World's largest chemical company or best supply chain? Or both?

Hello everyone, I am Nikitha - A final year MBA student from Amrita School Of Business majoring in Operations and Marketing. I am back with my blog and this time I am going to take you through the cleverly constructed supply chain where the byproducts of one operation get converted into starting materials of another operation. 

BASF, a company headquartered in Germany with annual revenues of $65 billion, calls this "Verbund." In English this means to "combine" or to "cooperate." and the supply chain experts call it excellence in supply chain design.

BASF has six Verbund sites that create efficient value chains that extend from basic chemicals basic chemicals to high-value-added products such as coatings and crop protection agents. When by-products of one plant can be used as the starting materials for another, chemical processes consume less energy, produce higher product yields and conserve resources.

The Ludwigshafen site, encompassing ten square kilometers, is the largest chemical complex in the world. At this site, 110 production facilities and 200 production plants are interconnected. Byproducts and products flow through 2850 kilometers of pipes, 230 kilometers of rail, and over 100 kilometers of road. An astounding 39,000 employees work at this site. Talk about a company town! The company believes they save over one billion euros annually through this concept.

BASF saves on raw materials and energy, lowers emissions and cuts logistics costs because the synergistic production operations are near each other. In logistics, having plants near each other allows for 280,000 fewer truckloads per year.

So, how do they do it?

In energy, waste heat from production processes is captured to be used as energy in other production plants. In 2016 this allowed the company to save around 19.0 million megawatts per year. That reduces CO2 emissions by 3.8 million metric tons annually. The company's smart manufacturing initiative is working on predictive maintenance, the use of augmented reality, and even greater savings in electricity and steam generation.

Improved savings in electricity is particularly interesting. Ludwigshafen needs about 20 million metric tons of steam per year. This is generated by the production plants and the site's three power plants. The power plants produce the majority of electricity needed at the site. But they sometimes generate more power than is required. That electricity can be fed into the public grid.

BASF also has a smart supply chain program that has created some of the world's largest automatic guided vehicles (AGVs). These AGVs allow the company to supply their production plants faster and at lower cost. They project that it will soon take one hour from order to delivery of raw materials in huge tanks. Historically, this took twenty-four hours.

My ending note would be when you look at lists of companies with the best supply chains, you rarely see chemical companies mentioned. BASF shows there is a lot more going on in this sector than most supply chain executives understand. BASF has been creating chemistry for a sustainable future. Through science and innovation they created a clever supply chain through which they were able to meet the current and future needs of the society.