Shell Chemical Re-Defines Supply Chain Management with Notes

Plant-Design.Com
Case History Review

Title: Shell Chemical Re-Defines Supply Chain Management with Notes

Company: Shell Chemical, Houston, Texas

Case History Source: http://houns54.clearlake.ibm.com/scmpub.nsf/detailcontacts/shell_chemical_re_defines?OpenDocument

Case History Author(s): Not given, IBM/Lotus presumed.

Application: Use of supplier-managed inventory (SMI) via a Token Ring network. Shell Chemical manufactures the base chemicals used in the downstream manufacturing of lots and lots of well-recognized industrial and consumer products. Their customers use our detergents, solvents, plastics, elastomers, epoxy resins and so on to produce everything from automotive paints and aircraft structures to diapers and plastic bottles.

As-Is Process: Shell customers avoid runing out of an essential chemical (causing lost plant time and revenues) by maintaining "safety stock" levels. They have to be diligent about this practice because a typical re-supply order takes about two weeks from the time the order is placed. The chemicals are weighed at Shell's plant, loaded onto railcars and then sent to the customer, who then weighs the materials at the other end before moving them into inventory. Miscalculations result in rush orders. Rush orders are more costly and all too frequent. Billing is difficult at best. An invoice is sent out for every single railcar load of product that is sent from Shell's facilities to the customer's. For years, Shell had conformed to the industry's standard practice of using electronic data interchange (EDI) forms, telephone orders, and paper invoices to communicate with customers, suffered with confusion in its production planning group and reconciling bills for last-minute shipments.

To-Be Process: Shell manages its customers' inventory and places orders for the customers instead of waiting for the customers to notice that they were running low. Shell now bills the companies monthly for actual consumption instead of per shipment. Using a Notes-based application called SIMON (TM) -- Now marketed as Supplier Inventory Management Order Network -- Shell routinely extracts information about:

the amount of product consumed in the past 24 hours

the amount of new product that arrived and was unloaded in the same period

current and anticipated production schedules, and

known changes to those schedules.

This information is replicated back to our customer service center in Houston, TX, where we're able to automatically reconcile it with our SAP MRP system. A Shell Chemical account service rep (ASR) is automatically presented with a re-supply plan. If the plan indicates that stocking levels at the customer site are low, the ASR fills out an electronic purchase order and initiates a new shipment to the customer.

To-Be Technology: A custom Lotus Notes database system that is linked to servers at customer sites and that replicates with Shell's server, which is linked to account representative systems via a Token Ring network.

How-To Process: EDI didn't give Shell the flexibility it needed to accommodate data on exceptions and processes. The company invested roughly $200,000 and two months setting up SIMON at the first site. SIMON, a set of Notes databases, allows customers to input consumption, forecast and inventory figures locally. A server in the customer's purchasing department replicates changes to Shell's internal SIMON server. Those changes are available to Shell account representatives via a Token Ring network.
When anticipated shipment needs change, customers can use custom fields to enter revised requirements, the probability that the exception will occur, and the reason for the exception. SIMON also calculates and issues an electronic bill to customers once per month.

ROI: SIMON was introduced to 23 of Shell's largest, most strategic customer accounts last summer. Within 12 months, they experienced a $20 million increase in additional product sales, and their customers were reporting flexible acquisition and delivery processes. Shell estimates the increased revenue SIMON has made via sole-supplier relationships exceeds the implementation cost by a 10-to-1 ratio, and Shell is considering licensing the system to other companies.

Other Benefits: Benefits to Shell Chemical Customers:

Eliminates expensive excess inventory, which means an increase in working capital.

Facilitates timely, low-cost "re-synching" of supply chain.

Ensures product is on site whenever needed.

Ensures quicker response times to changing conditions.

Reduces transaction costs (e.g., invoices and data entry).

Eliminates erratic order patterns.

Reduces order processing overhead.

Streamlines financial statements and reconciliation processes.

Rating: Editor's Choice

Comments: An unusually well documented use of Electronic Commerce in the Petrochemical Supply Chain. Although running on a token-ring intranet, it shows defined returns and integration with SAP. Lotus reports that Shell has now developed a SIMON version accessible over the Internet via a Domino server.
(Domino is server technology that transforms Lotus Notes into an interactive Web server, bridging the open networking environment of Internet standard protocols with the functionality of Lotus Notes.)

Company Contact: Kay Burns, Shell Services International, <klburns@shellus.com>, 713-245-3545 or Tom Eade, 713-245-3176, <theade@shellus.com>, http://www.shellservices.com/solutions/simon/

Technology Contacts: Phone number for IBM: 1-800-IBM-7080.

Title:	Shell Chemical Re-Defines Supply Chain Management with Notes
Company:	Shell Chemical, Houston, Texas
Case History Source:	http://houns54.clearlake.ibm.com/scmpub.nsf/detailcontacts/shell_chemical_re_defines?OpenDocument
Case History Author(s):	Not given, IBM/Lotus presumed.
Application:	Use of supplier-managed inventory (SMI) via a Token Ring network. Shell Chemical manufactures the base chemicals used in the downstream manufacturing of lots and lots of well-recognized industrial and consumer products. Their customers use our detergents, solvents, plastics, elastomers, epoxy resins and so on to produce everything from automotive paints and aircraft structures to diapers and plastic bottles.
As-Is Process:	Shell customers avoid runing out of an essential chemical (causing lost plant time and revenues) by maintaining "safety stock" levels. They have to be diligent about this practice because a typical re-supply order takes about two weeks from the time the order is placed. The chemicals are weighed at Shell's plant, loaded onto railcars and then sent to the customer, who then weighs the materials at the other end before moving them into inventory. Miscalculations result in rush orders. Rush orders are more costly and all too frequent. Billing is difficult at best. An invoice is sent out for every single railcar load of product that is sent from Shell's facilities to the customer's. For years, Shell had conformed to the industry's standard practice of using electronic data interchange (EDI) forms, telephone orders, and paper invoices to communicate with customers, suffered with confusion in its production planning group and reconciling bills for last-minute shipments.
To-Be Process:	Shell manages its customers' inventory and places orders for the customers instead of waiting for the customers to notice that they were running low. Shell now bills the companies monthly for actual consumption instead of per shipment. Using a Notes-based application called SIMON (TM) -- Now marketed as Supplier Inventory Management Order Network -- Shell routinely extracts information about: the amount of product consumed in the past 24 hours the amount of new product that arrived and was unloaded in the same period current and anticipated production schedules, and known changes to those schedules. This information is replicated back to our customer service center in Houston, TX, where we're able to automatically reconcile it with our SAP MRP system. A Shell Chemical account service rep (ASR) is automatically presented with a re-supply plan. If the plan indicates that stocking levels at the customer site are low, the ASR fills out an electronic purchase order and initiates a new shipment to the customer.
To-Be Technology:	A custom Lotus Notes database system that is linked to servers at customer sites and that replicates with Shell's server, which is linked to account representative systems via a Token Ring network.
How-To Process:	EDI didn't give Shell the flexibility it needed to accommodate data on exceptions and processes. The company invested roughly $200,000 and two months setting up SIMON at the first site. SIMON, a set of Notes databases, allows customers to input consumption, forecast and inventory figures locally. A server in the customer's purchasing department replicates changes to Shell's internal SIMON server. Those changes are available to Shell account representatives via a Token Ring network. When anticipated shipment needs change, customers can use custom fields to enter revised requirements, the probability that the exception will occur, and the reason for the exception. SIMON also calculates and issues an electronic bill to customers once per month.
ROI:	SIMON was introduced to 23 of Shell's largest, most strategic customer accounts last summer. Within 12 months, they experienced a $20 million increase in additional product sales, and their customers were reporting flexible acquisition and delivery processes. Shell estimates the increased revenue SIMON has made via sole-supplier relationships exceeds the implementation cost by a 10-to-1 ratio, and Shell is considering licensing the system to other companies.
Other Benefits:	Benefits to Shell Chemical Customers: Eliminates expensive excess inventory, which means an increase in working capital. Facilitates timely, low-cost "re-synching" of supply chain. Ensures product is on site whenever needed. Ensures quicker response times to changing conditions. Reduces transaction costs (e.g., invoices and data entry). Eliminates erratic order patterns. Reduces order processing overhead. Streamlines financial statements and reconciliation processes.
Rating:	Editor's Choice
Comments:	An unusually well documented use of Electronic Commerce in the Petrochemical Supply Chain. Although running on a token-ring intranet, it shows defined returns and integration with SAP. Lotus reports that Shell has now developed a SIMON version accessible over the Internet via a Domino server. (Domino is server technology that transforms Lotus Notes into an interactive Web server, bridging the open networking environment of Internet standard protocols with the functionality of Lotus Notes.)
Company Contact:	Kay Burns, Shell Services International, <klburns@shellus.com>, 713-245-3545 or Tom Eade, 713-245-3176, <theade@shellus.com>, http://www.shellservices.com/solutions/simon/
Technology Contacts:	Phone number for IBM: 1-800-IBM-7080.