Logichem 2010

« Improving profitability
Through cost-to-serve
Christian Backaert
European Supply Chain Analysis »
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

Figures

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

SOLVAY
C2S : Introduction
Company Profile
SolVin production sites

Rheinberg
Zandvliet

BERLIN
Zandvliet
Lillo Rheinberg
Lillo
Jemeppe

PARIS Jemeppe

Tavaux

Fos/Berre
Milan
Tavaux

Martorell
Barcelone ROME

Martorell Ferrara

SOLVAY
 C2S : Introduction
kt/y
PVC Supply 2008
1.800
Europe

1.600
Total : 8.9 Mt/y

1.400

1.200

1.000

800 1600

1300
600
1050

400 750
660
480 460
200 400 400
330

0
Ineos Vinyls SolVin Arkema Vinnolit Shin-Etsu LVM Anwil Vestolit Borsodchem Oltchim

Source: Solvay (Business Intelligence)

SOLVAY
C2S : Introduction
PVC World Market
40000

35000 34500

32000
30000
25000
25000

20000 17500

15000
11400

10000
6000
5000
1500
50 220
0
5

0
4

1
19

19

19

19

19

19

20

20
SOLVAY
C2S : Introduction
EU 27 Consumption of PVC
2009

COATED FABRIC PAPER

3%
TUBES PROFILES RIGID FILM
3% CABLES & WIRES 8%
8% FLEX. FILM SHEETS
6%
PROFILES
29%

FLOORING
5%

OTHERS
PLATES 10%
2%

PIPES FITTINGS
26% 5.880 mt

Source : SolVin (vision)

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. Sales & Mkting
• Do you know your customers
Production &

Approach
expectations in terms of service? Procurement costs

C2S
• Do you measure the cost of
delivering the expected level of Distribution costs
service?

Cost-to-serve is about both Customer
service costs
• Control of all the costs
• Segmenting the customer
portfolio to maximize the revenu

SOLVAY
Introduction to C2S

Frequency & cost of

commercial support To grasp the expected
Promotions


results from a cost-to-

All production costs

At the lowest level of SKU serve analysis it is
Sales & Mkting
All raw materials essential to collect all
« hidden costs »
Production &
Approach

Transport
Procurement costs
Warehousing
C2S

Traditional analysis Accurate C2S

Packaging

Claims management
Distribution costs Apparent

Management of documents
Profit

Multisourced or dedicated to a

Revenues

customer B
plant

customer B

customer C
customer A

customer A
Customer Flexibility in delivery accuracy

Costs

customer C

Technical requirements
service costs
Terms of sales

Yearly discounts

Value of accounts receivables

Security stocks

….

SOLVAY
Introduction to C2S

Working with real figures instead of averages

Impact of Averaged figures Working with
30
averages leads
Excellent growth
GROSS MARGIN Monthly
margin, extend
to short term
25 Gross Margin Average 3 Months
production, room for
20 mistakes in
price negociations
15 operational
10 decisions
5
0
-5
04 05
07 05
10 05
01 05
04 06
07 06
10 06
01 06
04 07
07 07
10 07
01 07
04 08
07 08
10 08
01 08
04 09
07 09
10 09
09
Negative gross
.20
.20
.20
.20
.20
.20
.20
.20
.20
.20
.20
.20
.20
.20
.20
.20
.20
.20
.20
.20
-10
01

margin, reduce
-15 production and
-20 sales

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 price
evolution are no longer only a trend
Sold quantities deviations

120

100

80

60

40
Sold quantities
20

0
04 05

07 5

10 05

01 5

04 6

07 6

10 06

01 6

04 7

07 7

10 07

01 7

04 8

07 08

10 8

01 08

04 9

07 09

10 9

01 9

0
00

00

00

00

00

00

00

00

00

00

00

00

00

01
0

0
.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2
01

SOLVAY
Introduction to C2S

The deepest possible: customer level

Analysis of Margin: detailed by geographical zone
While the
35 Gross Margin Country One

30 Gross Margin Country 2 average remains

25
Average Gross margin positive, one
20 coutry delivers
15 much bigger
10 Gross Margin
5
than the other.
0
-5
Treatment should
04 5

07 5

10 5

01 5

04 6

07 6

10 6

01 6

04 7

07 7

10 7

01 7

04 8

07 8

10 8

01 8

04 9

07 9

10 9

9
00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00

00
then be
.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2
-10
01

-15 differentiated

SOLVAY
Introduction to C2S

Control the data in your C2S analysis

T ra n s p o rt c o s t e v o lu tio n fo r o n e s p e c ific c u s to m e r

120
S u m o f Tran s p . an d t a k e aw a y € /t
100
A vera ge on y e a r b as is fo r th e c u s to m e r
80 A vera ge on y e a r b as is fo r th e c o u n try
Mastering your
Eur/T

60

40
database is key to
20 ensure success of
0
1 2 3 4 5 6 7 8 9 10 11 12 C2S approach. This
M o n th s

is however not the

A n a ly s is o f m a r g in e v o lu tio n
easiest task and is
300

250 a vg (a ll c u s t . ) n t v ve n t e via re f resources

T ra n s p . a n d t a k e a w a y € / t
200 ra w m a t e ria l c o s t consuming
150

100

50

0
05

05

05

05

06

06

06

06

07

07

07

07

08

08

08

08

09

09

09

09

10

-5 0
0

0
.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2

.2
02

05

08

11

02

05

08

11

02

05

08

11

02

05

08

11

02

05

08

11

02

SOLVAY
C2S : presentation topics

Who is Solvin?

Introduction to C2S

How to put in place & Solvin experience

Let’s share our experience

SOLVAY
 Q ty in Av g. T rans C redit Net & A ll v bl . Contribut Fi x. T O T AL Contri but G RO S S

C2S within Solvin : how we put C2S into practice

NT V
p. and Cash
price
m anuf. ion m anuf . P rod. M ARG I N

Ship-to party take C ost costs (Solv i n) - costs - Costs - ion CO P A -

f or
Price

Data collection RU in RU
away

€/t €/to
cust
€/to
A v erage

per ton
Av erage

per ton
Av erage

per ton
A verage

per ton
Warehousing
(solv i n)
&
ton
Av erage per

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 Transportation
5419,4 costs
10414,7 -530,8
- fixed production costs
53459 171404 5219,5 434,3 44,4 4740,7 4480, 8 260,0 638,3 5119,1 6104,0 -378,3
- administration
53508 costs178704 5402,0 402,2 45,1 4954,8 4158, 4 796,4 778,8 4937,2 19496,2 17,6
53511
- commercial costs 682550 5394,7 309,2 4,2 5081,3 4443, 1 573,7Shippin 976,3
Plant 5419,4
Shipme 53641,6
Gross wght per Net Weight-402,6 Loading
54902 100375 9855,0 934,0 82,2 8838,8 4820, 2 4176,4g
frm 1417,8 6238,0 57425,7 2758,6
55647 170637, 5 5292,5 309,2 Query22,1tool
4961,3 4434, 2 deliv.ite
462,6conditio 845,6 5279,8 10812,2 -383,1
56933 341275 5329,0 309,2 22,2 4997,6 4347, 4 m 585,6ns 778,8 nt5126,3
type stage
27377,9 Transported
-193,2 costs
7DYN 33 Road container 30ft
Z3C0 ROAD standard
2.469.100,000 KG 2.469.100,000 KG
Fix production
80088 cost / product
356824 5329,0 386,1 44,4 4898,4 4158, 4 740,1 778,8 4937,2
Result
36174,2 -38,8
2.469.100,000 KG 2.469.100,000 KG
80411 170637, 5 5475,0 309,2 45,7 5120,2 4442, 3 613,4Result 869,0 5311,3 14337,2 -255,6
2.469.100,000 KG 2.469.100,000 KG
80832 Month 1 Month 2 …
717152 5824,8 394,2 24,8 5405,8 4440, 2 7E9A965,530 719,8
Road 5160,1ROAD standard
Z3C0 94853,9
326.820,000 KG 326.820,000245,7
KG
ProductResul
A t 100 4335944,
107 5 5465,4 380,8 24,1 5060,5 4347, 2 685,5 825,5 Result
5172,6 326.820,000 KG 326.820,000
409049,7 KG
-140,0
Result 326.820,000 KG 326.820,000 KG
Product B 100 98 892P 30 Road Z3C0 ROAD standard
753.290,000 KG 753.290,000 KG
Product C 99 88 Result 753.290,000 KG 753.290,000 KG
Product D 97 105 Result 753.290,000 KG 753.290,000 KG
8BWV 12 Road -> Sea ctn 20ft
Z1B1 SEA booking
1.466.329,500
main leg KG 729.680,000 KG 6.857,50 EUR
Product E 102 103 Z1F0 SEA FOB. 565.040,000 KG 280.000,000 KG 3.400,00 EUR
… Z3P0 Road-Preliminary
914.820,000
leg KG 907.680,000 KG
Result 2.946.189,500 KG 1.917.360,000 KG ############
central DB for 14 Road -> Sea ctn 40ft
Z1B1 SEA booking
###############
main leg 8.489.365,000 KG ############
Variable Product Cost/Month analysis Z1F0 SEA FOB.6.367.777,600 KG 3.099.150,000 KG ############
Z3P0 Road-Preliminary
###############
leg ###############
Month 1 Month 2 … Result ############### ############### ############
Product A 100 107 30 Road Z3R0 ROAD returns1.410,750 KG 1.375,000 KG

Product B 100 98
Product C 99 88
Product D 97 105
Product E 102 103
…
- raw materials
BOM - energy costs
- 'by-products' selling prices
- transport cost of raw material
between plants
- ...
SOLVAY
C2S within Solvin : how we put C2S into practice

Not a perfect C2S approach as:

•Need to align commercial costs
to customers
•Systematic cost of product to
customer (new packaging)
• reverse logistics & cost of claims
at customer level
• warehousing cost at customer
level
•Some wrong data in system

SOLVAY
C2S within Solvin : how we put C2S into practice

The vision from the sales team : importance of your customer

70% of volumes are

strategic. Shouldn’t it
be revised/refined?

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
C2S within Solvin : how we put C2S into practice

Exclusives

SOLVAY
C2S Conclusions

Control your data

Working with averages is not appropriate

Keep a light system

Do it

SOLVAY
Any question?

SOLVAY