Firms in the chemical industry have not been as aggressive as those in some other sectors in adopting digital technologies. This has happened despite the fact that senior executives at many of these companies are aware of the range of benefits that digitization can offer in improving their chemical suppy chain.

How to Optimize Your Chemical Supply Chain

If a chemical consumer can accelerate its digital journey to approach the level of, say, the communication industry or the media and entertainment companies, there are tremendous gains to be made. Digitalization can provide quicker turnaround times, pricing that is more in sync with current market conditions, and a healthier bottom line.

Let us examine some of the specific steps that you can take.

Your supplier should provide a total package, not just a commodity

The days of selecting a supplier based solely on the price that is on offer are long gone. Instead, your supplier should understand your product and the role that the material it supplies plays in its manufacture. Is there an alternate chemical that can do the job better? If you use a different grade of material that is more/less expensive, what is the implication?

A supplier may not be the lowest-cost option but could bundle its product with value-added services. The total package could give you a superior result at a lower cost.

How can digitalization help your supplier achieve these ends? Some suppliers may use smart sensors to gather data from your site and use it to provide a greater level of service. They could also track inventory levels and arrange for additional shipments based on data that they gather remotely. 

Pricing your products

Chemical firms can face great challenges in pricing their products correctly. Charge too much and you will see your customers drifting away at the first opportunity. Lowering your prices may help to increase sales volumes, but your margins could take a battering.

A firm can use digital techniques to obtain real-time price quotations from multiple suppliers. These prices can be built into its own product pricing software. Consequently, the firm will be in a position to offer prices that are based on their own costs and which yield a pre-determined profit margin.

Sharing of information

A supply chain’s efficiency is dependent to a large extent on the immediate availability of information to all its stakeholders. If chemicals are to be procured at the lowest possible cost, it is necessary to outsource various functions along the supply chain. This results in several additional parties becoming involved and makes communication even more difficult.

It is absolutely essential for a chemical consumer to use digital means to ensure that it is possible for every organization along the supply chain to communicate with each other. Information that is visible to some participants must also be accessible by others whom it impacts.

Setting up such a system may prove to be difficult and may initially require a mix of digital techniques and human intervention. But once it is established, it can yield substantial benefits and a significant competitive advantage.

Estimating demand

If a chemical company is able to estimate demand accurately and plan its procurement strategy accordingly, it can lower costs and improve its profitability. Demand forecasts are based on a mix of short-term and long-term factors. What is the volume of orders that you have already procured and how much is in the pipeline? Long-term indicators of demand could include the opening of new markets and economic trends.

Companies could use several sources of data to estimate their raw material requirements. Estimating demand with a greater degree of accuracy could help to boost a company’s performance.

Making a digital roadmap

A firm cannot undergo a digital transformation overnight. The process has to be well thought out and it is necessary to monitor your progress by tracking yourself against pre-determined milestones.

However, it is essential that chemical firms begin this journey as soon as possible. Their adoption of these technologies will play a large role in determining their ability to remain competitive in the marketplace.

 

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#Digitalization in the Chemical Industry, #Chemical Supply Chain