Supply Chain and Logistics Challenges and Solutions for PETCHEM

This report analyzes the supply chain and logistics operations of PETCHEM, a company facing unique challenges in container management and forecasting. The company's hybrid pull-push system necessitates accurate forecasting of empty container demand. The report examines two improvement projects: enhancing forecasting accuracy and comparing costs among five shipping lines. The analysis reveals high detention costs and significant cost disparities between shipping lines, particularly with ONE shipping line. Recommendations include implementing the ABC method for better inventory management and focusing on cost reduction with ONE shipping line to improve overall efficiency and reduce expenses within the supply chain. The report references relevant literature and provides a detailed overview of the issues and proposed solutions.

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Date of submission

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Supply Chain & Logistics
Supply chain and logistics is very complicated all around the world. It is considered
as one of those areas that a company can reduce its costs by increasing its efficiency and
operational effectiveness. Supply chain in a company consumes almost 20% of the total
revenue. This is higher in other industries and lower in the petrochemical industries.
PETCHEM problem is a unique problem because the firm is using a different and unique
system from other Saudi companies. It is using a compensation of pure pull system and
transfers it immediately to a push system. This made the forecasting of the empty container
very essential (Haile, 2018).
The need to understand the concept used by PETCHEM in its container system is
important and is as follows. Firstly, the containers are received in the PETCHEM yard.
Secondly, a call off is made from the packaging center for delivery of the empty containers
for the packaging process. At this level, the containers are no longer empty but packaged. The
full container will be stored in the yard that is close to the port for the vessel to sail outside
Saudi. The costs in this will be higher for containers with more than 30 days. 30 days and
below, the cost will be zero.
Days Cost
Less than 30 days Zero
More than 30 days Accumulated cost depends on days and container stay.
Detention cost
Monthly detention for an average container is $1.3 MM which cost which will lead to
a very high cost of $ 15.8 million annually.

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Improvement Projects
There are many shipping companies that PETCHEM deals with. We use 5 different
shipping lines to deliver all the empty containers to be used by PETCHEM customers all
around the world (Laurent, Vallerand, van der Meer, and D'Amours, 2019).. This are the
shipping lines and their famous names:
Shipping Line Famous Name/ Used Name
MEARSK MAEU
America President Line APL
SAFMARINE SAFM
Compagnie Maritime CMA
Ocean Network ONE
Project A
After analyzing 2 main projects by the end of 2017 and year 2018. The 2 projects are
related to two different aspects. The improvement of the forecast accuracy in PETCHEM
dependent on the situation of the problem. In the chemical company, forecasting problem was
the period. PETCHEM forecasts the delivery of empty containers once in every month. For
example, the company forecasts the delivery of empty containers in January for the month of
February. PETCHEM decided to pressurize the management of the company and will
improve most of the uncertainties in the supply chain.
Project B
The second project is about going deeper into the five shipping lines cost on its own
and the do the comparison with the five lines. After the analysis, the supply team found out

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that ONE shipping line has the highest costs compared to the other SL. It was noted that ONE
shipping costs was 4 time higher than the rest of the shipping lines ( ,دبي2018 ).
Recommendations and Conclusion
PETCHEM should use the ABC method for better inventory management and focus
on the high cost on ONE shipping line. This will lead to a reduction in cost.
References

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Haile, B., 2018. Assessement Of The Effect Of Enterprise Resource Planning System In The
Logistics Activities Of Ethio Telecom (Doctoral dissertation, aau).
Laurent, A.B., Vallerand, S., van der Meer, Y. and D'Amours, S., 2019. CarbonRoadMap: A
multicriteria decision tool for multimodal transportation. International Journal of Sustainable
Transportation, pp.1-10.
,دبي2018 . The Impact of Management Accounting Costing Methods on Supply Chain
Management LACHACHE Abdelhalim.