Assurance of supply takes precedence
Collaboration and flexibility are essential in a time of chronic logistical challenges and most are willing to pay for performance . Gregory Morris reports
As the chemicals industry confronts the start of a third year of supply chain upheaval , two key themes are emerging : this is a great time to open or expand conversations with suppliers and customers ; and customers have been willing , so far , to pay a little more for assurance of supply . Paul Hirsh , senior vice-president for industry relations at SOCMA , confirms those practices are spreading rapidly . “ We ’ ve been hearing that members are diversifying their suppliers of key ingredients . This includes buying from multiple manufacturers and shipping to nontraditional locations to avoid port bottlenecks ,” he says . Batch manufacturers are working to overcome this challenge , he adds . From SOCMA ’ s ChemSectors programme chemicals , which focuses on performance chemicals , pharmaceuticals and agrochemicals , the pharma companies have done this for a few years through risk management . They diversified their supply chains pre-
COVID to stay competitive . Even when all suppliers and customers are aligned , however , the carriers and trade routes remain a major variable . An executive at one large specialities maker related a frustrating situation earlier this year . “ We ship intermediates to a client half way around the world three times a year . One shipment was in the box container on the wharf in the middle of March , sealed , certified and documented for export
Karim – Driving down working capital is no longer a viable strategy so it could be at the customer in May . It did not even get loaded before the end of May ,” he says . One of the more interesting possibilities in an industry with so much toll manufacturing is the ability of suppliers and customers to redistribute operations and storage . Several operators have arranged to bring some manufacturing back in house while shifting others up or down the supply chain , or even out to toll manufacture . “ Members are expressing two main issues with the supply chain : the ability and time to get the materials to the plant ,” Hirsh says . “ With availability , results from the 2021 Census + indicate a continuation of capital expenditures over the next three years , including areas like warehousing expansion and infrastructure . Customers are willing to pay for timely delivery of supply .” Toyota pioneered just-in-time many years ago , notes Shah Karim , CEO of executive advisory firm SafeRock . “ Companies had aggressive goals to reduce working capital to increase shareholder value . That approach is no longer feasible .” “ The realisation is starting to sink in that robust supply chains are part of comprehensive risk management , like insurance . It ’ s not just a line-item cost . Many businesses have been going down the zero-based budgeting path - where every little thing must be reviewed and justified – for a long time . Now we have to change the path