Key Ingredients for a Successful Chemicals Supply Chain

Supply chain and logistics are vital to effective visibility and process integration in the chemicals sector


Globalization opens up a number of degrees of freedom in the supply chain—there are more places that products can be made; customers are spread across the globe; and demand is shifting to Asia, with rapidly growing consumption especially in China. And for the chemicals sector—one of the largest and most diversified industries in the world—the trend toward more global supply chains creates complexity and competition that did not exist five years ago.

Made up of several smaller industries including bulk, specialty and polymers, the chemicals sector covers hundreds of segments—to which supply chain and logistics are vital to chemicals companies’ success because they represent a high share of cost and are critical for service level and top-line results. They are a means for chemicals companies to fight back against the pressure imposed by fuel price increases. To alleviate such pressures and overcome challenges such as accurate asset management across its various segments, chemical companies must deploy a fully scalable and interoperable solution to gain an accurate view into their supply chain issues.

Overcoming challenges

Forecasted to reach $4,297.7 billion in overall value by 2014 (an increase of 46.4 percent since 2009) according to the “Chemicals: Global Industry Almanac” from the Datamonitor Group, the chemicals sector in Western Europe alone provides employment to about 1.26 million people.

Further exacerbating its supply chain issues is the fact that many chemicals companies rely on a complex mix of spreadsheets, enterprise resource planning (ERP) systems and supply chain management applications to manage their assets. While ERP is typically the system of record, supply chain technology solutions often require data that is in a different form than the ERP contains or even falls outside of the ERP system entirely. One example of this includes set-ups and transitions in the polymers industry, which are typically not captured in the proper level of detail, if at all, in the ERP system. Polymers producers are looking to minimize time spent in transition from one grade to another, which takes up valuable capacity on assets and produces off-spec material that must be sold at a discount or on the scrap market.

Unfortunately, this complicated blend of solutions is not well-suited for tracking assets throughout the enterprise and into the wider supplier and customer supply chains if a framework is not in place for both business process and technology integration. When information is stored in many different places and systems, it limits visibility and creates ground for silos of information to develop. As a result, planners, schedulers, operations and business leaders may be looking at different information. Integrated systems and business processes are necessary for everyone to be working from ‘one version of the truth.’

To achieve actionable insight into key chemicals supply chain issues requires a fully comprehensive, tightly integrated solution, capable of melding together collaborative demand management, planning and scheduling that in turn integrates with manufacturing execution systems (MES) and ERP.  

This type of integration is critical if manufacturers are to manage their assets as effectively as possible and truly optimize their production processes. Any application that sits in isolation—whether it is scheduling, advanced process control or MES-related—will only result in a small proportion of the requisite value. The success of an individual plant or of the wider supply chain is not about isolated technological capability. Implementing integrated software solutions will deliver more effective business value and help to avoid a technological ‘disconnect.’

Supply chain best practices

Certain best practices and capabilities are key components in achieving the necessary visibility and integration of software systems to best manage process industry supply chains. These include:

 

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