George Lawson, CEO, DHL Global Forwarding, India

George Lawson, CEO, DHL Global Forwarding, India

11:15 AM, 13th September 2017
George Lawson, CEO, DHL Global Forwarding, India
George Lawson, CEO, DHL Global Forwarding, India.

Smart delivery with service oriented logistics  

In an interview, George Lawson with Chemical Today Magazine opines about how the definition of logistics has changed to become the package of logistics services wrapped around the product offering.

By Shivani Mody

Trends in the chemical logistics and supply chain landscape in India.

We see B-to-B (B2B) logistics becoming more service oriented and business customers demanding e-commerce-like experiences. Therefore, competitive advantage is no longer being determined by the product alone but more by the package of logistics services wrapped around the product offering.

Chemical companies who provide customers with differentiated logistics service solutions in addition to the products, could be tomorrow’s leaders of a global industry expected to be worth €5.6 trillion by 2035. This is also the conclusion of our recently published DHL Global Forwarding white paper Differentiated Logistics Services.  

As this trend grows, responsive logistics solutions become not just ‘nice to have’ but a deciding differentiating characteristic. Chemical producers who can strategically and quickly change their traditional view and offer differentiated logistics services will create competitive advantages, build customer loyalty and increase their bottom-line. For example, Vendor Managed Inventory (VMI) and Just in Time (JIT – Kanban) might not boost margins in the short term, but will build customer loyalty – an extremely valuable asset.

Trends in the storage, warehousing and distribution requirements.

Due to the sensitive nature of chemical warehousing, it’s important to focus on safety and compliance when storing and transporting both hazardous and non-hazardous materials. There are ever changing transportation (global) and environmental regulations, and hence it is necessary to ensure that chemical warehouses are well equipped to meet safety standards. There is a huge focus on training (of those who handle the cargo) to handle chemicals, lubricants, and hazardous materials. Chemical transportation requires hazardous material compliance, and drivers properly trained to handle emergencies.

Visibility of shipment in addition to robust systems and processes are necessary. Inventory management, online inventory visibility and automated management of min/max levels by SKU are important features necessary for transportation of chemicals. Additionally, we see an increased focus on Health, Safety and Environment.

Evolution of air, ocean and road & rail freight logistics in India.

Chemical logistics must ensure the safety of people, the environment and material goods with comprehensive protective measures throughout all transport phases of dangerous goods. That means: in addition to sound know-how, excellent knowledge of the industry is required for the transport and storage of chemical goods.

The standard mode of transportation still continues to be Ocean freight for the Chemical industry, with developments been made in the way the cargo is carried. Liquid chemicals are efficiently and effectively transported internationally in ISO tanks, Flexitanks. There are packing solutions like Intermediate Bulk Containers (IBCs), which are used for transportation by all modes. Some chemical cargo requires temperature control, and these are moved using reefer containers.

Considering the hazardous nature of chemicals, it is essential to be compliant with HAZ requirements. Carriers and ports have become very stringent in their regulations when handling chemical cargo. Road infrastructure is improving with newer kms of road being added every day, connecting ports with key cities to ensure that lesser time is spent on road than before. Increasingly chemical companies are considering the ‘Nicer Globe’ transportation model, where the transporter is well trained and equipped to handle chemicals, and there is also GPS monitoring of the truck.

For chemical companies, the benefits of differentiated logistics services include delivering the right quantities on time; ability to cover demand fluctuations in cyclical customer businesses without time delay; reasonable logistics costs and predictability and reliability of deliveries.

As a relatively new area of opportunity for chemical companies, ‘first movers’ can establish a real competitive advantage, especially when it comes to customer loyalty. More importantly, with the projected sector growth and the broader shift towards a service-orientated approach in B2B, this is a development that chemical companies cannot afford to ignore.

Segments witnessing more demand for logistics solutions.

Each segment poses a unique demand for logistics solutions. Specialty chemicals and construction chemicals are fast growing segments in the industry. These are high value chemicals known for their end use applications. This is the sector which requires diverse, innovative supply chain solutions requiring differentiated services to increase competitive advantage and corresponding more precisely to customer needs, even finding ways to adapt on the fly to changing situations and needs.

Logistics, supply chain demands from chemical manufacturers.

The immediate challenge facing chemical companies is finding the right strategy to meet the changes in demand and choosing the appropriate service differentiation. This requires high-level collaboration from top management to production, supply chain to marketing and sales.

The power of differentiation is on display everywhere today. Big data and increasingly sophisticated algorithms enable more customized user experiences for vendors, customers and advertisers. As products and services become smarter, more flexible and more automated, they correspond more precisely to individual customer needs, even finding ways to adapt quickly to changing situations and needs.

B2B logistics is becoming more service oriented today, even shifting in the direction of consumer direct logistics. With more business customers demanding e-commerce-like experiences, service orientation becomes a real competitive advantage. Understanding this and its implications for chemical producers represents a major opportunity for logistics.

Logistics can also support chemical companies in their production processes by delivering not just the right number of products for a given batch, premixing products, or offering dosing and discharge systems. Going one step further, a logistics partner can be responsible for integrating a chemical company site and its physical logistics structures, which can mean taking full management responsibility for all logistics facilities on behalf of the companies.

This, in turn, requires transparency, such as sharing of historical and current data between the logistics partner, chemical company and customers. One option here is to integrate respective IT systems.

In the future, supply chains offering comprehensive service bundles – including modern logistics concepts like vendor managed inventory (VMI) – will be a critical success factor. This requires close collaboration between vendor and customer, including the exchange of information on current and future production and consumption – and even planning logistics assets together.

Adopting ‘digitization’ for chemical logistics and supply chain.

Companies are digitizing essential functions within their internal vertical value chain, as well as with their horizontal partners along the supply chain. In addition, they are enhancing their product portfolio with digital functionalities and introducing innovative, data based services.

Chemical companies plan to invest 5 percent of annual revenue in digital operations solutions in the next five years. And they are setting themselves ambitious targets for the level of digitization and integration that can be achieved.

The chemical industry is already well accustomed to precise process control and automation which lies at the core of the production process in many situations; although in others there is still a high reliance on significant manual processing. Nonetheless, many chemical companies are now investing in more comprehensive digitization within operations and are also aiming to extend this outwards across the value chain and production lifecycle.

One of the big issues for chemicals companies is supply and demand planning and the need to achieve better linkages and transparency across their entire value chain – from procurement via manufacturing to distribution. Using digitization to gain visibility and direct integration into real demand will enable improved forecasting and planning of operations. It is a real step-change challenge for many companies that currently don’t have complete transparency about the inventory, location and movement of products upstream and downstream of operations or actual demand straight from customers. For example, in the agrochemical sector, companies supplying crop protection products and/or seeds are participating in ecosystems that can provide easy access to data and analysis on geo-location, diagnostics, crops, fertilizers, weather and other factors, over smartphones or through direct connections with farm equipment. Bayer, BASF, DuPont and Dow Chemical are among the companies that have developed these kinds of precision agriculture solutions for farmers.

Many SAP APO systems still rely on forecasts from sales staff and manual inputs to a large extent. Thus, greater transparency of the supply/demand situation, in combination with other developments such as predictive maintenance, can help to greatly reduce idle costs in production. It will also enable companies to have improved visibility over the real utilization and efficiency of their different plants across the globe and future capacity requirements.

Effect of Goods and Services Tax (GST) for chemical logistics and supply chain.

GST has greatly improved the transit time for domestic transportation – this is because inter-state permits have been removed which results in vastly reducing time and fuel wastages.

The other focus will be on optimization of warehouses within India, but this is still in an early stage, as companies are investing into understanding their own supply chains and market evaluation. However, what is certain is that warehouse optimization will take place, so that supply chain gets leaner and still closer to the market.

© Chemical Today Magazine


See the Interview in Chemical Today magazine

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