Redefining outbound distribution networks leads to new revenue streams, greater sustainability, and a more resilient supply chain.
FREMONT, CA: Global chemical companies have been adversely affected by supply chain disruptions, which have affected not only the inbound supplies of feedstocks but also the outbound distribution of chemicals to their customers. Even though many chemical companies have considerable control over their outbound distribution activities, they still need to optimize their supply chains, especially their outbound distribution activities. Especially as the market for chemicals becomes increasingly commoditized and customers switch to cheaper, more responsive producers, chemical companies may face serious risks if they don't optimize these outbound activities.
Due to significant advances in digitization, the time has come for businesses to rethink and reform their outbound distribution networks, not just in the chemical industry but in every industry that faces similar challenges, which have considerably improved efficiency and transparency. Significant competitive advantages over slower-moving competitors, new revenue sources through value-added services, greater sustainability through reduced energy costs, and more resilient supply chains contribute to success.
Outbound opportunity: Customer satisfaction is directly affected by outbound supply chains, which directly affect chemical companies' costs and service performance. Since outbound chains must support many products and a growing variety of products, the same narrow set of feedstocks is often more complex than inbound chains. In addition, the number and diversity of products and end markets, and customers tend to increase with each step of the value chain. According to research, outbound distribution chain optimization can result in significant cost reductions, as much as 20 percent, without adversely affecting the quality of service. Supply chains that are optimized and more cost-effective are also more sustainable and resilient than those that are not optimized. Even without direct attention to emissions reductions, companies can reduce their carbon emissions per ton-kilometer shipped by 20 percent by transporting less material over shorter distances and using the most energy-efficient transport modes. Companies can protect themselves from unforeseen disruptions by building more sophisticated, transparent, manageable, and agile supply chains.
Intelligent distribution: The outbound distribution chains of chemical companies, despite their complexity and direct impact on costs, customer satisfaction, and carbon footprints, should be addressed by more companies. The customer distribution network has grown substantially due to strong merger and acquisition activity with little overall strategic direction. The company leadership has downplayed the relevance of those networks to the business and has been reluctant to invest in assets they consider less strategic than production assets. Supply chains now generate millions of vital data points thanks partly to the Internet of Things and big data analytics. Artificial intelligence (AI) has become increasingly popular among leading companies to optimize supply chains in the last few years. Sophisticated machine-learning algorithms predict supply and demand. To establish the foundation for digital transformation, heuristics or mixed integer programming algorithms can be used to determine the best future setup of the supply chain. A fully integrated distribution chain forms in stages, providing transparency, flexibility, and predictability from end to end. Simple analyses often reveal quick wins.
Optimizing outbound product distribution networks results in real reductions in cost, sustainability, and resilience. Understanding the network and how it operates thoroughly using the available digital tools is important. By doing so, they can plan for and carry out the optimization efforts they need, both in the near term and in the future, based on the insights they gain. Those that succeed will be able to serve their customers more effectively, at lower costs, and with a sustainable advantage over their slower counterparts.
