Green Supply Chain & Logistics. Methodology to determine sustainability of logistics extend Green Logistics to Green Supply Chain

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Warren Dean
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1 Green Supply Chain & Logistics Methodology to determine sustainability of logistics extend Green Logistics to Green Supply Chain

2 Outline Bayer Technology Services Department Supply Chain & Logistics Green Supply Chain & Logistics Introduction Scope Approach Examples Page 141

Bayer Group Facts, Figures, Objectives Bayer Facts and Figures 2007 106,200 employees worldwide 350 companies 5,000 products Sales: 32,385 EUR million EBIT: 3,154 EUR million Net income: 4,711 EUR

3 Bayer Group Facts, Figures, Objectives Bayer Facts and Figures ,200 employees worldwide 350 companies 5,000 products Sales: 32,385 EUR million EBIT: 3,154 EUR million Net income: 4,711 EUR million R&D expenditures: 2,578 EUR million Capital expenditures: 1,891 EUR million Bayer Objectives Leader in research and technology Continuous growth of expertise in the manufacture of high-quality and environmentally compatible products Page 142

4 Bayer Technology Services a Bayer Group Company Holding Company Business Areas Bayer AG Turnover Group Management worldwide (*) 400 Board EUR mill. Employees worldwide Corporate (**) 2,400 Center (*) 2007 (**) Dec 31, 2007 Client industries Health Care Crop Science Material Science/Polymers Chemicals Service Areas Bayer HealthCare Bayer CropScience Bayer MaterialScience Offers services on external market Bayer Business Services Bayer Technology Services Currenta Page 143

International Locations/Offices Regional Office North America Baytown (TX), USA 230 Employees ( * ) Regional Office Benelux Antwerp, Belgium 80 Employees ( * ) Headquarters BTS Europe Leverkusen,

5 International Locations/Offices Regional Office North America Baytown (TX), USA 230 Employees ( * ) Regional Office Benelux Antwerp, Belgium 80 Employees ( * ) Headquarters BTS Europe Leverkusen, Germany 1,230 Employees(*) Headquarters Locations Regional Office Central America Mexico City, Mexico 320 Employees ( * ) Regional Office Switzerland Witterswil, Switzerland 20 Employees ( * ) Regional Office Asia Shanghai, China 520 Employees ( * ) (*) Status: Page 144 Dec 31, 2007 (without contractors).

Our Product Suite Product & Process Innovation Engineering & Construction Plant Optimization Product and Process Evaluation Process Technology/ Unit Operations Physics In-Silico-Methods Mechanical

6 Our Product Suite Product & Process Innovation Engineering & Construction Plant Optimization Product and Process Evaluation Process Technology/ Unit Operations Physics In-Silico-Methods Mechanical Integrity Engineering Contracting Civil, Structural and Architectural Engineering Utilities/Site Master Planning Process Control Systems Process Analytics Supply Chain & Logistics Advanced Manufacturing Solutions Complete Technology Solutions Biomass Conversion Chlorine/Electrolysis Environmental Protection Technology Engineering Contracting Chemical Processes Polymer Processes Healthcare Processes Page 145

Supply Chain & Logistics More Efficiency and Value Adding based on Integrated Logistics Supply Chain Optimization Logistics Studies und Concepts After Sales Support Information Flow

7 Supply Chain & Logistics More Efficiency and Value Adding based on Integrated Logistics Supply Chain Optimization Logistics Studies und Concepts After Sales Support Information Flow PROCUREMENT Storage Transport PRODUCTION Storage Transport DISTRIBUTION Material Flow Track, Trace und Authentication Logistics Execution Systems Logistics Equipments and Facilities Page 146

8 Outline Bayer Technology Services Department Supply Chain & Logistics Green Supply Chain & Logistics Introduction Scope Approach Examples Page 147

Transport An important source of CO 2 emissions Annual emissions of carbon dioxide equivalents (CO 2 e): 27 Gt CO 2 e * Global share of transport activities: approx.

9 Transport An important source of CO 2 emissions Annual emissions of carbon dioxide equivalents (CO 2 e): 27 Gt CO 2 e * Global share of transport activities: approx. 30 % 42 % Energy 30 % 14 % 14 % Other Source: International Energy Agency (IEA) Manufacturing / Construction * CO 2 emissions by fossil fuels (OECD countries 2005) Page 148

10 The Climate KPI CO 2 emissions per Product Amount Climate Footprint Parameter in kg CO2e per kg product output KPI to quantify greenhouse gas emissions in a defined process or value chain Control parameter to enhance sustainability of processes and products Page 149

11 Optimization environment of the Green SCL module Operating Cost, Investments CO 2 Emissions, Inventory Service Level, Lead Time Page 150

12 Target areas for climate relevant SCL optimization Logistics Production Logistics Transports Filling / Packaging Warehouses / Distribution Centers Supply Chain Sourcing Strategies Production & Distribution Network Supply Chain Process Reorganization Page 151

13 Green SCL: Approach to check on your supply chain & logistics Greener Enterprise Page 152

Enterprise All kind of operations Transport (internal/external)

14 Green SCL: Where do you want to start? Define Scope Establish scope of logistic processes Greener Enterprise All kind of operations Transport (internal/external) Filling & Packaging Warehousing Further parameters, e.g. Sites & Products Customers & Regions Page 153

15 Green SCL: What is your status? Measure Performance Greener Enterprise Targeted data collection using the special GSCL Questionnaire Raw materials Auxiliaries Products Waste Additional data: Network design/layout Forecasts Business/tax data Freight rates Page 154

16 Green SCL: Your SCL climate footprint and your opportunities Analyze potentials and identify measures Step: Determine the SCL climate footprint Greener Enterprise 2. Step: Additional parameters to identify specific potential and measures Build-up different scenarios to get a decision-making base Page 155

17 Green SCL: How green would you like to be? Improve Performance Greener Enterprise Find your optimal balance between Costs Service Level and A Green SCL Implementation support based on identified measures Page 156

18 Your benefits: from KPI to climate protection Quantify the overall climate relevance of logistics processes Identify potential for cutting CO2 emissions Consider achievable emissions savings in the context of other corporate KPIs Prepare and compare optimization scenarios Greener Derive measures based on Enterprise a list of priorities The SCL climate footprint represents a basis for many different strategic decisions, which now can also be assessed in terms of climate-related aspects. Green SCL has a clear structures resembling Six Sigma process -> It can be used for the ongoing improvement of the entire supply chain and logistics operation. Page 157

better CO 2 conversion Network optimization Increased storage efficiency

19 Example: Transports Potentials for the reduction of CO 2 emissions Improve efficiency of vehicle routing Warehouse energy saving measurements Equipment with better CO 2 conversion Network optimization Increased storage efficiency Transloading & multimodal concepts Optimization of transport mode Reduction of CO 2 Emissions Page 158

20 Example: warehouse Potentials to reduce CO 2 emission Energy efficient building e.g. heating Warehouse Warehouse efficiency Higher level of utilization, smaller storage areas Optimized equipment e.g. optimized automatic gates Further potentials to save energy e.g. optimized cold storage areas (utilization and equipment) Page 159

21 Example: Transport Potentials to reduce CO 2 emission Transport Shorter Distances Delta: proportional to reduce distances Optimize mode of transport Improvement by changing mode of transport Airplane -> truck -> train -> ship multi-mode transport possible? Optimize CO2 conversion Improved transport technology e.g. alternative fuel Replace Just-in-time by optimized routing or capacity utilization Cheaper routing, better use of existing capacity Page 160

Example: Transports Comparison of emissions for different

(> 35t) Air (long dist.) Air (med. dist.) Air (short dist.

22 Example: Transports Comparison of emissions for different transport modes Emission (kg CO 2 / tons. km) Pipeline Ocean navigation Inland navigation Train Truck (> 35t) Air (long dist.) Air (med. dist.) Air (short dist.) Source: The Greenhouse Gas Protocol, CO 2 Emissions calculation tools, 2005 Page 161

23 Example: Supply Chain reorganization Optimized BHC distribution for the Chinese market Scenario 1: One distribution center Scenario 2: Three distribution centers Beijing Beijing Shanghai Guangzhou Transport mode: Distribution center Page 162

24 Example: Supply Chain reorganization Consequences of optimized BHC distribution Scenario 1 Scenario Deliveries with short lead times Ton kilometers Safety stock Logistics costs CO 2 Emissions Page 163

Example: Distribution network Polymer supply for China with additional boundary conditions Complex network of production sites may take other parameters on gr

25 Example: Distribution network Polymer supply for China with additional boundary conditions Complex network of production sites may take other parameters on greater importance: e.g. taxation aspect for deliveries to and from Asia This example: tax considerations make it more cost-effective for Chinese customers who are intending to re-export their products to be supplied from neighboring Asian countries. Relative logistics costs Controversial Objectives % % % % Minimum CO 2 emissions by sourcing from China vs. 20 % CO 2 emission reduction, 0.5 % cost increase as effective solution vs % Increasing logistic cost by 0.5 % allows to reduce CO 2 emission by 20 %! Page 164 7,500 8,500 9,500 10,500 11,500 CO 2 emission (t) Minimum cost by sourcing from Thailand due to maximum tax refund

26 First results CO 2 e emission reduction and cutting costs can emerge simultaneously but they do not have to External factors like tax issues have to be considered Sometimes a small invest in logistic costs brings up a great CO 2 e emission reduction potential In addition to transport, a focus could be set on logistic buildings if special storage conditions apply (e.g. cold storage) Page 165

27 Green Supply Chain Green Logistics CO 2 Emissions Investments, Operating Cost Service Level, Inventory, Lead Time Thank you for your attention! Questions are welcome. Page 166

Bayer Climate Check. 180 Seminar, Green engineering IGCW-2013 Convention. An integrated tool to mitigate energy consumption and CO 2 emissions

Bayer Climate Check. 180 Seminar, Green engineering IGCW-2013 Convention. An integrated tool to mitigate energy consumption and CO 2 emissions Bayer Climate Check An integrated tool to mitigate energy consumption and CO 2 emissions 180 Seminar, Green engineering IGCW-2013 Convention 2013.12.08 / Jagdish Solanki / BTS India Agenda Introduction