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Digital Procurement of chemicals

01.10.2018

 

Due to the growing amount of digitalization nowadays, the procurement of chemicals is under transformation because the development of digitalization creates new channels to implement procurement process more advanced ways. Let’s go through some facts in order to get the idea of the global impact of chemical industry: according to the Deloitte, more than 20 million people are employed by the industry with worth of 5 trillion dollars of annual sales. Besides the facts, it is mentioned the challenges as well which include 4 topics: global market, competition, organization and emerging technology. Because of the challenges, CPOs, chief procurement officers, need to be up to date of the most efficient ways to keep up with the innovations of digital procurement, so they can reduce the costs and make the most out of the new online platforms.

 

The shift from domestic to global market                                                                                                                                                                                                                             

Digitalization is going to help to come up with smarter, faster and more flexible options to grow the business. CPOs are able to seek for both, business partners and customers, globally and seek new ways to expand. The transformation from the previous, domestic trade, to today’s international competition creates new opportunities for procurement process, which were previously much more challenging. As Wolfgang Falter, partner of Deloitte, states the fact that Western countries are shifting from producing to purchasing products from overseas, especially from Asian producers because of their low costs and efficient work methods. In Asia they are able to produce more with less amount of money. Even though it is more efficient, international trade requires more concentration on tariffs, taxes, and the safety issues. In international business high level of understanding about regulations and rules that apply between EU and other markets is extremely important in order to avoid big mistakes and losing a lot of company’s capital.

 

Paying attention to two important facts                                                                                                                                                                                                                                               

As Accenture’s Managing Director Chris Pesci mentions in Procurement in Chemicals “being a master in the chemical industry requires procurement personnel to have a strong understanding of what they are buying and how they buy it.”, which emphasizes the fact that CPOs really need to be educated well enough about the rules which apply to international business and what the products are made of. Safety issues needs to be taken under consideration, since chemical products require much more higher level of knowledge than normal goods.

  • Customs can cause big problems when having international partners and customers. Today’s opportunities to expend abroad are a great way to gain more capital and make the business grow for the companies, but they need to be well aware of current situation for tariffs in different continents. For example, the ongoing trade war between the US and China affects to the price of logistics. Inside of Europe is much easier to do business between European countries, but the US and China are able to offer bigger markets for chemical industry. However, big European business leaders are trying to find ways how to combine the power from all European countries in order to reach the same level of competitiveness.
  • Safety is taken into account now that people are able to order anything online across the world to their front door. The customers want to be more aware what the products they use include, so they expect to get the information from the companies. Especially when dealing with chemicals, safety is the most important fact that needs to be taken care of.

 

Different improving elements                                                                                                                                                                                                                                                                     

As already discussed earlier  about the new opportunities that are building up from digitalization, there are a lot of advantages making the growth of chemical industry quicker. In the article Chris Pesci discusses about different elements of digitalization affecting the procurement, such as:

  • Mobile procurement such as bar scans and mobile receiving are making procurement easier approachable. Companies are able to receive real-time inventory updates and check out necessary information on their mobile without wasting time to turn on the computer and going to the website. In today’s world mobile data needs to be quickly and easily accessible in order to be effective and beneficial. As mentioned in Deloitte’s brochure, real time information is going to improve the level of marketing intelligence and help with analytics to seek for more efficient ways to do business.
  • Networks and clouds are closely related to mobile procurement because they are essential tools for today’s companies to reach effective work method. Referencing Chris Pesci’s words “These new tools and processes help with faster delivery for the right price from the right supplier.”, which emphasizes the importance of digital channels improving company’s procurement. For example, chemical company is able to share digital information on cloud so the customers can check it out immediately on their smart devices and give direct feedback about it.
  • Predictive analytics is making planning easier. They key to success is being ahead of the trends and offering products or services before customers even realize needing them, but it is important as well to be ahead of the competitors. Often a term “big data” is used with analytics and to put the explanation of the term simple, it means to gather a huge amount of data together and recognize the future trends and patterns with the information. Michael Laprocido takes a deeper look into analytics and big data in Analytics And Big Data: Driving Agility In The Chemical Industry. In the article there is mentioned that by the end of 2018 the business intelligence and analytics market is globally going to be worth of 18.3 billion dollars, which is a proof for the statement that analytics is a key to the success.

The transition of procurement in the chemical industry has shifted a lot in a short amount of time, domestic market has expanded to a global competition where there are more challenges and requirements for the companies. They need to be ahead of the time, aware of upcoming trends to offer things customers do not even know the expect yet and as well beat the competitors. Western countries have decreased the amount of producing and focus more now on purchasing outside of Europe, since Asian countries are able to produce more with smaller amount of investments. It requires more knowledge from CPOs about safety and international affairs such as customs and regulations, but it is easier to gather information about those matters with today’s technology. Elements such as mobile procurement, cloud services and predictive analytics are a huge advantage for increasing the growth of the business. Professionals in these sectors working for chemical companies have many advantaged tools so they can take the most out of the new innovations to implement them to the company’s customs.