The chemical supply chain is experiencing major disruption since the pandemic. Although inventories are on the rise, the supply chain isn’t matching the demand.
With more and more businesses demanding raw materials and products from the chemical industry, it is putting huge pressure on the supply chain due to a lack of stock. It is becoming a significant challenge to overcome, especially seeing as the demand and disruption are both increasing.
For instance, there are more companies looking for materials for polyurethane dispersions yet with the supply being hindered, it is becoming increasingly more difficult to find.
An article on Supply Chain Dive states how almost 85% of distributors are reporting a lack of stock for one item or more, which is putting a huge strain on businesses. This disruption is causing supply issues, which can take up to 11 days to receive. According to the same article, up to 82% of these distributors are suffering from delayed shipments. In turn, businesses are receiving supplies slowly, which hinders their overall business efficiency. This can either put businesses offline for weeks or simply delay their processes.
Although the chemical supply chain disruption can cause issues and interruptions to businesses, it is possible to get back on track and mitigate the shocks in order to improve business resilience.
Therefore, here is more on the shortages, how to get back on track, and how to strengthen supply chains.
There is a key similarity among semiconductors, plastics, chlorine, and furniture, and that’s the supply chain disruption. All raw materials and products are suffering due to a lack of supplies, which is affecting the supply chain and therefore, affecting businesses.
Out-of-stock items have increased from 47% to 85% in a matter of months. These short supplies have caused huge pressure on the supply chain, a lack of business for industries that rely on these raw materials, and a spike in prices.
Here are some materials that have recently seen shortages in the chemical supply chain sector:
The shortage of semiconductors first took a toll on the automotive industry. This shortage soon spread to issues for electronic companies, due to the lack of chip production.
It is suggested that the lack of materials for semiconductors will last throughout the remainder of 2021, which includes gases, wet chemicals, solvents, and photoresists. Materials within the petroleum industry are also reducing.
Plastic is always in high demand due to its low cost. Countless industries rely on plastic materials from food and clothing to medical companies and packaging specialists.
Seeing as plastics make most kinds of products possible, it is increasing in demand, especially for food packaging and automotive components. However, the supply isn’t increasing, which means that the pressure is growing. With plastic being a mandatory product for a plethora of industries, it is understandable why the shortage of plastic material is a huge issue.
Gas, oil, and fuel
Gas, oil, and fuel are also essential materials within multiple industries. Some industries rely solely on these chemical materials in order to function. Hence, the lack of supply is hurting many businesses.
It isn’t that the materials are necessarily out-of-stock, although the supply is reducing. It is that there is a huge shortage of truck drivers to deliver gas, oil, and fuel. Up to 25% of delivery driver trucks are parked because of a lack of qualified drivers. Hence, businesses are waiting a lot longer to attain their chemical supply.
The world saw a huge surge in home swimming pools due to the pandemic. More and more people were staying at home and therefore, built swimming pools in order to fulfill their boredom and physical activity needs. Hence, the demand for chlorine increased in a short space of time.
In certain regions, chlorine supply has seen quantity restrictions. In others, prices have doubled due to the high demand and companies knowing people are willing to pay the higher price.
Shorter Supplies And High Demands
The issue with a shorter supply and higher demand is that prices start to increase. Consumer spending grew so quickly during the pandemic, that companies know people are now willing to pay higher prices. More people are looking to spend more on electronics, packaged foods, and healthcare. All of which, impacts the chemical industry. Therefore, it gives them more of a reason to increase prices.
Yet, with shorter supplies and more demand, there will always be an increase in price. Reports show that more than 20 companies have increased their prices already as a result of the shortage in supplies. The price increase is mainly due to a shortage of raw materials but also the knowledge that people are willing to pay more.
What’s more, is that containers and ships are in short supply, which slows the process of supply chains attaining raw materials to deliver to their customers. Hence, the prices are increasing and delivery is slowing down.
There is also a huge issue with a reduction in warehouse workers too, which means that raw materials are slowing down in production. Hence, the containers for shipments are taking longer to fill, which further increases the delay.
The shortage in warehouse staff is the main issue as if there are truck drivers or ships ready and waiting to go, the lack of warehouse staff means that there is nobody to help fill the containers.
Supply chain issues are impacting most industries and there is no hope in an increase in supply and production in the near future. With that, the demand continues to grow, which means that not much can go right in the chemical supply chain world in the near future. As NACD President and CEO, Eric Byer states, “I still maintain that the demand is very, very strong. And until logistics, supply chain logistics … gets fixed it’s not going to get any better anytime soon.”
How To Mitigate The Strain
All industries can benefit from an attempt to mitigate the strain that chemical supply chain disruptions are putting on their businesses.
Therefore, here are some ways to mitigate the strain of the disruption.
Begin building resilience
Should a business give in to the strain, then they will not see much change in the near future to their profits and supplies. Hence, building resilience is the best idea. This could mean moving to manufacture closer to home or finding other companies for cheaper supplies. Any way to reduce outgoings will make less of an impact on the business.
More access to technology
Utilizing technology for a supply chain is essential nowadays. It means that a business can optimize its tasks and processes, which will make for fewer delays and issues.
For instance, using a transportation management system (TMS) can help a business attain real-time communication of their deliveries, which can help a business meet expectations and increase service levels. Gaining an insight into a business’s processes will help business owners have more control and not be knocked down by disruptions.
Work with industry experts
By working alongside industry experts, a business will be able to attain insider knowledge of the current supply chain issues, which can prepare businesses for potential problems.
For example, working with a logistics expert can help to streamline procedures and avoid using supply chains that are seeing the worst disruptions. They will advise a business on what to avoid and how to resolve supply chain demand disruptions.
Leverage data and analytics
By leveraging data and analytics, it will help businesses to understand the latest challenges and find new opportunities. By understanding the challenges, it is easier to avoid them. Likewise, seeing trends in data will help businesses utilize the right business strategies to strengthen their capabilities.
For example, a business might understand that switching from plastics to sustainable materials is more attractive and well as easier to attain. Hence, reducing the plastic supply and switching it out for a material that is more easily accessible as well as cheaper will provide a business with great rewards.
Supply chains for the chemical industry are being disrupted like never before. Since the pandemic hit, there has been a surge in demand for materials, yet a reduction in supplies. Hence, prices have increased, making profit margins minimal for businesses. Likewise, the shortage of supply has impacted businesses so much so that many have come to a halt in success.
Therefore, all businesses that are being impacted by the chemical supply chain disruption (which is most) should take on board the mitigation advice. Using these tips will help businesses create a roadmap tailored to their business model, which will help with further successes. Simply building resilience and gaining access to a wider range of technology will help offset some of the pressure and make way for avoiding potential crises.