Executive Briefings

Supply-Chain Transformation in the Chemical Sector

The chemical industry was "pretty challenged" during the recession, notes Jack Weiss, chief executive officer of WAM Systems. Depending on the specific vertical, volumes dropped by between 20 percent and 80 percent in some markets. The good news, he says, is that the industry has essentially regained its footing, with volumes back to pre-recession levels, and even some record profits.

Still, says Weiss, the industry remains challenged by an increase in both market volatility and demand. Traditional tools such as statistical forecasting have become less effective, and history is no longer a reliable indicator of future trends. In response, many chemical companies are looking to engage in collaborative forecasting with customers.

In certain respects, the chemical sector is playing catchup with other industries. With inventory relatively cheap, there has been little incentive to optimize it and do a better job of matching supply with demand. Now, with the rise of uncertainty and more intense competition, chemical companies are strongly motivated to improve their inventory management, as a means of increasing margins.

The volatility of oil prices is a big factor in driving uncertainty. The global chemical industry depends heavily on oil for many key products. In the U.S., where natural gas is the key feedstock, chemical manufacturers have enjoyed something of a competitive advantage over their foreign counterparts, says Weiss. Still, the exploitation of shale oil and gas deposits in places such as Pennsylvania "could be incredibly game-changing for the U.S.," he says. "It could cause a resurgence in the development of new chemicals."

To view video in its entirety, click here

The chemical industry was "pretty challenged" during the recession, notes Jack Weiss, chief executive officer of WAM Systems. Depending on the specific vertical, volumes dropped by between 20 percent and 80 percent in some markets. The good news, he says, is that the industry has essentially regained its footing, with volumes back to pre-recession levels, and even some record profits.

Still, says Weiss, the industry remains challenged by an increase in both market volatility and demand. Traditional tools such as statistical forecasting have become less effective, and history is no longer a reliable indicator of future trends. In response, many chemical companies are looking to engage in collaborative forecasting with customers.

In certain respects, the chemical sector is playing catchup with other industries. With inventory relatively cheap, there has been little incentive to optimize it and do a better job of matching supply with demand. Now, with the rise of uncertainty and more intense competition, chemical companies are strongly motivated to improve their inventory management, as a means of increasing margins.

The volatility of oil prices is a big factor in driving uncertainty. The global chemical industry depends heavily on oil for many key products. In the U.S., where natural gas is the key feedstock, chemical manufacturers have enjoyed something of a competitive advantage over their foreign counterparts, says Weiss. Still, the exploitation of shale oil and gas deposits in places such as Pennsylvania "could be incredibly game-changing for the U.S.," he says. "It could cause a resurgence in the development of new chemicals."

To view video in its entirety, click here