Chemicals

Chemical distribution companies have several requirements when facing challenges in today’s business world. They include:

• Needing an overview of end-to-end supply chain processes including solutions to increase operational efficiencies
• Getting an overview of planning and inventory management for bulk chemicals and packaged chemicals
• Understanding best practice depictions of typical chemical distribution processes

4 Key Processes

There are 4 key processes that matter to a chemical distribution company:

1. Order-to-Cash: The ability to take a customer’s order efficiently and deliver it by the customer’s deadline.
2. Procure-to-Pay: The ability to manage purchase orders and receiving departments efficiently, optimizing spending on procurement to avoid high capital inventory spending.
3. Inventory Management: Inventory Management: Maintaining optimal inventory levels without excessive capital spending.
4. Break Bulk Operations: Break Bulk Operations: Breaking down bulk shipments such as tankers and large shipments of individual products into smaller pack sizes.

User Story: Warehouse Chaos

Survival in a highly competitive world requires chemical distribution companies to efficiently organize and design their warehouses. Internal routes must be optimized to let manned and robotic pickers grab inventory for break bulking, repacking or outbound shipments. Inventory storage needs to be precisely planned, especially while handling hazardous chemicals.

Too familiar is the chemical customer with multiple warehouses. They store bulk and packaged chemicals stocked in rows, racks and bins spread across multiple aisles. Some of these chemicals require temperature controls. Many have hazardous condition restrictions.

It’s common for companies to focus on meeting the basics and storing things wherever they fit. No warehouses are organized, making it difficult to track where the incoming product was stored and gather items to fill customer orders.

Making matters worse are poor operational practices. For example, a high-volume order involved taking some contents from a 55-gallon bulk chemical drum. Operators move the drum to the Stage, remove what order the order required and then leave the drum at staging. No effort is made to record the location or remaining quantity. At best, inventory numbers are manually written on a tag attached to the drum, not entered into the computer system.

This method creates many inefficiencies later in the production process. They include:

1. Inefficient use of space. The Staging area was already small. It was made worse by leaving drums and totes for break-bulk orders, causing Staging to grow continually.
2. Inefficient use of time. The system showed the drums were at their primary inventory location. Operators unable to find items there had to manually check each tag. Some operators eventually knew to look for inventory in the primary or staging locations. Other workers wasted time looking for the items.
3. No inventory tracking method.
4. Inaccurate inventory counts. Inventories were constantly adjusted for missing or untraceable inventory. Lack of accurate counts meant ordering more supplies to fulfill customer demands.
5. Over-ordering meant not having enough space to store the extra bulk material.

The chaos caused by not returning bulk items to their designated location can make conducting a physical count a Herculean task. With missing inventory placed at unplanned staging locations, it added to the warehouse imbalances.

An Ideal Journey

Organizing any operation-chemical manufacturing or distribution starts with analyzing its operations, growth initiatives and business goals for the next five years.

Ways to make warehouses more efficient include:

• Review existing warehouse storage and design in terms of locations and inventory groupings.
• Using federal, state and local safety guidelines based on chemical properties, create procedures stating where chemicals must be stored.
• Number locations by aisle, row, rack and bins.
• Place the fasting moving items close to the shipping area.
• When receiving bulk containers, label them with a scannable barcode.
• Label the put-away locations and staging locations so checkers can quickly and easily count quantities in a specific location.
• Provide workers with mobile devices that let them scan barcodes providing real-time work details and order status updates.

Processes and Procedures in the Chemical Industry

Chemical manufacturing and distribution companies have many similarities in terms of receiving, inventory, planning, shipping and warehouse management.

The basic processes within the chemical distribution industry are centered more around warehouse management, inventory, planning, repacking, light manufacturing, shipping and receiving. Chemical manufacturing adds route operations, resources and work-in-progress (WIP) testing.

Inventory management processes in a chemical distribution company start with Purchasing and Receiving.

Purchased products are bulk or packaged chemicals, packaging items, labels and other supplies. These products normally come from an approved primary vendor or supplier.

Reporting and analytics show two statistics that determine the effectiveness of the primary supplier:

1. The buyer’s decision to switch to an alternate vendor for a specific purchase.
2. The number of times this change occurs.

Vendor ratings showing the percentage of purchases delivered on time and in full are also important to buyers.