Over the last ten years, the U.S. has become flush with inexpensive gas and petrochemical feedstocks, a result of the shale-drilling revolution. Now, US producers have an abundance of petrochemical products and plastics available.
Because U.S. markets haven’t been able to absorb the massive capacity increase, chemical companies have turned to overseas customers. However, shipping to an international customer base has not been a smooth process because development and upgrades to the U.S. Gulf Coast (USGC) infrastructure have lagged behind the growth of the manufacturing base.
Supply Chain Challenges Facing Chemical Manufacturers – and How Digital Technologies Can Help
Companies moving products by container face increasing congestion over road and rail routes, as well as a lack of storage facilities near petrochemical plants and packaging facilities.
And there is a structural container deficit in the USGC, as empty containers tend to collect on the US east and west coasts. Container scarcity in the Gulf Coast requires the repositioning of containers, which adds to the cost of transportation.
In total, the chemicals industry is facing a challenging global business environment due to heightened competition, changing consumer demands, persistent raw materials price instability, and international shipping challenges. Chemical manufacturers have realized that more supply chain agility provides options for negotiating a volatile business environment.
Betting on Digital to Create Flexible Supply Chains
Chemical supply chains are making adjustments to manage around these chokepoints to maintain service levels and keep customers satisfied. Concurrently, they must focus on efficiency and keeping the total cost-to-serve down.
To meet these often competing goals, companies must discard the static, linear supply chain and adjust quickly to evolving conditions—this means producing more flexible supply chains.
Digital technologies have already become critical differentiators in creating resilient, forward-thinking supply chains in other industries such as consumer packaged goods. Both the increasing number of connected devices, as well as advances in capabilities–such as real-time visibility, predictive analytics and immediate response to disruptions–Internet of Things (IoT) and digital technologies create profitable outcomes that distinguish organizations from their competitors.
In Part 4 of this series, we’ll dive into how the Electronics industry is benefitting from IoT technologies.