Supply Chain Improvements in the Chemical Industry
Supply Chain Improvements in the Chemical Industry
CEFIC (The European Chemical Industry Council) are encouraging the extended use of Enterprise Resource Planning (ERP) tools to improve supply chain efficiency as competition from chemical companies in Asia erode the Europeans market share. ERP is widely adopted but the benefits of it are not being fully exploited.
In 2001, chemicals accounted for 5% of freight tonnes lifted in the EU and around 8% of tonne-kms. Their share of cross-border freight tonnage was roughly twice as high, reflecting the high volume of intra-EU trade in chemicals. The relatively high transport-intensity of the chemical industry is also revealed by average length of haul statistics. Consignments of chemicals move an average of 114 km on the road network and 386kms on the rail network, whereas for all commodities the average hauls are respectively 77 and 214 kms. The chemical industry will therefore be more exposed to congestion problems on European transport infrastructure.
Vendor Managed Inventory
Vendor managed inventory (VMI) is a well-established practice in many other industrial sectors. It relieves customers of the need to place orders in the conventional manner and puts the onus on suppliers to replenish customers’ supplies within agreed limits. This gives the producer both visibility and control of the end-to-end supply chain, allowing it to manage inventory and transport capacity more efficiently. From the customer’s perspective, the main disadvantage of VMI is that it locks them into a single-sourcing arrangement with a particular supplier. Experience in other sectors, however, suggests that the risk associated with single sourcing can be more than outweighed by the cost and service benefits of VMI.
Tank Level Monitoring
In 1993 one of Air Products and Chemicals, Inc.’s business units faced a difficult challenge. The company had 70 different regional distribution and logistics hubs spread throughout North America, each operating independently, warehousing products, taking customer orders, distributing products and supporting customers. As a result, the business had a number of inefficiencies.
After analyzing its strategic options, Air Products arrived at the decision to centralize and automate many of the support functions of the business, including customer orders, deliveries, and production.
Devices were installed on customer tanks that measured the volume of product contained in the vessel. Taking the necessary readings and detecting problematic volume changes, these devices would communicate with the back office where applications would convert raw data into actionable information for the supply and logistics planners.
With deployment, Air Products recognized operational benefits, while customer service benefits escalated. Equipped with this leading supply chain innovation, Air Products is able to achieve an average of 99.95% of fills without a stock-out on its 330,000 annual deliveries, 8% reduction in total miles to serve the customer base, and a reduction of customer service representatives. Since industrial gas has a relatively low carrying cost and high turnover, inventory efficiencies were also realized.
Today, automated replenishment of products is a standard industry operating practice in the industrial gases industry, and a requirement for remaining competitive.
The benefits for an automatic replenishment system come in four forms:
1. Operational
Eliminating emergency shipments, reduced customer service organisation, reduced sales resources.
2. Balance Sheet
Reduced finished goods and raw materials inventory.
3. Revenues
Saleable service to the customer, increased customer retention, increased or sustained pricing in core products, more sole source deals.
4. Intangibles
Better use of sales force time, integrated link with the customer.
Level Monitoring System
A successful program makes a supplier more competitive while also increasing the success of the customer, resulting in long term supply relationships and wins for both parties.
New technology is reducing the cost of VMI, with lower priced hardware that can be battery or solar cell powered with flexible wire free communications making installation very quick and easy. The cost of communications is reducing with competitive price plans becoming available from the network operators and easy interfacing to back office I.T. infrastructure.
Sources:-
http://www.skychain.com/pdf/AutomatingTheReplenishmentOfYourProducts.pdf
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Supply Chain Improvements in the Chemical Industry
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