BASF Nutrition & Health operates global value chains with high service standards, requiring a close coordination between supply and distribution points.
BASF worked with IBM on a PoC to demonstrate that AI and machine learning could support supply chains with smart visualization of relevant information to support supply decisions and develop replenishment advice.
Increases visibilityon operation status, enabling better supply chain replenishment decisions
Supports comprehensive planningand more agile responses in a volatile market
Greater monitoring and optimizationof a significantly larger portfolio thanks to cognitive insights
Business challenge story
Striving for supply chain excellence
BASF’s supply chain is becoming more effective and efficient thanks to digital technologies. The company is achieving these results by creating an integrated supply chain with customers, suppliers and partners, increasing the transparency of the entire process.
Especially in multi-echelon, global supply chains, digitalization provides step change opportunities to ensure timely and transparent supply to customers. High delivery performance requires close, end-to-end coordination across suppliers, manufacturing plants, logistic partners and distribution centers, providing high availability to customers while managing the risk of dysfunctional inventory.
These challenges, along with increasing demand dynamics across continents and time zones, motivates organizations such as BASF’s Nutrition & Health division to pursue permanent improvements in planning and executions to maintain competitive agility within a distributed supply chain.
Applying real-world experience
After evaluating its options, BASF Nutrition & Health identified AI as a potential step change solution to drive innovation in replenishment planning.
The company’s planners had to comb through a number of systems and reports to get the facts and figures they needed to make informed replenishment decisions, but cognitive technologies would allow them to integrate, analyze and visualize data from multiple sources to make the decision-making process quicker, easier and smarter.
Impressed by IBM’s achievements with cognitive intelligence based on Watson™ solutions, the BASF Nutrition & Health Supply Chain team engaged IBM Services™ to help build a PoC. The goal was to evaluate how cognitive technology based on AI and machine learning could be used to build a more powerful Replenishment Advisor tool. The new Replenishment Advisor tool will use the latest operational data, such as forecast and actual sales, sales opportunities, and shipping schedules, to provide planners with guidance on replenishment timing and quantity. The tool will rely on machine learning and feedback from experienced planners to offer increasingly intelligent recommendations for highly efficient inventory decisions.
The Replenishment Advisor tool could be built quickly using IBM Cloud™ and IBM Watson AI services, a robust integration platform that allows expert users to connect structured and unstructured data from disparate systems to deliver a unified overview of supply chain operations.
Today, many of the AI-related capabilities have been developed in a standard supply chain offering called the IBM Watson Supply Chain Insights platform. The solution applies AI, trained in supply chain through machine learning, to provide comprehensive, end-to-end visibility and insights. With Watson Supply Chain Insights software, organizations can now access the unstructured data relevant to their operations; predict, assess and mitigate disruptions and risks; and optimize the supply chain to deliver greater value to the business.
When presenting their vision of a more responsive supply chain, the IBM team highlighted how they had recently overhauled their own global supply chain operations. The results IBM achieved internally encouraged BASF Nutrition & Health to conduct the PoC together.
Matthias Graefe, Director of Supply Chain Transformation at IBM, notes: “IBM has been using AI and Watson to support supply chain operations for over a decade. This makes us uniquely placed to offer advice in that area and support others in creating innovative solutions that drive digital transformation. Furthermore, IBM was named 2018 Manufacturer of the Year in recognition of the supply chain team’s use of new technologies, including AI and machine learning, to optimize operations.”
As a first step, IBM organized an IBM Enterprise Design Thinking™ workshop with BASF Nutrition & Health Supply Chain teams, and they decided on the replenishment planning process for exploring the new opportunities of AI. Supply chain activity represents a promising, scalable pilot to investigate the feasibility of cognitive technology for improving the accuracy and overall performance of handling dynamic market conditions across continents and time zones while minimizing disruptions.
Second, data scientists designed a model based on transactional order data from the ERP system, information about future orders in the pipeline and other sources, including sales pattern reports, volume strategy, inventory levels and average shipping times, to assess the stock levels of a small subset of products. Using integrated and open-source machine learning tools, the team developed a customized solution based on so-called artificial neural networks to predict the future development of replenishment requirements.
Dr. Bernd Lohe, Director Supply Chain Operational Excellence & Digitization at BASF Nutrition & Health, states: “IBM Cloud and Watson AI services gave us access to a wide range of machine learning models with IBM experience built in, right out of the box. This meant that we could start analyzing our data and training the Replenishment Advisor immediately. The solution also includes data visualizations. During the training phase, this helped our planners to understand system recommendations and to execute effective training loops for machine learning. An integrated chatbot functionality is built into the Replenishment Advisor, allowing staff to interact with the solution using natural language. Based on our successful PoC, we are very satisfied with the IBM Watson portfolio, both in terms of the powerful cognitive capabilities and ease of use.”
Making the most of cognitive technologies
After completing just 10 training cycles, the Replenishment Advisor accurately predicted when product stock was running low, providing early warnings and advising the optimal time to replenish supply and minimize disruptions. This signaled planners to take timely action, helping to prevent under- and over-stocking.
With the success of the PoC, BASF Nutrition & Health could demonstrate the potential of cognitive supply chain management to the entire group.
The Replenishment Advisor has proven to increase visibility into inventory levels, which supports smarter replenishment planning, more efficient demand fulfilment and, ultimately, better service to customers. This will help BASF Nutrition & Health to adapt to shifts in demand faster and more effectively, so that products are always in the right place at the right time. The Replenishment Advisor has also proven to reduce manual workloads, allowing planners to redirect their attention from data collection to sophisticated decision-making and coordination activities.
The conversational component provided by a chatbot is especially useful for stakeholders less familiar with the planning systems. Being able to ask questions and be guided to the right answers is a great option for many users who might be overwhelmed by a complex user interface with many detailed options. In combination with the powerful graphical visualization of the recommendations, the Replenishment Advisor can communicate complicated analyses in a simple, straightforward way, making the innovative insights intuitively accessible to cross functional teams.
Based on these positive results, BASF Nutrition & Health estimates that with the Replenishment Advisor, planners could significantly extend a more rigorous monitoring and optimization to its full product portfolio, increasing availability and reducing waste for lower priority products. Together with IBM, the team is now evaluating ways to bring the PoC into production.
Dr. Lohe concludes: “The Replenishment Advisor PoC demonstrated how IBM Watson, AI and machine learning can help to deliver greater visibility across a global supply chain. Equally important, it showed the willingness of our teams to engage with digital technologies. By optimizing inventory management further with the latest solutions from IBM, we can further increase the service levels to our customers. With help from IBM, we have made a big step toward understanding the high potential – beyond replenishment planning – in digitizing and innovating our supply chain processes. This is just the start of our transformation journey, and we are excited to see what the future will bring.”
BASF is one of the world’s largest chemicals groups, helping customers in almost every industry to overcome diverse social and environmental challenges with its broad portfolio of chemicals, plastics, performance products and crop protection products. Headquartered in Ludwigshafen, Germany, with 390 production sites in 90 countries, BASF employs more than 122,000 people and achieves annual sales revenues of about EUR 63 billion in 2018. BASF Nutrition & Health provides a comprehensive product and service portfolio for the human and animal nutrition, pharmaceutical, ethanol, and flavor and fragrance industries. With innovative solutions and modern technologies, the division strives to help its customers improve their business efficiency and the sustainability of their products.