M I D -T E R M LO G I S T I C S P L A N N I N G F O R T H E C H E M I C A L S I N D U S T R Y
“The absence of Mid-Term Logistics Planning is adversely affecting the Chemicals Industry” A recent report by A.T. Kearney discloses that tactical logistics management can bring windfall savings of up to US $73 million for an average-size company.
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.T. Kearney, a global management consultancy firm, has issued a new report focusing on mid-term logistics optimisation in the chemical
industry. The report reveals that a look into the world of logistics in the chemicals industry unveils an interesting state of affairs. Long-term logistics planning is largely in place to ensure there is infrastructure to support chemical companies’ needs for several years. Short-term logistics runs pretty well, too, with transport and warehouse managers seeing to regular daily and weekly transportation needs. The report indicates that in the chemicals industry, tactical logistics management poses an opportunity for competitive advantage. It can save an average-size chemicals company up to US $73 million annually through increased efficiencies and responsiveness; for the whole chemicals industry, the savings could surpass $9 billion. Munich-based Ingo Schroeter, a principal at A.T. Kearney and one of the international authors of the paper, responded exclusively to a questionnaire by Logistics News Middle East Define Mid-Term Logistics Planning in the chemicals industry context? Is that the equivalent of Tactical Logistics Management? Yes, Mid-term or tactical logistics planning addresses the timeframe between transport scheduling lasting a few weeks and longer logistics network planning, more than two to three years, in order to ensure available capacities for logistics assets such as transport, warehousing. In this region where chemicals players are very export oriented, supply chain excellence is essential, putting high demands on short-term, mid-term as well as long-term logistics management. How does Mid-Term Logistics Planning contrast with Long-Term and Short-Term Logistics Planning. Put it all into perspective? Mid-Term logistics is in some companies the 38 | Logistics News ME | July 2015
Ingo Schroeter • Principal at A.T. Kearney • Over 14 years of consulting experience in the energy and other industries. • Supply chain expert in Oil & Gas Upstream and Downstream and Chemicals at A.T. Kearney • Author of Mid-Terms Logistics Optimization in Chemicals paper. weak link of logistics excellence. Companies generally excel in short term logistics, the daily processes ensuring the right chemicals are shipped to the right clients and long–term logistics, which includes decisions on investments in warehouses and distribution centres as well as whether to rely on in house assets or leverage logistics service providers. Mid-term logistics put in place three building blocks to excel—firstly capacity planning; secondly optimising the supply chain mix to different carrier segments and thirdly monitoring, which enables optimisation in short- to mediumterms of asset usage and carrier agreements. With these three building blocks in place, notable delivery reliability and management of costs and assets can be achieved. Is the lack of Mid-Term Logistics Planning widely prevalent in the region? In our experience, this region is nascent when it comes to logistics planning. Many companies are still managing well the short term horizon and some have started to think more strategically about network development. The tactical level (mid-term) is mostly not yet established. Even in other regions such as Central Europe or the US only few companies master this process, hence the significant opportunity. How and why is the absence of Mid-Term Logistics Planning costing companies financial losses and give us a sense of the scale of the losses? Tactical logistics management can save an average-size chemicals company up to $73
million annually through increased efficiencies and responsiveness; for the whole chemicals industry, the savings could surpass $9 billion. Even more important, tactical planning and optimisation can yield up to four percentage points of improvement in on-time, in-full delivery reliability. Single players that improve their logistics ahead of competitors can translate this advantage into more satisfied customers and increased sales. Your study reveals the chemicals industry is in a state of tremendous flux. Please explain? The chemicals industry faces three major challenges: One is the change of flow patterns driven by growth in wild card regions which drives volatility but also the development for further downstream products especially as Middle East chemicals players try to gain position in higher margin downstream products. The second is capacity limitations, logistics capacity investments are reaching bottleneck status due to a lack of investments. What factors are stressing chemicals companies supply chains? How and why? One of the factors stressing the importance of supply chain excellence in chemicals is the continued commoditisation Best practice supply chain management offers an opportunity to differentiate in the markets of tomorrow. Chemicals companies who provide cost effective, agile and reliable delivery to their customers will be the winners. Mid-term logistics management is one key success factor in achieving this.