For chemical companies, the high efficiency of Verbund Sites has been a valuable asset in the past in terms of cost efficiency and independence. However, Verbund Sites are interlinked, often highly complex systems with limited flexibility. To avoid turning from a competitive advantage into a burden, the Verbund networks need to be adapted in the context of digitalization and changing market demands.
Verbund Sites are chemical production sites with highly interlinked product flows. They evolved due to a specific characteristic of chemical production chains, the generation of by-products and couple-production. In addition, input materials are quite often partially regained at the end of the production chain and recycled, creating loops in the material flows. The physical link of the production lines at a Verbund Site through pipes and buffer tanks allows to maximize the cost efficiency of production and to minimize storage and transportation effort. The captive use of the intermediates ensures independency and value generation along the whole value chain.
Complexity & digitalization
However, the complex production networks of Verbund sites that have evolved over the years also create increasing challenges:
- They lead to a high complexity for planners and planning tools in supply chain management.
- Depending on volumes and product mix, bottlenecks occur at different units.
- Small failures in operational synchronization can cause supply issues in the whole chain and lead to instability – a major challenge with respect to digitalized business models.
- With value chains stretching across business units, the limited financial transparency impedes the right business decisions in terms of product mix and margin optimization.
Fit for the future in four steps
To stay competitive, the valuable Verbund structures need to be made fit for the future. This can be achieved by following these four steps:
- Set the framework: The business models and strategic objectives of the companies operating on the sites need to be updated. This requires a thorough review of market developments, the competitor and supplier landscape as well as M&A intentions.
- Identify constraints: An assessment of the material flows, plant interdependencies and capacities reveals current and future mismatches of demand scenarios and supply capability and indicates potential solutions.
- Create transparency: By building a digital tactical twin, all relevant flows, capacities, costs and prices are captured in a model. This delivers transparency on the consistency of cyclic flows, buffer constraints and the margin impact of product mix and allocation.
- Select improvement scenarios: The digital tactical twin is also the solution to simulate and evaluate potential improvement scenarios like
- Optimization of product mix and material flows
- Capacity and buffer adjustments
- Increase of flexibility by opening loops through integrating sales and 3rd party sourcing options
After completing these four steps, a clear transformation program ensures the future competitiveness of Verbund Sites as a key asset of the EU chemical industry and prevents them from turning into a burden. If you are interested in further discussing the future of Verbund sites, don’t hesitate to get in touch.