1. Bringing Profitability Into Focus Optimizing the Chemical Value Chain
Chemical Executive Briefing
December 6, 2001

2. The AspenTech Vision
To make our customers more profitable by enabling them to design, optimize, and execute their entire value chain – from the supply of raw materials to the delivery of final product.
This is sort of a new statement of our vision. A vision is something you don't want to change too often, but we've been evolving, and this is at least one articulation, something we are going to be talking about to get just exactly right, but the vision here is to be the leader in delivering value through intelligent e-business solutions that enable enterprises and the process industries to integrate, automate and optimize their strategic business processes both internally and among their partners.
So what do you think are the key words in that vision statement? Maybe someone could tell me maybe the most important word in that statement.
Value
Leader
Process Industries this is where we're putting our stake in the ground.
E-Business too, it's a major new frontier.
I think "strategic business processes." We focus on strategic business processes.
So, in many ways almost every word in that vision is very, very important in terms of what we do, and there is not a lot of fluff or a lot of room for being too much more economical. I think the key thing that we want to be know as, we want to be dealing with someone very similar to what we do, and forget about the technology and forget about a lot of what we do. We deliver value to the process industries. We deliver economic value to this industry.

3. Overall Business System Landscape in Process Manufacturing
Enterprise
Plant
ERP
Enterprise Resource Planning
SRM
Supplier Relationship Management
CRM
Customer Relationship Management
SCM
Supply Chain Management
e-business
e-business
APS
Advanced Planning & Scheduling
FCS
Finite Capacity Scheduling
MES
Manufacturing Execution
System
Design
Engineering
Plant Simulators
DCS
Distributed Control System

4. AspenTech Footprint in the Business System Landscape
Enterprise
Plant
Aspen Footprint
ERP
Enterprise Resource Planning
SRM
Supplier Relationship Management
CRM
Customer Relationship Management
SCM
Supply Chain Management
e-business
e-business
APS
Advanced Planning & Scheduling
FCS
Finite Capacity Scheduling
MES
Manufacturing Execution
System
Engineering
Plant Simulators
Design
DCS
Distributed Control System

5. Value Chain Profit Opportunities
Sell-side Marketplaces
Engineering & Construction Firms
Buy-side
Marketplaces
Logistics
Providers
Asset Optimization
Value Chain Planning
E X E C U T I O N
Supply-side
Optimization
Production
Demand-side
Operating Company
Value Chain Planning
E X E C U T I O N
Supply-side
Optimization
Production
Optimization
Demand-side
Optimization
Purpose of Slide: (1) Explain that the opportunities for profit improvement will center on the components on this slide (2) Provide short overview of each element. (3) Show/explain timeline associated with each element.
Key Points:
There are huge potential opportunities for profit improvement in the various relationships and business processes across the value chain , as illustrated in the above graphical representation, which is reminiscent of the SCOR model. For example:
Suppliers and Customers: New Economy technologies are facilitating increased collaboration between “Operating Company” and its suppliers, its suppliers suppliers, its customers and its customers customers. This collaboration can reduce unplanned variability and hence reduces costs, such as inventory holding across the value chain.
The examples highlighted above, Net Marketplaces, Logistics Providers, E&Cs: New Economy technologies are again facilitating closer, tighter links with your key providers and partners, driving down transaction costs, removing slack from the value chain, and potentially driving closer collaboration with process and product development partners. In some cases these partners will even become intermediaries in companies interactions with their customers.
This web of relationships and the business process by which companies deliver value to the customers in called the "process industry value chain". AspenTech see the term value chain as a significant extension of the traditional term supply chain to cover the following areas:
Provide and public marketplaces as a means of interacting with customers and suppliers
The production operations
And the design and optimization of the physical assets that support the value chain.
Within the value chain, AspenTech see three major areas where significant value can be delivered:
Asset Optimization is a medium-long term (6 months-5 years) activity that allows customers to optimally lay out and build their Value Chain assets, e.g. plants, logistics capabilities, storage facilities, etc. and is concerned with questions such as:
Whether to divest, acquire, or form joint venture?
Where to locate manufacturing and logistics facilities?
How best to develop facilities to achieve lowest cost production?
Business Processes
Strategic planning
Collaborative engineering
Debottlenecking & process improvement
Value Chain Planning a near-medium term activity (1 week - 6 months) that optimally plans the execution of the value chain to determine where we produce, how much we produce and how we deliver. It concerns questions such as:
Where to manufacture for a particular order or campaign in order to maximize profitability and customer service
Where to locate inventory in order achieve the best trade off of customer service and working capital
How best to respond to events (e.g. manufacturing or logistics failures) in the value chain
Collaborative demand management
Enterprise supply & demand optimization
Inventory management
Finally, there is Value Chain Execution and management around three key elements of sourcing, making and delivering that are involved in satisfying your customers’ need for physical products. This is a "real-time" activity focused on time frames from 1 week to seconds. It is concerned with the optimal day to day execution of value chain activities and with the management of the real day to day events and operational realities that invariably effect the the actual real implementation of the plans. Here, by improving business processes you can improve the quality and timeliness of decision making and execution, resulting in improved margins, customer satisfaction etc. AspenTech divides this execution and management activity into three sub activities:
Supply-side Optimization allows you to optimize the acquisition of direct/raw materials to reduce both the average cost of raw materials and the cost to execute their execution. This element is concerned with questions such as:
Which is the most profitable feedstock to process, on a real-time basis, as opportunities occur?
What’s the best price?
What’s the best channel?
Feedstock/raw material selection
e-Procurement
In-bound logistics optimization
Production Optimization (traditionally referred to as Plantelligence™) optimizes the costs, quality and schedule of the manufacturing and provides real-time visibility into the status of the production assets (which enables better planning and management) and allows real-time execution of the plans and schedules created. It is concerned with questions such as:
What is optimum product mix?
How to run today ?
How to achieve optimal execution?
Production scheduling
Production management
Plant optimization
Advanced production control
Operator training
Demand-side Optimization optimizes key elements of customer interaction e.g.. Logistics and collaborative replenishment, commitments to orders (ATP/CTP) and automation of the customer/supplier interactions through private marketplaces. It is concerned with questions such as:
How to execute the best trade-off between customer satisfaction, costs and inventory?
How to capture a greater percentage of customer enquiries into orders
Is it profitable to take this order? And how to make it more profitable?
How best to get this delivered to the customer?
Logistics optimization & management
Collaborative replenishment
Order management & commitment
e-Sales
Account management
CUSTOMERS
SUPPLIERS
Asset Optimization

6. How Aspen Tech Increases Economic Profit
Increase Revenue
Increase Economic Profit
Reduce Costs
Improve Capital Efficiency
Presenter: You have the option to use either slides 8-11 or slides 12-15
Purpose of Slide: Explain that (1) Broadly, polymer manufacturers have three levers for improving profitability, and (2) AspenTech can provide solutions to dramatically improve results across all these levers:
Increase revenue
Reduce cost
Increase Capital Utilization
Value Chain Design
Value Chain Planning & Management
Production Optimization
Supply-side Optimization
Demand-side Optimization

7. Increase Revenue Increase Volume Increase Revenue
Improve Strategic Planning and Demand Management
Increase Volume
Improve Product Quality and Consistency
Innovation & Faster Time-To-Market
Increase Revenue
Increase Market Share
Improve Manufacturing Responsiveness
Industry Anecdote
Aspentech’s production optimization solution for a major US Gulf Coast polymers plant increased production by 3.5%, boosted average sales price by 2.5%, reduced variable cost by 3.0% and reduced feedstock cost by 0.5%. (Equistar Matagorda)
Aspentech formulated a supply chain solution for a multi unit polymers manufacturer. This customer reduced inventory by US$15 million and forecast error by 25%. It increased fill rate by 25% and achieve a 98% reduction in dead inventory. (Chevron Phillips)
Aspentech also helped developed a Design Value chain solution that enabled a forward-thinking polymers manufacturer to leapfrog existing technology. Once Aspen Tech captured the process fundamentals, the customer was able to build a pilot plant, achieving a 35% reduction in capital costs and realizing $25 million benefit. (NOVA Chemicals)
Increase Average Sales Price
Improve Customer Responsiveness
Increase Throughput and Reduce Downtime
Typical Economic Value-Add:
Increase Revenue by 3% - 5%
Asset Optimization
Value Chain Planning
Production Optimization
Supply-side Optimization
Demand-side Optimization

8. Reduce Costs Reduce Variable Cost Reduce Costs Reduce Fixed Cost
Reduce Raw Material Costs
Reduce Variable Cost
Reduce Distribution Costs
Reduce SG&A Costs
Reduce Costs
Reduce Fixed Cost
Reduce Inventory Carrying Cost
Industry Anecdote
Aspentech’s production optimization solution for a major US Gulf Coast polymers plant increased production by 3.5%, boosted average sales price by 2.5%, reduced variable cost by 3.0% and reduced feedstock cost by 0.5%. (Equistar Matagorda)
Aspentech formulated a supply chain solution for a multi unit polymers manufacturer. This customer reduced inventory by US$15 million and forecast error by 25%. It increased fill rate by 25% and achieve a 98% reduction in dead inventory. (Chevron Phillips)
Aspentech also helped developed a Design Value chain solution that enabled a forward-thinking polymers manufacturer to leapfrog existing technology. Once Aspen Tech captured the process fundamentals, the customer was able to build a pilot plant, achieving a 35% reduction in capital costs and realizing $25 million benefit. (NOVA Chemicals)
Reduce Capital Cost
Reduce Energy Cost
Reduce Capital Cost
Typical Economic Value-Add:
Reduce costs 5% - 30%
Asset Optimization
Value Chain Planning
Production Optimization
Supply-side Optimization
Demand-side Optimization

9. Improve Capital Efficiency
Rationalize Manufacturing
Optimize Fixed Asset Utilization
Optimize Inventory
Improve Capital Efficiency
Reduce Capital Cost
Industry Anecdote
Aspentech’s production optimization solution for a major US Gulf Coast polymers plant increased production by 3.5%, boosted average sales price by 2.5%, reduced variable cost by 3.0% and reduced feedstock cost by 0.5%. (Equistar Matagorda)
Aspentech formulated a supply chain solution for a multi unit polymers manufacturer. This customer reduced inventory by US$15 million and forecast error by 25%. It increased fill rate by 25% and achieve a 98% reduction in dead inventory. (Chevron Phillips)
Aspentech also helped developed a Design Value chain solution that enabled a forward-thinking polymers manufacturer to leapfrog existing technology. Once Aspen Tech captured the process fundamentals, the customer was able to build a pilot plant, achieving a 35% reduction in capital costs and realizing $25 million benefit. (NOVA Chemicals)
Reduce Cash Operating Cycle
Reduce Cycle Time
Typical Economic Value-Add:
Increase Capital Utilization
2%- 6%
Decrease capital expenditures 5%- 20%
Asset Optimization
Value Chain Planning
Production Optimization
Supply-side Optimization
Demand-side Optimization

10. The Value of Optimizing : Improved Profit Performance
AspenTech partners with chemical and polymer manufacturers to help better manage and optimize their value chains. This can increase ROCE by 1-4% :
Increase revenue by 3-5%
Reduce costs by 5-30%
Increase capital utilization and reduce capital expenditure by 5-20%
Purpose of slide:
Capture executive's attention through compelling statement of the (total) economic value AT can deliver for him / her.
Introduce AspenTech as providing significant hard dollar improvements to KPIs that are of deep concern to senior executives.
Some executive customers may question the validity of the ROCE benefit numbers of 1-4%. The way to explain is this: For commodity polymer producers, the ROCE increase will likely fall in the lower range, say 1-2%. For specialized, smaller, engineering polymer producers, the ROCE increase will likely fall in the higher range, say 2-4%.
Key Points:
Even in this challenging business environment, AspenTech delivers substantial economic value for polymers manufacturers.
AspenTech’s approach will deliver significant and distinctive value to create the right strategy, establish best practices, implement and embed those best practices in software and ensure rapid time to value.
Profit AdvantageTM delivers value in several key ways:
       First, AspenTech’s mission is to provide profit.
       Second, the point is to provide a competitive advantage. Within AspenTech’s various target verticals, this competitive advantage might involve “maximizing supplier relationships” or “achieving higher levels of customer satisfaction”, or “achieving higher P&E due to improved margins”, which are the basics for establishing world class operations, etc.
AspenTech delivers an e-business strategy that is fundamentally a back-to-basics strategy for providing profit. The e-business strategy is designed to integrate disparate technologies across the value chain and create superior KPI improvements.
Anecdotes
As indicated in slide number 2, polymer stocks have been taking a beating the last few years, hence to improve shareholder value, the CEO must increase earnings(profits). To improve profits, we must goes back to the fundamentals of economics: Increase revenue, reduce cost, and increase capital utilization.
Aspentech can help polymers producers increase these bottom lines by providing value added solutions and services.
Aspentech’s production optimization solution for a major US Gulf Coast polymers plant increased production by 3.5%, boosted average sales price by 2.5%, reduced variable cost by 3.0% and reduced feedstock cost by 0.5%. (Equistar Matagorda)
Aspentech formulated a supply chain solution for a multi unit polymers manufacturer. This customer reduced inventory by US$15 million and forecast error by 25%. It increased fill rate by 25% and achieve a 98% reduction in dead inventory. (Chevron Phillips)
Aspentech also helped developed a Design Value chain solution that enabled a forward-thinking polymers manufacturer to leapfrog existing technology. Once Aspen Tech captured the process fundamentals, the customer was able to build a pilot plant, achieving a 35% reduction in capital costs and realizing $25 million benefit. (NOVA Chemicals)

11. Implementation Partners
AspenTech partners with major consulting and systems integration specialists to develop and deliver profit improvement through:
Business process improvement
Change management
Applications and systems integration
IT consulting
Enterprise consulting and solutions implementation
IT management and application hosting
Post-implementation benefit analysis to ensure results….
AspenTech delivers Enterprise Consulting and Solutions Implementation services, including analysis and implementation, for each solution area, i.e.:
Supply-side, Demand-side, and Production Optimization
Value Chain Planning, and
Asset Optimization
Our Implementation Partners provide:
Business process improvement
Change management
Applications and systems integration
IT consulting
IT management and application hosting
Post-implementation benefit analysis