How agile is your chemical supply chain after covid-19?
Trace amounts of chemicals can be found in almost every product we contact or use. Chemicals play a very important role in the production of basic products such as pharmaceuticals, detergents, disinfectants and protective equipment. At the economic level, the contribution of the chemical industry to development and growth has dominated for many years.
In 2018, GCC's chemical industry revenue reached US $84.1 billion, and its production capacity reached 174.8 million tons, contributing 2.8% to the regional GDP. The International Council of Chemical Associations (ICCA) also disclosed that the chemical industry and its wage induction and supply chain have contributed US $5 trillion to the global GDP and created more than 120 million jobs in the world.
Novel coronavirus pneumonia has been the main cause of the recent disruption of the chemical industry. The latter led to a 30% reduction in demand for chemicals in the automotive, transportation and consumer goods industries, which are the most severely hit end markets. Covid-19 not only aggravates the disruption of the global supply chain, but also exposes the vulnerability of the supply chain's dependence on primary and secondary suppliers. At present, the global supply chain system is divided into three levels (1, 2, 3), using liner mode. This linear supply chain model shows little or no collaboration between levels. In addition, the movement of goods from one point to another is not visible at any given time. The covid-19 pandemic (Coronavirus) has exposed the weaknesses of many enterprises and is now making supply chain participants and professionals stop to think. Will the continuous disruption of the supply chain be the beginning of a new dawn of resilience? Let's discuss some of the current challenges.
1. Dependence and concentration of limited supplier network
Supply chain is about integration and dependence between different levels / players. Therefore, any significant impact in the process flow can lead to disruption. The novel coronavirus pneumonia is the case after the outbreak. Although news and reports cannot explain exactly how the new coronavirus started, the consensus so far points to Wuhan, China. The global supply chain industry relies heavily on China. For many years, China, South Korea and Italy have been manufacturing centers for more than 12000 factories and warehouses of the world's leading 1000 companies and their suppliers, according to a study by resillinc. At the height of the virus, most manufacturing plants in China were blocked to contain the spread of the virus. Resillinc reported that nearly 1800 manufactured parts were traced back to Hubei, one of China's first provinces to be quarantined. As a recent GPCA report reveals, "China is one of the main destinations for GCC's polyethylene exports, and the slowdown in demand will mean that China's imports from GCC in 2019 will be reduced by 6% compared with that in 2019 and 10% compared with that in 2020 predicted before the outbreak of the epidemic." The impact of the pandemic on the industry has become apparent. Globally, production in the chemical supply chain market has fallen sharply, resulting in shortages of most raw materials and finished products. In March 2020, the output of petrochemical industry decreased by 3.3% and in April by 1.3%. Similarly, the cw75 index fell 23% quarter on quarter on Thursday.
2. Lack of visibility in the end-to-end supply chain
Global scenario planning based on data-based decision-making and technology is another key component in evaluating supply chain choices and preparing for the future. Unfortunately, in terms of Technology / digitization, most industries such as chemical industry and supply chain are lagging behind. A recent GPCA industry insight report pointed out: "the chemicals industry is somewhat slow in the effective use of digital technology. Only 17% of global chemical companies meet BCG's definition of "digital leader", compared with 23% in all industries.
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