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Supply Chain Challenges in the Chemical Industry

Jan 9, 2018

The rise is globalization looks promising for manufacturers in the chemical industry. US-based chemical manufacturers are heavily depending on emerging markets to expand their profit margins. However, what is worrying the management of players in the chemical industry is the sudden influx of suppliers  in the market who are equally taking advantage of the open doors of globalization. The big question now is who reaches the right market and the right customers within the desired time.What is crucial for these companies is an efficient supply chain in place. But is increasing competition the only challenge that players in the chemical industry are facing? According to analysts at SpendEdge,  competition is only the tip of the iceberg as far as these chemical companies are concerned. Based on our research, some of the other critical challenges that the chemical industry suppliers should be aware of are:SE_Demo2

Fluctuating prices

Chemical companies are regular victims of the sudden changes in the cost of raw materials, energy, and other commodities. For instance, commodities such as crude oil and natural gas account for a significant portion of a chemical company’s manufacturing cost. Therefore, any fluctuations in the price of these commodities has a considerable effect on the company’s bottom line. Also, if  chemical manufacturers  have a varied portfolio  chemicals in their inventory, it would become difficult for them to keep track of the costs and changes in prices quickly. By having a holistic view of the supply chain, chemical supplier and manufacturers can stay ahead of rising costs and sustain a healthy bottom line. Companies must ensure that they have visibility into the fluctuating prices of raw materials and other commodities. This will help them to integrate the necessary changes into the resource planning systems and also make the required adjustment in the supply chain.

Quality control

The chemical industry is a highly standardised and regulated industry. Various regulatory bodies like Globally Harmonized System of Classification and Labelling of Chemicals (GHS) aim to ensure the protection and safety of the environment and human health in the course of chemical handling. Chemical companies must ensure that they have complied with these regulations at the procurement stage of the supply chain itself. In addition, the introduction of stricter consumer protection programs have made it mandatory for initiating regular quality checks and control programs. Any negative reviews or news of product recalls can severely damage the brand image.

Large volumes of data

Chemical companies deal with massive amount of data, making data management an increasingly complex task for them. They deal in complex and varied data such as information on the quality and pricing of raw materials and other commodities, contracts and agreements with clients and customers, manufacturing and operations data, regulations and compliance requirements from government and other regulatory bodies, among others. Companies must ensure that every piece of data is rightly catalogued, processed and leveraged to produce valuable business insights. A major drawback that many players in the chemical industry face are that they are not equipped with world-class IT infrastructure and systems to capture critical information. A typical example is a company not having adequate data to determine the end-to-end costs, i.e. from procurement to delivery of each of their products. Therefore, their ability to correctly identify the bottom-performers and the top contributors in their product portfolio becomes inaccurate.

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