Posted: 02 Nov. 2020 4 min. Lukuaika

The chemical industry is in the middle of an unanticipated turning point

The global chemicals industry has a far-reaching impact in terms of interacting on a worldwide basis by delivering materials and substances to sectors such as agriculture, the automotive sector, construction, and pharmaceuticals. This means that a severe disruption in the chemicals industry can have a significant impact on many other industries and the global economy.

 

During 2020, COVID-19 has provided just this type of disruption, which is creating an unanticipated turning point in the chemicals industry. The disruption has clearly accelerated:

  • The growing consumer awareness of sustainability, which has led chemical companies to explore decarbonization technologies, re-examine their assets, and begin to diversify away from hydrocarbons where possible

  • The increased use of digital technologies within the chemical industry and, more specifically, the digitalization of core business processes

  • Chemical companies seeking means to increase downwards scalability without losing the ability to grow when demand comes back as they are facing a situation of oversupply in certain market segments.

Thus – in the wake of the new normal and the accelerated trends mentioned above in terms of sustainability, the increased use of digital technologies, and oversupply in the market – chemical companies have started to evaluate how long-lasting these changes will be and how they will impact on their operating environment. 

Leading chemical companies are accelerating the digitalization of their sourcing and procurement

The leading chemical companies in the world are making their response clear by harmonizing their supplier management, sourcing, and supply chain processes using a digital strategy. This allows such companies to build in flexibility as well as increase their ability to react when things change from an end-to-end chain perspective. As a side benefit, these companies are also realizing new efficiencies and cost savings.

They are clearly tackling the increased competition, demand complexity (i.e., consumer preference for green packaging), and the volatility, as well as the oversupply, created by putting into place non-linear supply chains. A concrete example of this has been the recent move to toll manufacturing with chemical companies, which has made costs predictable but, at the same time, places greater pressure on supplier visibility and collaboration. It is also imperative that a chemical company provides a “one window” type of solution with the digital sourcing systems in order to eliminate fragmented communication with suppliers. 

These types of digital solutions ensure that the company will also increase its flexibility and manage the inevitable volatility more effectively.

SAP Ariba can be your solution to a new digital sourcing and procurement operating model

Establishing the changing trends and required capabilities is clear, but how do you digitize them and with what? Fortunately, SAP and its end-to-end source-to-pay solution, SAP Ariba, can help chemical companies thrive in this environment. The SAP Ariba direct spend solution can help accelerate the digital transformation of procurement by managing the source-to-contract and supplier management processes. The added benefit is that SAP Ariba will integrate smoothly with ERP and supply chain optimization systems.

Furthermore, specific chemical company direct spend benefits from SAP Ariba functionalities include:

  • Up-to-date supplier risk information that allows buyers to look at aggregated supplier profiles, monitor ongoing activities, and access risk profiles in order to make smarter decisions about suppliers

  • Standard and end-to-end integrations with internal ERP systems that ensure that execution documents, such as purchase orders and work orders, are accurate and drive higher contract compliance

  • Effortlessly sharing demand and quality information with suppliers and manufacturing partners—such as inspection results, deviations in components, work in process, and end products—to ensure alignment during manufacturing.
     

Leading chemical companies in the world are taking the major leap forward with digital solutions and increasing their competitive advantages

Ultimately, SAP Ariba solutions for the chemical industry help various companies compete more effectively in a turbulent market. This will ensure that the company reduces the risk related to suppliers, achieves greater core process efficiency, and collaborates with suppliers in a much more visible manner. Thus, given that the pressures and changes in the global chemical industry are only accelerating, the time to go digital is now.

Ota yhteyttä

Niko Lindell

Niko Lindell

Supply Management & Digital Procurement Leader

Niko Lindell vastaa Deloitten hankintatoimen kehittämiseen liittyvistä palveluista Suomessa.  Nikolla on yli 10 vuoden kokemus erilaisista konsultointiprojekteista liittyen hankintatoimen eri osa-alueisiin.  Hänellä on myös operatiivista taustaa sekä tilintarkastuskokemusta. Niko on ollut mukana myös useissa hankintojen optimointiin liittyvissä projekteissa ja vastannut mm. toimintamallin määrittelystä, kilpailutuksista ja projektinhallinnasta. Briefly in English: Niko is responsible for the Supply Management & Digital Procurement offering in Finland.  He has over 10 years of experience with various kind of sourcing and procurement related consulting projects for both the private and public sector.