Customer to Cash
Clariant employs a holistic, cross-functional approach to Operational Excellence that strives to optimize the Customer to Cash process along the whole value chain. While the Market to Customer process centers around stimulating growth, the main objective of Operational Excellence is to optimize the end-to-end supply chain by balancing supply and demand, enhancing product availability and simultaneously improving Clariant’s supply chain cost situation and risk profile. Planning, procurement, production, and delivery are continuously improved to guarantee on-time, in-full delivery and thus contribute to Clariant’s overall profitability.
Customer to Cash
Customer to Cash encompasses planning to balance demand and supply, optimizing sourcing for spend effectiveness, constantly monitoring production for high efficiency, and delivering finished goods on-time and in-full as required by the customer.
1. Integrating the planning landscape
Strong global competition and increasing customer service requirements, such as short lead times, make holistic management of Customer to Cash processes a prerequisite for business success. To keep up with increasing speed in the industry, Clariant sees digitalization as a great opportunity for making information about the whole value chain more accessible to all departments. This connects the different departments, steers the entire Customer to Cash process from planning to delivery in real time, and enables flexible responses to changing customer needs.
A key building block is the Integrated Planning Landscape (IPL), which was launched in 2015 and rolled out in the Business Units Industrial & Consumer Specialties and Oil & Mining Services in 2017. It enables cost reductions in the planning phase by aligning processes, capabilities, and IT tools. In the Business Unit Additives, where IPL had already been implemented, the »Days’ Inventory on Hand« (DOIH) could be reduced by 10 days.
To complement the IPL, Clariant is currently introducing a Process Order Management (POM) tool as part of its Manufacturing Execution System (MES), which provides a real-time view of the status of production. In conjunction with the IPL, this tool will make the whole Customer to Cash process visible, thereby leveraging the ability of Operational Excellence to support Clariant’s focus on strategic growth. For more detailed information regarding the Order-to-Cash process, see Case: Customer Service. Developing more advanced digital solutions to optimize Clariant’s operations, for example regarding digital material flows, falls within the scope of responsibility of Digital4Clariant, an initiative that was launched at the end of 2016 and will be further rolled out in 2018.
2. Achieving holistic targets
In 2017, Operational Excellence focused on the so-called Mission Approaches. These aim to align the activities of all departments (Clariant Procurement Excellence, Clariant Supply Chain Systems, and Clariant Production Systems) along the value chain, allowing Clariant to overcome silo thinking and achieve holistic targets. The Mission Approaches promote working in cross-department teams and evaluating progress with KPIs from all different functions. This reduces the trade-offs that sometimes exist between optimization efforts in different departments, such as when optimizing batch sizes to reduce change-over led to increased inventories.
The Catalysts site in Louisville, Kentucky, is only one example that illustrates how the Mission Approach breaks silos. Louisville was able to increase first pass quality to 100% on a historically challenging production line, increase capacities in another production line to achieve a revenue enhancement of CHF 1.2 million, increase transparency of in-process inventories, and improve employee engagement across the site.
2.7
Clariant’s spend on raw materials amounted to CHF 2.7 billion in 2017.
3. Reducing risks and costs in a large supply chain
Clariant is embedded in an extensive global supply chain. In the 2017 reporting year, it purchased CHF 2.7 billion worth of raw materials from around 7 000 vendors and approximately CHF 1.8 billion of other products and services, such as technical equipment or energy, from roughly another 25 000 suppliers. Optimizing procurement processes thus has a tremendous impact on Clariant’s overall profitability.
In 2017, Clariant Procurement Excellence (CPX) strengthened the application of the procurement excellence methodology, aiming to reduce supply risks and costs as well as improve free cash flow. Raw materials were harmonized wherever possible and the substitution of materials, as well as de-specification, was tested. All three approaches aim at reducing the overall number of different raw materials purchased by Clariant, leading to reduced complexity and a wider supplier base and ultimately lowering purchase prices. Supply risks are reduced by widening specifications and available sources, which also minimizes the need for high safety stocks and makes inventories more efficient. Applying the Procurement Excellence methodology allowed Clariant to realize cost savings of roughly CHF 20 million in 2017.
To reduce risk and dependence from suppliers, Clariant developed new relationships, especially in cases where single source situations existed. Furthermore, it conducted workshops with suppliers to look into new business development and innovations that presented win-win situations for both parties.
17 ideas for Suzano
Employees at the production plant in Suzano, Brazil, developed 17 ideas with a revenue enhancement potential of CHF 1.3 million.
4. Making a difference through cross-functional collaboration
In 2017, the Clariant Production System method was upgraded by designing door-to-door material and information flows along a facility’s value chain. This new approach fosters collaboration between different Business Units and thereby accelerates business transformation, as demonstrated by the employees of Clariant’s production plant in Suzano, Brazil. In a joint workshop, participants from the Business Units Industrial & Consumer Specialties, Oil & Mining Services, and Clariant Procurement Excellence developed measures to increase the ether amine throughput of the sold-out facility by 20%. Using a data-driven analysis, the team derived 17 ideas that could be implemented within six months without additional investments. Furthermore, these ideas presented a cost-impact and revenue enhancement potential of CHF 1.3 million for both Business Units.
»The continuous implementation of our blueprints by production units has delivered savings around CHF 40 million, thus assuring that we encounter inflation effects and stay competitive in our costs.«
Axel SchoenfeldHead of Operational Excellence
To follow the continuous improvement cycle illustrated above, developing employee competencies is vital. Clariant therefore established the Supply Chain Capability Building Program in 2016 through the IPL rollout, which helped identify knowledge gaps, upgrade functional knowledge, and increase individual performance. In 2017, a structured capability program for both production management and shopfloor has been created as part of the Clariant Production System. It will be launched to strengthen the skills, mindset, and behavior that is needed to drive Clariant’s lean transformation process.
5. Enhancing Inventory Health Checks for optimized service quality
Inventory Health Checks are central to determine optimal inventory levels and define inventory targets. Based on dedicated data analysis and market research, improved planning parameters can be fed into the Integrated Planning Landscape, which then drives inventories toward optimal levels. This approach guarantees a high On-Time, In-Full (OTIF) rate, while simultaneously reducing inventories. The Inventory Health Checks thus result in immediate, positive impacts on cash flow in the Customer to Cash phase.
In 2017, Clariant introduced Inventory Health Checks in large parts of the Business Unit Masterbatches, in two main regions of the Business Unit Industrial & Consumer Specialties, and in new acquisitions of the Oil & Mining Services Business Unit. Operational Excellence is also working with the Business Unit Pigments to introduce the program in Europe. Clariant plans to launch the program in the remaining Business Units in 2018.
International Council of Chemical Association (ICCA)
icca-chem.org
6. Guaranteeing safe operations
While the lean process is the engine of continuous improvement, safe production is a prerequisite for the engine to work properly and guarantee Clariant’s social, economic, and ecological license to operate. In 2017, the Occupational Health & Safety (OHS) department was working on changing Process Safety Event reporting in all its sites to comply with the requirements of the International Council of Chemical Association (ICCA). Furthermore, OHS rolled out four Safety Leadership Improvement packages to further anchor the topic throughout all hierarchy levels. This will make a vital contribution to reaching Clariant’s health and safety target of zero accidents. Thanks to trainings and investments in plant safety, Clariant managed to stabilize the lost time accident rate (LTAR) in 2017 at a low level of 0.2 days lost per 200 000 hours of work, as compared to 0.19 days lost in 2016.
Input
Performance
248
Investments in property, plant and equipment in CHF m
2 674
Raw material procurement in CHF m
125
Production facilities
3.14
Raw materials procured in m t
People
7 000
Suppliers of raw material
65 %
Raw material supply base by spend covered by sustainability evaluations
Planet
3 245
Energy consumption in m kWh
49
Water consumption in m m3
Output
Performance
6 377
Sales in CHF m
428
Operating cash flow in CHF m
4.60
Production volume in m t
People
0.20
Lost time accident rate (LTAR, accidents with at least 1 day lost/200 000 work hours)
Planet
13
Waste water in m m3
198
Waste in thousand t
0.97
Greenhouse gas emissions (scope 1 & 2) in m t
Customer to Cash encompasses planning to balance demand and supply, optimizing sourcing for spend effectiveness, constantly monitoring production for high efficiency, and delivering finished goods on-time and in-full as required by the customer. VIEW ENTIRE GLOSSARY
The value chain describes the series of steps in the production process, from raw materials through the various intermediate stages to the finished end product. VIEW ENTIRE GLOSSARY
Market to Customer includes identifying market attractiveness, developing a clear value proposition and articulating it to the customers, and capturing the value created through relationship building and the sales process. VIEW ENTIRE GLOSSARY
A substance added to products in small quantities to achieve certain properties or to improve a product (Clariant Business Unit Additives). VIEW ENTIRE GLOSSARY
Customer to Cash encompasses planning to balance demand and supply, optimizing sourcing for spend effectiveness, constantly monitoring production for high efficiency, and delivering finished goods on-time and in-full as required by the customer. VIEW ENTIRE GLOSSARY
A substance that lowers the activation energy, thereby increasing the rate of a chemical reaction without being consumed by the reaction itself (Clariant Business Unit Catalysts). VIEW ENTIRE GLOSSARY
Economic indicator representing the operational net inflow of cash and cash equivalents during a given period. VIEW ENTIRE GLOSSARY
The value chain describes the series of steps in the production process, from raw materials through the various intermediate stages to the finished end product. VIEW ENTIRE GLOSSARY
The EBITDA margin is calculated based on the ratio of EBITDA to sales and shows the return generated through operations from sales before depreciation and amortization. VIEW ENTIRE GLOSSARY
Exceptional items are defined as non-recurring costs or income that have a significant impact on the result, for example expenses related to restructuring measures. VIEW ENTIRE GLOSSARY
The pool of funds available to the company for use in the production of goods or the provision of services. This can include funds obtained through financing, such as debt, equity, or grants, and funds generated by the company, for example through sales or investments. VIEW ENTIRE GLOSSARY
Knowledge-based intangibles used and created by the company, often in collaboration with partners. This can include intellectual property, such as patents, trademarks, copyrights, software, rights, and licenses, and »organizational capital« such as tacit knowledge, systems, procedures, and protocols. VIEW ENTIRE GLOSSARY
Manufactured physical objects such as buildings, equipment, and products. These can include objects that are available to the company for use in the production of goods or the provision of services, or that the company produces for sale to customers or for its own use. VIEW ENTIRE GLOSSARY
The company’s staff and its composition, competencies, capabilities, experience, and motivation to innovate. This can include employees’ alignment with corporate values and their ability to understand and implement the company’s strategy. VIEW ENTIRE GLOSSARY
Key relationships including those with significant groups of stakeholders and other networks. This can include shared values, the trust and willingness to engage that the company has developed, and related intangibles associated with its brand and reputation. VIEW ENTIRE GLOSSARY
Renewable and nonrenewable environmental resources and processes that support the past, current, or future prosperity of the company or are affected by it. Examples can include resources related to air, water, and land that are utilized or impacted for example by emissions. VIEW ENTIRE GLOSSARY