18 Apr 2024

Top 10 Chemical Industry Supply Chain Challenges

The chemical industry supply chain is at the fulcrum of the global value chain's functioning. But like any other process, it tackles its fair share of challenges. Here's a list of a few of them.

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You know how when a machine works, there are lots of parts that need to be in sync. Like a fulcrum that makes sure that the whole output is just what we intended it to be. If other industries or processes ranging from transportation to manufacturing to distribution have to be on their A-game, then the chemical supply chain, more often than not, will be forming the crucial foundation that contributes immensely. A complex mechanism in nature, the chemical industry finds itself being the catalyst agent for other processes. From being a key ingredient in the development of fertilizers for farming to fueling our daily transportation needs to well, handling highly sensitive commodity that are meant for medicinal, production, or research purposes, the titular agency is integral to driving innovation, ensuring product quality & safety, and maintaining economic stability.

However, like any other workflow, supply chain challenges in the chemical industry are quite profound. As we mentioned, it being a complex process, the stages from procurement to storage to manufacturing to distribution have many parameters that needs to be intact. With many operators involved, from manufacturers to distributors, retailers, and consumers, operations need constant visibility to optimize resources, mitigate unforeseen risks, and maintain performance. In the quest to the above objectives, here are the chemical industry supply chain challenges.

Table of Contents

What are the key supply chain challenges the chemicals industry faces?

A visual exploring the main obstacles faced by chemical companies in managing their supply chains
  1. Lack of Transparency:

    One of the key bottlenecks in the chemical industry is transparency. Not knowing the exact amount of inventory leads to delays in subsequent deliveries and inflated costs. In some cases, it also leads to quality degradation when mismanagement of demands is at the helm, too. Such shortcomings are usually tackled best with the adoption of analytics, which gives accurate insights into the actual customer demands while managing market fluctuations. This bodes well on the cost front as well, as stakeholders will duly know the exact amount of production quantity required, both for the current timeline and the foreseeable future.

  2. Manufacturing Process:

    Chemicals are susceptible products. Which means their production plans or recipe need a very considerate approach. From choosing the right proportion of materials, solvent, reactants, or catalyst to maintaining the right production temperature to knowing which preservation fluid will keep the final product in its truest sense, even during hectic transportation, forms the essential requirement of manufacturing process challenges of the chemical industry.

  3. Quality Checks:

    A non-negotiable aspect of the chemical industry is that of regular checks that must be carried out to maintain efficacy and, most importantly, its state to ensure that it does not bode any health hazard. This step is a comprehensive one that includes material mapping, evaluation of the composition and quality, or equipment that is directly involved in manufacturing. Additionally, being transparent with the quality assurance practices with the customers keeps a brand in sound check. Failure to keep a tab on the regular checks might lead to untimely disruptions in the form of device failures, malfunction, and subpar production (which can also be owing to lack of QC done on raw material).

  4. Transportation:

    A herculean task for almost every industry, the timely delivery of a finished commodity carries the flag for an organization's reputation, too. A delivery made in time is synonymous with how well the enterprise’s customer gratification metrics are. With many parties involved, from transportation to suppliers, any hiccup or delay may lead to a subsequent slowed process at the recipient's end. Not to mention, documented disruptions like the Red Sea Crisis have shown that untimely disruption on a global scale does impact the global supply chain. In some cases, a failed delivery consignment, which is time-critical, can also create a case of handling chemical waste.

  5. Inventory Optimization:

    With the pointers mentioned up until now, it’s underlined how chemicals are time-critical commodities. Their handling is of utmost importance and diligence. Inventory optimization plays a critical role in staying true to these parameters. With an AI-powered platform, SCM can make decisions with forecasts in mind while optimizing resources and costs. When the stock figures are finalized, stakeholders know the exact amount of raw material required to match the market demand. This holds more true for a conglomerate whose business network spans countries and needs more astute inventory requirement insights to avoid the collapse of balance sheets.

  6. Environmental Regulations:

    Chemical manufacturing, storage, transportation, and waste management pose a particular ecological challenge. With increased government regulations pushing conglomerates towards a more sustainable value chain process, the equipment and the whole operational framework need to be in line with the neutral carbon footprint policy. Lack of it can result in heavy penalties being imposed on the enterprise and, in some cases, a complete cease-of-operation.

  7. Fluctuating Economy:

    It goes without saying that management’s critical decisions are made based on the current economic situation and how it will act. Any fluctuation in fiscal standing directly impacts demand, which sets a direct chain reaction toward production levels and inventory management. Companies that are late to read the market scenarios find themselves confronted with excess or shortage of stocks.

  8. Market Competition:

    Each industry has many players. In a globalized market, a chemical supply chain organization needs to be updated with the latest tech to solidify its presence. Investment in the GenAI platform has been proven helpful, providing timely insights that can help management plan better for their quarterly, half-yearly, or yearly timelines.

  9. Cybersecurity Issues:

    Perhaps a flipside to technological advancements with all data being online is that owing to a lack of security protocols, it stands to get breached, too. With cyberattacks and malware exercises for ransom being very prominent, companies have to be proactive and install the latest protocols that do not allow unauthorized access to databases.

  10. Global Supply Chain Shortcomings:

    A more prominent challenge for an MNC with operations spanning multiple countries, global disruptions (Ukraine-Russia War, Houthi Rebel Attacks) can impact the whole value chain process. For instance, a local disruption in a country from where an organization procures its raw material will affect its manufacturing hub, which is situated in a different country. Natural disruption, too, sometimes can alter the course of SCM, leaving them adapting at the last moment.

The inculcation of tech has rectified the bottlenecks with data-driven insights, preparing SCM to handle last-minute disruptions. The same holds true for the titular value chain. With new-age platforms powered by artificial intelligence and machine learning churning out insights for informed decision-making, the leadership can adeptly subside the chemical industry supply chain challenges.

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