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The benefits of SIMON
Initially, Shell used SIMON to manage their down‑
stream supply chain processes which involve distribu‑
tion of chemical products for use by their customers.
The system enabled Shell to assume the inventory
management role on behalf of their customers. Once
it was successful in this role it was then applied to the
upstream processes of Shell acquiring raw materials
from suppliers.
For customers, the benefits of the SIMON system are
that responsibility for inventory management is trans‑
ferred from customer to supplier. A Shell Chemicals
customer doesn’t need to place an order. Instead,
SIMON manages the amount of inventory in stock at the
customers’ manufacturing locations.
Before the introduction of SIMON, there were a lot
of manual, time‑ consuming transactions, often initi‑
ated by the customer, that required a lot of phone calls
and faxes. There was also the danger that Shell’s cus‑
tomers might run out of an essential chemical, so that
plant time and then revenues would be lost. To avoid
this, companies tend to maintain ‘safety stock’ levels.
Re‑ordering then occurs when inventory gets too close
to these safety stock levels. The problem was that a
typical re‑supply order can take at least two weeks from
the time the order is placed. This delay occurred since
chemicals must be weighed at the plant, loaded on to
railcars and then sent to the customer, who then weighs
the materials at the other end before moving them into
inventory. Miscalculations and errors can also occur.
For SIMON to enable a supplier to manage inventory,
the customer needed to supply three types of informa‑
tion: the levels of current inventory; forecast demand for
inventory; and the shipment details such as location,
timing and quantities.
In addition to analysing inventory and consumption,
SIMON also generates demand forecasts, calculates
stock, tracks shipment status and generates a re‑supply
plan.
We can summarise the benefits of SIMON by consid‑
ering the supply chain and logistics information about
which it regularly extracts information. This includes:
●
The amount of product consumed in the past 24
hours
●
The amount of new product that arrived and was
unloaded in the same period
●
Current and anticipated production schedules, and
●
Known changes to those schedules.
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Part 2 Strategy and applications
Web‑based communications are used to synchro‑
nise information at different locations. So this informa‑
tion is replicated back to a customer service centre in
Houston, TX, where Shell then automatically reconcile
it with their SAP Material Requirement Planning (MRP)
system. Shell Chemical customer service representa‑
tives then automatically present customers with a
resupply plan. If the plan indicates that stocking levels
at the customer site are low, the customer service rep‑
resentative completes an electronic purchase order and
initiates a new shipment to the customer.
From a customer perspective, the benefits of the
enhanced supply chain management system include:
●
Elimination of expensive excess inventory, which
means an increase in working capital
●
Facilitation of timely, low‑cost ‘re‑synching’ of sup‑
ply chain
●
Ensures product is on site whenever needed
●
Ensures quicker response times to changing
conditions
●
Reduces transaction costs (for example, invoices
and data entry)
●
Eliminates erratic order patterns
●
Reduces order processing overhead
●
Streamlines financial statements and reconciliation
processes
The customer is able to access the status of orders
and shipments; estimated dates of arrival, shipment
weights, receipt and unloading dates; and current
stock and consumption levels. SIMON offers custom‑
ers a ‘Reconciliation’ tab, which compares metered
and calculated consumption, and a ‘Site level agree‑
ments’ tab, which shows the mutually agreed‑upon
plan for the management of their inventory. Once a
month (not once per railcar load), an invoice is gener‑
ated. The invoice is based on consumption figures, not
shipments.
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