Key points
In a rapidly changing global marketplace, the volatility and uncertainty of the current conditions are causing significant challenges when it comes to managing a supply chain.
This is particularly true for the chemicals market, where trade patterns are ever-changing, price trends are unpredictable, and the increasing customer demand for enhanced services and products drives growth.
With so much unpredictability, planning adequately to meet current demand while simultaneously creating capabilities that can accommodate future opportunities can be challenging.
In Accenture’s recent ‘Transforming Growth with Digital Innovation’ paper, the authors highlight that: “Feedstock-sourcing challenges, uncertain trade and tax policies, new forms of competition and more demanding consumers. These trends are coalescing to put enormous pressure on chemical companies.” As such, it’s clear that these growing trends are threatening the efficiency of supply chains, making operations more complex and impacting the balance between supply and demand.
At the same time, logistical complexity is increasing, with an ever-growing number of shipping points and a rapid increase in the volume and variety of raw materials that chemicals companies manage.
However, far from shying away from these new challenges, chemicals companies have the opportunity to embrace them: creating a competitive advantage by adapting and expanding their capabilities to meet changing demands, and responding in an agile manner to the otherwise unpredictable and uncontrollable complexities of the current marketplace.
The answer to these challenges lies in technology. In an increasingly digital world, businesses must embrace the need to move with the times: implementing technological solutions to automate manual tasks and streamline their supply chain planning.
An investment in enterprise resource planning (ERP) systems is an obvious first step for chemicals companies to meet increasing demand, but for true success, more advanced technological solutions are required to facilitate enhanced collaboration and effective supply chain planning.
And for maximum impact, technology can be used to improve three specific elements of a chemicals company’s operations: processes, people and learning and development.
Improving the process
Consistency across departments is a key challenge when it comes to process effectiveness within chemicals companies. With supply chain planning and operations execution teams often assessing challenges from different perspectives, the lack of organisational unity can cause a discrepancy in the overall approach, causing friction between departments and ultimately making processes less efficient.
As such, the broad strategic overview put in place by planners can only do so much. When dealing with the minute-by-minute reality in production, schedulers often have to make decisions that aren’t in accordance with the plan.
This result in inter-departmental disconnects that lead to gaps between plans and execution, which in turn prevent producers from reaching the optimum margins by limiting profitability.
However, the latest technologies can help to close the gap between planning and execution. With the right technologies in place, chemical manufacturers can better align supply chain managers and operations execution teams to help bring plans and execution in line with each other: mitigating against issues caused by viewpoint discrepancies and addressing process inefficiencies to improve profitability.
Similarly, the increased levels of visibility this will generate can help facilitate better decisions in a complex supply chain network: aligning supply chain and operations teams to allow for improved levels of agility and customer centricity.
Momentive, a global chemicals company, is one such example. With new AspenTech supply chain solutions, Momentive was able to realise multi-million dollar savings by redesigning its North American supply chain network.
By creating a model to assess its supply chain performance, the company was then able to conduct what-if analyses to identify the best redesign. Adam Collier, Sr. Supply Chain Management Systems Specialist at Momentive, explained:
“The model uses optimisation to determine the lowest cost distribution plan while still fulfilling all demand and honouring constraints.”[1]
Applying the same solution across its European and Asian supply chains has also delivered additional savings for Momentive, making it a widespread success in a geographically disparate organisation.
Using AspenTech technology, Momentive has also been able to optimise its supply chain daily by employing high fidelity production and stock transfer orders (STOs) scheduling models.
However, there are broader benefits to using the right technology to solve supply chain challenges. Better organisational collaboration can help inform overall planning and scheduling, which in turn helps reduce inventory kept by plants.
Improved efficiencies in supply chain processes can expedite production, allowing increased customer demand to be met, and ensuring that products are delivered in a timely manner.
A more collaborative process, facilitated by improved technological solutions, can give everyone access to the same version of the plan or schedule and allow a central place to share information, comments or concerns – whilst allowing for advance notice of problems, thereby helping plants to avoid them.
The people challenge
However, solving process challenges in isolation is only half the battle. Due to the industrial locations of chemical plants, initial recruitment can be difficult from a logistical perspective – but without advanced technology in place, recruiting and retaining talent can be an even greater challenge for chemicals companies.
As such, investment in the latest and greatest technologies is essential to navigating people challenges. Offering operational staff the tools they need to succeed is essential to retention: if they do not have access to these technologies, satisfaction levels are likely to be lower and this may cause a higher rate of staff turnover.
Providing sophisticated alternatives to basic tools, such as Excel, can help solve these challenges. By offering more collaborative solutions that people want to work with, worker satisfaction levels will increase.
As well as this, collaborative technologies can provide employees with the key information to do their job at the touch of a button – giving chemicals companies the added benefit of improved efficiency, as well as increased staff satisfaction.
Of course, there are also associated challenges around learning and development. An Accenture report found that 40% of respondents believed that 20% of the chemicals workforce would be approaching retirement in the next three to five years.
With an older workforce and increasing trends for earlier retirement, as well as the younger generation’s tendency to move jobs more frequently, there is a significant risk of losing valuable operational knowledge within chemicals companies.
Improved supply chain management and more advanced technology can help retain this vital knowledge, addressing the challenges posed by loss of human IP.
Collaboration across global supply chains, as well as the widespread usage of collaborative technology, can help increase the culture of knowledge sharing – helping workers build their expertise from the experience and learnings of their colleagues, and in turn, enabling them to take on more value-added roles.
Looking to the future
Looking forwards, supply chain efficiency is vital in giving chemical companies a competitive edge in the market. Though it can be challenging to align processes and perspectives across an entire organisation, future success relies on resolving these challenges.
With such a rapid pace of change in the global marketplace, aligning plant capabilities with customer needs and plant capabilities is essential, and collaboration and the latest collaborative technology offer huge opportunities to improve efficiencies.
By embracing new technologies, chemicals companies can improve their processes, boost recruitment and retention and mitigate against the loss of valuable knowledge due to staff turnover: successfully meeting growing customer demand and future-proofing their place in the market.
