SECTION A [40 MARKS]

Read the case study below and answer ALL the questions that follow.

CAPACITY DISRUPTION AT BASF

On October 17, 2016, because of an incorrect maintenance operation on a pipeline at BASF facility in Ludwigshafen (Germany), there was an explosion and subsequent fires at North Harbor, a terminal for the supply of raw materials such as naphtha, methanol and compressed liquefied gases. More than 2.6 million tons of goods are handled there each year and an average of seven ships a day moor at its docks. Two steam crackers, the starting point for producing basic chemicals, needed to be stopped because they could no longer be supplied, and 22 were only partially working. The two steam crackers could have been restarted 2 days later, but only in May 2017 was the concept for reconstruction released whereby the reconstruction should be completed by September 2017. Restricted production output, daily revenue decreases of 1015% as compared to the previous year during the disruption period, impact on the basic chemicals division (about 21% of sales), delivery delays, limited access to key raw materials, exhausted product inventories, and a forecasted impact on 6% of BASFs annual earnings were some of the consequences of this incident (Dolgui et al. 2018). Logistics was temporarily shifted from ships and pipelines to trucks and trains. BASF was in close contact with its customers to keep them informed about the current availability of products to minimize the impact on customer deliveries. Because of BASF integrated Verbundsystem (networking system), comprised of various plants and delivery systems for feedstocks, the incident had an impact along the global supply chain (SC). This high and long-term impact is the so-called ripple effect (Ivanov et al.2014a, b). BASF built a resilient SC, which is why the economic consequences of the incident were considerably smaller than expected. BASF took process safety and risk prevention measures that included globally valid guidelines and requirements for buildings etc. and practical security trainings for employees and support staff. Along with process safety and risk prevention measures, BASF has global emergency response management. This management consists of the integration of worldwide group companies, joint ventures, partners, suppliers and customers. Emergency phones and an integrated network of control centres (e.g. internal/external fire departments and rescue service) also enable this global emergency response management to work even more closely together. BASF was prepared for the incident in October 2016, but there are still long-term impacts being experienced.

Source: Ivanov, D. Tsipoulanidis, A and Schnberger, J. (2019) Global Supply Chain and Operations Management: A decision-oriented introduction into the creation of value, Springer Nature, Cham, 2nd Ed.,

QUESTION 1 [20 MARKS]

1.1 As extracted from the case study, BASF built a resilient supply chain, which is why the economic consequences of the incident were considerably smaller than expected. Considering this statement, critically discuss what resilient supply chains entail in the context of BASF and their significance in contributing to its bottom-line. Your response should make use of relevant examples.

1.2 With reference to the case study and using relevant literature, critically discuss the ripple effects of the explosion and subsequent fires at the North Harbor terminal from a supply chain context. Your response should discuss the impacts of these effects for BASF and its stakeholders.