Leading the digital transformation in chemicals W. Alex Marvin

November 2019, FICO World2019-111

About me

◼ 2013 PhD chemical engineer

◼ 2013 joined BASF

Current role: Operations Research Manager in a global data science team

Location: NA Headquarters in NJ

Co-creates solutions with internal businesses

Builds web-based prescriptive analytics tools

Leads scalable application frameworks

2019-112

BASF – We create chemistry

◼ Our chemistry is used in almost all industries

◼ We combine economic success, social responsibility

and environmental protection

◼ Sales 2018: €62,675 million

◼ EBIT 2018: €6,033 million

◼ Employees (as of Dec 31, 2018): 122,404

◼ 6 Verbund sites and 348 other production sites

2019-113

BASF’s segments

Chemicals

Petrochemicals

Intermediates

Materials

Performance Materials

Monomers

Industrial Solutions

Dispersions & Pigments

Performance Chemicals

Surface Technologies

Catalysts

Coatings

Construction Chemicals

Nutrition & Care

Nutrition & Health

Care Chemicals

Agricultural Solutions

2019-114

Source: PwC Strategy&

Digital transformation is expanding in waves

across industries and value chains

Transformation

Waves

Starting point

of digital

transformation

Media

Retail

Hotel

Transport Health

Farming

Automotive

Utilities and Energy

Process Industry

2010 2015 20202000 2005

Telco

Computing

Power & Data

Digitization of Production

Digitization of Services

Digitization of Distribution

Digitalization of Media & Marketing

2019-115

Digital solutions

Predictive

Maintenance

Augmented

Reality

Process Optimi-

zation by Big

Data

Vertical

Integration

Digital Plant

2019-116

How the competitive environment of BASF developed

We are the only chemical company with a full end-to-end portfolio across the chemical value chain, mastering the

complexity of the process industry.

Reliance

Valu

e C

hain

1980

Oli & Gas

Petro-

chemicals

Commodities

Specialities

Crop protection

Plant-Biotech

Pharma

BASF

DuPont

Shell

Hoechst

Bayer

Dow

ICI

2018

BASF

Syngenta Chemchina

Conoco

Invista DowDuPont

Shell

Clariant

Celanese

Solvay

AkzoNobel

AstraZeneca

Sabic

Sinopec

LyondellBasell

Valu

e C

hain

Lanxess

Covestro

Bayer MonsantoRhone

Poulenc

2019-117

▪ BASF is committed to contributing to the

Paris Climate Agreement

▪ Key measures:

Process improvements

Operational excellence measures

Shift to CO2-neutral power

Portfolio development

▪ Development of new, breakthrough

technologies with impact beyond 2030

CO2-neutral growth until 2030: Creating value to society

and protecting our climate

1990 1995 2000 2005 2010 2015 2020 2025 2030

Global GHG emissionsAssumed policy

shift → 2°C scenario

BASF business

as usual

Target:

No increase

of GHG

emissions

Absolute greenhouse gas (GHG) emissions

indexed (1990 = 100)

BASF GHG

emissions

World 1990

36.4 billion tons

BASF 1990

40.1 million tons

Carbon

management

2019-119

A highly interconnected supply chain – complexity management is at

the heart of BASF

2019-11

End Product A

End Product B

End Product C

Suppliers

Target

industries /

CustomersBASF

Raw Material A

Raw Material B

10

Goal: One common solution for medium- & long-term integrated planning

2019-11

Supply

Production

Demand

What is the margin effect of a long-term raw material shortage?

What are the optimal production quantities at a potential site?

Can the value chain handle a “low price – high volume strategy” for a product?

What is the impact of different raw material cost developments?

How much extra capacity is needed to fulfill a sales plan target?

What is the margin and volume flow effect of a new product introduction?

Scenario examples

11

Application SILOS – Before FICO Xpress Insight

2019-1112

FICO Xpress Insight platform

Business Logic

Business Logic

Model/Solver

Application 2Application 1

Model/

Solver

Solution Developers and Administrators

❖ Duplication of development efforts, lack of synergies and limited knowledge

sharing in all phases of application lifecycle

❖ No consistent standards for key aspects such as security, database management

reporting across applications

❖ Development resources are hard to interchange due to siloed environments

…..

Users and Key Stakeholders

➢ Inconsistent user experience

➢ Widely varying application

capabilities

➢ No centralized administration.

➢ Lack of a common solution platform

can result in increased time to

market, reduced investments and

missed opportunities

A Sustainable optimization platform with FICO Xpress Insight

2019-1113

Model/Solver

Business Logic

FICO Xpress Workbench

Model/Solver

Business Logic Business Logic

Scenario

Database

FICO Xpress Insight Platform

Reporting

Database

Application 1 Application 2

Third Party Software

Model/Solver

Application 3

Benefits✓ Unified app

development/deployment using

Xpress workbench

✓ Scenario management, rapid

prototyping and other great

features

✓ Centralized administration,

monitoring for all applications

✓ Excellent integration with 3rd party

tools including databases,

reporting and analytics

✓ Easy web app development

providing consistent, secure and

seamless end user experience

Data SourcesUser Web Application

Application Server

Develop and

Deploy

LDAP

Administration

Benefits of using FICO Insight for optimization

2019-1114

Foster a collaborative

approach between

stakeholders

Model complex

constraints

Rapidly build

production ready

business solutionsHelp handle

complexity

Enable

information

transparency

KOH 45%

B 163050 A50

150 m³

B 165060W1000

75 m³

B 1660CL 1400

150 m³

Reactor 2C 1200

EntsalzungR 1250

StrippungCL Blending

R 1275

B 165550A14075 m³

B 1500Swing

WS75 m³

B 1645Cl Gas 9

75 m³

B 1635B 55

75 m³

B 1640IL 308

75 m³

B 1665Swing WI

75 m³

B 1505Swing WI

75 m³

Reactor 1C 1100

B 160575 W270

75 m³

R 1175TB Blending

B 1615TB 150

150 m³

B 1620TB 195

100 m³

B 1610TB 120

300 m³

1 2 3 4

DEG

EO

PO

FilterF 1250

VE-Wasser

DEG

EO

PO

Starter

Starter

Additives

Linie 1000

Linie 1200

GebindabfüllungBulkabfüllung

Single platform for

modelers, data

experts and web

developers

steer the choice of a scenario

to be operationalized

Production

Data RecipesCustomer

Demand

Business

RequirementsProduction Planning

Production schedule is generated

to support detail planning

Scenario

ManagementOptimization

toolResults are basis for

tactical decisions

monitor the accuracy of the model

based on a continued tracking of

model results / reality

Establish a common data foundation – “Single

Source of Truth”

Adapt model to changing

business conditions

Improved user experience and interaction between

business partners and optimization experts

2019-1115

Deployed solutions

◼ Surfactants supply chain

◼ Citrus products value chain

◼ Synthetic lubricants scheduling

◼ Construction chemicals global procurement

◼ Catalytic converter global production allocation

◼ Precious metal recycling planning and contract optimizer

◼ Global strategic capital investments

2019-1116

Business unit feedback

◼ Sustainability: Our previous tool was not easily updated with SAP data, not supported with documentation, and the developer was no longer at BASF. It required a lot of manual data manipulation, and thus was hard to update the tool.

◼ Alignment: Our process engineers are agreeing that the tool is becoming increasingly descriptive of their plant. This way our S&OP meetings align more closely with operations.

◼ SAP data improvement: Now, almost all data is maintained in SAP and sync’d with the tool. We identified some SAP data to improve on (e.g. packaging line rate)

◼ Better schedules: Now, we can account for scheduled downtime

◼ Scenario exploration: We explored different preferences for reactor modes, which allowed us for the first time to quantify the benefit of being able to quickly switch reactor modes. This has motivated a new automation project.

2019-1117

Conclusions

◼ Interconnected supply chains require coordinated decision making

◼ FICO Xpress Insight enables BASF

Faster from problem to deployed solution

Advanced analytics made visual and intuitive

Business answers in minutes rather than months

2019-1118

www.basf.com/digitalization