Supply Chain Comment

By Laura Rokohl, Chemicals Supply Chain Manager, Aspen Technology

November 10, 2011

Cultivating an Agile Supply Chain in the Chemicals Industry

The Chemicals Industry Faces a Series of Unique Business Challenges, Which Require Careful Consideration Of the Current Supply Chain Structure and Practices

Introduction

The chemicals industry today faces a series of business challenges. Rising costs of raw materials, regulatory issues, and vertical integration from bulk to specialty chemicals are creating the need for complex supply chains with many degrees of freedom. Product portfolios are expanding to drive new sources of revenue and higher margins, necessitating the creation of new markets and customer specific requirements to stay competitive. Business responsiveness becomes paramount in this customer-focused culture, putting pressure on chemicals producers to overcome the barriers to agility to improve profitability and continue to meet customer needs.

Rokohl Says: Business responsiveness becomes paramount in this customer-focused culture, putting pressure on chemicals producers to overcome the barriers to agility to improve profitability and continue to meet customer needs. What Do You Say? Click Here to Send Us Your Comments Click Here to See Reader Feedback

Unexpected Events Rule the Supply Chain

One thing is certain—supply chain disruptions will inevitably occur. The complex global supply chains of the process industries feel the ripple effect of events that previously had only local reach. A catastrophic event such as a tsunami or hurricane can impact feedstock availability, cause capacity outages, and disrupt logistics.  Of course, not all disruptions are a result of natural disasters—demand volatility is also a significant area of concern.

Barriers to Agility

Why do chemical companies that seem to have much of the infrastructure in place for an agile supply chain continue to struggle to achieve it?

Cultivating an Agile Supply Chain

Best-in-class companies are leveraging technology and using agile supply chains as a competitive differentiator. But what steps can chemical companies—especially ones that already have much of their supply chain infrastructure in place—take to foster agility in their supply chain?

Visibility and Fact-based Decision Making

Visibility into the right information is half the battle. Transforming the sea of data into a usable format facilitates decision-making based on facts and economics, rather than focusing on just solving the crisis of the moment. An easy to use interface with advanced exception reporting directs users to the highest priority problem and helps them hone in on the specific information required to make decisions.

Expect the Unexpected …. and Plan for It!

The ability to perform rigorous business simulation via what-if analysis is a ‘must-have’ for chemical manufacturers. Without this capability, companies are blind to both profitable opportunities and potential risks. Best practices dictate developing a ‘playbook’ to respond to unplanned events, both upside opportunity scenarios and downside risk mitigation scenarios.

Adaptability and Alignment

In addition to changes in supply and demand, companies face changes in markets that can alter their supply chain strategy. If chemical manufacturers don’t adapt their supply chains, they won’t stay competitive for very long. In terms of technology, this means keeping the systems that support supply chain functions aligned with your business.

The best supply chains aren’t just fast and cost effective. They are also agile and adaptable, and they ensure that all stakeholder interests are in alignment. While it is hard to assign a monetary value to having the ability to react, agility drives improvements in customer service, asset utilization, and inventory management.