Potential in the chemical supply chain

LET’S GO DIGITAL

MEMBERS OF EPCA’S SUPPLY CHAIN PROGRAMME COMMITTEE DISCUSS THE POTENTIAL FOR DIGITISATION TO OVERCOME SOME OF THE CHALLENGES CURRENTLY FACING THE SECTOR

There are many hurdles facing the European chemical logistics sector at the moment. These range from the possibility of tariff-based trade wars erupting to the ongoing driver shortage and long-term shortcomings with regard to the continent’s road and rail infrastructure. Meanwhile, another major challenge, says Peter Marshall, Dow Europe’s director of supply chain operations, India, the Middle East and Africa (IMEA) and member of the EPCA Supply Chain Program Committee (SCPC), “is the tight logistics market capacity”, something that is itself “a result of the strengthening economy, with all sectors moving more products [and] in turn exposing more transport infrastructure limitations”.

“A specific example is intermodal logistics,” he continues. “There is broad agreement that increasing use of rail and short sea is desirable but the current reality is that service reliability is not meeting expectations, resulting in more trucks on the roads and adding to the capacity constraints. The EPCA SCPC fosters collaboration between shippers and logistics service providers [LSPs] enabling these long-term structural issues to be addressed.”

ATTRACTING TALENT At the same time, another major issue concerns the sector’s ability to attract and retain talent. “Finding the relevant people who have an interest in working in not just the chemical industry but the logistics part of the chemical industry has become progressively difficult,” says Anthony Elwine, Damco’s global head of chemicals and fellow SCPC member. While Elwine cites various possible reasons for this, including the increasing levels of regulations governing the sector, he also identifies what he terms “the generational question”, whereby a lot of Millennials (defined by the US Pew Research Centre as those people born between 1981 and 1996) “who just have zero appetite” to work in either the chemical or logistics industries.

In addition to wanting “a work-life balance which may be not too akin to what the [chemical logistics] industry is about”, many technologyminded Millennials, Elwine notes, likely see both chemical producers and their LSPs “as not innovative enterprises compared to other employers”, particularly those in the tech and online retail fields. “It’s just not an attractive industry for those people who are technologyfocused. When you’re trying to attract a data scientist to a shipping and logistics company and they have an offer from a large tech company, you get a feeling for the direction that they want to go in,” he says. As such, LSPs need “to find different ways of enticing them into the business” and “making it compelling for them to want to join” the sector.

Rather than simply being financial in nature, the incentives required to attract talent should arguably take the form of “opportunities to innovate” on a par with those to be found within the tech industry. The good news is that as more players within the chemical and logistics sectors realise the need “to become part of [the] digital revolution”, so the number of such opportunities is on the rise, with Elwine noting that in addition to bolstering their digital capabilities, some companies are even looking to establish their own start-up tech firms and the like. »

POTENTIAL BENEFITS But attracting new talent isn’t the only benefit greater digitisation potentially offers the sector. “Digitisation can clearly help improve customer service through better logistics visibility, for example, [by enabling] more proactive communication of estimated arrival times. It will also help improve overall reliability as the data will highlight issues and opportunities,” Marshall states.

“Linking back to the topic of intermodal transport, typically many different service providers are involved in the supply chain and a seamless, real-time information flow will help improve performance and build more resiliency to strikes, weather and the other disruptions that challenge operations on a daily basis,” he continues, noting that Dow, for instance, “has the objective to implement logistics visibility for all modes of transport and maximise the automation of data exchange with its service providers”.

And when it comes to the environment, there are also other potential benefits to be unlocked. “There’s so many different ways to measure and report [environmental performance], so it’s not particularly uniform how companies do certain things,” Elwine says. “If you were to look at the industry from an HSSE perspective, there’s nobody better worldwide than the chemical/ pharma industry, so if they were to adopt a similar approach to sustainability, they could also be market leaders,” he continues, asserting that in this particular area “technology has quite a role to play moving forwards”.

WORK AHEAD However, as a recent study commissioned by EPCA and conducted by the Vlerick Business School revealed, there is still much work to be done if the chemical logistics sector is to attain the levels of digitisation found in other branches of the economy. “The chemical industry clearly lags behind FMCG and other sectors in terms of digitisation,” Marshall states. “We are predominantly B2B players and therefore further from end customers in the value chain. There are also specific considerations when transporting dangerous goods that make us naturally more cautious. However, it’s clear that the chemical industry will not be immune from new entrants and disruptors as seen in other sectors. While we are behind other industries, attitudes are shifting and there [has been] much more attention to digital in the last couple of years.”

So how can the sector advance its level of digitisation? “A good starting point is to take a serious look at the EPCA study on digitisation in the chemical industry and develop a holistic digital strategy. There are a multitude of service providers ready to offer digital solutions; before moving into implementation it’s important to have a clear vision of the desired end state and value proposition to ensure an ultimate return on investment,” Marshall says, reporting that EPCA is also keen to help its members in this area. Indeed, as well as its ongoing work with the Vlerick Business School, the Association also “recently held a workshop focused on digitisation [that brought] together industry thought leaders with practitioners across the chemical industry”.

And in this ever-changing and ever-more tech-savvy market place, it would certainly seem that the onus is on LSPs to adapt if they want to stay competitive. “I think what the industry has realised is that unless they move forward from the B2B to a more B2C environment, they’re going to expose themselves. If they don’t do it, somebody will produce technology that disrupts them,” Elwine says, citing recent examples of major disruptions affecting the retail, hotel and taxi sectors among others. “Shipping has historically been a slow adopter of technology and now you see it being disrupted, so anybody that hasn’t adopted new technology are the ones that are at the greatest risk.” HCB