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Strategic Supply Chain Management in Process Industries

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More and more often practitioners in process industry have to adapt their global production networks to changes in the competitive environment. A majority of the supply network design models proposed by academia does not sufficiently capture the economic and technical questions that have to be resolved. This work seeks to provide the necessary operations research decision support tools. It builds on the example of specialty chemicals industry, which faces a strong increase of competitive pressure and historically grown production networks that typically lack a coherent design strategy. Decision makers have to define a production network re-design strategy that allows them to capture the competitive advantages of a global production network. Therefore, the book proposes a planning process split into the two phases: global production network optimization and individual site selection. To support the former a comprehensive Mixed-Integer Linear Programming model is proposed while an approach based on the Analytic Hierarchy Process is suggested for the latter. Findings from a case study demonstrate the applicability of the tools presented to real-world production networks and the insights the use of OR methods can provide in practice.

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Contents
List of Abbreviations ...............................................................................XI
1Introduction ...................................................................................... 11.11Motivation and Objectives........................................................... 1.24Approach and Dissertation Outline..............................................
2Production Network Design and Specialty Chemicals .................. 72.1Supply Chain Management and Production Network Design ..... 72.1.1Supply Chains and Production Networks ............................ 72.1.2Production Network Design................................................. 92.1.3Production Network Design and Advanced Planning  Systems .............................................................................. 122.1.414Generic Production Network Design Strategies ................ 2.2Production Network Design and Industrial Location Science ... 192.2.119Introduction to Industrial Location Science....................... 2.2.2............. 21Major Findings from Industrial Location Science 2.324Specialty Chemicals Production ................................................ 2.3.1Process Industries, Chemical Industry and Specialty  Chemicals........................................................................... 242.3.227Chemical Production Sites................................................. 2.3.3Production Technologies in Chemical Industry................. 292.3.4Specialty Chemicals Production Networks........................ 312.435Production Network Planning and Controlling.......................... 2.4.135Production Network Planning Process............................... 2.4.239Problem Definition Phase .................................................. 2.4.343Production Network Optimization Phase........................... 2.4.4Site Selection Phase ........................................................... 452.4.5Integration of Production Network Design into  Strategic Planning .............................................................. 47
VIII Contents
3Global Production Network Optimization ................................... 513.1Location Analysis and Production Network Optimization ....... 513.2Review of Supply Network Optimization Literature ................. 533.2.1... 54Classification of Supply Network Optimization Models 3.2.258Review of Individual Publications..................................... 3.364Modeling Specialty Chemicals Production Networks ............... 3.3.164General Model Characteristics........................................... 3.3.267Objective Function............................................................. 3.3.3Capacity Selection, Expansion and Reduction .................. 723.3.4Plant Loading and Economies of Scale and Scope ............ 763.3.5Specific Factors of Global Production Networks .............. 793.3.688Single Sourcing.................................................................. 3.3.7............................................................... 89Product Transfers 3.3.889Other Model Features ........................................................ 3.4............................................ 89Mathematical Optimization Model 3.4.1Model Notation .................................................................. 903.4.295Model Formulation ............................................................ 3.4.3106Model Extensions ............................................................ 3.4.4Accounting for Uncertainty: Robust Production  Network Design ............................................................... 1153.5Numerical Performance ........................................................... 123
4127Evaluation of Individual Production Sites ................................. 4.1128Introduction to Multiple Criteria Decision Analysis................ 4.1.1Classification of MCDA Methods ................................... 1284.1.2130Common Steps of MADA Methods ................................ 4.2Traditional MADA Methods ................................................... 1354.2.1Simple Additive Weighting and Simple Scoring............. 1354.2.2137Analytic Hierarchy Process ............................................. 4.3Outranking Approaches ........................................................... 1414.3.1ELECTRE ........................................................................ 1414.3.2PROMETHEE ................................................................. 1434.4147Data Envelopment Analysis..................................................... 4.5151A Specialty Chemicals Site Assessment Model ...................... 4.5.1Choice of Method ............................................................ 1524.5.2153The AHP Site Assessment Model.................................... 4.5.3Lessons Learned from Application Case Studies ............ 160
5Case Study Production Network Optimization ......................... 1635.1Developing a Decision Support Tool for Strategic  Network Design ....................................................................... 1645.1.1..................................................... 164Industry Requirements
6
Contents IX
5.1.2Structure of the Decision Support Tool ........................... 1645.2166Creating the Value Chain Model ............................................. 5.2.1166Mapping the Current Value Chain Configuration............ 5.2.2Aggregating Demand and Product Data .......................... 1695.2.3Identifying Cost Drivers for Operating Expenditures...... 1705.2.4Identifying Alternative Value Chain Configuration  Options............................................................................. 1765.3Establishing and Forecasting External Parameters .................. 1795.3.1General Considerations.................................................... 1795.3.2179Investment Expenditures.................................................. 5.3.3........................................................ 180Transportation Costs 5.3.4Personnel Costs................................................................ 1815.3.5Exchange Rates................................................................ 1835.4Performing Analyses and Evaluating Results Obtained .......... 1835.4.1Assessing Alternative Scenarios ...................................... 1845.4.2.............. 186Analyzing Network Configuration Alternatives 5.4.3Integrating Parameter Scenarios and Configuration  Alternatives ...................................................................... 1885.4.4..................................... 189Standardized Evaluation Reports 5.5.......................... 193Selected Findings from the Pilot Application 5.5.1Reproducing the Status Quo to Obtain a Baseline ........... 1935.5.2193Assessing Alternative Environmental Scenarios ............. 5.5.3Assessing Configuration Alternatives.............................. 195
Conclusion ..................................................................................... 197
Appendix................................................................................................. 201Appendix 1: Derivation of Discount Rate .......................................... 201Appendix 2: Tariff Regulations .......................................................... 203Appendix 3: Political Risk.................................................................. 205
References............................................................................................... 209
http://www.springer.com/978-3-540-72180-2