– Chemicals Industry’s Supply Chain

Chemical industry supply chain

This article explains the chemical industry supply chain and discusses key issues such as the importance of supply chain management and why the chemical industry needs to focus on supply chain management . Understand the key factors influencing the chemical industry supply chain and strategies to overcome current challenges.

What is a supply chain?

According to the US Council of Logistics Management, the definition of supply chain is: “Supply chain management encompasses the planning and management of all activities involved in sourcing and procurement, conversion and all logistics management activities Importantly, this also includes coordination and collaboration with channel partners, which may be suppliers, intermediaries, third-party service providers and customers. supply chain integrates the management of supply and demand within and between companies.

How important is supply chain management to the chemical industry?

Comprised of several smaller industries including bulk, specialty and polymers, the chemicals sector spans hundreds of segments and as a result a wide variety of feedstocks are required to produce industrial chemicals that supply other industries and customers. Supply chain and logistics are critical to the success of chemical companies, as they represent a significant portion of costs and are critical to service level and bottom line. Supply chain costs represent an average of 8-10% of chemical companies’ turnover, reflecting the low value per tonne of chemicals and the high costs of moving them and relative storage, given of their cumbersome and dangerous nature.

Why should chemical industries focus on the supply chain?

The chemical industry is also unique in that it supplies virtually every other sector of the economy with essential materials. The competitiveness of all these other sectors depends in part on an efficient supply of chemicals. It is for this reason that the chemical industry has been described as the “anchor point” of a modern economy. Faced with challenges such as global and global customers, complex operations and rising costs, an increasing number of chemical companies are focusing on the supply chain to balance costs and service levels and foster flexibility and sustainability.

Importance of logistics in the chemical supply chain:

Logistics is a key aspect of the chemical industry as production and consumption sites are mostly separated. Efficient, competitive and sustainable logistics is therefore of great importance for its future development. For example, it is common for explosive, toxic and hazardous materials to be transported throughout the supply chain. Great care should be taken to ensure safety and security during transport. The transport of chemicals must be carefully planned and controlled at every stage, from the production facility to the end user. Companies should consider the type of containers used to transport chemicals and whether they will travel by truck, train or ship; the organizations that will have access to the materials during shipment; and how they can get real-time information on the location and condition of materials, to minimize risk. Logistics management for the chemical industry requires continuous improvement in operational safety and security. Supply chain security and risk management will be a key area of ​​logistics to prevent disruptions from factors such as major transportation accidents, thefts, labor issues and threats. terrorists.

Continuous improvement of safety and security standards will remain a high priority for chemical companies. This will require close cooperation with logistics service providers and joint improvement programs. Rigorous selection and continuous monitoring of the performance of logistics service providers will continue to be necessary.

Impact of regulations on the supply chain:

Chemical companies are required to follow strict regulations and limit the risk of deterioration, accidents or spills. Safety measures must be taken to ensure that dangerous chemicals do not fall into the wrong hands. The general public and politicians are increasingly emphasizing emissions reduction, safety and security, resulting in increased regulation, focused on reducing emissions and improving safety and security standards. of security. Competitive pressure to reduce costs and environmental pressure to manage resources more sustainably are increasing the importance of the supply chain. Finding the optimal balance between cost, responsiveness and sustainability is the key to advanced logistics solutions.

Impacts of globalization on chemical industry logistics:

Globalization has led to increased complexity in the chemical industry supply chain. There has been a significant increase in imports from Middle Eastern countries and has resulted in increased supply chain complexity for chemical producers in the areas of logistics management, planning and coordination . This situation is exacerbated by the focus on working capital reduction, which leads to lower inventory levels and ultimately requires greater supply chain flexibility. The shift in production has led to a shift in the global trade balance and has an impact on lengthening the supply chain from suppliers to producers to customers. This leads to a change in logistics flows and longer lead times for incoming materials.

Supply chain assets:

Chemical companies manage supply chain assets used for transportation, including drums, bottles, railcars, bulk containers, and tanks. They must ensure that they have sufficient numbers of these assets in each plant, distribution center, warehouse and port to maintain day-to-day operations and ensure delivery promises to customers are met. To achieve this, many industry players have private fleets and distribution centers based on manufacturing sites and distance from finished product demand. Chemical companies need to consider the full business value chain and get a clear view of how the operational components of an organization are currently configured and working together to execute business strategy. It should provide an end-to-end view of the important elements of operational activity.

Use of technology:

Logistics models have evolved over time to meet changing market needs and vary in the scope of service offerings and degree of collaboration throughout the supply chain. The move towards integration has taken place at a slower pace in the chemical industry than in others, such as the automotive industry. Rapid advances in supply chain technology allowing for increased functionality across multiple sites and countries and greater potential for improving supply chain performance (e.g. IT allowing for time tracking and tracing and supply chain visibility, complex multi-echelon planning tools, cloud computing) . The chemical industry needs to start using integrated scheduling systems to improve logistics asset productivity and network reliability.

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Creation Date Thursday, December 27, 2012 Hits 9840