Working closely with your logistics providers to ensure the provision of optimum capacity

( in the short, medium and long term)

Logichem 2010

Dusseldorf

Roger Moore

Supply Chain & Customer Services Manager

2

Leading questions

� Who is Ineos Nova ?

� Am I clear about my service and capacity requirements ?

� Sourcing strategy –what are my options to secure capacity?

� Do I have the right portfolio of LSPs ?

� What is the right type of relationship for me?

� What might we expect ? – the Ineos Nova experience

3

INEOS NOVA

� Business:

� Global manufacturer of styrene and styrenic polymers

� History:

� Formed in October 2005 through merger of BP and Nova European styrenic polymer businesses,

� Expanded in October 2007 to include North American assets – 50/50 JV between Nova (IPIC) and Ineos

� Headquarters: Joliet, Illinois; Fribourg, Switzerland for Europe

Shared service centre in Breda NL

� Revenue:

� Approximately €2.7 billion ($3.8 billion )

� Employees: Approximately 1150

� Sites: 11 manufacturing plants in 6 countries

� Volume:

� Styrene monomer– 1,675 KT

� Polystyrene – 1262 KT

� Expandable Polystyrene – 410 KT (all in Europe)

4

Working Together

What do service partners say about our industry?

� Heavily regulated by external / internal controls

� ADR / IMO etc SQAS / CDI / EN norms/ site rules

� Inflexible in general : slow to change and risk averse

� Low levels of outsourcing / lack of trust

� Relatively low levels of vendor loyalty

� Tendering processes

� Cost driven despite insistence on quality / safety standards

� Unwilling to support (re) investment in new equipment

� Use volume as a lever to reduce costs

Horizontal collaboration not widely adopted

� Operational constraints limit asset utilization

� Plant loading hours

� Customer unloading windows

How do we become the customer of

choice?

5

Some impacts of recession-What we see in the market

� Service providers downsized / restructured

� Once gone drivers are lost to the industry

� Aggressive and non sustainable pricing policies

� Significant imbalance and changes in traffic flows

� Marginal intermodal services withdrawn ( rail & ferry)

� Significant unavoidable cost increases not fully recovered

•Maut increases

•Fuel price volatility

Net result

- capacity ero

sion !

..and n

ow we are

moving to

a selle

rs mark

et!

6

How do we secure capacity for the future

in a sellers market ?

� More carriers / fewer carriers: portfolio management

� Cross regional vs local / niche players

� Time and mileage agreements / dedicated fleet

� Look for productivity / efficiency gains: maximize utilization

� Maximise inter-modal volumes = increase driver output

� Stand by commercial agreements - esp. payment terms

� Look for more flexibility on transit times / delivery dates

� Manage the order profile – demand smoothing

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Developing a logistic sourcing strategy –

3 step approach to securing capacity

Understand own capabilities / attributes

Own marketing / selling strategies

Organizational capabilities / resources

Distribution cost or supply chain management ?

Achieve internal / external alignment…..

Critical performance criteria – what do we need from our carriers

‘Rules of engagement’ – customers and LSPs

Establish clear SLA terms and conditions

Measure performance

8

Logistics Landscape-important in defining requirement

� A mature commodity business - mainly repeat FTL business

� Simple mode / product mix

� Dry Bulk / 1000kg IBC (octabins) / 25 kg bags

� ADR adds complexity

� Compact logistical footprint

� Europe wide markets

� Av. Delivery -1000km

� Small / medium size buyer

� 800kt / € 32m spend

� Small central procurement and planning team

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Business characteristics- what is the service need ?

Niche purchases

one-off discrete items high cost / low support

Commodity Purchase

high volume / repetitive transactions

Leveraged volume

Combining service needs

Speciality servicesSector/product/customer

needsCritical service element

Co

st / s

erv

ice le

vel

Service level / SRM support

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Service providers……choose your partner with care !

‘I want to speak with the man who pays the driver’ = asset owning

Sub contracting is OK …. to a certain level

Chemicals require a particular mind – set

Customer segmentation is a fact of life

Is my service provider a true partner ?

Does the LSP REALLY understand my business ?

How much can I afford to invest in this relationship ?

Look for ‘best fit’ synergies

11

Commercial relationships – what are the options?

Long term partnershipsLower cost of maintenance

Low risk / high quality

Often based on ‘ cultural alignment’

Value proposition is acknowledged

Flexible to respond to market changes

Periodic tenderingTypical procurement strategy

Relatively high implementation effort

Start up risk – change management

Used when capacity exceeds demand

May not be sustainable

Value added logisticsHigh level of integration between parties

Sustainable relationship

Investments / binding contracts

Win – Win

Performance incentives /benefit sharing

Open book / cost plus structure

Spot purchaseHigher risk of failure

Sub-contracted?

Lack of customer loyalty

High cost of ownership for shipperMargins

Business continuitylimited extended

high

low

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The Ineos Nova experience

Time spent in strategy definition is time saved in execution !

(but we still made mistakes )

Be prepared to make changes – ethically.

Mix of pan European – regional – local carriers

Bulk and packaged goods freight markets very different - demand different approaches

Added value is for all – if it isn’t it isn’t added value

Put energy into strengthening relationships……….not building new ones