Study Highlights Strategic Role for Logistics (Online Exclusive)
For all the operational advances that have been achieved in chemical logistics in the past few years, and for all the savings that have been realized by producers and shippers, large opportunities for gaining efficiency and saving money remain. The most important advance would be for logistics to be included in the strategic planning stages with an equal seat at the table with production and sales. That was among the findings of the Global Chemical Industry Supply Chain Best Practices study released early in January by Accenture.
"There has been a lot of work on logistics at the business-unit level," says Christopher Lange, senior executive in Accenture’s chemicals practice and author of the study. "Where we are seeing the most friction is between the commercial side of the producers and the manufacturing side. Manufacturing tends to think in terms of yield out of the productive assets. Sales tends to think in terms of tonnage or volume moved. This is where logistics can come in and help frame the planning in terms of profitability."
For example, it is common for a plant manager to want to produce at the unit’s optimum operating rate, while at the same time the sales department wants either less volume to tighten the market or more volume to stimulate sales.
"But what is the point of making 500 million pounds of product that nobody wants, or selling less at a higher price, then having to pay a premium to move it or store it?" says Lange. "We see that situation all the time."
What should happen, he says, is for the supply chain to sit in the middle. "If sales and production sit down with supply chain and do the math together, they can work together to determine what to produce, where to produce it, whom to sell to, and what services to provide. But if sales and production just hand their decisions to the supply chain, there is a limited ability for logistics to help."
And while Lange is very supportive of benchmarking, he adds that "this was not a benchmarking study. The industry has been benchmarking for years. The question is now what? How do we take those metrics and actually move the needle. The best use of ERP systems is action oriented, not academic."
One step Accenture has taken to foster that action orientation is to incorporate the study to a query tool. "This is not a static thing…here’s your report. We are trying to combine gap analysis and facilitate discussions within a company’s business groups and across peer groups around the company."
To that point the study found that only 37 percent of respondents said their companies had a formal process for sharing logistics best practices. Fewer, just 11 percent, said best practices were measured, documented, and translated into standard operating procedures.
Worst of all, only a paltry four percent of respondents said that their companies have gathered best practices in one place and made them available to all supply-chain professionals within the organization.