Case Study
$24M auditable savings with dynamic margin optimization in petrochemicals through sales and procurement collaboration
- Industry: Chemicals
A Fortune Global 500, one of the largest chemical companies in the world. This $47 billion multinational chemical company employs around 19,000 people and is a global leader in innovation, consistently developing high-quality chemicals, polymers, fuels, and technologies.
Challenge
- High raw material costs due to siloed functions and complex data structures
- Inefficient product mix allocation based on tribal knowledge
- Slow and non-actionable flow of information across functions
- Lost margins and suboptimal buying decisions
Solution
An advanced margin optimization Nerve Center was established to bring together marketing and sales, production, inventory planning, and procurement. The center utilized a connected data fabric across raw material prices, production batch BOM, POs, finished goods prices, and margin contributions. Predictive analytics were used to guide raw material purchasing and product mix decisions, enabling:
- Real-time prediction of input price fluctuations based on market indices
- Estimation of the impact of raw material price fluctuations on margins
- Proactive guidance for the marketing and sales team on optimal product mix and pricing
Capabilities leveraged
Data & Analytics
Process Transformation
AI & ML
Outcome
Cost reduction:
achieved significant savings in raw material costs
Optimal product mix:
improved revenue through intelligent product allocation
Optimal inventory:
reduced holding costs and improved cash flow
Enhanced EBITDA:
improved overall profitability
Margin erosion avoidance:
prevented potential loss of margins