Chemicals production is a multi-million dollar industry with a complex supply chain ecosystem. It is one of the largest industries with a global impact and more than $5 trillion annual sales and supplying nutrition, agriculture, construction, and many other industries. The chemical market is experiencing many transformations right now, and not just because of the coronavirus pandemic. Companies face many challenges in the chemical supply chain and will have to adopt new strategies to excel in operational efficiency.
There’s no surprise that the chemical industry is a complex one and requires high operational productivity. It is always under regulatory control due to the nature of its products, so it was always a challenge to sustain all the parts of the end-to-end chemical supply chain. Now, with an unstable market, pressuring customer demands, digitalization, and industry consolidation, some chemical companies are crippling under the pressure.
What are the key challenges of the chemical supply chain?
One of the complexities in the chemical supply chain is the increasing customer demands in terms of speed and service, and the general uncertainty in terms of supply and demand at the market. One of the things going on in the chemical business right now is commoditization, which implies a customer having multiple suppliers to get the product from. Adding the natural complexity of the chemical supply chain to the equation, companies have a hard time creating a forecast and keeping track of all the little fluctuations, affecting the different parts of the value chain.
It may sound ridiculous to mark digitalization as a challenge in our time, but for the heavy, global industries as chemicals, the transition is long and challenging. What’s more, new technologies and regulations put a strain on the rigid functioning machine of the industry, making it even harder to incorporate flexibility and adopt these new technologies, and, therefore, improve service.
Industry consolidation and growing competition
Intensifying competition means slower growth and fewer possibilities for many companies. While western markets are oversaturated with chemical companies, the focus shifts to Asia and the Middle East. Because of the overcapacity, smaller players are merging with larger ones to avoid bankruptcy.
Stay on track with PLS
We have extensive experience with industrial businesses, including chemical companies, and will take care of your supply chain needs with the focus of reducing supply chain costs. Learn more about our solutions here!