Logistics adds competitive edge in chemicals sector, DHL research finds

dhl_chemicals-infographic-1HONG KONG — The world’s chemical industry could significantly increase its competitive advantage by treating logistics as a key differentiator as other global industries do, according to research commissioned by DHL.

In a white paper titled “Supply chain in the boardroom – 5 levers to boost a chemical company’s bottom line”, the study identified opportunities to boost performance and overcome challenges such as commoditization by getting logistics onto boardroom agendas in the chemical industry.

According to the report, the five levers that can help chemical companies increase performance and competitiveness are: optimizing logistics costs, better inventory management to free up capital, smart investment in logistics assets, increased focus on end-to-end safety and security processes and differentiated logistics services.

“Logistics in the chemical industry is expected to run smoothly and reliably with senior executives usually only paying attention when something goes wrong and rarely regarding logistics as an opportunity,” Michael O’Hara, global head of chemicals sector, DHL Global Forwarding, said in a statement.

“Logistics and supply chain management should be key elements in a formula for success for global chemical companies in today’s complex interconnected marketplace where products are fast being commoditized. The research has identified five levers that when applied strategically at board level, can restore competitive advantage, increase liquidity and turn a standardized approach to safety and security from a cost into a benefit that adds value and attracts new customers.”

With worldwide sales valued at $3.3 trillion, the chemical industry is one of the world’s largest sectors, generating international trade volumes above 700 million tons of freight annually. The industry is diverse with complex supply chains challenged by the variety of products, highly specialized transportation and storage requirements, and growing safety issues.

The most recent example of the need to observe safe and secure logistics practices was the Tianjin blasts at a chemicals warehouse in the port area that killed more than 150 people and levelled a huge area.

With the ongoing globalization of the supplier and customer base, chemicals are fast becoming commodities and as a result, competitive advantages are getting harder to find, the white paper noted. To meet these challenges, the report urged senior management to change its perception and see logistics as a strategic asset rather than a transport and delivery service.

Authors of the report, Prof. Dr. Thomas Krupp (Cologne University of Applied Sciences), Prof. Dr. Carsten Suntrop, (CMC² GmbH-European University of Applied Sciences) and Uwe Veres-Homm (Fraunhofer Center for Applied Research on Supply Chain Services SCS), found that a holistic end-to-end approach to logistics could achieve greater logistics value through cost optimization, increased supply chain liquidity, smart investments in logistics assets, standardized safety across the supply chain, and differentiated logistics services.

“Management boards of chemical companies usually do not perceive supply chains and logistics as opportunities for their business,” Krupp said. “The five levers we outlined provide executives with insights and recommendations on how to improve their company’s capability for better performance and increased competitiveness.”

Read more here.

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