Chemical supply chain teams are challenged to maintain profits and service levels during these turbulent economic times, writes Ian Huntly, CEO and MD of Rifle-Shot Performance Holdings.
Plant closings, staff reductions, industrial unrest, depressed sales, and volatile prices confound operating plans. To succeed, companies must adopt planning processes and strategies to support rapidly changing market forces. Supply chain leaders are deploying advanced planning technology to enhance market visibility and hone strategies to gain competitive advantage over rivals.
Chemical supply chain practitioners are reeling from the effects of the global economic downturn and instability. Balancing supply and demand to optimise operating performance in the chemical industry has never been harder.
Sales volumes and prices are down in most chemical markets resulting in an unprecedented wave of plant closures and increasing downward pricing pressure, while large amounts of new capacity has entered the market. Raw material prices remain volatile and uncertainty reigns whilst chemical industry executives are unable or unwilling to predict if and when business conditions will improve.
In light of all this uncertainty, how are supply chain professionals who are tasked with planning and deploying your company’s manufacturing and distribution assets able to see the forest through the trees?
These planners are accustomed to evaluating the options and to balancing customer service demands against inventory, manufacturing, distribution and other operating costs to meet company profit targets.
Traditionally, chemical planners coordinate monthly sales and operations planning (S&OP) cycles to derive operating plans that in turn inform tactical purchasing, manufacturing, distribution, and customer service decisions. These tactical decisions are essential to corporate performance. Under typical business conditions, planners rely heavily on historical sales patterns and standard operating rules of thumb to create these operating plans.
Unfortunately, current market conditions are so unusual and volatile that standard operating practices may not be relevant or too slow to support chain professionals as they steer a course to acceptable supply chain performance in 2009.
Supply chain leaders in the chemical industry are re-engineering their planning processes to cope with increased volatility and the uncertain market conditions that are likely to persist throughout 2009 and well into 2010.
Planners need better visibility to changing business conditions and analytical tools to help them more rapidly sense and respond to market changes. We are helping more and more chemical companies upgrade to planning tools that support a move from static monthly S&OP to evergreen planning. In such an environment, near real-time demand, transportation, and production data are used to continuously monitor performance and make operating course corrections whenever market conditions dictate.
Industry analysts tout this best practice approach to successfully navigate 2009’s chaotic business conditions. Consensus opinion suggests an orchestrated approach to improved processes and supply chain planning technology can, in the short term, optimise inventories, production and purchase plans to achieve a profitable financial balance.
This will also help a company react to unplanned events and market swings more quickly than competitors to garner increased market share. Speed to guided action can be everything in these times. As the chemical industry emerges from the downturn, these companies will find themselves in the strongest position to capitalise on new opportunities as the global market expands.
Progressive chemical companies are using today’s challenging business environment as a catalyst to drive improved supply chain processes and tools through which they expect to gain competitive advantage, bolster profitability and improve service levels.
The current market downturn will hopefully be short lived, but market uncertainty, excess capacity, operating complexity and an increasingly competitive market are here to stay. Tomorrow’s leaders are the ones who will act now to upgrade their company’s supply chain performance and competitive position.