Specialty chemical manufacturer Hexion uses Celonis to proactively tackle supply chain disruptions, free up millions in working capital, and give valuable time back to their teams.
For more than 100 years, Hexion has been pushing the boundaries of chemistry to accomplish their mission of making the world “better, safer, and cleaner.” Manufacturing specialty chemicals and performance materials for more than 1,200 companies across 60 countries, Hexion’s products can be found in everything from cars and trucks to wind turbines, electronics, aircraft, and buildings. “You can think of Hexion as the glue that holds everything together,” says Javier Invernizzi, Hexion’s VP of Global Supply Chain.
But with more than 30 manufacturing and research and development facilities around the world, the Ohio-based company relies on a large, complex supply chain that, like so many others, has recently come under extreme pressure.
“Both 2020 and 2021 were incredibly challenging,” notes Invernizzi. “We have had the impact of COVID-19, ongoing global logistics issues, storms, material shortages, enforced measures, and reliability issues. This has caused a lot of disruption across the entire supply chain — not just for us, but for everyone.”
Invernizzi and his team were determined to not only respond quickly to supply chain disruptions but to get ahead of them. The key to this has been getting comprehensive, real-time transparency into their operations.
“Our system and process landscape have grown so much over the past decades, that it was hard to identify our biggest pain points in a data-driven manner and see what ripple effect undesirable process steps had further upstream or downstream,” explains David Baldwin, Global Supply Chain Process Leader at Hexion. As a result, their supply chain teams often “got stuck in firefighting.”
For example, while their Order Management team could see the frequency of order changes in their systems, they could not understand which customers were the main drivers behind them, let alone quantify the impact these changes had on adjacent processes like Production Planning or Procurement. “It was all just guesses,” says Baldwin. “So now we are working to take advantage of the data that we have in order to predict what’s going to happen and become more proactive.”
Celonis delivered the solution they needed. Today, Hexion is maximizing execution across five of their core processes with the Execution Management System (EMS): Order-to-Cash, Procure-to-Pay, Accounts Payable, Accounts Receivable, and Production Planning.
Hexion’s EMS journey started in Order-to-Cash, one of their most complex processes. Previously, it would take a room full of experts around a week to come up with five to ten key process flows, says Baldwin. “With Celonis, we found 10,000 different variants in our Order-to-Cash process. Who would have known that a single order could potentially go through so many different steps?”
To tackle this complexity, Hexion targeted the low-hanging fruit first. For example, the team noticed that incorrect routes in their master data were driving a very high number of route changes — causing significantly longer delivery times. “By making simple changes in our master data, we have been able to reduce route changes by 45%,” says Baldwin.
Leveraging Celonis’ intelligent automation capabilities, also known as Action Flows, Hexion’s teams also get notified about any blocks on orders that are at risk of a shipping delay. Thanks to these alerts, the company now investigates these blocks proactively. By doing so, Hexion reduced the time from credit hold release to shipment from approximately 11 to five days, ultimately driving faster deliveries and a better customer experience.
Celonis’ ability to connect different processes and dissimilar IT systems is paying dividends within Hexion’s Production Planning.
“It’s been really eye-opening to understand how the high variability in our Order-to-Cash process is impacting our Production Planning,” says Baldwin. “We always knew that last-minute order changes were costly, but we could never quantify the effect on our adjacent processes.”
With Celonis, Hexion can now follow an incoming order all the way through to Production Planning to precisely calculate the financial impact of last-minute order changes. “What’s more, Celonis helps us act on these insights. Now, our schedulers get alerts for last-minute order changes and can take immediate action to avoid delays.”
Celonis is also helping Hexion to speed up the company’s cash conversion cycle and boost liquidity. The biggest cash flow driver has been the fact that the team uses Action Flows to monitor their supplier financing and auctioning processes more efficiently. When customers have significant outstanding receivables, Hexion’s Collections team works directly through a bank or institutional investors to get paid faster, in exchange for a reduced price on the outstanding receivables. Naturally, Hexions wants to monitor their customer’s payment behavior as closely as possible to avoid costly supplier financing.
However, without this visibility, it was difficult for Hexion to know which customers were at risk of not paying on time.The result: higher financing costs that could be avoided through a more proactive collections approach.
“With Celonis, we can now predict more accurately whether our customers are likely to pay us on time and, if not, receive early alerts to cut down payment delays,” explains Caroline Legault, Hexion’s Global Credit Director. Rather than reaching out to customers after an invoice’s due date has passed, her team now has a daily overview of all invoices due within the next few days and can proactively drive collections. “There is no other tool that allows us to do this,” says Legault.
“Our insights with Celonis have translated into significant savings,” adds Invernizzi. “For example, we have seen an improvement of up to 50% in days to collect within three months, equating to several million dollars in working capital reduction in our supplier financing receivables.”
With Celonis, the Accounts Receivable team gained visibility into unearned cash discounts, a problem they weren’t even aware of. By using those insights and working with customers to improve compliance to the agreed upon payment terms, the team has reduced payouts for unearned discounts by a stunning 50% within six months.
Celonis also helped Legault’s team smooth out the transition to an outsourced collections provider. When the outsourced team first started, it was simply writing off all unearned cash discounts, rather than putting them back on the books — which meant the company would have never been able to recoup them. “We wouldn’t have seen that without Celonis because it was very difficult to extract this data from our ERP. So we were able to quickly train the collections team in the correct way of handling discounts,” Legault adds.
Armed with continuous real-time intelligence about how their processes influence each other, Invernizzi and his team have become a driving force within Hexion to reduce disruption and ensure smoother operations. “The game-changing aspect of Celonis is how it ties dissimilar systems, such Order-to-Cash, Transportation, Planning, and Scheduling together. For us, that’s extraordinary because we can really steer our supply chain operations end-to-end, at every step of the way.”
In the near future, Invernizzi and his team plan to use Celonis for their biggest transformation project yet: measuring the cost of process changes through Hexion’s entire value chain. “We want to measure the cost of disruptive events in our network, whether it translates to our people’s time, resources, or materials,” says Invernizzi. “To do that, Celonis will sit on top of all of our processes to ensure they’re executed correctly.” That includes connecting more processes, such as Transportation Management and Quality Assurance, and eventually, Hexion’s entire process landscape to Celonis.
When it comes to driving value quickly, Celonis is “a great solution”, says Invernizzi. “Celonis not only lets us experiment with all sorts of processes, but it gives our teams the time back to focus on the bigger picture: What is the next big idea that drives incremental value for the company?”