BASF’s SCM Learning System

1. BASF’s SCM Learning System APICS Triangle Chapter May 12, 2009 Alan L. Milliken CFPIM CIRM CSCP CPF Business Process Education Manager BASF Corporation

2. Alan L. Milliken CFPIM CIRM CSCP CPF • 20+ years at major manufacturing sites working in Production, Logistics, Process & Quality Control, Industrial Engineering, Training, and Scheduling • 14+ years as a Supply Chain Consultant and APICS Instructor including two years in Mexico City helping BASF Mexicana improve their supply chain • Identified by an independent consulting firm as one of three APICS members who best answer the question, “What is a Supply Chain Manager?” • Served as an SME (Subject Matter Expert) on the team that developed the new Certified Supply Chain Professional (CSCP) program. • Served as an SME on the team that developed the new Certified Forecasting Professional (CFP) for the Institute of Business Forecasting (IBF) • Engineering Degree from Auburn University and MBA from Clemson University

3. BASF • Founded in 1865 as Badische Anilin und Soda Fabric • The world’s leading chemical company with sales of approximately $80B in 2008

4. Value-Based Management (Business Perspective) Start Here Shareholders receive High ROI Shareholders provide Capital E A U 3. Create Value for Your Shareholders D 1. Invest in Adding Value to Products & Services L Your Firm D A E V D And receive Value in Return 2. Deliver Value to Your Customers

5. Value-Based Management (Learning & Development Perspective) Start Here You & Shareholders receive High ROI You and Your Firm provide Capital for Education & Training E A U 3. You Create Value for Your Firm’s Shareholders D 1. You Invest in Adding Value to Yourself through Education, Training & Experience L YOU D A E V D And receive Value in Return 2. You Deliver Value to Your Firm

6. Value-Based Management Approach Value can be created by: • increasing Profit and/or • reducing capital employed(e.g., inventories, receivables) Profit Reducingcapitalemployed Source: Kurt Bock – Chief Financial Officer – BASF Group The company’s definition of success should define the contents of the learning system.

7. Where Does Value Come From? Triad of Operational Excellence TECHNOLOGY PROCESS PEOPLE Which one controls how much “value” the other two generate?

8. Value Drivers and Associated Metrics Drive Performance

9. Analysis of a “Value Driver” in Supply Chain Forecasting Improved Service, Less Inventory, Lower Costs YES – Marketing,Sales, Operations, SC, Finance % Error e.g. [(Fcst-Actual)/Actual] Process Improvements, Education & Training, Better Systems, etc.. Logistics Cost, Production Cost, Delivery Performance, Inventories SAP R3, Global Reporting System, GIIC Source: BASF Group Value Based Management Handbook

10. Functional Strategies Driven by Competitive Priorities Help to Prioritize Learning: Identification of Customers, Products, Competition, Socioeconomic Environment Market & External Environment Analyses Overall missions & goals of the Organization, Recognition of Distinctive Competencies. Corporate Strategy Must develop the supply chain expertise required to plan & execute strategy. Competitive Priorities(Cost, Quality, Time, Price, etc..) Future Direction (Global Strategy, New Products & Services, etc…) • Capabilities • current • needed • plans Functional Area Strategies Finance Marketing Operations Supply Chain others Source: Operations Management, Fifth Edition, Krajewski & Ritzman

11. Learning Priorities must be Linked to the Business Model CIM: Trader-Transactional Supplier Product: Commodity Bulk Chemical Competitive Priorities: Price & On-Time Delivery Supply Chain Value Drivers: - Supply Chain Costs - Delivery Reliability - Inventory Investment Supply Chain Capabilities: - Accurate Forecasting - Production Cost Minimization - Inventory Optimization SC Competencies Required: - Demand Planning - Supply Planning - Inventory Management

12. BASF’s Vision Form the best team in theindustry Help our customers to be more successful Earn a premium on our cost of capital Ensure sustainabledevelopment None of these business & functional strategies can be achieved without competent employees who have been provided the necessary capabilities (behavior, knowledge, & skills) to succeed.

13. Learning System – Virtual Organization SAP Business Integration SAP Training & Support Human Resources Logistics/SCM • Supply Chain Council • BPO Consulting Team • MM Education & Training Team • *BSUG Teams (e.g. Matls. Mgmt.) • Application Development Team • Logistics/SCM HR Operations • N. A. Learning CoE • Compensation & Performance Mgmt. Services • *BSUG Teams (e.g. Matls. Mgmt.) • Software Applications Training Team Virtual Team The Logistics-Supply Chain Community both provides input to help guide these services and receives outputs from these services.

14. Identifying and Defining Key Personal & Technical Competencies

15. Adding Value through Individual Competency The “Best Team” can be built by fostering the use of personal and professional competencies. Competencies describe the personal behavior, skills, and knowledge of a person. Competencies differentiate individual performance and contribution to the team. There are two types of competencies: Describe capabilities in a specific area of knowledge (e.g. Supply Chain Management) and are based on education & experience. Refer to capabilities based on personality, personal trait, and values. Success Competencies enable employees to create value!

16. Examples of Personal Competencies Improve your ability to guide and inspire employees to meet their maximum potential and the ability to work on a team. Lead to better utilization of resources, improved decision making, more creativity, and the ability to manage change. Improve your ability to develop and maintain collaborative working relationships (inside & outside the firm) and express facts and ideas in a convincing manner.

17. Sample Definition of a Personal Competency Once the list of personal competencies is developed, a detailed definition of each is required. For example many supply chain roles require competency in “Analytical Thinking.” • Analytical Thinking is the ability to identify key issues and relationships, patterns and connections buried in a mass of data. A person in a job role requiring this competency should demonstrate: • the ability to break down problems and identify basic relationships • see inter-relationships in complex information • do complex analyses including “what-if” and “if-then” scenarios

18. BASF 2015 HPO 2006 Required Competencies Training Available Value Based Management (Learning Portal) Earn a premium on our cost of capital Business and Financial Acumen Financial Essentials (HMMP) Marketing Essentials (HMMP) Focusing on your customer (HMMP) Help our customers to be more successful Customer Focus Marketing Essentials (HMMP) Marketing & Sales Academy (to be launched in 2nd quarter) Leading a team (HMMP) Form the best team in industry Leading Employees to Success/Teamworking Keeping teams on target (HMMP) Working with a virtual team (HMMP) Ensure sustainable development Environmental, Safety and Health Orientation The Journey to EH&S Excellence (to be launched in 3rd quarter) Harvard Mentor Management Program (HMMP) is used to support Global/Personal Competencies.

19. Examples of SCM Technical Competencies • Information Technology • ERP System • Advanced Systems • PC Skills • SCM Competencies • Demand Planning • Supply Planning • Execution & Control • Inventory Management • Distribution & Transportation • Foreign Trade • General Skills • Continuous Improvement • Project Management • Contract Management • Data Analysis Technical Competencies describe capabilities in a specific functional area and are based on education and experience. Each operational function must define those Technical Competencies needed to successfully implement their strategies.

20. Define Levels of Technical Competency Once Technical Competencies are identified, definitions of progressive levels are needed to define specific job requirements. • Competency:Business Applications Knowledge – ERP System • Level 1: Beginning • Completed ERP Overview Training for SCM • Know how and where to find and use ERP tip sheets • Can use ERP online help functions • Understand basic system operations and/or commands within ERP System • Can modify a user profile • Know how to enter master data in your area of responsibility • Understand how others are impacted by your inputs into the ERP System • Can enter a Help desk ticket for the ERP System

21. Developing the Competency Curriculum

22. Major Components of the Technical Competency Curriculum APICS Certified in Production & Inventory Management (CPIM) is a BASF global standard for supply chain planners (e.g. Master Schedulers, Demand Planners, Material Planners, etc..). The five CPIM modules are available via the on-line Supply Chain Academy, through local APICS chapters, and through self-study. Certified Supply Chain Professional (CSCP) is recommended for those who already achieved CPIM Certification or persons in supply chain functions other than production & inventory management who meet the eligibility requirements. SAP R3 Training SAP specific concepts, processes and transactions training is available via the SAP Training website. Supply Chain Academy (SCA) SCA is an on-line education & training tool used at BASF. It contains approximately 200 on-line courses including the APICS CPIM body-of-knowledge, Physical Logistics, and International Trade. In-House Classes & Webinars BASF offers in-house classes that focus on supply chain management at BASF in SAP R3.

23. List of Approved External Providers

24. Strategic Management of Resources Master Planning of Resources Detailed Scheduling & Planning Execution & Control of Operations Philosophies Strategies Targets Product Demand Material Plan Internal Resource Capacity Plan External Resource Supplier Plan BASICS of SUPPLY CHAIN MANAGEMENT APICS CPIM House of Knowledge

25. APICS CSCP Body of Knowledge Four domains of knowledge Supply Chain Management Fundamentals Building Competitive Operations Planning and Logistics Managing Customer and Supplier Relationships Using Information Technology to Enable Supply Chain Management CPIM’s primary focus is on “internal operational excellence” while CSCP’s focus is on the entire supply chain (supplier’s supplier to customer’s customer) with a global emphasis.

26. SAP Training & Documentation • Training is organized by process/role (e.g. Prod. Plng, WM, TM, C. S., etc…) • Step-by-Step includes SAP screenprints • Training & Documentation linked directly to SAP Transactions • Company experts maintain concepts & reference docs

27. Sample of Supply Chain Academy (SCA) Courses Sales & Operations Planning SCA Sales and Operations Planning Concepts (MFG107) Self - Study .5 Hour l – The sales and operations planning process is impacted by various elements of the business environment, integrates the multiple plans of a business, and pr ovides direction for subsequent more detailed and near - term planning. This course explores the concepts that impact the sales and operations planning process and the ways that the process can be adapted to fit various environments. SCA Sales and Operations Planning Process (MFG108) Self - Study 1 Hour l – This Online Self - Study course explores the five primary steps in the sales and op erations planning process. It also discusses the roles and responsibilities of ind ividuals involved in each step. SCA Developing and Validating the Production Plan (MFG201) Self - Study 1 Hour l – The production plan is a key output of the sales and operations planning process that sets product family production volumes for all subsequent priority planning processe s. This course explores the development and validation of the production plan and the measur ement of the performance of the production planning process. S&OP Basic Concepts

28. Sample of In-House Class Agenda

29. Sample Webinar Topics • Supply Chain Event Management (SCEM) • When and how to use Re-order Points • Basics of Inventory Management • Use of Transfer Orders in TMS • How to determine Safety Stocks • How to set Inventory Targets

30. Assessments of Learning – Key Points • All courses should include post-assessment (e.g. review quiz, simulation of knowledge, etc..). • Major courses (e.g. >4 hours in duration) should also include pre-assessment to help in determining focus areas and periodic reviews to reinforce learning throughout the course. • Thresholds to pass internal assessments (not external certifications) should be set relatively low to motivate and reward participation. • Assessment results should always be kept confidential and only the highest score should be stored when multiple attempts are required.

31. Participant Evaluations are Used to Improve the Program

32. Implementing a Competency-Based Process “Learning is not compulsory... neither is survival.” W. Edwards Deming (1900 - 1993)

33. Prioritize Competencies by Position/Role In order to determine what education & training an employee needs, Competencies must be prioritized by job. Review of existing job descriptions, review of current objectives for the position, and surveys of experts, incumbents, and leaders can be used to prioritize Competencies. Note: Some competencies are company specific (e.g. Product Knowledge, Manufacturing Knowledge, Internal Business Knowledge, etc..) and education & training must be developed in-house.

34. Sample Curriculum based on Role & Competencies Curriculum includes progression from fundamentals to advanced and integrates use of systems.

35. Evaluate Individual Needs & Develop Plans Self Evaluation: plus Performance & Development Review with Your Leader = a Plan

36. Example of an Individual Plan

37. DO HANDOUT EXERCISE

38. Practice Exercise: Response at BASF

39. Key Performance Indicators (KPIs) KPI’s can be used to measure participation and confirmation of learning. Examples include: • No. of Education & Training Hours Taken per Year • No. & Percent of Employees Participating • Number of Exams Passed • Certifications Received

40. Current Status at BASF • 175 employees have participated in on-line CPIM classes in 2008/09. • 38 employees participating in an on-line CSCP class. • 150 employees participated in 2.5 Day SAP-MM Workshop • 106 CPIM’s and 15 CSCP’s Globally • 100 CPIM Exams taken in 2008 (28 outside US) • 224 APICS Members via Enterprise Membership • 100+ SCA Users taking 400+ Hours per Year

41. Identify & Define Global (Personal) Competencies Identify & Define Technical (SCM) Competencies Prioritize Competencies by Position Develop Curriculum by Competency Competitive Priorities & Value Drivers Assess Individual Needs based on Position Develop Individual Education & Training Plans Monitor Progress and Provide Feedback Summary of the Learning System

42. Alan’s Perspective on Education’s ROI Alan has just completed a presentation to the Group Vice-president and his staff regarding the need for supply chain education in their business. Director’s Question to Alan: “Alan, what if we educate & train all our supply chain employees and they leave.” Alan’s Response to Director: “More importantly, what if we do not educate and train them and they stay? GVP’s Response: “Alan, all of my units will be participating in the program.”

43. Final Thought or FIRM “Our progress as a nation can be no swifter than our progress in education. The human mind is our fundamental resource.” John Fitzgerald Kennedy

45. Practice Exercise: Competencies by Job SC/Logistics Mgr. – the person responsible for planning, organizing, and controlling supply chain/logistics activities. Master Production Scheduler – the person charged with establishing, managing, reviewing, and maintaining a master schedule.