Value chain management for commodities: a case study from the chemical industry |
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Authors: | M Kannegiesser H-O Günther P van Beek M Grunow C Habla |
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Affiliation: | 1.Department of Production Management,Technical University of Berlin,Berlin,Germany;2.Management Studies Group and Operations Research and Logistics Group,Wageningen University,Wageningen,The Netherlands;3.Department of Manufacturing Engineering and Management,Technical University of Denmark,Lyngby,Denmark;4.Department of Enterprise-Wide Software Systems,The Fern Universit?t in Hagen,Hagen,Germany |
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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–quantity
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. |
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Keywords: | Value chain management Sales and supply network planning Demand uncertainty Commodities Chemical industry |
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