Chemical Technology March 2015

Chemical Technology • March 2015

in both short and long-term demand – distributors may

stock pile products prior to price increases or producers

may attempt to time price increases at the precise point

when distributors require maximum inventory to prevent

them from stockpiling at lower prices.

• Expanded product portfolios –

Specialty chemicals producers

continue to differentiate their products in direct response

to customer requirements and newmarket opportunities.

Supply chain systems must evolve in parallel to handle

various product specs, production scheduling and batch

scheduling.

• Regulatory compliance –

Government regulation has had a

profound impact on the chemicals business that has re-

sulted in stricter controls for both finished and unfinished

products. Specialty chemicals producers must assure

product quality, report precise batch and lot traceability,

and deliver tighter product testing and documentation. As

part of regulatory compliance, operations such as major

and minor cleaning between batches to meet regulatory

compliance have a significant impact on plant scheduling

and product availability.

• Hedging behaviour –

To address risk, planners and schedul-

ers often prepare for the worst case scenario by build-

ing up safety stock in anticipation of uncertain future

demand. Known as hedging, this business behaviour

ignores the cost of excess capacity and often points to

the business’ inability to ‘catch-up’ in the event of equip-

ment failure. Possibly the most damaging and costly part

of current planning and scheduling practices, hedging

leads to both under production of required product and

over production of unwanted product, which results in

increased inventory cost and product waste.

In today’s business environment, these factors are a con-

tinual threat to operational success and impact the busi-

ness in specific areas.

The measures of supply chain success

For supply chain operations, the typical measures of suc-

cess include:

• Customer service –

Customer service is paramount for spe-

cialty chemicals producers and it is a standard measure

of business performance. There is constant pressure to

reduce order lead times to retain customers, as well as

pressure to maintain appropriate stock to meet demand.

• Inventory management –

Inventory is expensive to store and

ties up working capital. Companies require the ability

to closely monitor inventory levels and track common

metrics such as inventory turns and number of days of

SUPPLY CHAIN

MANAGEMENT