The European chemical industry has for some time faced mounting pressure from its Middle Eastern and Asian competitors in supply chain practices and technologies. The debt crisis in European countries is taking its toll on the chemical industry. With customer industries restricting production, sales figures of chemicals are dropping. According to a recent Chemicals Trends Report from the European chemical industry association, Cefic, EU chemicals production recorded a 2.4 per cent decrease in the first six months of 2012 compared with the same period in 2011. The first-half 2012 data point to EU chemicals production levels which remain at 5.8 per cent below the peak in 2007.

The European customer base is gradually eroding as large users of chemicals relocate their production to more cost-effective labour countries in the Middle East and Far East. Servicing these new opportunities involves extending the supply lines and providing an effective distribution service over longer distances. This is made more challenging by customer pressure to reduce order lead times. The traditional borders of business are being redefined. Therefore, investment in operational performance, innovation, people and technology will help to keep businesses agile to optimise the supply chain and react quickly to market demands. A laggard in the industry loses business – a leader drives innovation and remains competitive.

Hague

EUROPE IS LAGGING
It has been predicted that ethylene production in the Middle East and Asia will continue to expand and the annual growth rate will diminish in Western Europe. Middle Eastern producers are starting to exploit their feedstock advantages. New cracker capacity is being constructed with much larger and more technically advanced plants that can achieve significantly lower unit costs than their aging European counterparts.

Globalisation is a significant driving force in the chemicals industry. The relationships between regional and global markets, emerging competition, along with the ongoing need to increase profitability are having a tremendous effect on companies today. This trend is also influenced by increased feedstock prices, which are linked to the prices of crude oil and natural gas. The major cost factors are raw materials, energy, labour, operating costs and transportation. The trends across the supply chain are shifting. Companies have to address highly complex products and grades on a continuous basis, especially in the polymers industry. The main challenge is to reduce costs and increase capacity whilst consistently meeting quality specifications, maximising production and minimising inventory. However, the principal of measurement and control over the supply chain is crucial. All areas require rigorous measures and standards, but successful management should be a balance between quality and quantity. The expectation in the market is to meet demand forecast, material availability and production throughput, as well as having the agility to react quickly to
customer demands.

Software tools drive operational excellence

TECHNOLOGY HELPS
Effective supply chain management integrates supply and demand management within and across companies and those who recognise the trends in the chemical industry will identify commercial opportunities more quickly and at the critical stage where they can still make a difference. With change comes volatility. More streamlined planning processes provide a more reliable and agile supply chain. Also, increased transparency and clear differentiation between sales and operations planning (S&OP) and operational scheduling can act as the cornerstone for better tactical management of the supply chain. Global chemical companies aim to harmonise their business processes across diverse business units and geographical regions because they can better understand and visualise the operation at a glance and standardise processes.

Many chemical companies have recognised the need to invest in their operations and have turned to process industry software to help them overcome issues in the supply chain from simple daily issues to more complex long-term challenges. For example, the visibility provided by aspenONE Supply Chain Management helps reduce inventory costs by enabling chemical companies to identify the optimum levels to achieve customer service goals, while balancing them against production and distribution costs. Its standard framework for modelling processes ensures consistency in standards, enabling long-term maintainability and sustained economic value.

Software tools drive operational excellence by addressing the complexities and inefficiencies end-to-end in plant operations and production control, planning and scheduling, engineering and innovation. Polymer producers in particular are able to maximise profitability by consistently operating units in optimal range through cost effective debottlenecking and identification of optimum operating conditions. Leading-edge software helps to drive first quality and agility in production through improved in-grade operational control and optimised transitions.

The tools improve enterprise-wide collaboration by ensuring that all the business functions aligned and working together. AspenONE, for example, drives operational excellence by addressing the complexities and inefficiencies end-to-end in plant operations and production control, planning and scheduling, engineering and innovation. Companies deploying aspenONE are able to generate bottom line benefits of $6 million per year per site with payback in months instead of years. These software tools help chemical companies manage global networks and the shifts in emerging markets, price fluctuations and changing customer
buying patterns.

TAKING THE LEAD
Globalisation has blurred the lines of commercial boundaries. In a report published by the European Commission in 2007 entitled “The state of the European Chemicals Industry – a thoughtstarter for the High Level Group on the competitiveness of the European Chemicals Industry,” between 1995 and 2005, world chemical production increased by almost 40 per cent. However, over 95 per cent of that growth was concentrated in developing countries. This trend is opening up new opportunities in emerging markets. So, time is of the essence. Every minute saved in on-time deliveries adds dollars to the bottom line. Maintaining a focus on supply chain management, including people, systems and tools will help companies to meet customer demands and regulatory requirements and keep ahead of the fast moving industry trend.

If there is a lack of integration in sales planning and production planning the impact can be significant and it can be like leaving money behind on the table. With the right processes and software tools, companies can achieve an integrated environment providing visibility, including access to the most important information to support decision-making, sharing of data and process models – it could be the difference between being a laggard or a leader in a highly competitive and fluctuating industry.