SUPPLY CHAIN MANAGEMENT concerns as the availability of raw materials ( 93 %) and transportation ( 86 %). Downstream , the numbers are basically similar . “ Distributors are in the middle of this . In this time of volatility , shortage of supply and too little transportation capacity in many areas , distributors must ask how they can create value for themselves , their suppliers and their customers ,” Winkler said . The chemical industry was already embracing new technology , notably automation , advanced analytics and digitalisation , but COVID hugely accelerated its adoption . McKinsey found that the use of advanced technologies in manufacturing , supply chain and general business decision-making grew 25-fold in the pandemic , almost as much as in consumer markets . Similarly , in a recent survey of the customers of wholesale distributors , including chemical distributors , 60 % stated they preferred digital platforms as an ordering channel . “ They also said that this started in the pandemic . They like it and they want to keep it .” Real-time tracking of shipments and inventories are also in demand . The availability of digital channels is still below the range and availability of products , customer service and
The congress features a ‘ young leaders ’ panel the relationship with the sales representative as a top criterion for customers , Winkler added . However , it is growing in importance , while the traditional concerns are in relative decline . The last trend is demographics , or the ‘ Great Resignation ’. Another recent McKinsey survey found that 40 % of employees are at least somewhat likely to leave their job in the next three to six months . Moreover , 25 % of chemical industry employees are between 55 and 65 and thus likely retire within the next ten years . In Germany and probably elsewhere too , the number of new entrants into the industry is only around two thirds of the number leaving . The industry will also struggle to attract and retain talent .
Navigating the challenges
Winkler argued that a ‘ glass half full ’ approach is the most productive approach to these challenges for chemical distributors . They play a crucial role in the value chain , and can help their customers and suppliers to decarbonise their products and value chains , or by building circularity straight into their business models . For example , the average bottle of shampoo creates 540 grams of CO 2 emissions , 60 % from raw materials , 30 % during production and 10 % during packaging and transportation . “ If you ask me , that ’ s 70 % a distributor can help the customer to address ,” he said . That bottle would typically contain ten chemicals from multiple suppliers . Many suppliers thus question what they can achieve by decarbonising their products when they are such a small part of the overall product . In addition , there are many ways to decarbonise key ingredients and producers are often uncertain which is the right way . Distributors can play a key role in helping them to make those decisions . The current volatility is also an opportunity for distributors , in Winkler ’ s opinion . Many are doing “ extremely well ” by leveraging their networks of multiple suppliers to help customers solve their supply chain crises . Doing this proactively could create even more value . Currently , he said , there is a lot of duplication and a lack of connection between the warehouses of the chemical industry and distributors , even when they are close together geographically . “ Imagine if you could bring those together physically but also through technology , platforms and so forth .” McKinsey has calculated that doing this could yield huge savings in costs without decreasing service . It requires collaboration , bringing systems and data together , and extensive discussions on how to split the benefits but it is a “ significant opportunity that would bring significant amounts of inventory into the market , which is highly relevant at a time of short supply ”. Distributors sit at the centre of digitalisation , Winkler said , and are thus “ custodians of massive amounts of data ... You sit on millions and millions of data points . The question is how you can use AI and machine learning to benefit from them .” A revolution is going on in pricing , Winkler added . McKinsey has studied this extensively since 2009 and sees a 2-5 % return on sales from using AI in distribution . It helps to manage margins
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