Established players need to start delivering added value if they’re going to compete with their cheaper competitors.
The market for chemical products is expected to double to 5.6 trillion euros by 2035, according to LogiChem. That might sound like good news for chemical companies, but the situation is not that clear cut, especially in Europe. Yes the market is growing, but customers are getting more demanding. They want more, and they want it for less. That might sound like a problem every industry is facing, but in this case buyers are beginning to outsource to cheaper markets further East.
In terms of production, chemical companies have long understood how to get the most out of their assets. However, it’s fair to say that when it comes to understanding customer needs they are playing catch-up. This lack of focus means chemical companies are often burdened with high logistics and inventory costs. In a market characterized by fine margins, there’s a real opportunity to add value and stand out from the competition..
A study by the Boston Consulting Group found that a strong customer focus can be a real differentiator in the chemical sector and delivers substantial value to industry leaders. While the move to this type of model requires upfront investment, the long-term benefits outweigh the risks of standing still. This is especially true as other industries made the leap long ago and have left the chemical sector looking like a dinosaur.
A survey of 101 heads of supply chain and logistics management, carried out by LogiChem, found that customer demands were split across price, reliability, quick delivery and transparency. All areas where the industry has been lagging.
A number of these issues can be tackled by implementing a TMS. Features such as live vehicle tracking give companies visibility over their products and ensure they are never caught out by unexpected delays. This functionality is increasingly important as thinner margins in the chemical sector, mean forward planning is more vital than ever.
While a lack of drivers has impacted every sector that relies on a supply chain, the chemical industry has been hit harder than most. Transporting chemicals often requires specific licenses meaning there is an even smaller pool of carriers to call on. Implementing an automated tracking solution is a good way to ensure drivers don’t waste their time with costly and inaccurate manual processes that many in the sector still rely on.
These are just a few examples of areas the chemical sector can look to for innovation. It’s improvements like this that will let companies compete with their low cost rivals and avoid a price war they can’t afford to win.
Established players in the chemical industry have rested on their laurels for too long. Increasingly complicated supply chains and global marketplaces mean companies need to be able to track their shipments and update their customers along the way. Many customers rely on real time tracking to make operational decisions and unexpected delays can have huge implications. It’s time for the chemical industry to invest in its customers and deliver the changes they need to be able to compete.