Basf Report

Table of Contents

1. Overview of the BASF logistics operation in Southeast Asia

1.1 Company background

1.2 The supply chain and logistics operation of the company in Southeast Asia

2. Company's problem identification

2.1 Lack of qualified personnel in logistics

2.2 Lack of appropriate logistics strategy

2.3 Overlapped organizational structure

2.4 Weak information system within the whole region

3. Recommendations

3.1 Changes in terms of logistics personnel

3.2 Implementation of one single logistics strategy within the regional company

3.3 Restructuring the organizational structure

3.4 Establishing a coordinated information system

4. Cost and benefit of the recommendations

4.1 Cost of the recommendations

4.2 Benefit of the recommendations

5. Reference List

Report of BASF

1. Overview of the BASF logistics operation in Southeast Asia

1.1 Company background

BASF is one of the world's largest chemical companies. It was established in 1865 with the main product was coal tar based dyestuff. It has six main categories of products, which are oil and gas, chemicals, agricultural products, plastics and fibers, dyestuff and finishing products, and consumer products. The structure of the company is presented by three-dimensional matrix consisting of operating, regional and functional divisions. Since 1960, the company began to expand its operation at a global level through acquisition. In Southeast Asia, the company has over 30 companies in 16 countries through the region of which 12 have the production facility. Headquarter for the region is located in Singapore.

1.2 The supply chain and logistics operation of the company in Southeast Asia

In terms of the flow of goods in the region, each group company can directly order the material, produce the goods and sell them within the regional market. They build their own physical flow of goods, being relatively independent from the parent company's physical flow of goods. However, only one third of total revenue in the southeast Asia is produced in the region due to the limited production capacity of the group companies, the remaining two-thirds are still mainly supplied from the company's main production site in Germany.

Regarding the information management, there is little information flow within the region as group companies are located in different countries. Besides, each group company has developed its own information system so it is hard to communicate and share information among them. There is almost no systematic information within the regional company due to the lack of computer support.

Then in the organization and structure management, the headquarter in Singapore holds the responsibility for the performance in the region, however, each group company is also responsible for one or more of the BASF production line and therefore, be responsible to the BASF's operating division. As the result, the BASF operating division can control the performance of the region through its control on the production of the group company. Within the group company, although there is functional division to meet the demand of the operating division, the responsibility of the each department in the functional division is not clearly defined.

Concerning Supply chain and logistics performance, every group company has its own logistics operation but with little similarity among them. Each activity of logistics acts relative autonomy. Furthermore, since group companies try to minimize cost at one particular step, the total cost is not optimal cost and the customer service is not maximized.

2. Company's problem identification

2.1 Lack of qualified personnel in logistics

The company had almost no logistics specialists, since many staff in the logistics department came from other fields such as production or marketing. Moreover, most staff had only gained on-the-job training and there is little of the formal training in logistics. Even though training program was available, the staff had been trained to meet the need of other department than to give advice or solution on how to better manage the logistics function.

2.2 Lack of appropriate logistics strategy

Basically, the company has undermined the function of logistics department. Within the region, little effort had been expended in determine in the capacity of logistics services to add value to the various businesses. Logistics were therefore viewed simply as cost avoidance and no sufficient concern was thus given to logistics department. For instance, although purchasing, warehousing and transportation were logistics activities, they were subject to strict control or oversight by other departments. And most of the activities of customer service, inventory management, product identification and production scheduling were also under the control of marketing, production or finance department.

As a result, there is no centralized logistics strategy within the regional company. Each company has its own kind of logistics sophistication and the measurements of the logistics costs and inventory level vary considerably among group companies. Moreover, the local planning for logistics other than warehousing is non-existent. In addition, there are no decision support tools such as inventory planning, distribution planning, production planning and forecasting.

2.3 Overlapped organizational structure

Next we can see an overlapped management exists between the regional management and parent company's operating division. For example, the regional division monitors the total inventory levels while the operating division sets the inventory level within a product group. Meanwhile, this replicated operation can also be seen between logistics department and other departments where the customer service, production

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