The Amazon Effect

How the e-commerce tech company is changing customer expectations in the industrial supply chain.

The petrochemical industry is in the middle of a transformation of sorts in terms of its logistics and supply chain processes. It seems industrial owners haven’t been excluded from the changing customer expectations brought about by the Amazon business model – aka “The Amazon Effect.”

Speakers at a recent Petrochemical Supply Chain & Logistics conference in Houston pointed to enhanced transparency, increased reliance upon technology and greater visibility of the entire order and delivery process as direct outcomes of Amazon’s impact on commerce.

“The bottom line is, are we meeting the customer’s expectations in the current environment?” says Mark Baxa, president & CEO of The Council of Supply Chain

Management Professionals in St. Louis, who mediated the panel.

By SAM BARNES

Bruce Sullivan, vice president of integrated logistics at Covestro in Freeport, Pennsylvania, a supplier of premium polymers, says The Amazon Effect has pushed the industrial market in a new direction. An owner’s success will soon depend upon its ability to enhance the end-to-end visibility of the process through data unity and building resilience with smarter planning and operations. “We would’ve eventually gotten there, but the Amazon model has pushed industrial companies to look at transparency, technology and visibility into their products, from point of shipment through delivery,” Sullivan says.

“It’s a matter of figuring out how we as an industry can meet customer demand and manage expectations.”

The Amazon Effect is particularly impactful in the logistical and supply chain space, says Manish Misra, vice president of Sandpiper Chemicals in Houston. In that realm, it can affect everything from the conceptualization of a manufacturing facility to the delivery of the product it produces. Sandpiper Chemicals is currently building a grassroots methanol plant in Texas City, Texas, to be completed in 2024.

Misra says network optimization is a key component of the Amazon way doing things. Often, he adds, owners are choosing to physically locate closer to the customer to both reduce product cost and improve reliability. “The lifecycle of a product starts with the location of the manufacturing plant,” he adds, “and how efficiently you get your feedstock, equipment and supplies. That capital expenditure ends up in the cost of the product and passed on to the customer.

“One of the key considerations in choosing your location,” Misra says. “Will you have adequate access to feedstocks? Can you get the feedstocks at a lower cost? Can you transport your finished product to you customer at a lower cost?

Not only do you have access to rail, shipping and other infrastructure, but do you also have access to pipelines so that your product can go directly from where you’re producing to the end customer?” ose factors all contribute to bringing down the overall cost of the end product. “After all, a customer wants a product at the lowest cost within a reliable time frame,” Misra notes. “Choosing a physical location that enables an owner to do that can make all the di erence.”

Going Regional

Similar to Amazon’s strategy of building distribution facilities at various locations across the country, industrial owners are nding ways to get their product closer to the customer via warehouses for improved “last mile” deliveries, or by building manufacturing facilities closer to a product’s nal destination.

“ e linear supply chain is something of the past,” Misra says. “Much of our product goes to a warehouse. Not only does that help us from a petrochemical standpoint, but on the transportation side as well.”

It’s all about network optimization, says Sullivan, “and ours at Covestro is pretty robust. Whether shipping by rail to a transload location or to a warehouse, it gets our product closer to the customer and helps with that last mile delivery where we can meet customer demand in a day or two days, whatever the case might be. Much of our product goes to a warehouse, whether the northeast, west coast or elsewhere.”

When properly applied, technology is undeniably crucial in terms of automating and accelerating the process.

“For example, can you incorporate AI-based executions strategies when building up your plant and processes?” Misra says. “Can you create your network in a way that is more e cient? In our company, we don’t have the numbers of employees as some of the larger players, so we lean on

Four ways Amazon is influencing industrial supply chain and logistics

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Demand for end-to-end transparency of shipping and delivery

Demand for enhanced customer experience through technology

Network optimization through proximity to customers for ‘last mile’ delivery.