Redesign of the joint supply chain with Dow Corning

This report summarizes the results of a Logistics Design Project, which was carried out at Univar Products International B.V. in Rotterdam, the Netherlands. It started on July 7st, 2007 and ended on January 7th, 2008. The goal of the project was to identify and validate the most effective way of storing and shipping Dow Corning silicones from Paper and Process Industries (PPI) and Life Sciences (LS) Business Units to Univar end users and simplify the existing processes between both companies. At the moment, the supply chain for Univar works in a decentralized fashion, where each Univar regional office orders from Dow Corning independently. The project was initiated to analyze the possibility of centralized purchasing from Dow Corning, offering a single interface to the supplier, as well as central storing, which may offer substantial working capital reduction, as well as transport savings. Interest to pack the silicones closer to the demand point in Europe was another motivation for this project. After analyzing the data collected and the output of the interviews, a number of issues came under the spotlight, such as too frequent deliveries to some Univar Regions, excessive number of distribution centers in France and the UK, and high inventory levels in Iberia, among others. Moreover, to assess the quality of the data collected I applied Benford's law, a well known first digit distribution used by auditors to detect fraud in tax declarations, for instance. The data collected was input into CAST, a commercial software package with which Centers of Gravity were calculated. These results were compared with another tool implemented in Excel. One of the conclusions that came out of CAST is the realization that the number of Regional Distribution Centers for Univar is optimal, i.e. a reduction in the number derives necessarily in higher transportations costs. In addition to the mentioned outcomes, the new supply Chain proposed was selected from a number of scenarios that were analyzed in terms of qualitative as well as quantitative criteria. The Scenario chosen shows savings of €380,000, while at the same time reduces complexity, and increases control for Univar over its inventory. Next to the proposed supply Chain, a risk analysis has been carried out to point out the dangers that the implementation may have to face. Finally, an Inventory tool was implemented in Excel for the purpose of determining optimal inventory levels subject to a service level. With the aid of this tool, the inventory levels for 8 products (24 sku's) were calculated. These 8 commodities were chosen for being the fastest movers, adding up to more than 4,000 tons (40% of the total volume). Since the tool works with empirical distributions, no changes are necessary to utilize it for the rest of the product range (292 products, circa 500 sku's).