Bayer AG’s most well-known brand may be Aspirin, one of the greatest inventions in healthcare and considered one of the most endurably successful commercial products of all time. But Bayer is also an innovator in a range of other areas.
In business for 160 years and considered one of the world’s leading agriculture, healthcare and nutrition companies, it recently embarked on a mission to reinvent itself, aspiring to ensure health for all and hunger for none. The process began with an overhaul of its operating model to deliver faster innovation and a better experience for the farmers, patients, and consumers who depend on Bayer’s products.
From reactive to proactive
“We are reimagining every role and every process to keep us focused on our mission. That includes accelerating innovation and enhancing financial performance,” said Rogerio Andrade, senior vice president of supply chain at Bayer. “To that end, we’ve revised our supply chain strategy to navigate cross-continental logistics disruptions and gain more visibility.”
Andrade was speaking at the recent LogiChem EU 2024 event in Rotterdam where Europe’s top chemical companies gathered at their annual logistics conference. The main theme was fostering end-to-end supply chain connectivity while decarbonizing operations.
Andrade described how Bayer, like many others in the business, is still facing the disruptive impact on supply chains that was set in motion by the COVID-19 pandemic.
Volatile demand leading to higher inventories, along with backed up containers, labor shortages, and geopolitical upheavals are among the reasons supply is not always able to meet demand or optimize working capital. One of the greatest wake-up calls came when a 220,000-ton container ship blocked the Suez Canal for six days, preventing 400 ships carrying billions of dollars’ worth of cargo from crossing the waterway.
“We’d been operating in an international logistics network that relied too heavily on optimal conditions. We were dealing with the bullwhip effect of demand and found ourselves relying heavily on air freight as mitigation measure,” he said. “Now, we are building a resilient supply chain using a multidimensional approach.”
Andrade’s team is responsible for the Crop Science supply chain, making sure active ingredients, which are the raw materials for pesticides and other agricultural products, are transported according to strict guidelines for crop protection. Delivering these products to customers in a timely manner requires robust planning and superior operations.
Andrade and his team set about creating resilience with a multi-step program to measure, reduce, optimize, and innovate along the entire value chain. The team developed a Smart Data Center consisting of end-to-end digital operational platforms to optimize and operate its supply chain with a customer focused, data-driven mindset.
Bayer’s new Smart Data Center, which consolidates and aggregates supply chain data from systems such as SAP Business Network, planning and transportation management applications, and many other sources, is enabling a quantum leap in its logistical operations. Before it was implemented, decision-making was siloed and fragmented. It required extensive meetings and coordination efforts and was characterized by reactive problem-solving.
Now, the company has standardized, cross-functional supply chain frameworks that enable data-based decision-making. The high quality of data and the use of exception alerts help staff move beyond firefighting to proactively allocate existing supply to customers instead of scrambling to find product and shipping at exorbitant rates to meet last-minute demands.
Reaping the benefits
An opportunity to test the strategy came when recent attacks on vessels in the Red Sea area reduced traffic through the Suez Canal, through which about 15% of global maritime trade volume normally passes.
“By enabling our people to leverage more smart data than before we were able to avoid a dip in sales, and we avoided increases in inventory and freight costs,” said Andrade.
Freight costs play a key role in reducing ecological footprint, which is at the core of Bayer’s ambitious decarbonization strategy. The company’s reduction targets for its Scope 1 and 2 emissions and those of all entities along its entire value chain for Scope 3 have been validated by the Science Based Targets initiative.
Thanks to the increased transparency and proactive approach to mitigating problems resulting from the Smart Data Center, the team has numerous opportunities to optimize its operations.
Data collected in the Smart Data Center helps logistics teams better maximize truck loads and minimize the number of trips, which in turn helps reduce costs and emissions.
The team also works with its regional partners to optimize the freight transportation mix. For example, some regions like Europe use a combination of rail and truck transport, while others, such as the Americas, rely more heavily on trucks. In this case, the team is experimenting with e-trucks for short distances and also consolidating warehouses to reduce the number of trips.
The increasing burden on ecosystems is one of the biggest challenges facing humanity. With its strategic end-to-end approach to supply chain optimization, Bayer is not only reducing its own ecological footprint but helping mitigate the ecological footprint of the agricultural industry.
