The supply chain needs transparency

SEEING IS BELIEVING

SURVEY • RELIABILITY, VISIBILITY AND FAST DELIVERY ARE KEY TO A SUCCESSFUL SUPPLY CHAIN BUT NOT ALL CHEMICAL MANUFACTURERS ARE FINDING THOSE KEYS

OVER THE PAST few years, the annual LogiChem event has accurately reflected – and even predicted – changes in the chemical supply chain being brought about by the increasing application of new information technologies. This year’s LogiChem, which takes place in Amsterdam on 19 to 21 March, looks set to continue that tradition, facilitating an ongoing conversation about the tools that exist to open up the implementation of digitally enabled systems in the sector, as well as address the problems and fears that are holding industry back.

Ahead of the meeting, WBR, LogiChem’s organiser, partnered with Alpega Group to survey 100 senior logistics executives in chemical companies across Europe to find out more about the challenges they are facing and the innovative solutions that are being brought to the table to help them address those challenges. It is not all about digitisation, of course – there are plenty of existing and emerging commercial challenges to be faced, but individuals working in the chemical supply chain are coming to expect the same levels of visibility and reliability that they now take for granted in the consumer sphere.

Introducing the results of the survey, which was carried out in late 2018, Carolyn Hunt, senior segment manager at Alpega Group, explains some of the current stresses. “Firstly, buyers are becoming more demanding and, secondly, they are increasingly outsourcing to cheaper markets. That leaves business leaders with an interesting quandary: how to increase customer satisfaction without raising prices.” THE BIG PICTURE In this new, highly connected world, the key items for those leading the logistics function in chemical companies are price (as ever), reliability, quick delivery and visibility. “These are all areas where the sector has made relatively slow progress,” Hunt says. “The rise of customer-focused business models has led to increased expectations for the chemical sector. Buyers want to see operations that give them not only full visibility, but also confidence that they have the best possible product at the best possible price, exactly when they need it. This shift to customer-centricity requires some upfront investment, especially in a sector hamstrung by legacy systems.”

The ubiquity of enterprise resource planning (ERP) systems is, Hunt feels, something of fig leaf covering up fundamental weaknesses. “ERP systems often propose a basic framework, and although they are a step in the right direction, they cannot meet the unique needs of the industry,” she says. “Managing complex capacity, planning and handling requirements is simply outside of their scope.” And that is before taking account of the very special safety and regulatory compliance issues that are a feature of the chemical industry. »

Getting the talent needed to lead this transformation is another challenge. “Finding innovative employees who are willing to take on a technology shift is critical,” Hunt says. “Attracting these people requires the sector as a whole to reconsider the image it projects and engage with more women and millennials, while making the most of the knowledge held in its current workforce.”

“It’s an exciting time for the chemical industry and there are plenty of opportunities for forward-thinking managers,” Hunt observes. This is especially true of those who are willing to embrace technology as an enabler for growth and promote better collaboration within the supply chain ecosystem.

BARRIERS TO PROGRESS Access to talent is a big issue, particularly as new business models will lean heavily on non-traditional skill sets. Of those surveyed, 39 per cent felt that the biggest challenge to recruiting the best talent is the nature of the chemical logistics industry itself. “The sector clearly needs to work on its image and highlight the numerous factors that make it an exciting proposition for new and experienced workers,” says Hunt.

“That said,” she continues, “leading businesses work hard to retain the best talent and have reshaped working patterns to appeal to new generations.” For instance, flexible working appeals particularly to millennials and women – and these are to key talent pools that the sector needs to embrace.

The other issue that the chemical logistics sector has to deal with in terms of attracting talent is that the skills that it needs are the same skills that other industry sectors are seeking and competition is fierce. “Top-level talent is more likely to be attracted to other industries like FMCG, as their supply chain methods are more advanced,” says Fabian Gasczak, head of SCM polyols and oxidation products at Lanxess. “The chemical industry is just starting to evolve from a logistics function to a supply chain function.”

While access to talent is a barrier to rapid implementation of digitised systems, the biggest hurdle the industry faces lies in the legacy systems it is still working with. Of those surveyed, 43 cent cited this as the biggest problem.

“Legacy systems are a big challenge for chemical manufacturers to overcome,” says Hunt. “Effective change management and a true commitment from the organisation are absolutely essential if legacy systems and processes are to be replaced with more efficient digital ones.”

“It’s necessary to get a consultant company to provide you the right solutions according to your unique situation,” adds Joan Manel Azuaga, global demand inventory manager at Clariant. “The main obstacles are a lack of investment, not having enough people to manage the change, and the difficulty of changing a big company.”

BUILDING RELATIONSHIPS Chemical companies do not work in a vacuum and, as the growing use of the term ‘ecosystem’ to describe the supply chain shows, they have to interact with other players, particularly their logistics service providers (LSPs) and the third- and fourth-party logistics (3PL/4PL) companies that follow in their wake. But, as the survey indicates, developing a strategic relationship with those logistics providers is the biggest challenge in terms of supply chain management.

“Getting more strategic relationships with logistics partners is on the minds of many – and it’s a key issue that can be aided by technology,” Hunt notes. “Carrier scorecards and real-time feedback from analytics that come out of a transport management system (TMS) can help guide the discussion and get to the heart of what needs to change.”

But it is clear that there is no ‘one size fits all’ solution to developing such relationships, something that further hampers the application of standardised systems. While 31 per cent of the logistics leaders surveyed said that developing strategic relationships with their 3PLs and 4PLs was their biggest challenge, 27 per cent said it was the need to develop and prepare back-up plans in case of logistics disruptions and capacity limitations, and another 24 per cent identified the need to optimise service levels to increase customer satisfaction and loyalty.

“There are many important features we look for in a 3PL, including flexibility, cost, long-term agreements, professional »

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processes, stability and the ability to attract employees in a difficult environment (e.g. lack of truck drivers),” says Gasczak, while Azuaga explains: “We have different scenarios depending on the country. In some we manage everything, while in others we employ a third party to handle the storage and preparation of goods. However, the documentation is always handled by our central team who are in contact with the transport providers.”

WHEN THINGS GO WRONG Capacity constraints and logistics interruptions are other factors that prevent full automation of the logistics process. Only 32 per cent of those surveyed said they have no issues with deliveries and 23 per cent said there were only occasional bottlenecks. By contrast, 40 per cent said that they spend more time than they would like organising last-minute alternatives, and in total 62 per cent said they have already or are currently looking to diversify their 3PL base.

“If VPs of supply chain are looking to diversify their 3PL base, it’s necessary to prepare an in-depth analysis of the cost involved,” Azuaga recommends. “Prepare one strategy with a timeline and have different offers on the table. Before deciding anything, revise the result considering all the pros and cons.”

“The disruption caused by the Rastatt tunnel collapse in August 2017 was unprecedented and underlines the importance of effective contingency planning and risk management,” Hunt says. “Having an agile supply chain is pivotal to dealing with this type of incident, as is having a sustainable Plan B. This type of preparedness often translates to a competitive advantage when something goes wrong.”

A Plan B can be quite different to Plan A, as Gasczak observes: “In the future we plan to implement more intermodal transportation to compensate for bad infrastructure and/or truck driver shortages.” Looking at Rastatt more specifically, Azuaga says: “I’m convinced that the rail industry will recover. Transport by train is important as it’s much less expensive than delivery via truck. Countries need to invest in an efficient rail network and maintain a thorough risk analysis. They need alternatives in place in case something goes wrong so that the supply chain can continue despite disruption.” SEE WHAT’S GOING ON The key to dealing with supply chain interruptions is having visibility across the supply chain, but only 30 per cent of the survey respondents believe that have complete inventory and shipment visibility in real time and 23 per cent admitted to having very little or none at all. “Visibility is key to effectively managing a supply chain and it is alarming that for almost three quarters of respondents it is limited,” says Hunt. “Leading companies leverage real-time updates and dynamic ETAs to drive efficiencies, mitigate risks and provide the added value customers demand.”

“Organisations with limited visibility are vulnerable to selecting the wrong transport mode, increasing the use of expensive air freight, for example,” agrees Azuaga. “Different shipments of the same product may end up going to the same destination, and master data issues such as wrong pallet size could result in unnecessary added cost.”

Respondents agree that visibility is an issue but, in the marine sector in particular, limited data-sharing practices and a lack of communication are holding it back. “This trend could be reversed by embracing new digital technologies such as RFID scanners at ports and better collaboration between the carriers, terminal operators, vessel owners and other players,” Hunt says. It is interesting to note that both Rotterdam and Antwerp have recently begun implementing digitised systems to provide greater visibility with the aim of improving throughput speeds and reducing congestion – with the positive side-effect of providing more data and information to shippers. HCB

The survey covered more topics and also garnered some comments from the European Commission. It will be made available to delegates at this year’s LogiChem event, where the conference sessions will discuss these and other topics. HCB will be on hand to report back in a future issue but readers who want more information or are interested in attending, full details are available at https:// logichem.wbresearch.com/.

THE RASTATT TUNNEL COLLAPSE HIGHLIGHTED