The Chemical Supply Chain Explained

The chemical supply chain industry has seen a dynamic shift in recent years due to risk mismanagement and lack of resilience in global value chains. These chemical supply chains encompass various stages, from the sourcing of raw materials to the final delivery of finished products to customers. In this study, we capture major themes of chemical supply procurement, sustainable procurement, and recent developments in the chemical supplier market.?

The chemical industry is a highly competitive but low-margin industry. The chemical supply chain market is a dynamic and complex industry that plays a critical role in delivering chemicals and related products to various sectors globally. Over the years, the market has witnessed significant developments and transformations driven by factors such as globalization, technological advances global industrial chemicals business stands tall with a market size of US$1.4 trillion worldwide. With the recent restructuring of the global supply chain, growth has slowed in the chemical market segments, sustainability considerations, and regulatory compliance.??

With the ongoing development of Environmental, Social and Governance (ESG) standards, there is a dire need for more accountable chemical supply chains. Hence,?the study of chemical supply chain stability and practically implementation of sustainability standards is significant to strengthen the safety of chemical supply chain operations, improve the competitiveness of chemical industry, reduce global energy consumption, and protect the social environment. By adopting these strategies, India can develop its chemical supplier market, position itself as a hub for sustainable chemicals, and contribute to the country's economic growth while addressing environmental and social challenges as shown below in Figure 1.???

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What is The Chemical Supply Chain??

Chemical supply chains refer to the network of interconnected activities and processes involved in the production, distribution, and delivery of chemicals and related products.? These supply chains encompass various stages, from the sourcing of raw materials to the final delivery of finished products to customers. It encompasses the broader process of managing the flow of chemicals from sourcing to delivery while Chemical procurement supply focuses on the specific activities involved in acquiring chemicals. Effective chemical procurement supply is essential for optimizing the chemical supply chain.???

What are the challenges faced by Chemical Value Chains??

The production and transportation of chemicals is a risky process with high-cost operations for members of the supply chain, where some of the materials deteriorate over time and deal with value-reduction challenges. To prevent potential hazards and improve product quality, the manufacturer invests in risk reduction and quality improvement technologies that can also attract more market demand.?

The Race against Time??

Owing to the importance of time in the storage and production of chemical products, many companies are focusing on a novel lead-time-based discount contract to coordinate the channel members. This contract seeks to maximize the total profit of the chain by determining the optimal lead time and the manufacturer’s technology level. By doing so, the supplier provides high-quality products and the manufacturer’s unit supplying cost reduces and can buy more chemicals from the supplier. On the other hand, the supplier will have more time to supply the product and its initial cost will be reduced. As a result, the profit of both sides increases simultaneously. According to Deloitte CPO Survey in 2016, the solution to prepare chemical companies for the requirements of future markets is to fix the basics: customer excellence and digital transformation.?

Obstructions to Digital Transformation????????????????

While manufacturing in general has been adopting new technologies and seeing benefits, chemical manufacturers have mostly lagged in the strategy to develop a digital roadmap. According to a study by?LNS Research , an average of only 25%–50% of chemical manufacturers (depending on sub-vertical) have implemented new, cutting-edge technologies. The study also found that discrete manufacturing counterparts fared much better than any chemical segment—specialty, basic, and bulk. A similar study done by?Accenture ?indicates that 55% of chemical companies that invested in digitalization report profit increases of 5–20%, while about 25% of the companies saw profits grow greater than 20%. Chemical companies face an uphill battle trying to optimize their end-to-end supply chains with so much of that data existing outside of the organizations. In fact, Ernst & Young reports that “up to 80% of a large enterprise’s supply chain data is likely in the hands of other companies.”?

The Top 5 Expectations from Chemical Supply Chain Markets in The Decade??

Sustainability and Circular Economy?

There will be increased demand for sustainable and eco-friendly chemicals, as well as initiatives to promote the circular economy. Companies will strive to reduce waste, promote recycling and reuse, and adopt cleaner production processes.??

Digital Transformation and Industry 4.0?

The chemical supply chain will continue to undergo digital transformation and adopt Industry 4.0 technologies. Automation, data analytics, artificial intelligence (AI), and the Internet of Things (IoT) will enable real-time monitoring, predictive analytics, and optimization of supply chain operations.????

Risk Management and Resilience?

Companies will focus on identifying and mitigating risks such as supply disruptions, regulatory changes, and natural disasters.? Strategies like scenario planning, supplier diversification, and agile supply chain design will be emphasized to enhance resilience and minimize disruptions.??

Collaboration and Partnerships?

Expectations will include closer collaboration between suppliers, manufacturers, distributors, and customers to improve demand forecasting, inventory management, and overall supply chain efficiency.??

Regulatory Compliance and Safety?

Companies will be expected to demonstrate adherence to safety protocols, responsible sourcing practices, and ethical standards.? Transparency in compliance and the use of digital tools for regulatory reporting will be crucial.??

Chemical procurement services in global supply chains?

What is Chemical Procurement Supply??

Chemical supply procurement refers to the process of sourcing and acquiring chemicals for various purposes, such as research, manufacturing, or industrial applications. It involves identifying the required chemicals, finding suppliers, negotiating terms and pricing, placing orders, and managing the logistics of delivery. Chemical companies in the supply chain should optimize the supply chain design, improve replenishment efficiency, enhance collaboration with other enterprises, and reduce the lead time to enhance the stability of the supply chain.??

Sustainable Chemical Procurement?

Sustainable procurement of chemicals means buying chemicals in a way that minimizes harm to the environment and society. It involves considering the entire lifecycle of chemicals, from production to disposal, and choosing eco-friendly options. Key aspects include using green-certified chemicals, ensuring supply chain transparency, collaborating with suppliers, finding safer alternatives, and complying with regulations. By adopting sustainable practices, organizations can help create a better future and positively impact the chemical industry.?

Supply chains are changing their business paradigm as they strive for sustainability and not just for increasing profits. Sustainability, however, is a concept that is open to interpretation since it is based on societal and organizational values. Some of the key aspects of the sustainable procurement market for chemicals are environmentally friendly chemicals, green certifications and labels, supply chain transparency, collaboration with suppliers, chemical substitution and alternatives, life cycle assessments, regulatory compliance,? social responsibility, reporting and transparency, innovation, and research, etc.??

The sustainable procurement market for chemicals is driven by the growing awareness of environmental and social impacts, as well as the recognition of the long-term benefits of adopting sustainable practices. By considering sustainability throughout the procurement process, organizations can contribute to a more sustainable future and create positive change in the chemical industry. There are many examples that demonstrate how companies can integrate sustainable practices into their chemical supply chains, making significant strides towards a more environmentally and socially responsible industry.??

Chemical Industry and suppliers should strive for implementing a circular economy approach by developing eco-premium solutions, recycling waste materials, and optimizing their manufacturing processes. They should be committed to reducing carbon emissions, water consumption and increasing the use of renewable energy in its operations. According to a report by AkzoNobel , they currently generate a revenue of 29% in the Asia Pacific and are using the powder coatings segment, which currently contributes around 13% of revenue and is driven by a shift away from single-use plastics – packaging coatings.??

While the demand for sustainable chemicals is increasing, there are still several challenges associated with procuring them. Some of the current challenges to procuring sustainable chemicals include limited availability, higher costs, lack of standards and certifications, complex supply chains, technical performance and compatibility, education and awareness, regulatory hurdles, performance and quality assurance, scalability and infrastructure, etc. Addressing these challenges requires collaboration among stakeholders, including chemical manufacturers, suppliers, buyers, policymakers, and certification bodies. Efforts to promote research and development, establish clear sustainability standards, improve supply chain transparency, and increase awareness can help overcome these challenges and facilitate the wider adoption of sustainable chemicals.??

Global Chemical Supplier Market?

Chemical suppliers must navigate complex regulatory landscapes to ensure compliance, invest in sustainable production practices,? and manage the impact of changing regulations on their operations. These sustainable challenges require proactive efforts from chemical suppliers in the Asia Pacific and? Atlantic regions to adopt sustainable practices, invest in technology and innovation, collaborate with stakeholders, and align their operations with the evolving sustainability expectations of the industry and society. Sustainable challenges faced by chemical suppliers in the Asia Pacific and Atlantic regions can vary based on specific factors such as regulatory frameworks, market dynamics, and regional priorities. Different countries within the Asia Pacific and Atlantic regions may have varying regulatory requirements concerning emissions, waste management, and hazardous substances.?

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Traditional chemicals procurement practices have focused on consolidating the supply base to fewer supply sources for more competitive pricing and to achieve economies of scale. This trend is reflected in the volume of chemicals different countries have been importing and exporting. For instance, the U.S. has become one of the largest importers of chemicals, with volumes growing by 23% from 2015 through 2019. In this period,?China consistently maintained its position as the second-largest exporter of chemicals to the U.S. after Ireland . This has made many American chemicals companies increasingly dependent on foreign sources of supply, most of which are concentrated in one region.?

How the Chemical Supplier Market is Expanding in India?

To develop its chemical supplier market in this decade, India can focus on these 10-point strategies and initiatives to work towards developing its global outreach:??

Strengthen Regulatory Framework?

India can work towards enhancing its regulatory framework for the chemical industry. This includes updating and enforcing environmental regulations, waste management policies, and safety standards.??

Promote Sustainable Manufacturing Practices?

Encouraging and incentivizing sustainable manufacturing practices will be crucial for the growth of India's chemical supplier market. This can involve promoting clean and green technologies, resource efficiency, waste reduction, and pollution prevention measures. Government support? through incentives, grants, and tax benefits can encourage chemical suppliers to adopt sustainable practices.??

Invest in Research and Development?

India can invest in research and development (R&D) to foster innovation and product development in the chemical sector.? Government funding and collaboration between industry and academia can support R&D efforts focused on developing sustainable and eco-friendly chemicals.???

Encourage Collaboration and Networking?

Promoting collaboration and networking within the chemical supplier market can foster growth and innovation.? India can facilitate platforms for suppliers to connect with each other, share best practices, and collaborate on research and development projects??

Support Skill Development and Training?

Investing in skill development and training programs for the chemical workforce will be essential to enhance capabilities and promote a culture of sustainability. The government, educational institutions, and industry associations can collaborate to provide training programs that focus on sustainable manufacturing practices, safety standards, and emerging technologies.??

Foster International Partnerships?

India can foster international partnerships to expand its chemical supplier market. Collaborations with international suppliers, research institutions, and organizations can help exchange knowledge, technology, and best practices.???

Promote Digital Transformation?

India can promote the adoption of digital tools and platforms for supply chain management, data analytics, and process optimization.? This will improve operational efficiency, enable better decision-making, and enhance the overall competitiveness of Indian chemical suppliers.?

Focus on Sustainable Supply Chains?

India can encourage the development of sustainable supply chains in the chemical industry. This involves promoting responsible sourcing practices, traceability, and transparency throughout the supply chain.??

Enhance Infrastructure and Logistics?

Upgrading transportation networks, investing in warehousing and storage facilities, and streamlining logistics processes will help reduce costs, improve supply chain efficiency, and enable the timely delivery of chemical products.??

Promote Export Opportunities?

India can explore and leverage export opportunities in the chemical supplier market. By focusing on product quality, competitive pricing, and meeting international standards, Indian chemical suppliers can tap into global markets.??

Frequently Asked Questions ( FAQs )?

1. What are the key steps involved in Chemical Supply Procurement??

Identify the Chemical Requirements: Determine the specific chemicals needed for your project or operations. Consider factors such as chemical composition, grade, quantity, and any specific certifications or quality standards required.??

Supplier Research and Selection: Conduct market research to identify potential suppliers who can provide the required chemicals. Consider factors such as supplier reputation, product quality, reliability, pricing, and customer service.??

Request for Quotations (RFQ): Reach out to selected suppliers and provide them with detailed specifications of the chemicals needed. Request quotations or proposals that include pricing, delivery terms, and any other relevant information.??

Evaluate and Compare Quotations: Evaluate the received quotations based on factors such as price, quality, delivery terms, payment conditions, and any additional services offered. Compare the offerings to determine the most suitable supplier.??

Negotiation and Contracting: Engage in negotiations with the chosen supplier to finalize the terms and conditions of the procurement. This may include negotiating prices, delivery schedules, payment terms, and any additional contractual obligations.??

Order Placement: Once the terms are agreed upon, place the purchase order with the supplier. Ensure that the order includes all the necessary details, such as product name, quantity, specifications, delivery address, and any special instructions.?

Logistics and Delivery: Coordinate with the supplier to arrange for the transportation and delivery of the chemicals. Ensure compliance with any legal and regulatory requirements related to the transportation of hazardous materials.??

Quality Assurance: Implement measures to ensure the quality and integrity of the received chemicals. This may involve inspections, testing, and verification of certificates of analysis (CoA) to ensure that the delivered chemicals meet the required specifications.??

Payment and Invoicing: Process the supplier's invoice and arrange for payment according to the agreed-upon terms. Keep track of invoices, receipts, and any relevant documentation for accounting and record-keeping purposes.??

Supplier Performance Evaluation: Assess the performance of the supplier based on factors such as product quality, on-time delivery, responsiveness, and adherence to contractual obligations. Use this evaluation to inform future procurement decisions.???

2. What Sustainability Challenges Do Chemical Suppliers Face in the Asia-Pacific and Atlantic Regions??

Sustainable challenges faced by chemical suppliers in the Asia Pacific and Atlantic regions can vary based on specific factors such as regulatory frameworks, market dynamics, and regional priorities. Different countries within the Asia Pacific and Atlantic regions may have varying regulatory requirements concerning emissions, waste management, and hazardous substances. Chemical suppliers must navigate complex regulatory landscapes to ensure compliance, invest in sustainable production practices, and manage the impact of changing regulations on their operations. These sustainable challenges require proactive efforts from chemical suppliers in the Asia Pacific and Atlantic regions to adopt sustainable practices, invest in technology and innovation, collaborate with stakeholders, and align their operations with the evolving sustainability expectations of the industry and society.?

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Views expressed does not represent companies position on the matter??

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