chemical manufacturer is often so high up in the value-chain

In order to remain competitive in today’s chemical industry, manufacturers must maintain a high level of production efficiency. In addition, current problems, such as rapid commoditization, complex supply chains, aging assets, and growing demand for dynamic operational planning, make it more demanding than ever to achieve the level of productivity that drives differentiation and innovation. Manufacturers usually fall into a mode in which they implement some short-sighted cost reduction measures, which will have a negative impact on production efficiency and reduce the overall market response capacity.

To make sure you don’t fall into these traps, it’s important that you not only understand the industry challenges you’re facing, but also recognize the top trends that are reshaping manufacturing. Mastering these knowledge is the first step to lay the foundation for digital transformation.

This blog post provides a useful summary of the biggest challenges facing the supply chain today. If you want to learn more about how to turn these barriers into opportunities, please read our recently released executive summary to learn more about this topic.

Complexity of supply chain

Chemical production can be carried out continuously or in batches; different processes and chemical processes can be combined, split, and produced intermediate (batch) materials or finished products, which are carried out to inventory (MTS) or to order (MTO) at different asset portfolios and different starting points. These variables complicate planning, cost, formulation, and quality management because the supply chain must operate under constant pressure to minimize asset downtime and maximize asset utilization.

Most importantly, chemical manufacturer is often unable to foresee the full range and range of their products or molecules, which are often just the intermediate link – usually downstream production – of another final product. Moreover, due to the nature of its materials and products, the chemical manufacturing industry is under continuous regulatory surveillance and must balance these demands as it deals with unique supply chain pressures.

The unpredictability of supply and demand

The supply chain is volatile. Supply ecosystems can be disrupted anywhere, leading to chain reactions up and down the value chain.

For example, the rapid commercialization of the chemical industry means that customers often have many sources, and they can get the materials they need. If you don’t have what customers need, in terms of quantity, price, when they need it, they can go to your competitors.

Moreover, because chemical manufacturer is so high in the value chain, they can be victims of the “bullwhip effect” – small changes at the “tail end” (end market) that turn into significant changes when they reach the “handle” (producer).

All of these happen in the interrelated and interactive global economic cycle. In such a dynamic environment, it is extremely difficult to provide accurate predictions. With so many, even confirmed purchase orders can be transferred, which makes it difficult for manufacturers to meet the most profitable demand in the best time.