Future chemical supply chains: focus on sustainability
Today, supply chain managers across the global chemical industry, while operating in a very difficult economic environment, need to respond to important sustainability challenges in the supply chain. Chemical production is shifting faster than expected from Europe to Asia, while shale gas is attracting new investments in North America.
These factors are realigning global supply and demand balances, altering the volume and direction of material flows, and significantly increasing supply chain complexity and uncertainty.
EPCA: Sustainable chemical supply and logistics chains
Mindful of today’s wide-ranging changes, EPCA, with the participation of Cefic, initiated a project to explore opportunities to respond to these major supply chain challenges. Combining expertise from the industry, academia and consulting companies, the study examines supply chains in the chemicals and other sectors.
By making extensive use of case studies, this report aims to showcase good practices and demonstrate how they contribute to more sustainable logistics and supply chains.
The EPCA report ‘Sustainable Chemical Supply and Logistics Chains: The Path forward‘ focuses on four major areas:
1. Managing complex and uncertain supply chains in a global context
The report recommends addressing complexity and uncertainty in chemical supply and logistics chains. As such, it identifies key drivers and maps supply chains for several chemical products, reflecting various degrees of complexity and uncertainty. The case studies highlight possible ways to cope with uncertainty (requiring strategic business engagements) or complexity (requiring functional expertise). The chemical industry, like other leading industries, is applying in this context demand-driven supply chains, product standardisation, collaboration, decoupling downstream, differentiation and segmentation.
2. Pro-competitive collaboration as a route to more efficient and sustainable supply chains
While the technology and concepts all appear to be available, there still seems to be reluctance or inability amongst supply chain business partners to collaborate more effectively, often manifested in an unwillingness or inability to share data and information. The report highlights the growing need for pro-competitive collaboration (both horizontal and vertical), while respecting competition rules, to secure efficiency and sustainability in logistics chains. Drivers include rising energy prices, environmental requirements, infrastructure issues and the skills gap. The report shows that partnerships can help to significantly improve supply- and logistics chain sustainability, e.g. delivering significant cost savings, lowering CO2 emissions or raising the quality of service for customers. The report highlights the critical success factors of both vertical and horizontal collaboration which includes clarity about the business case, visionary thinking and leadership. A methodology and checklist for pro-competitive horizontal collaboration are proposed.
3. Technology as an enabler of sustainable supply chains
The report categorises technology applications by reference to their relationship with assets or supply chain processes and whether these applications have been initiated by producers or service providers. The majority of the applications were initiated by service providers and were process-related. For reaching sustainability goals, economic benefits were the most important driver whereas “planet” and “people” effects reached a similar, but slightly lower level than “profit”. In addition, the report highlights cutting edge and future technology breakthroughs that could radically transform supply chains. The internet of things, the cloud, social media, customisation technology (e.g. 3D printing) and nano-technology are put at the forefront with a timeframe for implementation. To be successful in these fields, the industry has to look beyond the numbers, as the business case may not be evident today. This requires leadership and vision.
4. The three elements of sustainability: “people, planet, profit”
Whilst the vast majority of cases produced in this report show “profit” benefit, more than half thereof also have a positive effect on “planet” and nearly half on “people”. This “people” effect addresses change management as well as the need for constant train- ing and development of individuals to reach the skills required for collaborative approaches and the application of new technologies, as well as improvement of safety and security. Collaboration and technology as enablers to manage or mitigate uncertainty and complexity as well as to reach sustainability goals prove to be equally important. A quarter of collaboration cases include authorities (regional, national, local).
This report demonstrates the crucial importance of greater responsiveness and resilience, increased innovation in processes and technology, and enhanced collaboration in making supply chains more efficient and sustainable. It identifies pathways for sustainable chemical supply chains in an increasingly complex and uncertain business environment inclusive of the implementation of the 10 Global Compact Principles.
The full report is available on the EPCA website.