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This case illustrates the evolution of a typical e-business application for supply chain management within one company.
Shell Chemicals originally introduced SIMON, a bespoke system to manage their customers’ inventory based on data
shared by its customers about their usage and forecast demand for chemicals. This process is referred to as ‘vendor-
or supplier-managed inventory’. The benefits of introducing this system for Shell and its customers are described.
SIMON was then used for upstream supply chain management. Ultimately, Shell Chemicals switched to using the
Elemica Marketplace portal for supply chain management since this was thought to be more cost-effective than
maintaining an in-house system.
The introduction of SIMON
Shell Chemicals ([Link]/chemicals) manufactures the chemicals used by other manufacturers of many
industrial and consumer products. Shell’s customers use detergents, solvents, plastics, and epoxy resins to produce
everything from automotive paints and aircraft structures to diapers and plastic bottles. Within such an organization,
supply chain management has a dramatic impact on customer satisfaction and profitability. Shell Chemicals have
invested in SIMON which stands for ‘Shell Inventory Managed Order Network’ for managing both upstream and
downstream relationships.
SIMON was originally launched in 1995 using the IBM Lotus Notes Domino application server and is one of the
earliest examples of an e-business application. This represented a change from the industry standard practice of using
electronic data interchange (EDI) forms, telephone orders and paper invoices to communicate with customers. EDI
didn’t give Shell the flexibility it needed to accommodate data on exceptions and up-todate information about dynamic
processes.
Initially, Shell used SIMON to manage their downstream supply chain processes which involve distribution of chemical
products for use by their customers. The system enabled SHELL to assume the inventory management role on behalf
of their customers. Once it was successful in this role it was then applied to the upstream processes of Shell acquiring
raw materials from suppliers. For customers, the benefits of the SIMON system are that responsibility for inventory
management is transferred from customer to supplier. A Shell Chemicals customer doesn't need to place an order.
Instead, SIMON, manages the amount of inventory in stock at the customers’ manufacturing locations. The analogy
can be made with a water supplier, which bills its customer on a consumption basis rather than a forecast basis and
where this is limited excess inventory (water) held on site! Before the introduction of SIMON, there were a lot of
manual, time-consuming transactions, often initiated by the customer, that required a lot of phone calls and faxes. There
was also the danger that Shell’s customers might run out of an essential chemical, so that plant time and then revenues
would be lost. To avoid this, companies tend to maintain ‘safety stock’ levels. Re-ordering then occurs when inventory
gets too close to these safety stock levels. The problem was that a typical resupply order can take at least two weeks
from the time the order is placed. This delay occurred since chemicals must be weighed at the plant, loaded onto railcars
and then sent to the customer, who then weighs the materials at the other end before moving them into inventory.
Miscalculations and errors can also occur. For SIMON to enable a supplier to manage inventory, the customer needed
to supply three types of information to the supplier. These are: the levels of current inventory; forecast demand for
inventory; and the shipment details such as location, timing and quantities. In addition to analysing inventory and
consumption, SIMON also generated demand forecasts, calculates stock, tracks shipment status and generates a
resupply plan.
SIMON 10 years on
In 2004, the Shell house magazine showed how the SIMON system is still in use nearly 10 years later and how it is
used for supply chain management. The Shell Chemicals Channel Captain programme provides customers with
integrated inventory management. For Bayer in the US, the coordination and management of all phenol and acetone
deliveries by one supplier offers both supply chain efficiencies and potential for competitive advantage.
As a supplier-managed inventory analyst for Shell Chemical LP, Denise Covin begins each day checking SIMON
(Supplier Inventory Management Order Network).
A Shell-developed software programme, SIMON allows Covin to see the status of product shipments and reconcile
product supply and demand so that her customer, Bayer Corporation, has a continuous supply of phenol and acetone
for its BPA plant in Baytown, Texas.
What’s unique about Covin’s role is that she coordinates the entire supply chain inventory management process,
working closely with the customer and even coordinating product delivery requests with another supplier, to manage
Bayer’s inventory. While the Channel Captain service has been offered to numerous bulk supply customers around the
world for several years, the relationship with Bayer is unique because it is the first to involve product deliveries by
barge to the company’s Business Process Automation (BPA) manufacturing facility.
In an industry often driven by spot market price advantage and future delivery schedules, the Channel Captain service
is more than an inventory management system. It’s a working relationship between Shell Chemical LP and the customer
to cut costs from within the total supply chain. ‘It is costly to have extra inventory in your supply process’, says
Phenol/Acetone sales manager Chuck Walker. ‘The Channel Captain programme enables us to better understand
inventory requirements and have only the product needed by the customer in the supply chain, thus helping us to better
manage inventory and reduce carrying costs. The objective of the service is to realise increased value and savings to
both parties in the supply management process.’ The key to the success of the Channel Captain service is close
cooperation between the Shell Chemical people and their supply chain counterparts at the customer. In the case of
Bayer, Shell Chemicals LP people worked closely with the customer to define the working relationship process and to
identify key people involved and their responsibilities within the overall supply chain process. ‘It’s important to have
people at all levels, within both companies, involved so everyone is aligned with the same vision’, says Matt
Vandergrifft, Phenol/Acetone supply chain manager. ‘This is not simply a process that takes a
job from the customer’s purchasing group and transfers it to Shell. Instead, we as supplier literally manage the inventory
and billing process, so people on both sides get involved at different levels of the supply chain.’ Shell customer
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relationship coordinators, like Covin, use SIMON to get daily inventory readings, consumption forecasts, product
receipts and current customer consumption in order to supply inventory on an asneeded basis. She also places product
orders and coordinates delivery with another phenol and acetone supplier. Barge delivery is a complicated process that
can be impacted by weather, dock issues and ship cannel traffic conditions.
‘This is a customer who needs product on a just-intime basis. Product flows very rapidly and there is not a lot of slack
in the system’, she says. It means, among other things, watching the weather. ‘If there is a potential problem with fog,
we may opt to load the barge ahead of time and reposition closer to the delivery location to get it to the customer on
time. We must be able to keep the process moving regardless of any contingency.’ Covin works closely with production
and shipping colleagues at the Deer Park phenol/acetone plant near Houston to make sure product is in the correct tanks
for loading onto barges, and to coordinate movement of product at the docks.
If a barge is delayed due to weather conditions, dock congestion or any other reason, she’s in contact with the barge
company, logistics and supply people, as well as Bayer’s purchasing and logistics people, to keep everyone informed.
Product transfers occur several times per week, so timing and close coordination for both loading and deliveries is
critical. Deer Park production specialist Carl Pittman, who coordinates movement of product, says:
‘We’ve developed a good team that works together to make sure both Bayer and Shell needs are met.’
The Shell Chemical LP customer service and production teams meet their customer counterparts on a quarterly basis
for a general round table discussion, to foster good communications and to continually streamline the process.
‘SIMON may appear on paper to be a computerised system that provides information, but the expertise really lies with
the people who understand the value and know how to use the system effectively’, Walker adds. Shell began the
Channel Captain arrangements with Bayer in 2002. That same year, it was one of only twelve of Bayer’s 4,000-plus
suppliers to receive a Superior Supplier award for service quality and value provided. Only one other raw material
supplier received the honour. Duke Stiddard, procurement manager of raw materials for Bayer in Pittsburgh,
Pennsylvania, says the Channel Captain service is more than just saving money. ‘It’s a concept that says Shell will
share in your business and help you better manage your inventory processes. We don’t view our relationship as ending
at the point of barge delivery.
‘The service separates Shell from other suppliers’, Stiddard continues. ‘A lot of people talk about doing this, but very
few implement it. For Bayer, our low inventory is the biggest benefit. We don’t have inventory in our system until we
consume it.
‘Obviously, as a result, we save time and energy around scheduling and logistics. Plus, our people are free to work on
other things’, he adds. The relationship is a win–win for both supplier and customer. ‘If we can streamline the supply
management process and save the customer money at the same time, it goes a long way to help them have a competitive
advantage in the marketplace’, says Walker.
Integration with the Elemica Marketplace portal
By 2005, the Elemica chemical industry portal had became an important part of the ebusiness strategy for Shell
Chemical. It was reported in the Shell Chemicals magazine that 30% of Shell Chemical business was online with an
ambition to increase this to 50% by 2008. Elemica was originally founded in 1999 by 22 leaders of the global chemical
industry and by 2005 had a network of 1,800 industry trading partners, so it offered benefits of standardisation. With
more than 1,500 active members and $50 Billion in annual transactions, the value we extend to our customers continues
to grow. As part of Elemica's industry-leading BPN, your enterprise can gain major competitive advantages through
direct access to the latest supply chain technologies and intelligent business process capabilities. Elemica describes the
principles of its Marketplace on its website as follows ([Link] About/Overview/[Link]?):
‘Elemica enables companies to achieve operational excellence by replacing complex approaches with automated
systems and intelligent business processes. Utilizing leading-edge technology and in-depth process expertise, Elemica
integrates disparate enterprise business systems and processes into one unified network across all customers, suppliers
and third party service providers irrespective of company size or industry. Elemica’s innovative business process
network (BPN) provides a fully connected operational framework that removes transactional and communication
barriers and institutionalizes processes for integrating the information flow between global trading partners. With
seamless access and visibility into the supply chain network, the enterprise can use fewer resources to do the same work
more efficiently and release people, inventory, and assets that cover for these issues in the current process.
1. Global Reach & Connectivity
Our founding member companies are among the industry leaders and represent a significant proportion of the industry’s
buy and sell transactions, creating substantial initial liquidity. This foundation provides financial stability and global
reach for Elemica, and the proven ability to scale quickly. This combination will continue to attract many additional
buyers and sellers, resulting in an ever-growing reservoir of potential connections for new customers.
2. Neutrality
Elemica is an independent company with a dedicated management team. Our network is designed as an open network,
embracing all industry buyers and sellers looking for a robust infrastructure, network and ecommerce solutions to
improve core business processes. Elemica is not an ‘aggregator’ of material purchasing, nor a ‘buyer’, ‘seller’, or
‘owner’ of products – it is a facilitator of transactions.
3. Security
Elemica has incorporated state-of-the-art security measures to safeguard the flow and accessibility of information so
that participants' individual transaction data is not shared with any other company. We have state-of-the-art security
features and processes, including highly visible firewalls and strong data protection policies, a policy of confidentiality
regarding handling of customer data, encryption technology to safeguard confidential data and secured information
with access limited by individual user and regular independent auditing of these policies and procedures’. Integration
with marketplace portals such as Elemica, which were not in existence earlier in lifecycle of SIMON, became important
to achieving this goal. Elemica could offer similar benefits to SIMON, i.e. it could
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• Reduces transaction costs through reduce human input to transactions
• Standardize business processes
• Reduce error sources
• Improve response time
• Can improve cash flow through faster payment
• Increase customer satisfaction
The article describes this example of the practical benefits the new system could bring. A company in Europe shipped
products directly from a Shell Chemical plant to their customers. Shell Chemical make the product; the company
markets it and manages pickup from the plant and delivery to the customer. Before the application of Elemica, these
additional processes stages or ‘handoffs’ were required while each truck waited after loading:
• Paperwork was developed at the plant
• Then faxed to our partner company
• Then entered manually into their system
• Then faxed back to the Shell company – where the truck had been all along
A further complication was that the partner’s offices closed earlier than the Shell traffic office. So, truck drivers could
sit for hours waiting at the plant until the documents were faxed through! After switching to Elemica, paperwork was
automatically processed 24 hours a day. Average truckwaiting times were cut from two hours to 15 minutes. In addition
to the process benefits which would créate better customer service, Shell Chemical switched from using SIMON to
Elemica for supply chain management since SIMON would require continued investment in ongoing development and
maintenance costs. Elemica, as an outsourced solution, was more favourable in terms of ongoing costs and
development. Since Elemica is not company-specific it also helped exchange of data since formats could be
standardized across companies.
The data contained within SIMON was integrated to the Elemica chemical marketplace platform. In the Shell Chemicals
Magazine, Spring 2005 ([Link] 4-article_id=184,[Link]) the benefits
of integrating
Elemica with SIMON VMI were described as:
The supply chain service developed through Elemica captures and manages daily inventory readings, consumption
forecasts, product receipts and current customer consumption. Its planning, forecasting and replenishment services
are combined with the added advantages of ERP system integration through the Elemica hub. A single source of
information Improved product, technical and HSE (Health, Safety and the Environment) information has been brought
together in the ‘Customer Lounge’.
Global positioning systems also enable details on the railcar carrying the chemicals including current location and
estimated time of arrival. There are also links to road hauliers. For example, a link with Bertschi AG, one of the largest
road transport logistics providers in Europe, enables thousands of transport instructions generated every month to be
sent automatically, removing the need for manual faxing and reducing the potential for errors. Bertschi Transport
Planning manager, Stefan Bryner, explains the benefits as follows: ‘It has reduced our paperwork and made the whole
process more transparent. The potential for errors has been reduced and issues are easier to resolve.’

PREGUNTA
El sistema SIMON admite tanto "upstream y downstream de relaciones comerciales”. A través
de un grafico explique