Next-gen chemical logistics to help take right strategic decisions

9:10 AM, 19th August 2020
V. Raju, Senior Vice President – CL, Chemical, Pharma & Food Sector, Avvashya CCI notes the global mega trends in the chemical industry that is making the logistics & supply chain reinvent itself.

Next-gen chemical logistics to help take right strategic decisions

V. RajuViswanathan has a account, Senior Vice President – CL, Chemical, Pharma & Food Sector, Avvashya CCI notes the global mega trends in the chemical industry that is making the logistics & supply chain reinvent itself and also adopt next generation solutions in thinking beyond the factory gate. 

By Shivani Mody  

Global trends making an impact on the chemical industry logistics. 

Here are ten megatrends which influence the chemical logistics industry:

  • Globalization
  • Demographic change
  • New lifestyles of customers
  • Trend towards service integration (servitization)
  • Sustainability
  • Rising risks along global supply chains
  • Digitalization or technology deployment
  • Professionalization of logistics processes
  •  Development of logistics as a core competence.

We need to go into the direction of an integrated steering of global supply chains in times when supply chains are becoming even more complex each day. There is a need to deploy smart business solutions and digitalization to gain business. Also the need is to focus on customers and process orientation according to business needs (resilience and responsiveness). Digitalization in production industry 4.0 must go hand-in-hand with logistics 4.0. Regarding data, shippers must think outside the box — that is ‘think beyond the factory gate’ to realize the true potential.The sooner we receive relevant information, the faster we can react. In our experience customers for logistics services are most successful when they analyze processes together with their logistics partners and, in consequence, are able to take the right strategic decisions.What really became apparent in our sector in addition to a lack of drivers — there is a shortage of load capacity. At peak times, it is becoming more and more difficult to get enough load capacity on the market. These capacity bottlenecks push up costs that we have to pass on to our customers. Additionally, in Germany we are mov­ing towards an alarming lack of drivers.

Chemical market dynamics building a case for improving logistics. 

The chemicals industry is expected more than double and touch $300 billion by 2025 from $147 billion now. The chemical sector is expected to double to $300 billion by 2025, clocking an annual growth rate of 15-20 per cent. To achieve this, government is also working on a draft chemical policy that will focus on meeting the rising demand f0r chemicals and reduce imports.

The industry is also targeting chemical exports of $18 billion by 2020 from $12 billion in FY17. In the first half of this fiscal, exports rose almost 27 per cent to $7.19 billion. The domestic chemical industry is the third largest in Asia and seventh in the world.One of the reasons for slower chemical industry growth are the norms of pollution control board, since the past five years. Production of certain chemicals has been significantly restricted by the various pollution control boards (PCB). Industries are unable to increase production to meet the demand.Over the past five years, there has been no capacity expansion by any of the companies because clearances are not given by PCBs. This has dented our exports which provides huge opportunities and, of late, is also impacting domestic industries, this has led to large scale imports from China. The domestic industry is simply unable to meet the demand due to policy bottlenecks. This is why Chinese manufacturers are hurting our industry.

Handling general issues in chemical logistics & supply chain. 

There are many areas where we need clear cut policy initiatives and speed in implementation of the standard government growth policies, especially in the logistics / supply chain infrastructure. The business of any company depends upon the efficiency of manufacturing, supply chain and marketing and commercials.Supply chain efficiency depends on the effectiveness of logistics which includes warehouse operations. These warehouse operations can be effective provided warehouse design, layout, infrastructure, processes, staff and safety norms, transportation are appropriate to the requirements.For accomplishing the required requirements, these functions should satisfy the desired parameters. Above all, corresponding national legal requirements have to be met. The relevant international norms should be met as per agreements. In the case of warehouses that store chemicals and/or materials that may be hazardous to humans, plants, animals or the environment, it is extremely important to have a design that ensures safety.

a) Transportation of hazardous chemicals -  

Safe transportation of hazardous chemicals across the country is one of the biggest challenges. A boom in the chemical industry has also led to an increase in the safety concerns of chemical logistics as freight traffic has increased sharply.An increase in the number of untrained staff to handle packaging and transportation of hazardous chemicals and lack of awareness about the new and emerging trends and technologies are some of the issues that challenge the transportation of hazardous chemicals in India.

b) Poor transportation infrastructure -

India’s roads haven’t been able to keep up with the transportation demands of rapid urbanization. Poor quality of roads existing in India are a major cause for concern. Process flow of logistic industry increased accidents and also led to a loss in productivity due to delays.Crossing check points: If a vehicle goes through numerous stoppages eg. toll booths, greater the chance of it meeting with an accident as the contact with the human ecosystem increases.

c) Pilferage in transit –  

Pilferage is a major concern. Costly chemicals are replaced by some other low value substance with truck drivers being the major culprits. As a consequence, raw material quality is compromised.

d) High level of fragmentation of the industry -

A large share of the pie goes to small truck operators who bulk deliver non hazmat. These do not need handling precautions and are highly cost competitive as compared to the service providers with standards set for all types of carriage handling. The latter suffers in this case. MSDS (Material Safety Data Sheet) not properly followed which results in various chemical disasters of warehouses resulting in huge losses in property and productivity.

e) Storage facilities/warehouses for chemicals -

The warehouse design should aim at desired utility of space, orderly layout, safe product storage according to hazard, safe warehouse operations, emergency handling, and security of warehouse. The most important part of the design is the concept of inherently safe design, such as creating a stable building constructed for built in protection. This should cover design of walls, floor, roof, ventilation, retention water catchment basins, fire walls, fire doors, etc.The layout should take care of product storage, loading/ unloading, parking, utility, safety equipment, welfare facilities. The chemical warehouse should ideally be situated away from residential areas, heavily populated places, area should have good connectivity of roads and emergency centres like hospitals, police controls, ambulances , fire services etc should be around the location.

f) Product storage plays an important role

Product characteristics may have health, safety and environmental hazards. Hazardous chemicals improperly stored and improperly handled in the warehouse, can cause fire or explosion resulting in injury of personnel at site, as well as the neighboring areas and loss of property inside the warehouse and outside.An understanding of hazards and associated risks will help in selecting better control measures. The potential safety and health and environmental impacts can be prevented by implementing control measures in the early design stage.The Globally harmonized system (GHS) hazard class can guide hazardous product storage. GHS also guides labeling and hazard communication which helps in identifying hazards and also helps in handling measures.

Guidelines for safe & secure storage system for chemicals. 

The available chemical guidelines always shall propose a safer way to establish safe storage and warehousing of chemicals whether already existing or in a planning stage. A proper storage of chemicals can contribute to the safety and health of employees and also the environment. The contents are as follows:

  • Key responsibilities: those of the service provider or owner of the chemicals, employer and employees;
  •  Legal framework: including main points to be regulated and state of the existing legislations – whether we have implemented them while storing chemicals
  •  Hazard Identification and Communication: the importance of chemical safety data sheet, classification and labelling & a chemical register check for compatibility while storage in warehouse
  • Hazards: highlighting common causes of incidents and hazard classification of chemicals
  • Seating and Design of Storage Area: the design of warehouse, location of warehouse or sites, the integrity of the structure and control of possible
  • Highlight loopholes in system and take corrective actions for a safe storage: Legislations to be implemented very strictly at all levels at all places.
  • Requirements in storage locations: Emergency exits, fire door, alarm systems, manning all 24 hours in such chemical warehouses, handling cargo lifting equipments to be checked and driven very safely in warehouses.

Managing safety as a key factor in chemical logistics. 

Hazardous chemicals improperly stored and improperly handled in a warehouse can cause fire or explosion, resulting in injury of personnel at the site, as well as the neighbouring areas, and loss of property in and around the warehouse area. An understanding of hazards and associated risks will help in selecting better control measures.The potential safety, health and environmental impacts can be minimized by implementing control measures in the early design stage. The Globally Harmonized System (GHS) guides hazardous product storage, and labeling & hazard communication, which helps in identifying hazards and handling measures.

Chemical transportation must be carefully planned and controlled at every stage – from the production facility to the end-user. Companies need to consider the type of containers used for transporting the chemicals and ensure the right modal mix – whether it should be transported by truck, train, or sea; the organizations that will have access to the materials during shipment; and how they can get real-time information about the location and status of the materials, in order to minimize risk.

Logistics management for the chemicals industry demands continuous improvement in operational safety and security. Supply chain security and risk management will be the key differentiator. Chemical warehouses also need to be specially designed for safety. If you have flammable chemicals, you need to have a designated room that contains a sprinkler system and wide aisles.

Chemical warehouses also need to be designed to ensure waste streams are contained in case of an accident. Compliance involves not only complying with governmental rules, but also following voluntary ‘good practice’ guidelines like ‘Responsible Care’.To achieve certification, companies need to have a detailed and documented process for responsibly managing the logistics associated with chemicals. Logistics models have evolved over time to address the changing needs of the market and vary based on scope of service offering and degree of collaboration across the supply chain.However, the pace of automation in the chemical industry has been much slower compared to other industries. Rapid advances in supply chain technology enables increased functionality across multiple sites and countries and have a great potential to improve performance of supply chains.

Working with appropriate partners for chemical industry logistics.  

Continuous improvement of safety and security standards will remain a high priority for chemical companies. This will require close co-operation with logistics service providers and joint improvement programmes. Stringent selection and continuous monitoring of the performance of logistics service providers will remain necessary.The encouraging growth of chemical industry in India has naturally brought issues concerning hazardous chemical storage and distribution into sharp focus. The bottlenecks pertaining to infrastructure, suitable storage facility, equipment and technology are posing serious challenges for the growth of the sector. There is a need for continuous engagement at the strategic and tactical level between the chemical industry and logistics service providers.

However, with the government providing a few sops in the areas of storage facility, equipment etc, the logistics sector seems to be moving on the right track. Hazardous materials storage and distribution risk management involves establishing, organizing, planning, executing and monitoring a set of operations that aims to decrease the probability of accidents and reduce the relevant potential consequences.

Governments and regulatory bodies around the world are overhauling chemical regulations. Both environmental and industry groups note that these changes could signal a kind of détente between the chemical industry and its watchdogs over next few years. In other parts of the world, however, the relationship between industry, activist groups and regulatory bodies remains more acrimonious.

Need to adopt next-generation digitization in chemical logistics. 

A recent PwC study found that chemicals companies plan to invest 5 percent of annual revenues on digitization over the next five years – and nearly a third of them reported having already reached an advanced level of digitization.These initiatives can produce near-term benefits across three primary business dimensions: operations, customer- facing, and organizational. In operations, the application of digital technologies to functions such as maintenance is already improving plant and network performance and minimizing downtime, reducing operating costs by 2-10 percent. But there are greater savings to be had.

By using digitization to integrate business and manufacturing systems, optimize production footprints, and redesign processes, chemicals companies can capture gains of up to 25 percent in capacity utilization. Chemical companies have long struggled to make the shift from “product sellers” to “solution providers” in the customer-facing aspect of their business.

Digitization can make a big difference in this regard. For example, with an application in the paper chemicals segment, suppliers are using sensors and other digital technologies to track how their products are integrated into their customers’ operations; in turn, this enables the chemical companies to improve their products on the basis of utilization patterns and enhance their ability to proactively address customer needs.

Among the results for chemicals firms, are stickier customer relationships, a greater share of customer budgets, and the potential for increased revenue based on provable performance metrics. Advances in machine learning offer chemical companies a valuable opportunity to do more with fewer people and effectively lower the cost of running the business.

Moreover, greater processing power and decision-support systems enabled by artificial intelligence can help reduce organization layers and create a more efficient and potentially innovative operation by, in essence, removing traditional centralized spans of management hierarchy and replacing them with more localized control.

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