Humanity relies on cultivated lands to feed itself and thrive. Fertilizers are responsible for 30%-50% of food production and phosphate is an essential and non-substitutable component of fertilizers. OCP, based in Northern Africa, is the world’s largest phosphate mining and processing company with a worldwide reach and a diversified product portfolio, and therefore plays a critical role in global food security. Its supply chain is large and complex, and running it involves many key decisions along the value chain.
OCP extracts about 40 million tons of rock per year from more than eight mining sites, with each site delivering up to 10 different grades of raw ore. These different grades may undergo physical processing and blending before either being exported or further processed into nine grades of phosphoric acid or over 43 grades of fertilizers in more than 42 plants in multiple geographies. Managing such a complex supply chain is challenging due to the large number of decision variables pertaining to extraction planning, rock beneficiation, blending, and chemical processing allocation. All of these operational decisions need to be adjusted to the sales opportunities that arise globally.
Over the last decade, OCP in collaboration with Dynamic Ideas, an analytics consulting company based in Massachusetts, developed a mixed-integer, multi-period optimization model to holistically optimize the entire production, sales, and supply chain of OCP: from the mines, to physical treatments, to chemical facilities, to inventory facilities and the port for global distribution.
This model brings together all major operational decisions of the company into the same decision platform, enabling all managers to collaborate in order to maximize the overall profit. It currently runs at different time horizons, ad hoc, monthly, quarterly, annually and multi-annually depending on the nature of decisions to be made.
The development of the model has been used to transform the processes of the company toward more cooperation, transparency, and alignment on common objectives. It contributed significantly to breaking the silos within the organization, educating managers on the interdependency of their actions, and materially affected the culture of the company to promote innovation collaboration and entrepreneurship. In turn, this led to the development of a new university (UMP6) in Morocco in 2017, in which analytics play a central role, and a very successful executive education class at MIT.
The optimization model is responsible for an EBITDA improvement year-on-year in excess of 20%, amounting to more than $2.3 billion for the period 2015-2020. (EBITDA stands for earnings before interest, taxes, depreciation, and amortization and is a metric used to evaluate a company’s operating performance. It can be seen as a proxy for cash flow from the entire company’s operations.) The incremental profitability has fueled OCP’s financing capacity.
OCP is consequently delivering a $20 billion in capital expenditures (CAPEX) program. The first phase of the CAPEX program led to doubling OCP’s mining capacity and tripling fertilizer production capacity, resulting in OCP bringing an additional 8 million tons of fertilizers production capacity in the last decade. The model further enabled OCP to produce customized fertilizers that helped achieve materially improved agricultural yields, hence food production, especially in Africa. The increased production of fertilizers and availability of customized fertilizers have significantly contributed toward global food security.