Chemical Technology March 2015

SUPPLY CHAIN

MANAGEMENT

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

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

27

Chemical Technology • March 2015