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Last week I had the pleasure of attending the popular LogiChem Conference at Antwerp, Belgium and it became apparent again that the the chemical industry is operating in a quite challenging environment, characterized by volatility, uncertainty, complexity and ambiguity. The new middle class in the emerging countries and the “always on” networked customers have not only shifted demand but also made it more erratic. The advent of shale gas in the US has shaken up the supply side. What is needed to ensure profitable growth and sustainable margins in such a climate? – Speed and agility to respond to market needs, a thorough evaluation of costs to serve and service differentiation. Finding the right answers to the questions below, although not new, is becoming more important than ever before:

  • Do I need to move my manufacturing assets closer to my raw material or to my supplier base?
  • How can I enhance my portfolio with differentiated services?
  • What value does my product and solution portfolio create for my customers and how can I turn this into profit?
  • How can I improve my forecast accuracy?
  • How can I achieve better collaboration with my customers and partners along the entire value chain?
  • How can I track and trace the status of my shipments and drive end to end visibility along my value chain to mitigate risks?
  • How can I prove the integrity of my products and initiate recalls in case of issues?

One critical success factor could be taking a comprehensive approach to segmentation, comprising besides standard customer and product classification the following elements:

  • A segmentation of customer services based on a clear understanding of associated costs
  • A segmentation of customers, based on forecast patterns and volume, rather than revenue based only
  • A segmentation of supply chains based upon critical characteristics like push/pull decoupling points, lead times, service levels, MTF/MTO/MTS etc.
  • Multi-echelon inventory optimization
  • Dynamic adjustment of segmentation criteria and targets

Speed and agility in adjusting your supply chain strategy to market needs and in striking the right balance between cost-centricity and long term value creation counts more than ever in protecting your margins and in achieving sustainable growth and operational excellence. A holistic approach comprising strategy, organizational set up, differentiated business processes/services and a rock solid IT foundation providing the framework for real time predictive analytics, what if simulations and decision making anywhere at any time by leveraging advanced algorithms, is pivotal to success. 

For more information on how to optimize your business processes to stay agile in this environment, visit the chemical expert table at Sapphire next week in Orlando.

Please share your ideas, thoughts and feedback with using the hashtags #SAPPHIRENOW and #SAP4Chemicals.

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