Digital innovations in the supply chain can only be successfully introduced in large chemical companies over the long term if supply chain management itself thinks and acts in a more cross-company manner. But can the solution lie in schematic centralization?
New conceptual approaches
In the past, projects to improve supply chain performance across the enterprise have failed time and gain: resistance from the business units led to the dissolution of central units in individual cases or caused them to stagnate in their ongoing development. In other cases, central supply chain experts nestled themselves in an ivory tower of lofty concepts that were either not implemented or quickly reversed.
These experiences need not be repeated. Innovation is also happening in supply chain transformation concepts. Here, too, business-specific orientation and the development of synergies can be combined. Even if supply chains remain differentiated by business, business unit SCM need not operate in silos, with little exchange across business boundaries and limited scope for innovation. It will be more important to identify which innovations fit which types of supply chain at an early stage, and which supply chains have so much in common that it makes sense to pool know-how and resources.
Identify and leverage commonalities between individual companies
For all their heterogeneity, many chemical businesses show commonalities that allow them to be typified. In the following, we will refer to these types for the architecture of value creation as ‘operating models’. The formation of operating models reflects a learning curve that, in CAMELOT’s case, is based on more than 400 supply chain transformation projects in companies in the chemical and related process industries.
By defining such a model, in a sense an archetype (basic model) for a large group of real-life manifestations of the distribution channels, the production network, the supply chain and the management of value flows, management can
- Assigning a common basic model to various individual businesses and thus provide well-founded support for decisions on divisional structures, pooling of supply chain competencies, etc.
- Quickly identify deviations by comparing the actual supply chain with the basic model and scrutinize them for usefulness. Improvement potentials become visible much faster than with conventional supply chain assessments, which only analyze the individual company for its strengths and weaknesses or use benchmarks whose comparability remains questionable.
- Recognize the interactions between supply chain management and distribution, production, and value flows.
- Take a holistic approach to supply chain transformation, rather than limiting itself to incremental changes. This is especially true in the case of disruptive changes, such as post-merger integrations, spin-offs, restructurings or changes to the entire business model. The archetype or basic model is a blueprint for the redesigned real operating model.
- Focus digitization initiatives on the businesses to which they really fit.
The operating model or blueprint is an approach whose impact on the chemical industry’s supply chain management of the future can hardly be overestimated. In fact, research findings suggest that the better diversified chemical companies set up and manage their businesses according to differentiated operating models, the more successful they are at creating value for owners. This approach opens up a third way beyond the existing fragmentation of know-how and resources, but also beyond the schematic centralization attempts of the past. But how does such a model come into being? What models are there and how do they affect business practice? We will address this in the fourth and final part of the series, which focuses on the supply chain model as an essential component of the operating model.
We would like to thank Dr. Yorck Dietrich for his valuable contribution to this article.