HAVING spun off their own fleets, more and more chemical companies are becoming involved with third-party logistics to handle their products, according to Gary Williams, Exel president, chemicals, Americas, Westerville, Ohio.
“They are shrinking the number of people they are working with,” he said during the National Tank Truck Carriers annual conference in Boston, Massachusetts, May 6-8. “The best carriers will get the jobs.”
Considering chemical companies generate $1.7 trillion dollars in sales worldwide, the market appears positive for carriers that can meet the requirements. At the same time, chemical companies are having their own problems with a sagging economy.
“This industry has not been performing especially well,” he said.
Pressure has mounted for chemical companies to create shareholder value. To do this, they are becoming more focused on the areas in which they have expertise and outsourcing the others. While transportation has been outsourced, so have in-plant operations. The transition not only suits the chemical companies, it pleases their customers.
“Customers want fewer providers to reduce costs and get better service,” he said. But in order for the service to improve, the chemical companies must be selective in their choice of providers.
“This industry is changing and we are going to have to change with it,” said Williams.
An analysis of the chemical industry by a British company, IAMCO, indicates that companies focus most of their management on outbound traffic, compared to inbound and in-plant operations, he said. Added to those statistics is the $170 billion spent on logistics, 30%-40% on transportation. Another survey revealed that chemical companies spend 10 times more in their supply chain management than do companies in the technology industry.
As the various insights become more obvious, the chemical industry will be adapting its management policies accordingly. The future is going to produce chemical companies with fully integrated global packages, said Williams.
Despite the anticipated changes, he predicted chemical companies will continue to retain customer interfacing for themselves.
“The outsourcing of services in this business sector will grow,” he said, “especially in the plant and back office. They are elevating customer service to be responsive.”