUNDLE).

Relation to Dinalog´s innovation themes

This proposal contributes to the core objective of the program, namely an increase in supply chain control and coordination, leading to increased added value in transportation in view of the decrease in the number of resources (transport capacity and people), and new business in supply chain control (both for bundling and for combined inventories.

Furthermore, it specially fits to the current call due to the involvement of the chemical industry with the program of Dinalog, and the renewed emphasis on sustainability in the call. Due to the substantial flows of transport in the chemical industry, the contributions of the ideas that will be developed in this project are impactful.

It should be noticed that chemical transport flows are primarily European and not national. Consequently, the impact of this project is well below the Dutch transportation volume and movements, and directly relates to the added value in exports that is provided by the leading transportation service providers, and it provides opportunities for expanding the concepts to a European scale if successful.

Note that the third project will be a basis to further include the chemical sector in a synchromodal transportation system. While rail connections are currently used extensively, the use of barge is limited, and the interchange between the various modes of transport at short notice is barely there due to widely different cost structures. Hence, the current project is an important step to enabling the inclusion of the chemical sector in synchromodal networks.

Finally, this project also serves as a cross-sectoral approach with the top sector Chemicals. The Netherlands government has encouraged cross-sectoral collaboration. The Netherlands chemical cluster is a very powerful cluster, but in the coming years, overcapacity is foreseen in the petrochemical sector due to increased efficiencies in production and a limited increase in demand. Consequently, across Europe petrochemical facilities are closed and limited investments take place. Well-managed transportation connections are increasingly a decisive factor in decisions on closure or expansion of petrochemical facilities. The current

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project will further strengthen the position of the Netherlands chemical cluster.

Objectives and goals

The design of the project is based on analysis and experimentation in parallel. Hence, we will not use a more traditional approach of first researching and then implementing, but we will build active business cases, which will be piloted if the business case is favorable. Simultaneously, a number of scientific challenges remain. These scientific contributions will need to be documented in research papers, such that also an impact on the global research community can be realized.

For PLAN, business case developing, piloting, and research will be needed.

For COMBINE, an actual pilot is unlikely, and the objective of the current project is to result in a business case, based on which a company could be started. The actual launch of the company might be brought in as part of a Dinalog experimental development project in a later stage (although this is not part of this proposal and we are aware that any awarding of an experimental development project is a separate decision by Dinalog). These will include (1) a very detailed analysis of how ARG works, not so much technically, but more operationally, governance-wise and financially; (2) a translation of the ARG concept into a setup whereby we continue to sell & distribute a chemical commodity (SM or PO instead of Ethylene) amongst several industry players but now under the situation where the logistics infrastructure is not continuous anymore (pipeline) but fragmented (separate tanks or railcars with logistics infrastructure); and (3) an expansion of the ARG concept by considering new value propositions for its participants (shippers but also customers!), e.g. “borrow” and “sellback”. This deliverable requires quite some thinking in terms of how you would construct such value propositions in a sense that they really add value while being open, transparent and compliant with anti-trust

For BUNDLE, we expect that current scientific results are mostly there, so that focus will be more on innovation and piloting.

Apart from the direct project deliverables, we expect the following output for dissemination:1. Each of the business cases will result in a written industry case study that can be

used in industry (easily accessible) and for teaching purposes at universities and polytechnics. The current very popular ESCF case study series will serve as an example.

2. A conference will be organized by the VNCI in which the results of the projects will be presented. VNCI will also work with the government and with the EU to take away any potential legal doubts.

3. The research work will result in academic publications, to impact the worldwide academic community. It is expected that four research publications can be completed (academic papers)

4. If the implementations are successful, we intend to submit the work for the Franz Edelman Award, which recognizes excellence in business analytics and operations research implementations.

An important element is the development of a web-based prototype, such as some start-ups have now developed for general applications. One of those startups, namely Cargogator, is part of the project to develop such a proof-of-concept.

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Expected results

Apart from the process results described above (case studies, research papers, conference, implementation pilots), on a more general level, we expect the project will deliver the following more general results:

1. A business model for a logistics service provider to extend services in this sector allowing the LSP to operate at a higher added value level if certain controls are transferred to the LSP, for instance in the operation of or coordination with site logistics. Since consolidation is taking place in bulk chemical shipments, this will enable those carriers to further strengthen their position in the European landscape. It is expected that the utilization of the LCUs of carriers operating in this way could be increased by 5%. Obviously, this would have similar impact on carbon emissions.

2. In the framework of the competitive situation of the European chemical industry, it is anticipated that the logistics capabilities and concepts are particularly relevant for the Netherlands chemical cluster due to the better opportunities to take advantage of this. Hence, there could be a direct impact on better utilization of resources, and better servicing of customers, and increased logistics efficiency (currently estimated at 10%). Since the cost of logistics as a percentage of the total operating costs in the chemical industry have increased over the past years, this could lead to an increase in market share for the plants in the Netherlands chemical cluster (which is closely linked to facilities in Flanders and Northrhine-Westphalia). Numbers are very hard to give, but even if the market share would increase by half a percent, the impact in terms of revenue can be measured in billions.

3. Building on the successful concept of ARG, we believe there is a basis for establishing a similar joint venture for inventory pooling related concepts. ARG has successfully enabled this by ensuring that commercial competition remains in place (so no anti-trust issues emerge), and this is a also a key functional requirement for any concept developed under the COMBINE subproject. A new startup like ARG would imply a high-added value 4C business (in the control tower concept), with high-level employment.

4. An important general objective is to use this project to establish a supply chain innovation community in the Netherlands chemical industry and associated logistics services. Therefore, the nature of this collaboration will be open, to provide a true basis for extensive collaboration.

Relation to government policy

Has been addressed above (innovation program is aligned with government policy). In addition, the success of the project will result in a proportional reduction in CO2 emissions and a potential reduction of industrial waste due to a reduction in LCU cleaning.

Orientation

PLAN: we will build on some earlier results from other (mostly downstream) industries when it concerns the business cycle forecasting, but essentially two new elements will be taken into account due to the specificities of the petrochemical (upstream) supply chain, namely

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the impact of prices on demand and the impact of (temporary) facility closings. These are very important in this industry, and the effects are yet unknown. Second, for the queuing analysis, we will outline the empirical queuing behavior at multi-modal terminals. Also this effect has not yet been studied. Past experience exists in the research team with studies (partially with the same companies) on business cycle forecasting (Udenio et al, 2011) and short-term coordination (Sarikaya, 2010).

COMBINE: in the frame of Dinalog, several projects have been conducted about benefit sharing (for instance in the 4c4more project), but none of these have included combined inventories of the very same product. This is a very novel approach that to our extent has not been documented. The ARG model may be a potential model, and we will be able to study the ARG business model and use this is a potential basis for this joint storage. A main difference is that in the ARG model there is a joint and very expensive infrastructure, which may drive the behavior. Furthermore, we will also explore the potential of railcar pooling.

BUNDLE: For bundle, we expect the scientific contribution to be mainly focusing on an empirical contribution of the associated cost structures, since from a modeling perspective the contribution will be relatively small. Relatively little is known about intermodal cost structures. Some initial analyses have been conducted by Van Rooy (2010) and Sharypova (2012). Also, we will build on the learnings from the Dinalog ULTIMATE project.

B. Subprojects

The project has been organized into 3 subprojects, each with their own scope and deliverables. For reach of the subprojects, one of the industry partners will be in the lead, in terms of guiding the main direction of the project, providing key data, and providing specifications of the deliverables. Where piloting is relevant, the lead-company will take the initiative. It is however important to note that all companies have an interest in all topics. Hence, to avoid over-structuring, there will only be a single project team, and no subteams. The relative small size of the project also allows for this to happen.

In terms of resources, we will work mainly with Master students and Postgraduate Designer students (PDEng), reflecting the application nature of the project, which is aimed at engineering new applications. Further, for some parts of the project new models would need to be developed that are worthwhile to formally test (academically) and make available to the research community at large. For this, we will appoint a postdoctoral researcher.

The overall project plan hence is as follows:

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Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 H1 H2PLAN Data preparation

Analyze MTBusiness Cycle FCPilot MTBusiness Case STPilot STGeneralize research

COMBINE AnalyzeBusiness CaseGeneralize research

BUNDLE AnalyzeBusiness CasePilotWeb-based toolVNCI Workshop

2015

Postdoc 0.5

SABIC

DH

2012

MSc 1

TOIO 1

PhD

2013 2014

MSc 2

TOIO 3

TOIO 2

MSc 3

Dow

Postdoc 0.5

Subproject 1: PLANFor transportation service providers there are two levels of planning. For there is the medium term planning, at which resources are committed. This typically involves the contract between the shipper and the transportation service provider, and the medium term agreements between the transportation service provider and the carrier. In chemicals logistics services, transportation is typically split between the Load Carrying Unit (trailer or tank container) and the tractor (truck, train, barge). Forecasts are both needed in the medium term and in the short term. For the medium term, we will use the insights from a study at DSM (Udenio et al, 2011), which uses system dynamics modeling to forecast business cycles. Since business in the chemical industry is very cyclic, improved business cycle forecasting will assist with resource planning.

For the short term, earlier work (Sarikaya, 2010) has demonstrated that forecasts are unlikely to bring a large contribution unless the site logistics will be more flexible. Hence, we will first make an integrated cost analysis to better understand the trade-off between site logistics and off-site logistics. Then, we will develop a mechanism to make a more integrated trade-off. The focus will be on bulk goods, shipped by truck. The objective will be to reduce the queuing time of trucks at the sites by 50% while maintaining site logistics utilization. This will lead to 5% extra loads to be carried with the same truck, hence considerably improving the added value created by a single driver.

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Planning and milestones

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 H1 H2PLAN Data preparation

Analyze MTBusiness Cycle FCPilot MTBusiness Case STPilot STGeneralize research

2015

Postdoc 0.5

SABIC

DH

2012

MSc 1

TOIO 1

PhD

2013 2014

For the medium term business cycle forecasting the milestones are:2013-Q2 -- delivery of the model based on the SABIC supply chain2013-Q1 - results of a pilot within SABIC

For the short term work the milestones are:2013-Q4 - completion of a model to analyze alternative scenarios2014-Q1 - completion of the business case2014-Q3 - results of a pilot (if business case is positive), Den Hartogh-Dow2014-Q4 - case study complete and published2015-Q4 - completion of 2 academic papers

Work distribution

For the medium term planning, SABIC will be the lead industry partner. For the short term planning, Den Hartogh Logistics will be the lead industry partner. The analysis will be conducted by an MSc student, the model and solution design for ST by a PDEng trainee and for MT by a PhD student with such experience, and the research generalization will be conducted by a postdoc.

Expected deliverables

MT: A simulation model that is able to provide a forecast of a business cycle, with a horizon of 18 months, to predict the development of required capacity (for manufacturing and for shipment), and that takes into account planned plant shutdowns.ST: A quantitative model to specify the costs and benefits of various site logistics design decisions, accompanied with a number of evaluated conceptual alternatives (such as dynamic pricing and carrier managed inventory).

In both cases, the models will be tested in an industry pilot.

Generalization of te results in two academic papers (one on business cycle forecasting by the PhD student, one on the ST coordination by the postdoc.

Subproject 2: COMBINEIn the transport of some commodities, the pipeline is a shared resource between the various shippers. For instance, an ethylene pipeline connects the chemical complexes of Rotterdam, Terneuzen, Antwerp, Geleen and Ludwigshafen. This pipeline is owned by joint venture companies such as ARG (JV of companies such as Bayer, BASF, SASOL, and SABIC) and R2C (JV of Port of Rotterdam Authority and ARG). R2C and ARG operate a common carrier

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pipeline system for transport of ethylene. Common carrier means that, within the available pipeline capacity, any consumer, producer or third party can contract transport of ethylene at a standard product specification, general transport conditions and a public tariff system (Port of Rotterdam, 2012). For other commodities, the use of a pipeline may not be feasible due to insufficient volume, and transportation takes place via other modes. However, short-term fluctuations can be substantial and hence may lead to unnecessary flows of transport, due to short-term imbalances in the supply chain. We hence propose to investigate a business case for virtually combined storage facilities, to allow for inventory pooling effects across a full range of suppliers, which now each hold their individual inventories. As such, the pool may be able to withdraw inventories from a particular (shipped-owned or operated) storage facility, and have the balance maintained in the medium term at the network level. The operations of ARG as a business model may serve as a potential example, We will combine inventories in a virtual way into a single pool which will then allow for more and better optimization of logistics compared to when there is no combining. And, it will even allow for some degree of “borrow” and “sellback”, under tight controls. Both concepts are not fully new as the industry does this already on a 1-on-1 relation basis (swaps/exchanges). What is new in our proposal is that we are now exploring whether, and if so how, this can be done on a many-to-many relationship via a central control point rather than 1-on-1. In the COMBINE project, we will focus on two commodities to develop the business case, the business model, the information sharing solution, and the control model, for instance Propylene-oxide and Styrene. Using ARG as a legal example will also provide clarity as to what information may be shared and how benefits can be obtained in terms of transportation and associated eco-efficiency, while maintaining the proper conditions of commercial competition.

The business case for virtually combined storage facilities will be based on (1) a 10% reduction of transportation movements, enabling a business case for a new startup company and/or a new startup activity for a logistics service provider based on the ARG model, and (2) a 10% increase in efficiency of transportation movements, enabling to deliver products to customers with fewer resources, thus increasing added value per resource used. Especially due to the foreseen reduction in transport capacity and the reduced availability of long-distance drivers over the next 5 years, an increase in the productivity of resources (trucks and drivers) is necessary for the Netherlands-based carriers to remain competitive and gain further market share in this European-wide market.

Further, the analysis and business case will also include rail transportation. Rail is an important mode in chemicals transportation. Applying the ARG model could lead to a common carrier model for rail transportation, rather than the specific bilateral lease agreements that are current common.

Planning and milestones

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 H1 H2COMBINE Analyze

Business CaseGeneralize research

20152012 2013 2014

MSc 2TOIO 2

Postdoc 0.5

2013-Q2 Definition of the common operating model, and specification of how such model can work for virtually combining inventories2013-Q4 Business case based on inventory optimization2014-Q2 Business case based on railcar optimization2015-Q4 Generalized research papers for (1) inventory and (2) railcar optimization

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Work distribution

Shell Chemical Europe will be the lead industry partner. The analysis will be conducted by an MSc student, the model and solution design by a PDEng trainee, and the research generalization by a postdoc.

Expected deliverables

This subproject will result in (1) an analysis of the current operating model of ARG, (2) a generalization of ARG’s operating model, and a specification of how such an operating model can work for virtually combining inventories, and (3) a business case for identifying business opportunities. The business case will be built on (a) inventory optimization and (b) a railcar and truck simulation model to assess the effects.

Subproject 3: BUNDLEFor more specialized companies and products, sharing of storage resources is not possible due to the fact that commoditization is far less developed. Hence, bundling of transportation flows is needed to increase the efficiency of the resources used. The increased containerization of cargo offers opportunities, but bundling of flows has only developed to a limited extent, and especially on barge transportation this is still limited. One of the main reasons is that in many cases a truck movement is needed at either end, and the costs of the modal change have been imperative. Second, volume fluctuations tend to be relatively high due to the business cycles. Experience in other projects (e.g., Fresh Corridor) has demonstrated that volume commitments are required to make barge transport competitive, since otherwise high frequencies cannot be maintained. In this project, we will take the results of the PLAN project (in particular in relation to the medium term volume forecasting to be able to create volume commitments, and in relation to the reduction of queuing times to decrease the cost of the modal change) to develop two particular business cases: one for the (export) Terneuzen/Bergen op Zoom-Rotterdam-Upper Rhine Area corridor and one for the import corridors to Terneuzen/Bergen op Zoom and Geleen. These are main corridors and hence may serve as an example of how a business case can be developed and bundling can be conducted. The concept will include the monitoring of inventory while in transit and postponed inventory further down the supply chain at the hinterland or receiving terminal. The concept will require coordination amongst the various shippers along the corridor to bundle their flows, in particular offering flexibility to the carrier regarding exact shipment times.

Planning and milestones

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 H1 H2BUNDLE Analyze

Business CasePilot

20152012 2013 2014

TOIO 3MSc 3

Dow

2013-Q4 Analysis of the size of the markets and corridors, and definition of a number of alternative operating concepts2014-Q2 Model to evaluate costs and benefits of operating concepts2015-Q1 Results from the pilot and learning on practical barriers

Work distribution

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Dow Chemical will be the lead industry partner. The analysis will be conducted by an MSc student, the model and solution design by a PDEng trainee, and the research generalization by a postdoc.

Expected deliverables

The project will deliver: 1. A number of alternative operational concepts to run these corridors, and (2) a model to evaluate the costs and benefits of such operational concepts.If the business case is positive, the operational concepts will be piloted to learn about the practical implementation barriers.

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Consortium and Project Organization

Research Team

Partner’s name Role and input Specific competence

Technische Universiteit Eindhoven

Project leader, provision of students, PDEng trainees, PhD student capacity for 1 year and a postdoc. Research generalization, writing of industry case studies

Operations Research modeling, planning systems design, simulation, chemical industry production and supply chain planning

 SABIC Petrochemicals

Lead of subproject 1(MT); participate in both other subprojects. Provides data and knowledge on capacity planning; leads associated pilot. Provides access to ARG

 Rail transport; inventory optimization of commodities

 Shell Chemical Europe BV

Lead of subproject 2; participate in both other subprojects. Provides data, and knowledge of commodity trading. Provides contact/access to other industry players

 Commodity trading, Intermodal transportation

 Dow Europe GmbH

Lead of subproject 3; participate in both other subprojects. Provides data, and knowledge of intermodal transportation; leads associated pilot

Intermodal transportation, commodity trading, rail transport

 Den Hartogh Logistics BV

 Lead of subproject 1 (ST); participate also in project 3. Provides data, and knowledge on chemicals transportation; leads associated pilot

 Chemicals transportation, safety and cleaning, transport planning

Cargogator BV

Project Management of web-based prototype for inventory and associated transport sharing

Management of web-based software development

VNCIOrganizer of industry-wide knowledge dissemination; workshop organization

Industry knowledge, dissemination knowledge, industry network

Project organization

The project will be lead by a project team, consisting of one representative of each of the partner organizations in the consortium. The project team will meet 4-6 times per year to monitor the progress of the project.

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Due to the limited size of the project, no further formal project structure will be established, since in the project meetings, the subproject staff can be invited to present the progress.

Within the subprojects, the respective companies mentioned above will be in charge of ensuring the functional requirements of the subproject remain in line with the overall project objectives. They will hence assume the role of lead (from a user perspective). Actual project management in the subprojects will be conducted by the designer-trainees.

C. Evaluation and Monitoring

Evaluation

At the completion of every part of the subprojects, a formal requirement exists to provide a report. This is fully in line with the educational requirements towards the students and designer-trainees; hence the evaluation from a process perspective is embedded and aligned with other procedures. Furthermore, each of these parts will provide:

- A poster that summarizes the results on one page in pictures and brief text- An executive summary that summarizes the results on 2-3 pages of text

The project will report the overall progress in comparison to the project plan twice per year, or more often if so required by Dinalog.

An important success factor for the project is that senior management of the involved companies are involved, allowing for actual decision making on process changes.

D. Valorization and Implementation Strategy

Valorization and knowledge dissemination

The valorization will consist of business case studies, web-based prototype software, 3 PDEng thesis and 3 master thesis studies. In addition, we spend 20,000 Euro for extra valorization activities to develop more advanced web-based software, and 10,000 for dissemination.

Further, within the project two actual implementation pilots are conducted. Hence valorization is an essential and integral part of the project proposal. Since TU/e has extensive experience with conducting project with the chemical industry, and in particular with two of the industry partners (Dow and SABIC), the project team is confident that any positive results of analysis and modeling will actually be implemented. Over the past decade, multiple projects conducted by TU/e’s students and designers have lead to implementations.

It is very important furthermore to train supply chain engineers for the chemical industry. Eindhoven University of Technology has a long tradition as such, with already since the early 1990s an active research stream and inclusion in the programs. Through this program, we intend to further strengthen this, by training additional engineers, and by integrating the results of this study in the various courses. Since the results will also be documented as academic papers (by the postdoc), it implies that the material is also available for any university to include in the curriculum.

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Demonstration and implementation projects themselves beyond the pilots (which are more aimed at a “proof of concept” rather than a full-scale implementation), could be started up but would need to be funded separately. The team of people from the various companies that have prepared this proposal are quite eager to implement, and hence intend to apply for a demonstration project grant at Dinalog in a later stage.

The developed knowledge will be disseminated via: scientific reports; popular articles in e.g. logistiek.nl, Supply Chain Magazine, and specific journals and websites for the chemical industry; finally, modern media, especially twitter and blogs, will be used to ensure wide coverage for the project with social-media-savvies

Implementation

This project will not include a full-scale implementation, but only a pilot-scale implementation to demonstrate the proof-of-concept. Further full-scale implementation is the responsibility of the companies involved.

For the COMBINE subproject, full-scale implementation may require the start-up of a new company, which may qualify for experimental development funding. As indicated by Dinalog, we have not made this part of this proposal and will consider this at a later stage.

References

Puijman, R. (2011), Buffer and inventory management downstream of a cracker: a queuing theory approach, MSc Thesis Operations Management & Logistics, Eindhoven University of Technology.

Sarikaya, E. (2010), On-time delivery performance improvement in bulk liquids transport: integration of tactical and operational distribution process between Dow and Den Hartogh, MSc Thesis Operations Management & Logistics, Eindhoven University of Technology.

Sharypova, K., T. van Woensel, and J.C. Fransoo (2011), Coordination and analysis of barge container hinterland networks, working paper, Eindhoven University of Technology.

Udenio, M., J.C. Fransoo, and R. Peels (2011), Sales Forecasting and Supply Chain Management during the Credit Crisis, working paper, Eindhoven University of Technology.

Van Rooy, B. (2010), Applying hub-and-spoke networks to inland barge transportation: a quantitative and qualitative analysis for a port terminal operator, MSc Thesis Operations Management & Logistics, Eindhoven University of Technology.

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Project Budget

See Appendix 2

18

Partner Agreement

It is mandatory to use this form.

Undersigned consortium partners:

Technische Universiteit Eindhoven based in Eindhoven and represented by ir H. Roumen, being applicant of the project,

and

Shell Chemical Europe BV based in Rotterdam and represented by J. Eggels

SABIC Petrochemicals based in Sittard and represented by W. Vermijs

Dow Europe GmbH based in Horgen (Switzerland) and represented by F. Oosterbaan

Den Hartogh Logistics BV based in Rotterdam and represented by J. Aerts

Cargogator BV based in Mierlo and represented by E. Noot

Vereniging van de Nederlandse Chemische Industrie based in Leidschendam and represented by C. Alma.

Declare that:

The partners in the Consortium authorize the Applicant to submit the project application for the project 4c4chem on behalf of the Consortium;

The partners will execute the project as described in the project plan and share cost and risks;

This partner agreement will run from 1 October 2012 until 31 December 2015; if the project and subsidy will be approved by Dinalog, this partner agreement will be replaced by a consortium agreement within 3 months after start of the project.

The partners commit to the content and financial contribution as described in the application form and in the project plan;

The partners commit to the rules and guidelines of Dinalog as written down in the Guide for Project Plan and Program Tender: Research & Development; Notes to “Call 4 – 2011: Research & development”, including the IP rules;

Partners will take care of public availability and knowledge dissemination of the project results, which includes making project results and information digitally available on the Internet free of charge.

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Applicant

Company / organization Technische Universiteit Eindhoven

Name Ir H.P.J.M. Roumen

Place and date Eindhoven, 14 May 2012

Signature

20

Consortium partners

Company / organization  Shel Chemical Europe BV

Name  J. Eggels

Place and date

Signature

21

Consortium partners

Company / organization  Dow Europe GmbH

Name  F. Oosterbaan

Place and date

Signature

22

Consortium partners

Company / organization  SABIC Petrochemicals

Name  W. Vermijs

Place and date

Signature

23

Consortium partners

Company / organization Den Hartogh Logistics BV

Name J. Aerts

Place and date

Signature

24

Consortium partners

Company / organization  Cargogator BV

Name E.Noot

Place and date

Signature

25

Consortium partners

Company / organization  Vereniging van de Nederlandse Chemische Industrie

Name  C. Alma

Place and date

Signature

26

Accountant’s Statement model

Following information from Dinalog, an accountant’s statement is not required for this project as TU/e has administered Dinalog projects before, and has already issued such a statement for an earlier project.

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Appendix 1 - Brief CV of the scientific researchers involved.

Jan C. Fransoo is a professor of Operations Management and Logistics in the School of Industrial Engineering at Eindhoven University of Technology in the Netherlands. He holds an MSc in Industrial Engineering and a PhD in Operations Management & Logistics from Eindhoven University of Technology. He also serves as Research Director of the European Supply Chain Forum, a collaborative effort with about 25 large multinational companies. He is currently also vice-president of Dinalog (Dutch Institute for Advanced Logistics), a national center of excellence in the area of supply chain management. Professor Fransoo held various visiting appointments at US universities, including Clemson University, the University of California at Los Angeles, Stanford University, and most recently, in 2011, at MIT’s Center for Transportation & Logistics. He serves as Associate Editor of Operations Research, Senior Editor of Production and Operations Management and is editorial board member of six other academic journals in the fields of operations and supply chain management. He has published over 60 papers in academic journals and presented at many academic and industry conferences, on topics such production planning, supply chain and inventory management, and transportation planning with a focus on the chemical, pharma and food industry. His most recent work is addressing issues such as synchromodal transportation, distribution in megacities, and carbon-efficient supply chain management. As part from his academic activities, Professor Fransoo has conducted dozens of projects with industry. He also serves on various governmental and nationwide committees in the Netherlands, such as the Strategisch Platform Logistiek (Strategic Platform on Logistics).

Selection of five relevant publications:M.M. Jansen, A.G. de Kok, and J.C. Fransoo (2011). Lead time anticipation in Supply Chain Operations Planning. OR Spectrum, available online since 12 June 2011.E. Zondervan, T.P.J. van Boekel, J.C. Fransoo, and A.B. de Haan (2011). Simultaneous Optimization of Planning and Scheduling in an Oil Refinery. Computer Aided Chemical Engineering, 29, 925-929.M. Jaksic, J.C. Fransoo, T. Tan, A.G. de Kok, and B. Rusjan (2011). Inventory management with advance capacity information. Naval Research Logistics, 58(4), 355-369.R. Peels, J.C. Fransoo, M. Udenio, and S. Griffioen (2011). Lehman Wave shakes the chemical industry. Chimica Oggi- Chemistry Today, 29(1), 25-27.Y. Boulaksil, J.C. Fransoo, and E.N.G. van Halm, Setting safety stocks in multi-stage inventory systems under rolling horizon mathematical programming models, OR Spectrum, vol. 31, no. 1, 2009, pp. 121-140.

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Appendix 2 - Project budget

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