Baling Petrochemical: Optimizing the Logistics

Baling Petrochemical Company Ltd. (Baling Petrochemical) is
located in Yueyang of Hunan province, close to the Dongting Lake.
It is an important production base of oil products, chemical
products, chemical fibers and chemical fertilizers in Central
South China. Major products of the company include cyclohexanone,
SBS (styrene-butadiene-styrene block copolymer), epoxy resin,
urea and caprolactam. Since 2004 Baling Petrochemical has taken
the sustained optimization of logistics as the focus and the plan
of "generating annually a revenue of RMB100 million from the
optimization of logistics" has been over-fulfilled.

Highlight potential tapping and revenue increase
Baling Petrochemical started to pay attention to the
optimization of logistics in 2003. In January that year the
general manager of the company pointed out that the company
should conduct research and utilization of marketing strategies,
establish an efficient marketing system and mechanism and shift
the focus from production to marketing. In August of the same
year he reaffirmed that the optimization of crude oil handling
and the expansion of product direct sales should be taken as the
focus to achieve the maximum revenue of logistics.
   At the beginning of 2004, Baling Petrochemical proposed the
overall goal of "strengthening potential tapping and revenue
increase in logistics and creating a revenue of RMB100 million".
The revenue from the optimization of logistics reached more than
RMB120 million in the whole year. In 2005 the company made
greater efforts in the optimization of logistics and the revenue
reached RMB180 million.

Seize key links
Since 2004 the crude oil price in the international market has
increased continuously. There is an irrational price
relationship between crude oil and oil products in Chinese
market. The price of raw materials and fuel oils keeps rising.
But Baling Petrochemical has managed to seize key links and hold
the initiative in the sustained optimization of logistics.
   Optimize crude oil handling: Baling Petrochemical has
summarized previous experiences and lessons in crude oil
handling, conducted round-clock monitoring on the international
crude oil market, made scientific selection of crude oil types
and avoided risks in oil price fluctuations. The company has
optimized transportation, and strengthened supervision on
receiving stations and transit links.
   Optimize material purchase and supply: Baling Petrochemical
has improved the information collection and processing system,
strengthened market analysis to chemical raw materials and used
strategies such as internal/external trade combination, timely
price readjustment and alliance and joint action to hold the
initiative in purchase and change the mode of raw material supply
being restricted by resources and price. The company has adhered
to the principle of conducting mutual supply within Sinopec
Group and relying on domestic resources with imported resources
as supplement to optimize the purchase of chemical raw materials.
The company has established the coal purchase risk pre-warning
system, strengthened inspection on coal quality, opened new
purchase channels and reduced the comprehensive cost of coal
purchase. The company has improved the pricing mechanism for raw
materials, fuels and internal materials, optimized appraisal
and settlement methods, implemented the market-oriented
mechanism for the outside purchase and the internal supply of
raw materials, maintained rational inventory according to
market changes.
   Optimize product marketing: Baling Petrochemical has used
marketing strategies, marketing tactics, marketing channels and
human resources, made production and operation decisions
reflecting market changes, vigorously expanded domestic and
overseas markets, actively coped with challenges from products
imported from abroad and products from private enterprises and
increased the rate of product direct sale. The company has
activated the marketing mechanism, strengthened the market
development of new products and products with high added value.

Combine targeted management and detailed management
In the optimization of logistics, Baling Petrochemical has
introduced and disseminated targeted management, detailed
management and other modern management methods and therefore
ensured sustained revenue increase from the optimization of
logistics.
   At the beginning of 2003 the company proposed the overall
implementation of targeted management. All economic and
technical indexes take the domestic advanced level as the target.
In case there is no standard for the domestic advanced level,
the historical best level in the company is taken as the target.
Every aspect of enterprise management is included in targeted
management. The company has made quantification and
segmentation according to defined targets, strengthened process
control, conducted linkage to economic responsibility and
strict appraisal and taken the attainment of logistics
optimization and revenue increase targets as the main item of
work supervision.
   In the optimization of logistics, Baling Petrochemical has
intensified detailed management and enforced implementation to
gain higher revenue. Since 2006 the emphasis on work style has
been fully embodied in the optimization of logistics. The
company effectively reduced the cost of storage and
transportation in the first half of 2006 through integrating
internal storage and transportation resources, expanding river
transportation channels and floating truck transportation
tenders. The company has reduced the insurance premium by nearly
50% through floating transportation/insurance package tenders.
The en-route loss of crude oil is effectively controlled and the
loss of chemical raw materials, oil products and LPG in storage
and transportation is controlled within 0.35%.
    Today, Baling Petrochemical is making constant innovations,
implementing targeted management and detailed management and
conducting logistics optimization and potential tapping to gain
maximum revenue and make new achievements in economic
performance.