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Chemical supply chain management is facing increasing volatility, both on the market and supplier side. This is caused by the effects of global networks and the emerging markets, price fluctuations and changing customer buying patterns after the recession.
This increasing volatility is adding more uncertainty to estimated future demand. Uncertainty is the driver of the bull whip effect. Preparing for the unexpected, adding a a safety buffer element to every stage of the value chain is creating an amplifying effect of impressive magnitude. Upstream producers in particular are facing tremendous demand fluctuations. Often these exceed capacity flexibility and cash constrained buffer stocks, leading inevitably to stock outs (Figure 10).
In the to-be model inventories are specifically used to synchronize product flows and to mitigate the effect of demand and supply variability. This approach increases added value contributed by operations and results in more stable capacity utilization as well as in reduced average levels of inventory across the
Collaboration may be a remedy, but is a planning approach and therefore could still be infected by the bull whip virus. If we are looking at the value chain within the boundaries of your company, there is a simple antidote:
Apply the principles of LEAN SCM
Read the entire article: http://www.camelot-mc.com/en/industries/chemicals-petrochemicals/