Case study - Chlorine and Derivatives Sales and Operations Planning

Overview
Ineos Chlor (formerly ICI Chlor Chemicals) uses the Sales and Operations Planning software created by Production Planning Solutions to optimize the operations of their integrated chlorine and derivatives businesses. The software was amended to meet the particular requirements of the users. The business model can be maintained and altered by the user to follow the changing structure of the plants and businesses.

Business Characteristics
Chlorine and the co-product Caustic Soda are sold directly, and are also the feedstocks for a number of derivative products. There are also recycle loops for some derivative co-products. The whole production network of continuously operating plants must be balanced, with limited storage capacity for many products. The final sales products serve a number of disparate markets, serviced by internal businesses that call on common resources and products.

The cost and availability of feedstocks can vary, as can the cost of electricity which is a major production cost. The different prices and volumes of the sales opportunities add to the complexity. The problem is to produce a sales and production plan that satisfies the mass balance of the integrated production network, while optimising the profit over the whole business.

Solution
The relevant data for the whole business is held in a database, including feedstock costs, production costs and capability, storage availability and sales forecasts. Transport costs can also be modelled. For routine Sales and Operations Planning the data is held in monthly time periods for a two year horizon. Different versions can use different time periods. This data can be viewed and edited by the user to reflect changes. The latest sales forecasts are collected at a detailed level and can be grouped before being added to the S&OP database.

As in any business there are commercial constraints that limit the freedom to adopt the short term financially optimum plan. These constraints can be set by the user.

The software constructs an Xpress-MP model from the database, optimizes and imports the solution into the database. The solution can be browsed as tables of data with a charting facility. In addition user designed reports can be created and exported to spreadsheet for further processing or printing.

Options
The use of Xpress-MP results in the model creation, optimization and database updating process typically taking less than 5 minutes, in spite of a model size of the order of 40,000 variables and 12,000 constraints. This gives the opportunity to explore the effect that different constraints have on the overall profit and pattern of operations.

Benefits
The basic benefit is to ensure that the sales plans of the various businesses are mutually consistent with the capabilities of the production assets. Because of the complexity of the interactions between products it is all too easy to manually create a plan that is infeasible.

However the use of linear programming gives much more by identifying the optimum strategy within the constraints, and showing the values of co-products. This optimum overall business plan is visible to all members of the organization, so that local sub-optimal strategies are not adopted.

What-if scenarios can be explored, as can the effect of events such as plant breakdowns or short notice changes to sales opportunities.