SUPPLY CHAIN MANAGEMENT
Figure 2 – US capacity utilisation in chemical manufacturing , 2021-3
Note : Source – Ycharts
implemented . The result is a supply chain that can quickly adjust to variability in supply , demand , and company resources .
A speciality chemical company realised more than $ 24 million in savings and a 10 % reduction in spend in part through network modelling . In the past , legacy suppliers responded to any attempt to negotiate by threatening to withhold supply .
After an assessment of their supply network , the company was convinced to by-pass Tier 1 and 2 suppliers and deal directly with producers whenever possible . The legacy suppliers realised they now had to negotiate in good faith ; prices dropped and reliability soared . 1
In summary , network modelling enables a company to :
• Track obstacles along the supply chain
• Identify the need for and find alternative suppliers
• Redesign their logistics for greater efficiency and reliability at a lower cost
• Decide when and where to add , close or expand facilities
• Better balance supply and demand
• Assess origin ( inbound feedstock ) and destination ( outbound products ) pairs
• Enforce standardisation between sites
• Adapt faster to changes in the marketplace across procurement , operations and logistics
• Provide a data-based foundation for advanced negotiations with suppliers to optimise the profit and loss impact
Footprint rationalisation
The design of a single plant is often considered ‘ one and done ’. Routine stifles any opportunities for maximising the efficiency of people and equipment . As people leave , any lessons learned are lost .
In the end , the footprint of a plant or warehouse falls out of alignment with the actual needs of the company . Space is overutilised in one area or location and underutilised in another . Workers may waste hours adjusting equipment , shutting down between shifts , waiting for maintenance or parts or trying to meet one scheduling change after another .
With footprint rationalisation , manufacturing facilities and overall operations are expanded or consolidated , distributed and organised strategically to improve efficiency , reduce costs and enhance sustainability while optimising the company ’ s make versus buy identity ( made to stock vs . made to order ).
Footprint rationalisation does more than right-size facilities ; it makes them agile . The process begins with a boots-on-the-ground analysis of the current facilities , processes , and supply chain , encompassing capacity , capability and cost ( or 3C ) as well as market demand .
For example , a speciality chemical company had seen a 30 % drop in sales volume and a corresponding drop in margin . Instead of simply cutting spending drastically , it was open to value creation initiatives , including switching its preferred logistics supplier and modernising operations . With the help of network and footprint optimisation , the company offset margin leakage and revenue loss with $ 18.6 million in procurement savings , $ 4 million in logistics savings and an 11 % improvement in productivity . 2
Rationalising the footprint includes , among other items :
• A cost , benefit and risk analysis of each location , including an assessment of available , overused and wasted space
• The creation of consistent KPIs aligned with company goals
• Standardisation of processes between sites
• Consideration of centralised sourcing and distribution
• Leadership and organisational improvement to address accountability , collaboration and planning issues
• An analysis of make vs . buy identity ; that is , what should be made in-house and what should or could be outsourced
• An emphasis on preventive maintenance to keep equipment working . In the end , the footprint of a plant or warehouse falls out of alignment with the actual needs of the company . Capacity is overutilised in one area or location and underutilised in another . When overall capacity does not match demand , companies miss an opportunity to save costs , consolidate operations , increase throughput , and optimize their network .
With footprint rationalisation , manufacturing facilities and overall operations are expanded or consolidated , distributed and organised strategically to improve efficiency , reduce costs and enhance sustainability while optimising the
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