Robin Weitkamp SVP, Lubricants and Additives September 2013 Implementing S&OP During Startup Phase...

Robin Weitkamp

SVP, Lubricants and Additives

September 2013

Implementing S&OP During Startup Phase

Bringing In S&OP with the Bricks and Mortar

2013 Copyright, Elevance2

How (not) to build a hotel

Source: Roberto Ferdman, blog, 12 August 2013

“On the Mediterranean coast, in the town known for pioneering cheap package tourism, Spain is building what will be Europe’s tallest residential building. Benidorm’s InTempo skyscraper is a gargantuan structure – some 650 feet tall and architecturally ambitious: Two separate towers are conjoined over 550 feeet in the air by an inverted cone which will house a massive garden and pool…..

But it’s also massively flawed: It doesn’t have any elevators capable of going all the way to the top.


How (not) to build a hotel

Source: Roberto Ferdman, blog, 12 August 2013

“Fixing Intempo’s structural flaws will mean tampering with its architectural vision, and funneling even more money into the project. The only viable way to correct for the builder’s design gaffe is to erect external elevator shafts….”

“Some 45% of the skyscraper’s 269 apartments have already been sold, but “sales are going slower now,” the project’s architect, Roberto Perez Guerras, told El Mundo earlier this month….”

We don’t make hotels

But we are worried about how to build a businesswith very few people and in a hurry

Elevance Renewable Sciences is transforming chemicals production

5

Founded 2007 ….. ~140 Employees today

First industrial scale manufacturing operational

Shipments of products to customers established

High Performance Specialty and Intermediate Chemicals from Natural Oils

2012 Copyright Elevance Renewable Sciences

Soy

CanolaCanola

PalmPalm

Variety of Natural OilsWidely Available

Specialty Chemicals

Oleochemicals

Olefins

Commercial TodayLow Capital RequirementsLow Operating Costs

High Value Product MixAddresses Critical ShortagesMeets Customer Performance Needs

Is this a test?

April 10, 2023 Copyright 2013, Elevance Renewable Sciences, Inc. April 10, 2023 Copyright 2013, Elevance Renewable Sciences, Inc. 7

Specialty Chemicals Based on Novel Di-functional Molecules

Typical oleochemicals:Monofunctional esters/acids

Typical olefins:Monofunctional olefins

Chemicals from the Elevance process combine functional attributes of olefins and oleochemicals in a previously unachievable single molecule

Di-Functional Molecules

R

O

R

O


You get what you get…

April 10, 2023 Copyright 2013 Elevance Renewable Sciences, Inc. 9

Products Address Critical Customer Needs

Products specifically target customer desired functional attributes

Improved cold water performance Alternative feedstock with pricing/supply dynamics

Anti-frizz and shine for leave-in hair care Moisturizing benefits & smoother feel for skin care

Thermal stability Increased fragrance loading

Reduction in formulation costs Improved fuel economy

Improved lubricity Enhanced cold flow properties

Enhanced corrosion, chemical and heat resistance Light weight replacement for metal alternatives

Detergents & Cleaners

Personal Care Products

Performance Waxes

Lubricant Base Oils

Lubricant & Fuel Additives

Engineered Polymers & Coatings


8-12 products…

How can we be prepared… starting from scratch?

6-15 markets…

100s of customers…

140 employees… total

The ERS S&OP process was designed by a cross-functional team

Design Team

•Process Manager•Logistics/Business Operations•Finance•Manufacturing

Design Team

•Process Manager•Logistics/Business Operations•Finance•Manufacturing

• Business Operations• Business Development• Finance

• The design project kicked off June 2012 and completed with an approved design proposal in November

• S&OP and organizational design consultants guided the team in the development of the process

• The on-going process launched in March 2013Executive Sponsor TeamLead Sponsor – COOCEO CFOEVP Sales & Marketing VP HR

Executive Sponsor TeamLead Sponsor – COOCEO CFOEVP Sales & Marketing VP HR

Others involved in the design• Marketing• Platform 1• Platform 2• Platform 3

• Manufacturing• Finance• Operations

plus consultant support



Elevance desired a process for managing chaos well before building our “hotel”…

Without a process…

Function-to-function handoffs

Multiple forecasts/biases

Units & dollars don’t match

Disconnected views

Reactive decisionmaking

With a process…

Coordinated

Integrated assumptions and views

Integrated financials

Consistent and holistic

View of future, with agreed boundaries

Additional benefits• Enhanced teamwork• Improved communications• Better decisions tied to financial

plans with less effort/time

• Tight linkage with corporate strategy

• Greater accountability• Greater control

Elevance relied on best practice literature in implementing Executive S&OP

Step #1Data

Gathering

End of Month

Decisions &Game Plan

Step #5ExecutiveMeeting

Conflict Resolution, Recommendations &

Agenda for Exec. Mtg.

Sales Actuals, Statistical Forecasts

&Production Actuals

Step #2DemandPlanning

Step #4Pre-S&OP

Meeting

Capacity constraints2nd-pass spreadsheets

Management Forecast1st-pass spreadsheets

Step #3Supply

Planning

Management’s handle on the business…a multi-step process involving demand planning,

supply planning, and middle and top management meetings for decision-

making and authorization

The ERS S&OP process includes 5 basic steps that will occur monthly and will look 36 months into the future

15 2013 Copyright, Elevance

Why 5 steps?

Why Monthly?

Why 36 months?

…includes 5 basic steps…..D

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Step#1

Step#1

Steps#2/#3Steps#2/#3

Step#4

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Step#5

Step#5

Dem

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AnalysisOptimization

Analysis

Gather data from previous month: sales, production, inventory

actuals

Develop unconstrained demand forecast based on customer, market and historical views.

Define unconstrained plant availability from JV and wholly

owned assets

Determine optimized supply/demand based on

inventory, financial constraints and incremental economics. Decide plan, set plant rates,

and define logistical requirements. Connect with JV

partners, tollers, etc to agree plan. Prep for ELT meeting.

Present plan to the leadership team with

appropriate inventory and financial information.

Bring forward recommendations for decisions outside of

established guidelines.

Decision MeetingDecision Meeting

Connection with JV

Connection with JV

Prep for ELT Meeting



…that will occur monthly…


Why 5 steps?

Why Monthly?

Why 36 months?

…that will occur monthly…


Feedstock inventories (left) and product inventories (below) can vary

significantly….

We decided that a monthly timespan was the maximum we

could handle

The ERS S&OP process includes 5 basic steps that will occur monthly and will look 36 months into the future


Why 5 steps?

Why Monthly?

Why 36 months?

…and will look 36 months into the future




Strong signal in this product that a decision about future capacity is

needed

Expand?

Position to marketplace an upcoming tight product?

What about other products?

Chemical plants take 2-3 years to construct typically



And, remember, we have many of these plots (for each Product) - each having its own plot so a strategic view

is CRITICAL

Now we know what we want…

How can we be prepared… starting from scratch?

…but how?

The best-in-class model for demand

Marketing collects historical and forecast market data, for appropriate markets in order to inform demand forecasts

Market View

Oooops… we have no ability to correlate market factors to demand for some of our products… they are novel



Platforms/ Business teams collect product-by-customer forecasts

Customer View

Market View

Through our development partnerships, working with companies in the space of selling such materials, we have indirect

inputs on expected demand

No correlations



Finance pulls prior month actuals and runs analysis to create historical view and forecasts (eventually)

Customer View

History View


Market View

No correlations

Being new, we have no history so no historical trends…




Customer View

History View

• Demand tool populated with 3 views

• Macros run to generate analyses from the input data

• Demand data published to Demand Team


Market View

No correlations

No history

So we have a demand view, but in our early years we must take

caution that our demand is very

customer-input driven…




Customer View

History View





Market View

No correlations

No history

Demand Agreement

Meeting

• Participation from platform/ business leaders and sales

• Goal of the meeting its to produce an aligned demand forecast

• Reconcile any misalignments with appropriate LT connection

So our process is “full”, but with no rearview or side

mirrors, reconciling opinions is a key risk




Customer View

History View





Market View

No correlations

No history

Demand Agreement

Meeting

• Participation from platform/ business leaders and sales

• Goal of the meeting its to produce an aligned demand forecast

• Reconcile any misalignments with appropriate LT connection

Aligned demand view published for optimization

However, we are committed to building 3 demand views with time


Intent• Compile a market-driven view of product demand and/or growth rate profile• Seen from the perspective of broad market indices and/or data

• Demographics, macroeconomics, industry trends, etc.

Construct• Selection of key broad markets

• Markets are not applications; markets are extrinsically and consumer driven categories• Collection of data independent of ERS customers and sales staff• Views of market growth are utilized along with correlations to project demand view for

ERS Products• i.e., over time, vehicular transportation market data could be correlated to market demand for a

type of lubricant, which could then be translated to a demand for an Elevance intermediate

Use• Automated conversion to 36-month forecast demand view, quantity and growth rate

For the future, we map our expected product derivatives…Example: Product -> Addressable Market Map (Product B)

31 Elevance Confidential

Detergent

Adjuvants

Oilfield Chem Biocides

PAO Base Oils

AdditivesCoatings Adhesives

Ester Base Oils

DERIVATIVES

Surface Cleaners

Engr Plastics

Sealants

Reactive Chemicals

Cleansing

Skin & Hair Care

To begin building a demand profile, we map the products that will be made

from our intermediates into key applications of use

…to the markets in which they could be usedExample: Product -> Addressable Market Map (Product B)


Non-durable Household

Durable Household

TransportationIndustrial

EquipmentElectronic &

Electrical

Construction & MaterialsMARKETS

Oil Gas & Fuels

Aerospace & Defense

Forestry & Paper

ChemicalsMedical Eqpt & Services

Food & Beverage

Furnishings

…noting that consumption of those products is driven by fundamental,

industrial demand drivers

Example: Potential markets for adhesives made from Product BExample: Product -> Addressable Market Map (Product B)


Detergent

Adjuvants


PAO Base Oils


Ester Base Oils


Durable Household



Electrical

Construction & Materials

DERIVATIVES

MARKETS

Surface Cleaners

Engr Plastics

Sealants

Reactive Chemicals

Cleansing

Skin & Hair Care

Oil Gas & Fuels

Aerospace & Defense

Forestry & Paper


Food & Beverage

Furnishings

So we identify the pairs which could be mapped

If we understand forecasts for growth in industrial equipment

manufacture, down the road we can correlate

that growth expectation to use of our product

Caution: This brings great complexity if not managed practicallyExample: Product -> Addressable Market Map (Product B)


Detergent

Adjuvants


PAO Base Oils


Ester Base Oils


Durable Household



Electrical


DERIVATIVES

MARKETS

Surface Cleaners

Engr Plastics

Sealants

Reactive Chemicals

Cleansing

Skin & Hair Care

Oil Gas & Fuels

Aerospace & Defense

Forestry & Paper


Food & Beverage

Furnishings

So we focus on effective vs. perfect


A A

BB

CC

EE

FF

GG

HH

II

ERS Products MarketsERS Platforms

Consumer Ingredients & Intermediates

Consumer Ingredients & Intermediates

Lubricants &AdditivesLubricants &Additives

Engineered Polymers &

Coatings

Engineered Polymers &

Coatings

Oil Gas & Fuels

Aerospace & Defense

Forestry & Paper

Chemicals


Transportation

Industrial Equipment

Electronic & Electrical


Durable Household

Medical Eqpt & Services

Food & Beverage

Furnishings• Performance Waxes and Candles• Personal Care Products• Detergents and Cleaners• Antimicrobials

• Specialty polyamide, polyols & polyesters

• Epoxies and polyurethanes• Coatings and Cross Linkers

• Lubricant Base Oils• Additives for Lubricants &

Fuels• Advanced Biofuels

DD

JJ

6

2

52

1

1

2IntermediatesIntermediates

Eventually, demand planning will flow right to left, based on market data




Customer View

History View


Market View

No correlations

No history

By building the relationships

And by collection our actual demands



Customer ViewOver time, we will have windshield, side mirrors and even a rearview…


History View


Market View

Fixed:-Plant Capacity-Monthly run days

Variable:-Scheduled outages-Existing product inventories-Ramp status (initially)

Fixed:-Transesterification unit capacity-ME fractionation Capacity

Variable:-Scheduled availability to the JV-Storage availability-Inventory

- Olefin Fractionation capacity by month

- Inventories

Biorefinery Inputs JV Partner Inputs

Toller Inputs Logistics Inputs

- Scheduled shipments- Material in-transit- Tank availability/inventory- Ship, barge, rail, storage availability

Aligned unconstrained supply view

Supply Agreement Meeting:Supply team to agree on unconstrained supply availability for planning horizon

Supply is another set of options to make stuff


Optimization and consensus can be difficult in a co-product business

• Multiple products are produced simultaneously with limited flexibility on yields

• Product streams have different market values and logistics/packaging/delivery costs

• Multiple internal business may have demand for the same product stream at different values

Mitigation Steps

• Inventories of all products must be simultaneously managed

• Incremental economics must be modeled to determine if projected demand streams so not meet established criteria

• Supply and demand plans must be adjusted to optimize the operating plan based on established constraints (i.e., maximize profitability, minimize working capital, contractual commitment vs. spot)

Logistics and communications must be part of the optimization

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L.A.

NOLA

= Elevance Plant

= S&OP Nodes

ERS

NODE

ROTT

SHAN

SING area

ERS

2012 Copyright, Elevance

Aligning organization roles and rules enable “effective”

OPTIMIZATION Team

ResponsibilitiesCross-Functional and Cross-Business Team with a common purpose to:

• Optimize supply and demand plans across Elevance based on working capital, cash flow, incremental economics and income constraints

• Make decisions to set rates and demand.

• Make recommendations to ELT for strategic plans that are outside of predetermined constraints

• Calculate rates for all coproducts and projects supply/demand balance over the planning horizon

Membership• S&OP Process Owner • Platform Leaders: (same as

Demand Team)• Consumer Ingredients• Lubricants and Additives• Engineered Polymers and

Coatings• Intermediates

• Supply Process Manager• Global Logistics Manager • Financial Planning and Analysis • Asia General Manager

OPTIMIZATION Team

ResponsibilitiesCross-Functional and Cross-Business Team with a common purpose to:

• Optimize supply and demand plans across Elevance based on working capital, cash flow, incremental economics and income constraints

• Make decisions to set rates and demand.

• Make recommendations to ELT for strategic plans that are outside of predetermined constraints

• Calculate rates for all coproducts and projects supply/demand balance over the planning horizon

Membership• S&OP Process Owner • Platform Leaders: (same as

Demand Team)• Consumer Ingredients• Lubricants and Additives• Engineered Polymers and

Coatings• Intermediates

• Supply Process Manager• Global Logistics Manager • Financial Planning and Analysis • Asia General Manager

EXECUTIVE Team

Responsibilities•Review and approve / modify decisions made by the Optimization team regarding optimized Supply and Demand plans. •Review recommendations made from Optimization team regarding plans outside of constraints established for S&OP Process and Optimization team.

Membership•ELT

EXECUTIVE Team

Responsibilities•Review and approve / modify decisions made by the Optimization team regarding optimized Supply and Demand plans. •Review recommendations made from Optimization team regarding plans outside of constraints established for S&OP Process and Optimization team.

Membership•ELT

SUPPLY Team

Responsibilities•Determine monthly capacities – unconstrained supply.•Determine logistics constraints and identify solutions / alternatives. •Coordinate interface with Wilmar / JV partner to ensure coordinated supply plans.

Membership•S&OP Process Owner •Supply Process Manager •VP Manufacturing •Plant Scheduler •Global Logistics Manager •Supply Chain Director

• FP&A, ad hoc

SUPPLY Team

Responsibilities•Determine monthly capacities – unconstrained supply.•Determine logistics constraints and identify solutions / alternatives. •Coordinate interface with Wilmar / JV partner to ensure coordinated supply plans.

Membership•S&OP Process Owner •Supply Process Manager •VP Manufacturing •Plant Scheduler •Global Logistics Manager •Supply Chain Director

• FP&A, ad hoc

DEMAND Team

Responsibilities•Consolidate input from 4 business units / platforms into an integrated Elevance Demand Forecast / plan. •Generate updated demand forecast on a monthly basis that reflects analysis from market, customer, historical data and trends. •Document key assumptions that underlie the demand forecast / plan.

Membership•S&OP Process Owner Demand Process Manager•Platform Leaders:

• Consumer Ingredients • Lubricants and Additives • Engineered Polymers and Coatings

• Intermediates • Market Analyst • Customer Service, ad hoc• FP&A, ad hoc

DEMAND Team

Responsibilities•Consolidate input from 4 business units / platforms into an integrated Elevance Demand Forecast / plan. •Generate updated demand forecast on a monthly basis that reflects analysis from market, customer, historical data and trends. •Document key assumptions that underlie the demand forecast / plan.

Membership•S&OP Process Owner Demand Process Manager•Platform Leaders:

• Consumer Ingredients • Lubricants and Additives • Engineered Polymers and Coatings

• Intermediates • Market Analyst • Customer Service, ad hoc• FP&A, ad hoc


That’s what we did…

What can we share that we learned?

Data mattersD

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Optimization Analysis


Connection with JV

Connection with JV




• Actuals and externals feed future view of demand• Process timing must factor in data rhythm• Actuals enable metrics for measuring the process

• How close were we?• What were variances in expectations?

Demand and Supply are unrelated….D

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• Demand and supply inputs must be “unconstrained” – it is independent of production and CANNOT be mixed

• Demand is a mix of various inputs – customer, market, and historical views are all important• This enables a discussion of assumptions vs. “how good

are the forecasts?”• This can be made to be VERY COMPLEX; don’t fall for it –

stick to what is pragmatic and just understand the risk in the data

….until we choose to flange them upD

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Connection with JV




• This is the “guts” of the process• Scenarios rule the day… i.e., no matter what you expect will

happen, you can only plan for what you believe is likely to happen

• Optimization can be iterative and involve multiple parties / multiple iterations

• Team must know the objective (the “rules”) otherwise recommendations will be rebuffed…

For optimization, financials and economics are both important, but serve very different purposes (i.e., NEVER MIX!!)


A process tied to financials is key, but an optimization led by “incremental economics” is crucial

The big picture can be consistent with the details, if done up frontD

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• Provides a window to the future – so useful for flanging near term (current/next month) with long-term view

• Serves to harmonize assumptions• Forces leadership to provide optimization team with clear

boundaries… i.e., an operational strategy!• If changes to recommendation are required routinely, then the

process has abjectly FAILED

Executive S&OP was chosen by Elevance to provide us the best chance to build our business (and even have elevators

when we finish) …

Robin Weitkamp SVP, Lubricants and Additives September 2013 Implementing S&OP During Startup Phase...

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Transcript of Robin Weitkamp SVP, Lubricants and Additives September 2013 Implementing S&OP During Startup Phase...