Optimizing Global Manufacturing Footprint: A Comprehensive Approach to Production, Logistics, Distribution, and Supply Chain Management
Objectives, Mission, and Goals of this Project
- Optimizing the chemical plant:
- Increase the plant’s production capacity by at least X% within Y months
- Reduce production costs by Z% within Y months
- Streamlining procurement:
- Reduce procurement costs by B% within Y months
- Reduce lead time for procurement by C% within Y months.
- Ensuring timely shipping:
- Reduce shipping and logistics costs by E% within Y months
- Improve on-time delivery rate by F% within Y months
Table of Contents
Understanding Complex Logistics and International Imports
- The client had been affected by a significant increase in shipping costs over the past two years, which could negatively impact the profitability of businesses that heavily rely on shipping for their operations.
- Importing chemicals from international markets also involve dealing with a wide range of customs and regulatory requirements, which can be time-consuming and costly.
- The delivery timing of chemicals procured from international markets are uncertain which affects the production planning.
- Without proper optimization, our client’s chemical plant was not operating at its full capacity.
Describe the Company
- The client, a leading fertilizer, agri products and chemicals company based in Australia.
- holds a nearly 50% market share and is considered a leader in its industry.
- Our client imports materials from Arabian Gulf, USA, Togo, Morocco, SE Asia, China.
- While being a market leader brings its advantages, it also poses challenges such as facing stiff competition, the need to uphold high standards, and the constant requirement to innovate and evolve with the market.
Exploring the Latest Trends in the Chemical Industry Supply Chain
- International Procurement: Companies are increasingly looking to international markets for procurement of raw materials and other inputs in order to take advantage of lower costs and greater availability.
- Storage- Chemical companies are investing in new storage and handling technologies to improve safety and comply with regulations, including automatic tank gauging, temperature and pressure monitoring, and remote-control systems.
- Shipping: Chemical companies are using technologies like RFID, GPS, and real-time tracking systems to improve shipping and logistics efficiency, reduce costs and improve delivery times, also adopting more sustainable and energy-efficient shipping methods.
- Supply Chain Resilience: Companies are making their supply chains more resilient by diversifying suppliers, building up inventory, and improving logistics and transportation capabilities to adapt to disruptions like natural disasters, pandemics, and geopolitical risks.
Adapting to Evolving Supplier Landscape in the Chemical Industry
- Chemical suppliers-Chemical companies are diversifying suppliers to reduce supply chain disruptions, by seeking new suppliers in different regions or alternative sources for key raw materials.
- Long-term contracts: suppliers are entering long-term contracts with companies for stable and predictable supply chains, through multi-year contracts or exclusive agreements.
- Pricing: Companies are looking to negotiate more favorable pricing terms with suppliers in order to reduce costs. This can include seeking volume discounts or negotiating fixed-price contracts.
- Storage of chemicals: Companies are using automated storage and handling systems and investing in safe storage infrastructure to improve safety and comply with regulations for chemicals.
Navigating Complex Logistics and International Imports: Uncovering the Stated Problem in the Chemical Industry
- Supply Chain Complexity: Procuring chemicals from international markets can add complexity to the supply chain, leading to increased risks of delays, damage, and lost shipments due to long-distance transportation and multiple modes of transportation. Shipping cost increased by 2x in 2 years.
- Customs and Regulations: Importing chemicals from international markets can also involve dealing with a wide range of customs and regulatory requirements, which can be time-consuming and costly, such as tariffs, duties, and compliance with safety, health, and environmental regulations.
- Delivery Timing: Delivery timing of chemicals procured from international markets can be uncertain, making it difficult to plan production and inventory management due to factors such as weather, transportation disruptions, and customs clearance.
- Storing: Proper storage and handling is crucial to avoid accidents, spills, and other hazards. Storing chemicals procured from international markets can be challenging, especially if unfamiliar with handling and storage procedures required.
- Cost: Procuring chemicals from international markets can be more expensive than sourcing them locally due to factors such as transportation costs, tariffs, and compliance with customs and regulatory requirements.
- Quality Control: Quality control can be more difficult when procuring chemicals from international markets, it may be harder to verify the quality of the chemicals due to language barriers, cultural differences, and the distance involved.
What were the complicating factors that made solving these problems so difficult?
- Complex regulations and compliance requirements for importing and exporting chemicals
- Variability in demand and supply of raw materials and finished goods
- Difficulty in predicting and managing the transportation and storage of hazardous materials
- Limited visibility and control over the entire supply chain and logistics operations
- Limited access to advanced technologies and data analytics for optimizing operations
- Difficulty in finding and maintaining long-term, reliable supplier relationships
- Pressure to constantly innovate and adapt to changing market conditions and customer demands.
Who benefited from not solving the problem? What benefit did they derive?
- Companies or individuals who act as intermediaries between shippers and shipping companies can also benefit from higher shipping costs.
- Some governments may benefit from higher shipping costs through taxes and tariffs on imported goods.
- If shipping costs are high for imported goods, it can make it more expensive for consumers to buy those goods, which can make domestic manufacturers more competitive in terms of price.
Actions Implementing Solutions: The Steps Taken to Address Industry Challenges
- Streamlining supply chain: Identify and eliminate bottlenecks in the supply chain, such as long lead times or unreliable suppliers. Implement processes for better inventory management and demand forecasting to ensure that the right materials are available when they are needed.
- Long-term contracts with vendors: Develop long-term relationships with key suppliers, negotiate stable prices and delivery schedules, and establish clear communication channels to ensure reliable supply.
- Shipping: Implement technologies such as RFID, GPS, and real-time tracking systems, to improve visibility and control over the shipping process. Adopt more sustainable and energy-efficient shipping methods to reduce costs and improve delivery times.
- Storage: Invest in safe storage infrastructure to store the chemicals, and implement automated storage and handling systems, such as tank gauging, temperature monitoring, and remote control systems, to ensure safety and comply with regulations.
Data Collection : Understanding the data
- Accurate forecasting and demand planning was achieved by collecting B2B, B2C customer and stock transfer data for a period of 30 months prior to the year of modeling.
- For more efficient data analysis and machine learning, the collected data was cleaned and organized.
Data Analysis: Understanding What it Showed
- An analysis was conducted to identify ways to reduce operational costs in the shipping industry, with a particular emphasis on the benefits of long-term contracts and optimizing package sizes.
- We evaluated the relationship between package dimensions and shipping costs, the benefits of long-term contracts for cost reduction in the long run, and methods for accurately predicting demand to avoid overproduction and unnecessary expenses
- The insights gained from this analysis have enabled us to develop strategies to improve efficiency and lower costs in these areas.
- By analyzing data on supplier trends, shipping costs, inventory levels, and storage capacity, we were able to identify specific areas for improvement and develop strategies to streamline procurement, reduce shipping costs, and optimize storage capacity.
How long did it take to conduct the analysis?
- The process of conducting the preliminary analysis took 2 week, followed by 9 weeks of additional analysis aimed at optimizing shipping costs.
- An dditional 3 weeksa were required to present the findings and gain approval from the board
Analysis: necessary to expose root problems
- To analyze data on package sizes, shipping routes, and carrier relationships in order to identify opportunities for cost reduction in shipping operations.
- Assessing the impact of various contract terms and package dimensions on lowering operational expenses in the shipping sector.
- Using data analysis to uncover patterns and trends in shipping costs, delivery times, and customer demand in order to optimize shipping operations and reduce costs.
- To devise plans for enhancing efficiency and cutting down expenses, such as arranging long-term agreements, grouping shipments, and incorporating environmentally-friendly and fuel-efficient practices.
Our recommendation to client
- Out scouring to 3Pl can improve operational cost.
- To form long term contracts with shipping company to get full benefits of operational cost savings.
- Grouping similar orders together in a parcel as this will reduce packaging material , space and we get volume based discounts.
- We suggested implementing automated systems for routing and scheduling, utilizing EDI for order processing and tracking, and implementing warehouse management systems to our client.
Importance of data analytics in planning shipping
Ship size can have a huge impact on deliver time.
Testing the raw data from ERP is a must.
Outsourcing can have a long-term positive impact on company bottom-line.
Teamwork is dreamwork.
Maximizing Results: Strategies for Achieving Success in Achieving Our Goals
- Developed cost-effective strategies for entering a market in a strategic way.
- Formed long term contracts with shipping companies to achieve operational cost savings.
- Research and identify potential international suppliers that can meet the specific needs and requirements of the chemical industry.
- Utilize logistics and transportation optimization techniques, such as consolidation of shipments and use of eco-friendly and fuel-efficient modes of transportation, to reduce costs.
- Utilized AI, IoT and blockchain technology to optimize logistics and reduce costs.
- Regularly review and evaluate supplier performance to ensure they continue to meet the company’s standards and requirements.
- Proposed automated routing and scheduling systems, EDI for order processing and tracking, and warehouse management systems to the client for improved international procurement, shipping, storage, and production optimization.
- With our recommendations the client save $X M to $XX M pa.
About the Author
Vivek Sood: Sydney based managing director of Global Supply Chain Group, a strategy consultancy specializing in supply chains. More information on Vivek is available on www.linkedin.com/in/vivek and more information on Global Supply Chain Group is available www.globalscgroup.com
Vivek is the Managing Director of Global Supply Chain Group, a boutique strategy consulting firm specialising in Supply Chain Strategies, and headquartered in Sydney, Australia . He has over 24 years of experience in strategic transformations and operational excellence within global supply chains. Prior to co-founding Global Supply Chain Group in January 2000, Vivek was a management consultant with top-tier strategy consulting firm Booz Allen & Hamilton.
Vivek provides strategic operations and supply chain advice to boards and senior management of global corporations, private equity groups and other stakeholders in a range of industries including FMCG, food, shipping, logistics, manufacturing, chemicals, mining, agribusiness, construction materials, explosives, airlines and electricity utilities.
Vivek has served world-wide corporations in nearly 500 small and large projects on all continents with a variety of clients in many different industries. Most of projects have involved diagnostic, conceptualisation and transformation of supply chains – releasing significant amount of value for the business. His project work in supply chain management has added cumulative value in excess of $500M incorporating projects in major supply chain infrastructure investment decisions, profitable growth driven by global supply chain realignment, supply chain systems, negotiations and all other aspects of global supply chains.
Vivek has written a number of path breaking articles and commentaries that are published in several respected journals and magazines. Vivek has spoken at several supply chain conference, forums and workshops in various parts of the world. He has also conducted several strategic workshops on various aspects of supply chain management. He received his MBA with Distinction from the Australian Graduate School of Management in 1996 and prior to these studies spent 11 years in the Merchant Navy, rising from a Cadet to Master Mariner.
More information on Vivek is available on www.linkedin.com/in/vivek and more information on Global Supply Chain Group is available on www.globalscgroup.com
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