Decentralized modular production to increase supply chain efficiency in chemical markets

Abstract In the chemical industry, shortened product life cycles and greater differentiation of customer demand increase challenges to efficiently meet specific customer requirements. Thus, production systems with high flexibility are required. One innovative production concept that meets this requirement is decentralized, small-scale modular production which offers significantly more flexibility in the tactical configuration of the production network. Corresponding production plants are assembled from standardized apparatus modules in transportation containers, hereby enabling a fast relocation of modular plants and adjustments of the production process. Therefore, modular plants can be operated close to customers or suppliers, which supports local sourcing strategies and a reduction in delivery costs. In this paper, we analyze the advantages of these modular production systems for a case from the specialty chemicals industry. Respective advantages arise especially from a technically flexible design of parallel process lines, autonomous production and local sourcing. In order to evaluate economic efficiency and network configuration of modular production networks, an efficient mathematical formulation for the optimization is proposed. This formulation includes a new way to model relocations of modules. We apply this model to a case based on real data from the chemical industry. As a result of this application we come to three technical and managerial conclusions. Firstly, technical designs with parallel process lines improve flexibility and efficiency compared to mono processes. Secondly, autonomous production increases economic efficiency in contrast to staffed production and finally, local sourcing offers significant cost reduction potential compared to central sourcing.