formed a corporate network optimization of packaged finished goods in North America. There were 17 operating divisions with multiple, heterogeneous systems: 25,000 stockkeeping units (SKUs), 134 shipping points, 15,000 ship-to locations, 956 million pounds shipped direct to customers, and 696 million pounds shipped to customers through distribution centers. By using optimization tools BASF reduced transportation and facility costs by 10%, next-day volume delivery increased from 77% to 96%, the number of distribution centers was reduced from 86 to 15, generating $10 million per year savings in operating costs (personal communication, Dr. Vladimir Mahlaec, Aspen Technology).

An example of production scheduling involves scheduling a plant in continuous time to optimize sequencing, while providing an executable production schedule. This problem is complicated by the fact that it must take into account forecast and customer orders, inventories of raw material, intermediates and finished goods, facility status, manufacturing information, rates, facility preferences, and recipes. Pharmacia-Upjohn was faced with such a problem in the scheduling of a fermentation process. Using modern software, schedules were generated for 6 days of production. The major benefit was an effective and flexible computer tool for rescheduling that can readily accommodate changes in customer orders.

Finally, an interesting trend in supply-chain management is improving business practices by providing capabilities to improve service for customers. One such concept is “capability to promise.” The idea is not just to ensure that the product is available, but that the supply chain is capable of delivering the product. This involves, for instance, capability to rapidly change the schedule to accommodate the customer order and interact with the active plant schedule. Such a system was developed at Celanese Fibers, which is integrated with a Customer Order System and enabled via a Web browser.