CAMELOT Value Chain Analytics

Margin optimization in the chemical industry enabled by data science

Dubai, 16th of April 2019

Slide 2 | © CAMELOT 2019 | CAMELOT Value Chain Analytics

Value chain management at the leading edge – from strategy to solutions

CAMELOT Consulting Group

CAMELOT Management Consultants: Thought Leader in Value Chain Management for more than 20 years

Global industry specialist in Life Sciences, Chemicals, Consumer Packaged Goods and Industrial Manufacturing

Specialized expertise for superior project quality and results

Camelot Innovative Technologies Lab is our incubator for Digital Innovations and business applications

Co-Innovation Partnerships with the leading software providers such as SAP SE & IBM

Data-centric and digital business solutions

Sourcing &Network Collaboration

Supply Chain Operations & Manufacturing

Distribution &Logistics

Sales &Customer Centricity

Strategy & Business Model Innovation

Organization & Business Transformation

Finance & Performance Management

Information Management & Digital Innovations

Slide 3 | © CAMELOT 2019 | CAMELOT Value Chain Analytics

Margin optimization across complex value chains is a challenge to integrated chemical players

Challenge

Typical questions / decisions

What products / customers are profitable from an end-to-end perspective?

How much can the market price for product X fall until it can no longer be sold profitably?

Where should we direct intermediates in case of a production capacity shortage?

To what extent would our budget assumptions change if the raw material price rose by 20 %? How would that impact margins of BU1 and BU2?

Challenges

Different BU strategies and incentives

Interdependencies between markets

Different pricing logics

Low transfer price vs. high chemicals market price

Raw Materials ProcessingPerformance

ChemicalsIntermediate

Chemicals

Merchant Market

End Market

BU 1 BU 2

Processing

End2end value chain

Slide 4 | © CAMELOT 2019 | CAMELOT Value Chain Analytics

The CAMELOT value chain model is superior in terms of speed, effort, usability and visualization capabilities

Differentiators

“Results in less than a second“

“Designed for management users “ “From data to business insights“

“Prototype and pilot after 8 + 10 weeks“

Intuitive mobile and desktop ready user interface powered by “R Shiny”

State-of-the-art data visualization using network graphs, interactive interfaces, drag-and-drop, hover overs …

Business understanding phases supported by a “R prototype” in combination with an agile pilot rollout

Multicore capable “R server” calculates new simulation scenarios in real-time

Slide 5 | © CAMELOT 2019 | CAMELOT Value Chain Analytics

PHYSICAL

A Value Chain Model is a data-based model of a complex end2end integrated manufacturing network

Solution approach

DIGITAL

ResultsData input

End2end transparency

Simulated scenarios

Optimized value chain WHAT will be the optimal allocation in FUTURE

WHY was the margin in-/decreasing in the PAST

HOW robust will the margin be under stress SCENARIOSRaw material market data

Production cost data

User manipulated data

Historical demand data

Insights

Slide 6 | © CAMELOT 2019 | CAMELOT Value Chain Analytics

New technologies help to overcome constraints that hampered the operability of comparable attempts in the past

Differentiator feasibility

Constraint Example Solution

High number of manual data entries or changes

Individual pricing formulas in customer contracts

Homogenize customer’s contract data by strong segmentation engines

Missing data and insufficient data quality

Adjustment postings and incomplete transactional data

Extrapolate and clean existing data based on statistical evidence

Unknown or non transparent product interdependencies

Price-demand elasticity Discover dependencies with stat of the art visualizations and define data-driven statistical relationships

Unassociated and complex data No transparent cost path from raw materials to end-product

Define learning rules to enable autonomous and dynamic cost estimation on every value chain stage

Slide 7 | © CAMELOT 2019 | CAMELOT Value Chain Analytics

Demand behavior, cost and margins are typical building blocks merged in a tactical twin to optimize the product-mix and end-2-end margins

Tactical twin in supply chain management - Approach

Production cost Demand behavior

Use the demand-price function and the production-cost function to simulate the impact of different end-customer prices and raw material prices on the contribution margin

Contribution margin

Margin

Price P2Price P1

Deduce the demand-price function for each product based on historical order quantities and order values

Take into account market influencing factors and demand correlations between products

Derive the production-cost function based on historical production schedules and costs

Calculate the impact of raw material prices on the variable production costs

Order value

Order quantity

Order quantity

Cost

Slide 8 | © CAMELOT 2019 | CAMELOT Value Chain Analytics

An agile development approach has proven to achieve active stakeholder involvement and to ensure a speedy and cost-efficient development

Project approach

Create proposalDescribe, explore

and verify data

Select, clean, construct and format data

Build and assess model

Create results report

Meeting Collect data Workshops

Businessunderstanding

Dataunderstanding

Datapreparation

Modeling Evaluation

Feedback loopvia phone

Documentation

Summaryworkshop

Conclusion /Deployment

Identify, understand and model relevant

business issues and drivers. Execute a

proof-of-value (R based prototype). Test

Machine Learning and Artificial

Intelligence algorithms.

8 weeks

Sprint nSprint 2Sprint 1

Adjust parameters based on actual values

R development following an agile project

approach. Why R? It is very cost efficient, fit-

for-future, the strongest statistical engine on

the market and on SAP’s roadmap with full

integration to SAP BW, etc.

4 x 2 weeks

Handover workshop

including rollout plan and

hyper care concept. Full

week train-the-trainer

training executed to

enable key users.

For new business units

the interface must be

adapted and trainings are

executed. Based on the

train-the-trainer concept,

the client can execute the

trainings themselves.

Business Understanding & Prototype Agile Pilot Handover Rollout

Proof-of-value