Value chain management for commodities: a case study from the chemical industry

M. Kannegiesser, H.O. Günther, P. van Beek, M. Grunow, C. Habla

Research output: Chapter in Book/Report/Conference proceedingChapterAcademicpeer-review

Abstract

We present a planning model for chemical commodities related to an industry case. Commodities are standard chemicals characterized by sales and supply volatility in volume and value. Increasing and volatile prices of crude oil-dependent raw materials require coordination of sales and supply decisions by volume and value throughout the value chain to ensure profitability. Contract and spot demand differentiation with volatile and uncertain spot prices, spot sales quantity flexibility, spot sales price¿3quantity functions and variable raw material consumption rates in production are problem specifics to be considered. Existing chemical industry planning models are limited to production and distribution decisions to minimize costs or makespan. Demand-oriented models focus on uncertainty in demand quantities not in prices.We develop an integrated model to optimize profit by coordinating sales quantity, price and supply decisions throughout the value chain. A two-phase optimization approach supports robust planning ensuring minimum profitability even in case of worst-case spot sales price scenarios. Model evaluations with industry case data demonstrate the impact of elasticities, variable raw material consumption rates and price uncertainties on planned profit and volumes
Original languageEnglish
Title of host publicationSupply Chain Planning : Quantitative Decision Support and Advanced Planning Solutions - Part 4
EditorsH.O. Gunther, H. Meyr
Place of PublicationBerlin
PublisherSpringer Verlag
Pages283-313
Number of pages392
ISBN (Print)9783540937746
DOIs
Publication statusPublished - 2009

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