September 10, 2020
In today’s highly competitive and unpredictable chemical industry, companies face an uphill battle trying to optimize their supply chains with so much data existing outside of the organization. In fact, Ernst & Young reports that “up to 80% of a large enterprise’s supply chain data is likely in the hands of other companies.” A digital supply chain can help analyze all that data.
End-to-end supply chain digitization puts all stakeholders—internal and external—on the same platform. In this blog post, we’ll explore the first three steps chemical manufacturers should consider to help them digitize the end-to-end supply chain.
1. Use forecasting capabilities to minimize variability
Chemical products go into diverse applications and end markets. By the time information reaches producers, small demand changes to the end product can translate into big impacts. To understand true demand, manufacturers should employ powerful supply chain planning tools that analyze leads for products, category, business, and sales. These tools use logic and statistical methods (such as Bayesian analytics) to leverage multiple forecasting methodologies to combine historical data, market indicators, competitive intelligence, and internal sales forecasts to run simulations and project concrete demand forecast. In addition, machine learning can be leveraged to detect seasonality and growth trends for predictiveness and to improve forecast accuracy. Demand sensing against forecast can detect any new trends or exceptionally large orders, which can then be presented for review and actions.
2. Streamline supplier complexities to enable optimization
Materials in the supply chain in different parts of the world follow their own seasonal patterns. For example, in oil and gas, production slowdowns in the Gulf of Mexico are anticipated during hurricane season, but the extent to which weather actually impacts production is difficult to predict. Supply variations have a bearing on availability, quantity, cost, and lead times of raw material across the chemical supply chain—making the job of the procurement team extremely arduous. A good supply chain management (SCM) solution should interact seamlessly with a company’s enterprise resource planning (ERP) system to provide demand forecasts, receive bill of materials, and specify forecast requirements for each raw material. The solution should aid procurement associates in their efforts to combine these raw material requirements across plants and carry out centralized bidding processes to realize spend synergy, or at the minimum send out RFQs. The solution should also help collate all proposals from suppliers; run what-if scenarios between various vendors based on targets such as payment terms, volume slabs, lead times and cost; and finalize vendors for all direct procurement.
3. Increase resilience with sophisticated planning and scheduling
Chemical manufacturing can be scheduled in continuous and batch runs—various streams and chemical processes can merge, demerge, produce intermediate (bulk) material or finished goods. Lacking accurate demand forecasts and having to deal with the variability of supplier changes, means that planners often have a difficult time determining intermediate goods and finished goods production volumes. A modern supply chain planning (SCP) tool can help address planning and scheduling challenges. For instance, it can help plan and manage constraints for new products to be applied during a critical launch phase. The right SCP tool can also assist with asset scheduling by considering multiple bottlenecks—including tanks, filling lines, flow rates, availability of specialized employee crews, compliance, etc. Sophisticated SCP tools are also capable of connecting multiple production schedules built by different schedulers, optimizing the separate schedules to achieve maximum efficiency of the entire plant.
To learn more about this topic and gain some practical information about additional steps your organization can take to create an end-to-end digitized supply chain, download the best practice guide “Achieving end-to-end supply chain excellence in the chemical industry.”