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Process Chemicals – A Complex Supply Chain in Motion

July 05, 2018


Process ChemicalOn a recent road trip to retrieve my daughter from college I drove past a handful for chemical manufacturing plants of various types. Viewing a chemical manufacturing plant from a distance everything seems so peaceful and static. A chemical plant is a complex and expensive array of storage tanks, pipes, controls and special chemical or biological transformation and/or separation equipment to take raw materials and create new value-added materials. Chemical manufacturing plants can take years to build and once operational produce continuously to maximize the output of refined materials at the lowest possible cost. Looking at these massive plants it might not be intuitive to think that materials are continuously in movement. The supply chain that supports these complex facilities are also in continuous motion.

Increasing customer expectations, global competition, increasing ingredients and labor costs, and growing industry consolidation put tremendous pressure on process chemical companies to improve their end-to-end supply chain. As these trends strain industry revenues and margins, mature supply chain capabilities can provide a competitive advantage in both bottom-line costs and top-line revenues. There has been significant progress made in improving supply chain planning capabilities for the chemical industry over the last 10 years. However, to gain the full benefit from those investments leaders in the chemical industry need to take the next steps towards empowering advanced supply chain capabilities.

An estimated, 75% of supply chain data originates from outside the ERP system. Complexity opens risks of miscommunication and disruptions, often from incorrect or incomplete data. Clean and consistent data is required to harness the power of investments in analytics, digitization, optimization, machine learning, big data and other advanced supply chain capabilities. A supply chain Master Data Management (MDM) solution provides consistent, harmonized, standardized and actively managed data from across the extended supply chain.

Accurate demand forecasts lay the foundation for an effective supply chain. Chemical manufacturers faced with shrinking margins cannot afford to put the wrong product in the wrong location at the wrong time. With greater forecast accuracy comes greater predictability ensuring downstream supply chain processes run smoother at less cost. To be successful at demand planning requires both in-depth knowledge of your business, experience forecasting your products, and an advanced enabling demand planning solution. Demand planning solutions use science to automatically apply a variety of forecasting methods in an unbiased way to create forecasts for all stages of a product’s life cycle.

Chemical production facilities are pressed by market demand to provide greater product variety and shorter delivery times. Shifting to production lines that are more flexible and closer to customer demand helps produce a greater variety of products with shorter lead times.  However, multi-plant sourcing and scheduling increases complexity and the need for enabling technology to develop an integrated plan for both aggregated levels of production by production site and batch level production to meet customer orders.

Eliminating the cost impact of excess inventory is a priority for many process and chemical supply chains. Effective inventory reductions are best achieved by synchronizing demand forecasts, inventory quantities, and supply capacity throughout the extended enterprise. Multi-echelon inventory optimization illuminates the drivers of existing inventory and replaces rules of thumb with science to optimize where and how much should be held across the extended supply chain.

In the process chemical industry, it’s extremely challenging to align supply capacity to variable demand for thousands of items, while meeting corporate objectives. Competition is intense and many chemical companies run on razor-thin margins. Market share is won or lost based on how well a company predicts and reacts to market shifts. Integrated business planning (IBP) can mean the difference between success and failure. A advanced, purpose-built IBP solution is critical to success. Companies that take a spreadsheet driven approach find that they spend too much time manipulating data and not enough developing value-added solutions.

Complex process chemical supply chains have many moving parts, each with their own challenges and potentially conflicting objectives. Only a scalable, interoperable supply chain planning and optimization platform can ensure a company’s supply chain performance is optimized. Five imperatives to building advanced supply chain capabilities are:

  1. High quality repeatable data to enable digitization and automation, and the adoption of advanced analytics and artificial intelligence.
  2. Accurate demand forecasts by ingredient, formula, location, customer, group and/or product
  3. Optimized multi-plant schedules and enterprise-wide plans to effectively manage a complex supply chain
  4. Optimized deployment of inventory across channels and distribution echelons to reduce inventory and lost tonnage
  5. Robust integrated business planning and comprehensive views of supply chain performance
For more information read about Seven Strategic Components for a Proactive Chemical Supply Chain. As always I welcome your thoughts and comments.
 

Tags: Industry Matters

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