The complexity of chemical companies supply chain

In order to remain competitive in today's chemical industry, manufacturers must maintain a high level of operational productivity. In addition, current problems, such as rapid commercialization, complex supply chain, aging assets, and increasing demand for dynamic operational planning, make it more demanding than ever to achieve productivity levels that drive differentiation and innovation. Manufacturers often fall into a pattern where they implement short-sighted cost cutting measures, which may adversely affect operational productivity and reduce overall market responsiveness.

To avoid falling into these pitfalls, it is essential that you not only understand the industry challenges facing chemical companies, but also recognize that major trends in manufacturing are being reshaped. Acquiring this knowledge is the first step in laying the foundation for digital transformation.

Complexity of supply chain

Chemical manufacturing production can be carried out continuously or in batches; a variety of different processes and chemical processes can be combined, separated, produced intermediate (bulk) materials or finished products, and inventory (MTS) or order (MTO) at different starting points on different asset portfolios. These types of variables complicate planning, cost, formulation, and quality management because supply chains must operate under continuous pressure to minimize asset downtime and maximize asset utilization.

Most importantly, chemical companies often fail to foresee the full coverage and scope of their products or molecules, which are usually only intermediate steps to another final product - usually downstream production. In addition, the chemical manufacturing industry has been under regulatory supervision due to the nature of materials and products, and these needs must be balanced in response to unique supply chain pressures.

One result of this complexity is low productivity, which is often overlooked because staff simply try to continue to use outdated, generic, or non integrated software solutions. Today's fast-paced technology environment has changed the way business is done. In fact, Accenture pointed out in a report in 2019: "due to all the technical disruption, the typical sequence of activities from customer perception to order fulfillment will soon be quite different from today's "The nature of many chemical industry challenges has changed - and will continue to change.

The unpredictability of supply and demand

The supply chain is changeable. Disruption can occur anywhere in the supply ecosystem and lead to chain reactions up and down the value chain.

For example, the rapid commercialization of the chemical industry means that customers often have many sources from which they can obtain the materials they need. If there is nothing customers need in quantity and price when they need it, they can go to your competitors.

Moreover, because chemical companies (and their customers) are usually high in the value chain, they may become victims of the "bullwhip effect" - small changes in the "tail" (end market) turn into major changes when they reach the "handle" (producer).

All of this happened in the interrelated and interactive global business cycle. In such a dynamic environment, it is extremely difficult to provide accurate predictions. As a result, even confirmed purchase orders can move around, making it difficult for manufacturers to meet the most profitable demand in the best time.

Article source: https://article-realm.com/article/Finance/9194-The-complexity-of-chemical-companies-supply-chain.html