As solution manager for procurement for the chemical industry I am often asked about future trends and updates for our industry.
It’s not news that the chemical industry is undergoing a major transformation through mergers and acquisitions, changing market dynamics and nonlinear supply chains. This results in managers making great efforts to harmonize their supplier, sourcing and supply chain processes. What’s new is HOW they are going about creating a successful digital strategy that will take them to the next level of business optimization.
Excellence in Procurement has become the fundamental focus for companies to gain synergies from M&A through consolidation, increased visibility, integration to planning, manufacturing, maintenance, sales and finance. Companies are much further along in driving excellence in indirect procurement and are now beginning to focus more on direct procurement and spend to realize the benefits.
Obtaining the right grade of raw material at the right price, right time complying to all safety and regulatory requirements is fundamental to the profitability of Chemical companies. Based on McKenzie, purchasing expenditures are 20 – 60% of revenue for specialty chemical companies and 50 – 80% of revenue for commodity chemical companies which is quite significant that cannot be ignored.
The raw materials can be supplied from many different locations and in many forms and numerous grades. Minor changes in the characteristics of the batch could have a huge cost differential to process them which makes procurement of direct materials challenging. This is more complex for specialty chemical companies. Therefore, it requires the buyers to have a deep knowledge of the product and perhaps certify every source of supply.
Identifying these opportunities requires also looking at the solutions that support the process optimization. SAP Ariba has made great strides in recent years specifically for the chemical industry and direct procurement.
For this reason we have created the Chemical Resource Hub for procurement. Click on the link to get access to exclusive content and discover how companies like yours have digitally transformed their end-to-end processes. Explore our content curated specially for you – including white papers, chemical industry guides, customer case studies and much more.