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Manage Uncertainty in Chemicals via Inventory Optimization. Ray Adams SAP, IBU Chemicals David Giacomini Anand Sundar DuPont Company Chris Potts Eastman Chemical. Spot Oil Prices – Department of Energy. Relationship to Inventories and Price Indices.

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Manage Uncertainty in Chemicals via Inventory Optimization

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manage uncertainty in chemicals via inventory optimization

Manage Uncertainty in Chemicals via Inventory Optimization

Ray Adams

SAP, IBU Chemicals

David Giacomini

Anand Sundar

DuPont Company

Chris Potts

Eastman Chemical

relationship to inventories and price indices
Relationship to Inventories and Price Indices

Source: US Bureau of Census Inventory to Shipments Ratio, ICIS Pricing

powerful trends are re shaping chemicals business worldwide
Powerful Trends Are Re-Shaping Chemicals Business Worldwide

Energy & Raw Materials Management

Innovation & Portfolio Management






  • Price volatility
  • Cost pressures
  • Proximity to raw material sources
  • New opportunities and competitors
  • Consolidation / M&A
  • IP Management
  • Innovation networks and Hybrid Development
  • Portfolio optimization
  • Alternative Feedstocks
  • Environmental compliance
  • Global trade compliance
  • Risk Management



  • Cash is King, Increased Focus on Cash-to-Cash cycle
  • Challenging Prices and Reducing Margins
  • Tightening up of Working Capital
  • Prepare for the Unexpected: Strive for Transparency
  • Sustainability becomes a Board Room Topic
  • Operational Excellence & Business Network Innovation

Company Profile


2009 Company Sales

  • DuPont is the world’s most dynamic science company
  • Creating sustainable solutions essential to a better, safer, healthier life for people everywhere
  • Founded in 1802
  • Operating in more than 70 countries
  • Total 2009 Sales $26.1B
dupont s smartops journey
DuPont’s SmartOps® Journey

Laying the


Automation &




Proofs of


  • 4 businesses
  • Developed data management processes
  • Demonstrated SmartOps® value
  • SmartOps® Forum
  • Initial business discussions
  • Agreement to move ahead with POVs
  • SmartOps® led proofs of value for 2 businesses
  • Identified business value for MIPO
  • Made decision to license SmartOps®
  • Automate the data extract, transform, and load processes
  • Address requirements for scenario management
  • Standardized support model
dupont business requirement
DuPont Business Requirement

“How do we provide a scalable

architecture that can integrate

supply chain data from several

heterogeneous IT systems

Business Unit A – SAP APO 4.1

Business Unit E – Legacy application

Business Unit F – SAP R/3

Business Unit N MIMI

Business Unit P - Legacy

Business Unit C – SAP APO 3.0

Business Unit S – SAP R/2


Architecture for SmartOps® Integration

Non – SAP Systems

Time Phased SS Levels








SmartOps® MIPO







Validate and Update SS in APO


Data Store



Data Gateway

Excel /


Error Handling and Resolution

the journey continues
The Journey Continues

All SmartOps® BUs begin using integrated functionality

First BU begins using fully integrated functionality

who we are
A global manufacturer of chemicals, plastics and fibers headquartered in Kingsport, Tennessee

A company dedicated to economic success, environmental stewardship and social responsibility

A leading producer of coatings, adhesives, specialty plastics and cellulose acetate fibers

A manufacturer of PET polymers for packaging

The first company to commercialize a gasification facility in the U.S., in 1983, which is operating at industry-leading performance

Who we are
what we ll cover
What We’ll Cover …
  • Achieving the Right Balance – Why Eastman chose SAP Enterprise Inventory Optimization by SmartOps® (SAP EIO)
  • Project Tools and Processes: A Six Sigma Journey
  • Reporting – Measures and Dashboards
  • Results and Future
  • Wrap-up
achieve the balance
Achieve the Balance

Customer service level

Some key stakeholders:

  • Customers
  • S&OP
  • Supply chain
  • Procurement
  • Logistics
  • Manufacturing
  • Business

Profitability $$

Manufacturing cost

Inventory Cost

started with a pilot proof of concept
Started with a Pilot/Proof of Concept
  • Work began: July 2008
    • Pilot area: 90 items, 15 plants/warehouses
  • Manual models of pilot area: Oct 2008
    • Decided upon major parameters and settings
  • Automated pilot area: Feb 2009
  • Concluded pilot project: May 2009
  • Company wide rollout: June 2009
  • SharePoint reporting: Oct 2009
  • SharePoint dashboard: Dec 2009
parallel project efforts
Parallel Project Efforts

Business Process Design using Six Sigma

  • S&OP
  • Business process design team
  • Supply chain management
  • Supply planning
  • Manufacturing
  • Procurement
  • Software implementation team

Software Tool Implementation & Configuration

  • Technical team
  • Business process design team
  • Supply chain management
business process design using six sigma
Business Process Design Using Six Sigma
  • Define
    • Stakeholder matrix
    • Interview guide and plan
    • The Affinity Diagram (KJ Analysis) – key process needs to meet
  • Conceptualize
    • Process concept generation to meet key needs
  • Design of the business process
  • Optimize – Testing and improving the process
  • Control – Establishing the control plan for the process
inventory measures
Inventory Measures
  • 1. Inventory level status – Current Inventory against limits
  • 2. Percent in control – % of KGs in control – weighted
  • 3. Percent touched safety stock – Percent of items that touched safety stock in last 90 days
project benefits
Project Benefits
  • Initial results are consistent with our expectations
  • Demonstrating relationship of forecast accuracy, customer service, master data, and inventory investment
  • Identifying the right number, and identifying levers to improve the summation of the variables
  • Accelerating the rollout to other groups within our company using black belts
7 key points
7 Key Points
  • Master data is critical and expect to spend significant amounts of time to correct
  • Accurate forecasts are foundational to optimizing inventories
  • Technical changes have been easier to overcome than business process redesign
  • Measures and dashboards helpful to speed adoption
  • SAP EIO by SmartOps while a good tool, is NOT a silver bullet
  • SAP connectivity is not a simple out-of-the-box connection
  • Expect continual iterations and loops; MANY small steps and changes are needed to complete the journey


  • Thank you for participating.

David Giacomini

Anand Sundar

Chris Potts