Individual consumers are accustomed to having many personalized choices in the materials and services they buy. Options abound for everything from color, size and quantity to payment method and delivery channel.
We see the chemical industry heading in this same direction. However, chemical companies face a major challenge with global supply chain complexity.
For the last three decades, we have seen a steady expansion of the global chemicals supply chain. Spurred by a number of factors—e-commerce, liberalization of trade agreements, investments in transportation infrastructure, improved methods of international communication, and advances in transportation technology, among others—supply chain globalization has opened new market opportunities and broader avenues for partnership and collaboration. But this growth has also brought increased complications.
To address complexity while delivering on customer demands more effectively and efficiently, chemical companies are now looking to enhance their supply chain capabilities. This means going well beyond achieving functional excellence in traditional models—plan, source, make, deliver and return—to adopting advanced data-driven and cloud-based capabilities that enable faster, more flexible and personalized customer experiences.
With the industry undergoing significant change, chemical companies should make investments today to prepare for the supply chain of tomorrow. We’ve identified three prime areas where chemical companies are innovating:
- Living segmentation – adapting the supply chain dynamically to changing customer needs
- Asset-light network – building a more agile business model leveraging an ecosystem of partners
- Data and applied intelligence – gaining deeper supply chain visibility for real-time decision-making
By enhancing capabilities in these key areas, companies could be in a stronger position to adapt to an ever-changing, complex landscape. Let’s explore each of these areas in more detail.
Chemical companies can better serve customers and meet their expectations by using living segmentation to individualize crucial supply chain capabilities. This means connecting more precisely to each customer’s unique requirements and tailoring supply chain capabilities to those desired needs. In pursuing this strategy, a key question can be addressed: Is living segmentation on the front end flowing through sales and operations planning to ensure the supply chain is keeping up with customer expectations?
As end products become more advanced and differentiated, so will the required chemical inputs. Incorporating living segmentation into the chemical supply chain will help companies adopt a “batch size of 1” production mentality. For example, a global coatings company may have one base product that can balloon into thousands of SKUs for its customers based on attributes such as color, viscosity and finish. Through living segmentation, coatings companies can create micro-segments to better align their offerings to the diverse market segments with which they interact—automotive, aeronautics, marine, transportation infrastructure, interior and exterior building applications, etc.—and provide more value.
Moreover, chemical companies will need to enable service-oriented operating models that address customers’ specific priorities (i.e., availability vs. flexibility vs. cost). Once these priorities are accounted for, customer experiences could be significantly improved.
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An asset-light network is about building an ecosystem of partners that can bring additional capabilities and value to your supply chain—beyond traditional co-manufacturing, co-packing and third-party or last-mile logistics providers. It should also include technology partners that enable chemical companies to be more innovative and flexible.
There are many advanced information technologies that can provide chemical companies with greater flexibility to adapt quickly to changing customer needs and introduce efficiencies that improve market responsiveness and reduce costs. According to the World Economic Forum, “The mobility of whole plants and technology platforms has enabled companies to make and reverse investment decisions much more flexibly.”1
For example, cloud technologies and distributed networks are foundational for accelerating an organization’s ability to adopt new business models and create new products, services and experiences for customers. If a company has controlled shared access to data in the cloud between co-manufacturers and co-packers, its ability to pivot and use third parties is significantly improved.
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With the industry undergoing significant change, chemical companies should make investments today to prepare for the supply chain of tomorrow.
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Data and applied intelligence
Improving speed, agility and efficiency in complex global supply chains requires deep visibility and the right insights with which to make quick, effective decisions. Data is central to providing both visibility and insights.
Gathering the right data and using it strategically to gain valuable intelligence is at the heart of consistently serving customers well. The good news is the industry produces a lot of data. How this data is selectively applied is key, which is where advanced technologies like artificial intelligence (AI) play a vital role.
Accenture has assessed tasks across 30 typical job families in the chemical industry and found that not only operational tasks (i.e., production or sales), but also administrative, managerial and scientific tasks will be impacted by data and AI.2 The same study found that AI is expected to reduce human effort in these jobs by up to 45% in the future. Technologies, like IoT, additive manufacturing, industrial robots, big data, AI and simulation modeling are driving new opportunities in supply chains. With AI-driven smart data, companies can gain granular visibility into the supply chain and create tailored views of order status that can be shared with customers to support planning and enable real-time decision-making.
To bring the value of data and AI to life, consider a manufacturing plant whose raw materials shipment got stuck in the Suez Canal delay in March 2021. The barge blocking the canal caused extreme shipping and delivery delays that had impacts very far downstream. The blockage held up an estimated US$9.6 billion worth of trade each day—equivalent to US$400 million of cargo per hour—according to Lloyd’s List.3 The Suez Canal blockage caused business leaders to quickly realize the importance of visibility into every end of their supply chains to ensure transparency and enable greater agility to react to disruptions.
Additionally, companies are now creating supply chains with geographically dispersed shipping/supplier options that use data and technology to enhance agility as another response to last year’s supply chain delays. Real-time visibility and advanced analytics can be leveraged to track delays by providing revised ETAs and analyzing downstream impacts of late materials shipments. Having access to these data-driven insights can alert companies of a delay almost immediately and provide the information necessary to quickly pivot and source raw materials from another supplier to minimize the domino effect downstream.
Questions to ask
Pursuing these initiatives—living segmentation, asset-light network, data and applied intelligence—requires chemical companies to think about their supply chains differently. They need to ask probing questions: How do we restructure our supply chain? How can we harness more of the data in our organization to drive innovation and accelerate decision-making? What new roles can our partners play in enabling greater supply chain agility and efficiency?
Let’s start a conversation to discover answers to these important questions.
Special thanks to Jessica McNally, Carter Morgan and Adam Payonk for their contributions to this blog.