*****Source-Supplychainquartly.com, Brandon Luna, First Published February 16, 2023
The disruptions of the last two years have forced companies to take a fresh look at their supply chain strategies. Here’s how one chemical distributor used this tumultuous time as an opportunity to redefine its supply chain, adopting new technologies and best practices.
The past 24-plus months have been challenging across almost every industry and especially hard on supply chains. From the COVID-19 pandemic to raw material shortages, from port backups and rail disruptions to extreme weather and geopolitical events, from factory shutdowns to labor shortages—we have not seen a confluence of disruptive forces like this in over a quarter-century. The challenges posed in recent years have served as a litmus test for modern supply chains. They have also required supply chain professionals to be immensely adaptable and resilient.
It forced our company, Univar Solutions, to take a new look at our supply chain strategies and address vulnerabilities in our highly complex supply networks. Univar Solutions provides an essential link in the chemical and food ingredient supply chains. As the third-largest chemical and ingredients distributor in the world, supply chain operations are the core of what we do. Univar has about 600 distribution facilities across the world and a private fleet of more than 3,700 tractors, trailers, and tankers as well as 2,500 rail cars and 90 million gallons of bulk storage capacity. Univar Solutions works with over 1,300 supply partners to connect with customers in several industrial and consumer end markets, including coating and adhesives, cleaning, chemical manufacturing, beauty and personal care, and food ingredients.
Our customers rely on us to help keep communities healthy, fed, clean, and safe. We strive to do what it takes in the moment to satisfy customers. Despite the size and scale of our operations, the turbulence of the past two years has been a true test of our organization’s purpose. It forced us to take a new look at our supply chain strategies and address vulnerabilities in our highly complex supply networks.
A resilient supply chain is one that is able to absorb shocks without interrupting supply to customers. Achieving resiliency is not just about padding inventories. To make our supply chain more resilient, Univar Solutions focused on three strategies. We embraced technology to improve visibility and scenario planning while also increasing our internal logistics and operational capabilities and capacities. Most crucially, we prioritized the safety, health, and development of our employees. By sharing our story, I hope it will provide some insight to help you mitigate risks and overcome future disruptions.
- PLAN AHEAD WITH THE RIGHT TECHNOLOGY
The challenges that have occurred over the course of these past few years have made it clear that disruptions in the supply chain often follow a chain of events—as opposed to a singular event. Weather events, factory shutdowns, semiconductor shortages, and other material shortages have all served as contributing factors to the supply chain disruptions still at play today.
Companies can manage their supply chains only when they have a clear picture of each link. The one area where Univar Solutions made significant progress during the depths of the pandemic was in using technology to increase visibility and scenario planning. The first step in accomplishing this was migrating to a single, modern enterprise resource planning (ERP) system across the United States, Canada, and Mexico.
As far as information technology goes, ERPs have been around for 25 to 30 years, so you may be asking, “What’s the big deal?” But chemical distribution is a business that has grown up locally and regionally, consisting of companies that have not had the sophisticated software tools you see in larger enterprises. So, moving Univar Solutions onto a common platform was a major breakthrough. By connecting planning, purchasing, inventory, sales, marketing, and finance functions across the Americas, Univar Solutions can better cope with adversity. When a customer requirement changes, the ERP helps us translate that signal all the way back to operations and determine how much material we need to buy and store.
During the pandemic, for example, normal sources of supply disappeared, and our customers had to get creative. Some of our largest U.S. customers began to source products from India for the first time. But these products were shipped in bulk tankers in quantities too large for them to use all at once. They didn’t know what to do with the extra inventory and asked us to meet the tankers at the port, repackage the products into smaller drums, and then ship them from coast to coast. Any additional product was then stored for future delivery by Univar Solutions, a benefit not available from most distributors. As we carried out these operations, our ERP system helped us understand the material we had and the potential ways we could support our customers.
The company is further building resilience in the supply network by using sensors—leveraging the internet of things—to track and trace inventory. Sensors provide that extra layer of visibility by capturing signals to provide real-time data and insights. All of this data allows us to allocate product and inventory where it’s most needed and effective—a capability especially important during times of supply uncertainty.
We also used sensor technology to enable a new feature that allowed us to respond to one of our customers’ top inquiries for our customer service team: “Where’s my stuff?” The new technology helped customers track their order status regardless of sales channel. We, of course, want to avoid supply disruptions, but when they do occur, it’s important to be transparent and communicate.
Univar Solutions has also invested in an automated rescheduling tool that recognizes when a shipment is going to be delayed and notifies customers. When we bring together a centralized business platform and digital tools, we offer suppliers and customers the transparency and self-service capabilities critical in this day and age.
- BUILD THE RIGHT MIX OF OPERATIONS AND LOGISTICS CAPABILITIES
As a chemical and ingredients distributor, it is essential to have the right mix of operations and logistics capabilities to deal with the unexpected. Resilience is all about saying “yes” when a customer asks if we can deliver a key commodity.
An example can be found if one transportation mode is impacted by a work stoppage, embargo, or other issue. With these occurrences increasing across supply chains, the impacts on critical industrial commodities such as chlorine, can be felt not only by customers but also by society as a whole. At Univar Solutions, we have developed a flexible transportation model that allows us to respond to capacity and reliability issues by diverting shipments to alternative modes of transportation. How? By pairing our own fleet with dedicated capacity that we have secured with common carriers. In the past few years, we have pivoted to more of a committed capacity model and that strategy has been a boon to our business.
Before the pandemic, Univar Solutions, like many shippers, secured trucks in the spot market. That strategy works when there is a lot of trucking capacity. But when there’s a shortage, it can lead to big swings in pricing. When you secure dedicated capacity with preferred providers, you might have to pay more but you also gain a measure of control over a pool of trucks. Univar Solutions typically uses its private fleet to serve customers within a 250-mile radius of our warehouses. We have the flexibility to send our carrier capacity longer distances. And our transportation management system connects with our supply chain partners to assess and analyze the most efficient way to move loads.
To improve our ability to deliver products quickly and safely where and when they are needed, we continue to invest in our logistics strengths. We’ve added warehouses (including a new facility in British Columbia, Canada, scheduled to open later this year), terminal tanks for bulk chemistries, and rail capacity.
On the operations side, we’ve been adding to our formulation and application development capabilities. Resilience means the ability to do whatever it takes in the moment to satisfy a customer. When certain chemicals and ingredients experienced shortages in the past two years, our lab services teams were able to work with customers to reformulate their recipes with components that were available.
When a specialized paper product manufacturer experienced an unforeseen shortage of its critical supply of the raw material sodium metabisulfite because of the severe winter storm in Texas in 2021, Univar Solutions came up with a custom solution by identifying a comparable material, liquid sodium bisulfite, that wouldn’t compromise on safety or quality. We then figured out the logistics of moving the bulk product into totes and delivered the liquid material in record time to avoid any production delays.
- INVEST IN YOUR PEOPLE
At the heart of our supply chain is our people, who connect our producers with customers they can’t efficiently serve. We realized that in order to keep our supply chains up and running during the early days of the pandemic, retaining the talented supply chain professionals on staff was critical. For this reason, every operational decision that we made at the time was with the safety and well-being of our staff in mind. We operated with a high degree of empathy to ensure everyone stayed safe.
For example, during the pandemic, we had our customer service and sales support teams work remotely. This not only helped them stay healthy but also helped our warehouse employees, drivers, and others who still needed to go into our branches. They were exposed to fewer people, making it easier to practice social distancing.
When the United States experienced a shortage in hand sanitizer at the start of the pandemic, our technical teams stepped up to formulate our own sanitizer. Our packaging service teams assisted in the project by packaging solution in personal-size bottles that were distributed to drivers and operations teams.
Part of our success during the pandemic was that Univar Solutions has regularly invested in the training and education of its supply chain team members. We supplemented our internal learning and development programs with third-party education partners. The pandemic also gave the company an opportunity to adjust its operations to match the latest industry best practices. We have taken legacy supply and demand planning processes, which were developed in the early 2000s, and supplemented them with the latest thinking to elevate the organization’s abilities.
Univar Solutions is now wrapping up the second year of a monthly training program for operations leaders to better understand the tools we have and how to harness them. We’ve also sponsored 10 supply chain professionals to get professional certifications in supply chain management.
Talent management is often seen as an HR responsibility, but it should be seen as a business process. Growth and development are increasingly becoming key attributes in job satisfaction and, ultimately, employee retention. Amid rapid innovation and digitization, strategic workforce planning is crucial to establishing future resilience.
THE WORK CONTINUES
Businesses have had to weather significant supply chain challenges in the past few years. Many have made significant progress in their efforts to overcome disruptions, mitigate risks, and build resilience in their operations. However, most still have significant work to do, as a recent McKinsey survey revealed. The survey shows that many companies are still struggling to find enough supply chain talent and still lack a clear picture of the risks that lie in their supply network.
At Univar Solutions, our supply chain is an ever-evolving organism. It is core to what we do. The secret of success for a chemical distribution business is managing complexity. Univar Solutions handles over 15,000 products, multiple package sizes, and unique special handling requirements, safety, and quality specifications. Almost every customer has a unique set of requirements. We recognize that it is our responsibility to provide the optimal method to serve those needs. As Univar Solutions has demonstrated, network resilience requires building on your success and constant improvement of your supply network, ensuring that you are prepared for whatever comes your way.