Here's How to Stay Competitive In the Face of Costly EU Regulations
The market for chemical products is expected to grow to 5.6 trillion euros by 2035, more than doubling its current size. As the industry grows, so do the demands of its customers, who are increasingly expectant of add-on services and functionality in the products they buy. This is why chemical companies are moving towards making the customer the focus of the supply chain. But this customer centricity can’t be achieved without substantial investment.
We asked 101 heads of supply chain and logistics management what they’re doing to deal with growing customer demand.
Chemical companies across the board have reported that they’re aiming to improve their ability to meet customer demand. This means Heads of Supply Chain and Logistics Management are being kept on their toes, trying to balance the fairly even split of priorities from their customers: price, reliability, quick delivery, and transparency.
These priorities are complicated further by buyers outsourcing labour to Eastern Europe and the Far East to cut costs. As a result, the European customer base is steadily eroding. Retaining these customers means meeting customer priorities while extending the supply lines and providing a fast long-distance distribution service which is competitive with local producers on price and reliability.
The difficulty is that the European market is the most strictly regulated in the world. There are now nearly 60% more EU regulations in place than in 2008, and companies are facing significantly higher costs, which is driving a reluctance to invest in customer centricity. Despite this, many chemical companies have already begun the transition from being pure manufacturers to solution providers with a more customer centric, value-adding experience.
Outright cost isn’t the only restriction on customer centricity. The most popular way of segmenting the supply chain among our respondents is basing it on distribution channel service-level agreements, instead of working around the needs of customers, so chemical companies are limited in terms of customer service. Although segmenting the supply chain based on customer need is close second, a large chunk of supply chain and logistics managers are yet to match their competition and rise to the challenge of making their customers the focus of their supply chain.
More commoditised manufacturers realise that they need more than a good product. However, customer service is a key element not only to beat the competition, but also to understand customers’ needs and translate them into future demands.
The most prevalent way chemical companies are managing customer demand fulfilment processes is by using cloud-based technology. In this way, supply chain managers are gaining better visibility on the activity in their supply chains as well as collecting crucial data on their customer demand fulfilment.
Furthermore, a big part of having centralised data on a cloud-based platform is being able to plan better for market volatility. The biggest challenge reported within supply chain management among chemical logistics companies is developing a backup plan in case of logistical disruptions and capacity limitations. By investing in customer fulfilment, supply chain and logistics managers can kill two birds with one stone.
By putting the customer at the centre of their thought process, chemical logistics can rise above the competition and at the same time create a source of data to help plan for their top concern of disruption.
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