Measures and best practices to meet challenges in the chemical industry

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Chemical industry is one of the oldest and largest industries. Annual sales are about $5trillion, providing employment directly and indirectly to about 20million people. Companies in the industry compete in product / service innovation or asset strength. According to these two parameters, the enterprises in the industry can be divided into the following sub areas:

1. scale operators – petrochemical, chemical fertilizer and industrial acid companies are all part of this part. The company in this area features high assets and low service / innovation intensity, raw material intensive, strong price completion and a large customer base.

2. commodity balance – Plastics, rubber and bulk middlemen are in this category. The company characteristics of this segment include: customer group diversification (small / medium / large), fierce price competition, large intermediary agencies, and large intermediary agencies

3. professional balance additives, catalysts and personal care chemicals companies belong to this field. The company’s characteristics in this segment include a diverse customer base (small / medium / large), large products / portfolios, close customer collaboration, moderate asset strength and existing customization.

4. service providers – pesticide, paint and paint chemical companies are all in this field. These companies feature low asset strength, high customer interaction, brand products, highly customized services and product delivery, and participation in customer processes.

When a diversified company fails in more than two areas, it becomes a participant in a portfolio.


Supply chain management of these companies is challenging due to the lack of flexibility to change and disruption, reliability of weather conditions, macroeconomic trends and political impacts, lack of transparency, ineffective cooperation with cross-border partners and complex customer segmentation. Traditionally, companies in the industry use strategies such as product / service innovation, spin off, merger and acquisition to survive and respond to challenges.

Best practice

Leaders in the chemical industry have taken various measures to meet the challenges and set an example. These measures and best practices are as follows:

1. digitization – digitization in areas where rapid returns can be seen in cost control and productivity.

2. automatic demand awareness – pre analysis of data to identify relevant patterns in requirements and develop requirements.

3. use cloud technology to collaborate in supply chain – chain with key elements of value chain (such as customers, suppliers and other partners), and exchange information with technology.

4. dynamic inventory management – continuous inventory management and adjustment across value chain to optimize safety and buffer inventory.

5. profit, sales and operation plan – proactively balance demand and supply constraints by considering the expected business scenarios and their impact on profitability.

6. supply chain resilience – monitoring and managing supply chain risks to improve the ability to handle disruptive events.

7. supply chain control platform – integrates the data visibility, analysis and execution platform of all supply chain functions to improve responsiveness and flexibility.