Just like the air people breathe, some of the most important things in life are invisible. Now, can you imagine your company’s supply chain becoming just as invisible as the air around us?
We envision the supply chain of the future in the chemical industry will be self-driving, self-maneuvering and self-correcting, resulting in a seamless fulfillment capability that delivers chemicals at the right time, to the right place and with right quality—without manual human interaction.
While leading retail giants invest in emerging technologies as a matter of course, historically this has not been the case for most chemical companies. However, the benefits of doing so are tremendous. Digitalization could unlock up to US$550 billion in value for the chemical industry, with digital supply chain initiatives driving US$70 billion of that value.1 Furthermore, by systematically combining digital technologies, chemical companies can drive efficiencies and realize average savings of approximately US$90,000 in terms of cost per employee.2
What’s more, customer centricity, which will be a primary driver of the future supply chain, is one of the most important factors for business growth and profitability in any industry, and chemicals is no exception. Price- and product-driven approaches are no longer a sustainable strategy for long-term customer retention. In the current chemicals market where we have excess supply in the system, cheaper alternatives become available and customers can more easily switch between suppliers. Similarly, in an age where products are evolving daily, it is difficult to outpace the competition and build loyalty.
One solution lies in building a customer-centric supply chain that can serve as a catalyst to gain market share and acquire new customers. In fact, Accenture’s latest research finds that leading supply chain executives prioritize customer centricity and recognize the importance of “getting it right” with key customers.3 Other research4 indicates that the most important business imperatives driving the deployment of digital supply chain technologies for chemical companies are: 1) improving customer experiences and 2) collaboration with customers and third-party providers. There are some areas where existing technologies are already making it possible to deliver on these imperatives; in other areas it is evident that emerging technologies will be critical to expanding future supply chain capabilities.
Looking at another Accenture study,5 85 percent of surveyed executives agree that the supply chain of the future will have to adjust in real time to best meet order requirements. And, there is widespread agreement (76 percent) that customers are looking for faster order fulfillment times. These objectives can only be achieved with scalable technologies.
Envisioning the supply chain of the future
The future chemical supply chain will need to be agile enough to work around planning and forecasting challenges, supplier runouts, unplanned outages, port congestion, rail car bottlenecks and other disruptions to provide the transparency and faster fulfillment that customers are seeking.
How will this be achieved? Using an ecosystem of technologies already available, chemical companies can build a supply chain of the future that seamlessly navigates the disruptions. These technologies include the Internet of Things (IoT), radio frequency identification (RFID) and global positioning satellites (GPS) to provide real-time data; big data analytics and artificial intelligence (AI) for scenario analysis and smarter decision making; and blockchain technologies to resolve disputes and provide transparency. All of these technologies would be monitored through a live control tower (see Figure 1), resulting in a supply chain that is quintessential to the survival of a chemical company yet seamless enough to be invisible.
CLICK TO ENLARGE FIGURE 1
To understand how this supply chain of the future will work for a chemical company, consider the scenario below that compares an existing supply chain operation versus a future supply chain with embedded technologies.
Today’s reality: It is common for chemical companies to have difficulty fulfilling orders due to a rail disruption. For example, a chemical manufacturer utilizes a packaging facility and distribution center outside of Houston, Texas. This facility relies heavily on its rail siding6 to have bulk product delivered on a weekly basis where it is packaged, palletized and distributed to regional customers.
The facility has strict capacity constraints and relies heavily on rail cars arriving on time to effectively run the operation, especially as demand in the region has increased. However, the manufacturer has limited visibility into rail location; if a product is delayed, the manufacturer cannot coordinate effectively with the rail operator, which leads to an inventory imbalance, difficulty managing resource staffing and ultimately delays final delivery to end customers. In this scenario, the enterprise data pockets are siloed between the rail provider, the chemical manufacturer and the end customers. There is substantial value in merging these data sources so that decisions can be analyzed and evaluated to improve the entire supply chain.
Tomorrow’s future: In contrast, the supply chain of the future would provide end-to-end automation for seamless, driverless fulfillment starting at the customer site where sensors would track raw material and finished product inventories (see Figure 2). When levels drop below a threshold, the system would trigger an order fulfillment process. An analytics platform layer of information across the entire network would not only consider the typical fulfillment channels, but also have the flexibility to choose the best supplier depending on the combination of price, quality and delivery availability of product.
CLICK TO ENLARGE FIGURE 2
Driven by AI, dynamic planning and manufacturing would be in effect, but the supply chain would also have the power to maneuver if there is a disruption. This would enable it to determine other options and even pick the best option depending on pre-defined business preferences; it would also make it easier to avoid potential operational disruptions like weather, traffic patterns and port congestions.
With a supply chain of the future, the current episodic sales and operations planning (S&OP) processes would become extinct and instead be run by AI-powered machines with data scientists managing and approving exceptions in real time. Robotics and RFID would allow for automated picking, packing and staging of the finished goods. The automation would also allow for superior safety in the distribution center.
As for tracking, the supply chain would rely on IoT and GPS to track the shipment back to the customer. Blockchain would connect the business and transportation providers’ systems and devices for a seamless execution without disputes. Executing transactions on a blockchain would also allow for a smooth transfer of information and materials. With that, all parties would get paid right after the service was rendered, and payment would happen automatically by leveraging smart contracts. Given the variety of new processes, the future supply chain workforce would need to be trained in data analytics, as well as how to create and maintain algorithms. The goal for these employees? Operate with agility and even think with agility.
Realizing seamless fulfillment
In summary, seamless customer fulfillment delivered through the supply chain of the future is the chemical industry’s version of today’s customer-friendly Amazon Dash button.7 Using IoT devices, customers expect ordered products to arrive outside their doors just as soon as they run out, without having to keep an eye on inventory levels.
Similarly, in five years or less, chemical companies that invest in the supply chain of the future will not have to keep an eye on their inventory. Suppliers, manufacturers, third-party logistics (3PL) providers and end customers will all be connected to the supply chain. AI-powered planning and manufacturing will reduce inventory up and down the supply chain with just-in-time levels, as well as optimize manufacturing, logistics and asset utilization. End customers will be able to track their orders in real time just like the capability that retailers offer today.
This quintessential yet invisible approach to seamless fulfillment will help chemical companies create a transparent, collaborative and customer-centric experience while enabling a chemical company’s “human+machine” workforce to focus on opportunities for growth and innovation. It’s time to start building this supply chain of the future.
Thank you to Accenture’s Jordan Loehr for his contributions to this blog.
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1 “Digital Transformation Initiative: Chemistry and Advanced Materials Industry,” January 2017, World Economic Forum, http://reports.weforum.org/digital-transformation/chemistry-advanced-materials/.
2 Chemical industry responses to Accenture’s 2017 Industry X.0 survey. The research report, “Combine and Conquer: Unlocking the power of digital,” is available at: https://www.accenture.com/us-en/insights/industry-x-0/vision-value-combine-conquer.
3 “From Inventory to Influencer: The mover becomes the shaker,” Accenture, 2019, https://www.accenture.com/us-en/insights/consulting/supply-chain-game-chainger.
4 Chemical industry responses to Accenture’s 2018 global supply chain survey. The research report, “Is your Supply Chain in Sleep Mode?” is available at: https://www.accenture.com/us-en/insights/industry-x-0/supply-chain-research.
5 “Architecting the 2025 Supply Chain,” Accenture, 2017, https://www.accenture.com/us-en/insight-architecting-future-supply-chain.
6 Rail siding is a short stretch of railroad track used to store rolling stock or enable trains on the same line to pass.
7 Dash Buttons are shortcuts to quickly find and reorder your favorite products on Amazon. Learn more at: https://www.amazon.com/b?node=17729534011&ie=UTF8.