Existing Value Chains

Christoph Syldatk, Ceorg Schaub, Ines Schulze, Dorothea Ernst, and Anke Neumann 

Industrial Biotechnology Today-Main Products, Substrates, and Raw Materials 

Renewable Raw Materials New Feedstocks for the Chemical Industry, First Edition. 

Edited by Roland Ulber, Dieter Sell, Thomas Hirth. 

Microbial product World production (t/year) World market price (estimated in /kg) Area of application 

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Figure 5.1 The existing value chain of industrial microbiology (based on Kircher [4]).

A quant is a meaningful logistic disposition unit, which can be cost tracked in the value chain. If, for example, a batch problem exists, a quant corresponds exactly to the batch size. If continuous production exists, a quant corresponds to a meaningful small rounding unit and in the case of a filling process to the respective bundling units. Quants can be individually defined. 

Additional challenges exist specifically for chemical commodities. Commodities are standard products with a defined quality, where price is the key buying criterion. Commodities are often volatile in sales and purchasing prices as well as volumes increasing crude oil prices lead to higher raw material prices in procurement while dynamic customer markets specifically in Asia lead to a sales price and volume volatility. These dynamics in volumes and values through the value chain directly impact company s profitability as shown in fig. 1. 

Management concepts in the value chain are the generally relevant research fields for the work. Value chain as a term was initially defined by Porter disaggregating a firm into its strategically relevant activities in order to understand the behavior of costs and the existing and potential sources of differentiation . Porter s value chain consists of a "set of activities that are performed to design, produce, market, deliver and support its product (Porter 1985, pp. 33-40). Developed management concept areas for the value chain can be classified by specialization on values, demand or supply ... 

Developed frameworks are applied to the specific industry problem to monthly plan a global chemical commodity value chain by volumes and values. Sub-objectives are to elaborate characteristics and planning requirements for a global commodity value chain in the chemical industry and to develop, implement and evaluate the respective model. Research question 2 is directed to a real industry case study demonstrating the real existence of formulated requirements, showing the applicability of the developed model in reality and evaluating the model using industry data. 

Concluding, existing definitions use value chain management as alternative term for supply chain management focusing on supply volume decisions to fulfil a given demand and minimize costs. Especially, value and sales decisions are not covered in an integrated framework. 

The sales strategy needs to decide what product to be sold in which sales market representing the sales location in the value chain network. New markets needs to be evaluated for their attractiveness and the own competitive position with respect to existing products or the capabilities in the development of new products for the respective demand. Sales business rules include decisions on the strategic share of contracted business volumes vs. flexible spot business volumes. These business rules often depend on sales channels and frame contracts with customers. The sales strategy can be matched with classical marketing mix decisions on products, prices, promotion and communication, as well as sales channel decisions. 

Different methods exist to support value chain management decisions in strategy, planning and operations that are applied in respective decision support models. A basic definition of method and model can be found in a review by Teich (2002), pp. 219-220. 

Existing typologies are extended towards a value chain typology also considering aspects of sales and procurement value characteristics. The typology classifies the value chain by overall network as illustrated in fig. 40 ... 

Relaxation of hard constraints is critical for optimization-based planning models used in industry practice with more than even 100,000 constraints and specifically for hard integer programming problems (Fisher 2004). Hard constraints set hard minimum and maximum boundaries for decision variables that have to be fulfilled. It may occur that no solution exists fitting all constraints at the same time. Planners have difficulties to identify manually constraints leading to infeasibility. Value chain planning model infeasibility is mainly caused by volume-related constraints of material flows e.g. by bounding sales quantities, inventories, transportation quantities, production and procurement quantities. Examples in literature for relaxation methods to e.g. transportation problems is presented by Klose/Lidke (2005)... 

Final material cost rates and product value rates are determined based on the indexed material cost and product value rates. Multiple indexed material cost and product value rates occur, if cyclic material flows exist in the value chain. In order to apply index-independent cost and value rates in the model for future inventory planning, the maximum value and cost rates are determined for all products, locations and periods across all value chain steps i. 

Additional research questions may exist related to other concept elements within the value chain management framework ... 

The measured G(x) value of representative epoxy polymers is approximately 10, but this value depends strongly on the structure of the polymer, its glass transition temperature and other characteristics. Since the crosslinking reaction that characterizes the COP resist functionality is a chain reaction, in theory, a single, electron-initiated event could result in the insolublization of an entire film of the resist material. Fortunately, because of the existence of chain terminating reactions, this does not occur and high resolution imaging of the resist material can be accomplished. 

The additional capacity needed does not require construction of one or more new plant(s) but can be achieved by expanding existing plants. Consequently, the solution space is limited to the value chain s existing production network and the plant most suitable for expansion has to be identified. In this case the plant to expand can often be selected based on investment appraisal calculations without a complete network design project. 

The additional capacity requires construction of a new plant. In this case location alternatives both within the value chain s existing network and outside this network have to be considered. Thus, a network design phase is required in all cases and a site selection phase if alternatives outside existing sites are to be considered. 

If the primary objective is the restructuring of a value chain, the solution space is wider as several plants can be affected simultaneously. Restructurings are usually initiated because of inefficiencies within the existing network or in the context of site closures and can take on one of three basic forms (cf. Bankhofer 2001, p. 95) ... 

A relocation of production transfers production to a more suitable site where usually a new plant has to be built. Even if the value chain s other plants are not included in the project scope, locating the new plant requires a network design phase. A site selection phase might also be required if the new plant is not to be built at an existing site or several existing sites have to be considered. 

For specialty chemicals production networks, the planning and controlling process has to combine the site perspective and the value chain perspective. Most specialty chemicals companies have a division/business unit organization and operate sites shared by several divisions. While each division can cover the value chain perspective individually, for example by integrating the above-mentioned indicators into controlling processes, the site perspective requires cross-divisional coordination to avoid suboptimal solutions. Different options ranging from centralized to decentralized setups exist to do so (cf. Hayes and Wheelwright 1984, pp. 120-125). 

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