A recent Deloitte think piece broke down key growth opportunities for chemical companies. It all starts with...Read More
Digital technologies play a crucial role in helping companies achieve supply chain excellence. Although IT and digital tools have supported supply chain processes for decades, today’s digital technologies provide opportunities for many innovative answers to difficult challenges. These technologies are based on multi-enterprise business platforms and intelligent solutions for visibility. Chemical companies have been adopting these new technologies at an accelerating rate in the past few years, with many large companies initiating digital programs that include a focus on integrating their trading partners of suppliers, customers, and logistics service providers for the products they are BUYING, SELLING, MOVING and COMPLYING with through their supply chains.
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Supply Chain Challenges
Global Economic Considerations: The industry operates in a global, competitive environment which gives rise to operating and market risk exposure. Additional uncertainty stems from a further intensification of the trade and geopolitical conflicts, with repercussions for the price of oil. The industry competes worldwide for sales on the basis of product quality, price, technology and customer service. Economic conditions around the world, and in certain industries impact sales price and volume.
Regulatory Compliance: Increased concerns regarding the safe use of chemicals and plastics in commerce and their potential impact on the environment as well as perceived impacts of plant biotechnology on health and the environment have resulted in more restrictive regulations and could lead to increasing levels of product safety and environmental protection. The industry is subject to extensive regulations, rules and ordinances such as the Globally Harmonized System of Classification and Labelling of Chemicals (GHS), relating to pollution, protection of the environment, greenhouse gas emissions, and the generation, storage, handling, transportation, treatment, disposal and remediation of hazardous substances and waste materials. Local, state, federal and foreign governments continue to propose new regulations related to the security of chemical plant locations and the transportation of hazardous chemicals.
Raw Materials: Availability of purchased feedstock and energy, and the volatility of these costs, account for a substantial portion of the industry’s total production costs and operating expenses. Chemical manufacturing companies are highly susceptible to sudden changes in the price of raw materials, energy, and other commodities. The fluctuating prices of crude oil or natural gas, which accounts for 50% of a chemical industry’s production costs, have a significant effect on their bottom line.To stay on top of rising costs and sustain a healthy bottom line, chemical companies need to have an overall view of their supply chain. They need visibility into the fluctuating prices of raw materials and commodities so they can be integrated into their resource planning systems. This allows them to make adjustments in their supply chain, find efficiencies in the market, and make better procurement decisions.
Supply Chain Disruptions: As a diversified chemical manufacturing industry, the Industry’s operations, the transportation of products, cyber-attacks, or severe weather conditions and other natural phenomena (such as freezing, drought, hurricanes, earthquakes, tsunamis, floods, etc.) could result in an unplanned event that could be significant in scale and could negatively impact operations, neighbors or the public at large, Major hurricanes have caused significant disruption on the U.S. Gulf Coast, logistics across the region, and the supply of certain raw materials, which had an adverse impact on volume and cost. Other natural phenomena in the future could negatively impact the Industry’s results of operations.