Chemical Logistics Vision 2020
September 2011
The next decade’s key trends, impacts, and solution areas
© 2011 Deloitte
Introduction
The chemical industry is an important driver of the global economy, with estimated global annual sales of €1871 billion in 2009. The EU remains a leading chemicals production area, valued at €449 billion and accounting for 24 per cent of world chemicals production in 2009. Europe’s share of the global chemicals production dropped, however, from 32 to 24 per cent between 1999 and 2009, due to stronger growth in other parts of the world.
Logistics are a key aspect of the chemical industry as production and consumption locations are mostly separated. Efficient, competitive, and sustainable logistics are therefore of great importance for its future development. Logistics are typically quite agile, flexible, and adjustable, providing opportunities to respond to market changes quickly and effectively.
This report is the final output of a review initiated by the Strategy Implementation Group Logistics (SIG Logistics) of Cefic to create a vision of European chemical logistics over the next decade. This review started with a workshop on 18 October 2010, attended by 15 logistics managers from key players in the chemical industry and facilitated by Deloitte. The scope encompassed chemical logistics by all modes of transport in Europe. The future was depicted from three different perspectives: the chemical industry, the logistics industry, and external factors (i.e., sustainability and regulations). The output from the workshop was then combined with the findings from the Deloitte Chemicals 2020 studies. The resulting draft report was reviewed at meetings of the Cefic SIG Logistics in February and June 2011.
The present report gives an overview of likely key trends in the next decade impacting chemical logistics as a whole. The solutions proposed provide food for thought to trigger further discussion on these issues. Likewise, it will help logistics managers in the Chemical and Logistics industry along the road towards 2020.
Source: Cefic Facts and Figures 2010 - The European Chemical Industry in a Worldwide Perspective
© 2011 Deloitte
Purpose
The purpose of this report is to describe the likely trends in European Chemical Logistics towards 2020.
- This report describes major trends and their impact on European Chemical Logistics based on historical evolution and likely future developments in the industry while taking account of external factors such as regulatory changes.
- This report should help shippers and Logistics Service Providers (LSPs) to reflect on the challenges ahead.
- The aim is to stimulate thinking about future developments in European Chemical Logistics. The described solution areas are only indicative and need further elaboration.
© 2011 Deloitte
Recap of Approach and Findings of the Chemical Logistics Vision 2020
Key Trends
- Product Flows: In 2020, product flows will continue to evolve. The role of developing markets in production and demand will become increasingly important.
- European Capacity: Continued clustering of European capacity.
- Capacity Constraints: Due to insufficient infrastructure, assets, and capable operators.
- Emphasis on Reduction: More emphasis on emission reduction, safety, and security from both the general public and politicians.
Solution Areas
- Logistics Agility: Emergence of logistics agility as a solution dependent upon many underlying drivers and enablers. The main objective is to balance costs, service levels, flexibility, and sustainability.
- Integration: Greater horizontal and vertical integration along the supply chain to improve efficiency and productivity and ensure better asset deployment.
- Sustainable Logistics: Increased focus on sustainable logistics strategies and concepts.
- Operational Safety: Continuous improvement in operational safety and security.
- Professionalization: Further professionalization of the supply chain organization supported by training and process excellence.
Impacts
- Supply Chains: Longer and more complex supply chains.
- Logistics Costs: Higher logistics costs and constant pressure on transport capacity, shifting power between shippers and LSPs.
- Regulation: Increased regulation focused on emission reduction and improvements in safety and security standards.
- Sustainable Approach: Demands for a responsible and sustainable approach to business.
Approach
Insights were gathered from three angles: the chemical industry, the logistics industry, and external factors.
Cefic Workshop
To sustain the outcomes of the workshop and to create a starting point for future action, Deloitte performed desk research and combined this with the workshop’s findings.
Deloitte’s Desk Research
The report provides an overview of relevant aspects within chemical logistics over the next decade. The intent is to trigger further discussion on the high-level solution areas to overcome future challenges.
Follow-up
© 2011 Deloitte
Key Trends, Impacts, and Possible Solutions for European Chemical Logistics
Key trends, impacts, and possible solutions are formulated based on insights from the chemical, logistics, and regulatory fields.
Key Trends
- Chemical Industry: An overview of key trends in the chemicals industry.
- Logistics Industry: An overview of key trends in the logistics industry.
- External Trends: An overview of key external trends.
Impact
The impact of the key trends on chemical logistics.
Solutions
Ways to anticipate key trends and solutions.
- Integrated Vision: This report combines three separate perspectives into an integrated “Chemical Logistics Vision 2020”.
- Three Perspectives: The three perspectives are:
- Chemical industry
- Logistics industry
- External factors
- Report Structure: The first part of the report formulates key trends and their impacts. The second part of the report provides solution areas, which are expected to become increasingly important in the next decade.
Set-up of the Chemical Logistics Vision 2020
© 2011 Deloitte
Cause and Effect Diagram for Chemical Logistics
Key Trends
- Increased Supply Chain Security
- Focus on Sustainable Logistics
- EU Consumption Levelling
- EU Production Levelling
- Global Competition
- Insufficient Investment in Infrastructure
- Focus on Safety in Urban Areas
- Clustered & Consolidated Facilities
- Production Shift from EU to Asia
- New Growth Strategies
Impact on Chemical Logistics
- Chemical Production
- Changes in Supplier Base
- EU Faces Specialty Chemical Competition
- Extension of Supply Chains
- Increased Sourcing Complexity
- Regional Volume Concentration
- Relocation of EU Production Facilities
Solution Areas for Chemical Logistics
-
Deliver:
- Administrative Burdens for Transport
- More Competition for Logistics Capacities
- Increased Infrastructure Congestion
-
Plan:
- Better Deployment of Logistics Assets
- Network Expansion of LSPs
- Shortage of Qualified Operators
-
Make:
- Global Supply Chain Dynamics and Complexity
- EU Regulation to Drive Down GHG Emissions
- Greater Levels of Control and Risk Management
- Increased Need for Compliance
-
Ensure Safe and Secure Operations:
- Supply Chain Risk Reduction
- Safety Standards/Culture
- Security Procedures
- Voluntary Industry HSE Initiatives
-
Introduce Sustainable Logistics Strategies and Concepts:
- Shift to Greener Transport Modes
- Maximize Vehicle Utilization
- Consider Product Swaps or Postponed Production
- Investment in Intermodal Infrastructure
-
Professionalize Supply Chain Organization and Processes:
Horizontal and Vertical Integration
- Actions for Integration:
- Use of Integrated Planning Systems to Improve Logistics Asset Productivity and Network Reliability
- Rethink Operating Models
- Consider 3PL/4PL Services
© 2011 Deloitte
Future Scenarios for the Chemical Industry
"Deloitte Chemicals 2020" Reports
The “Deloitte Chemicals 2020” reports analyze the future of the chemical industry in three different scenarios.
- Transition: Economic growth shifts from West to East and energy efficiency is emphasized.
- Resilience: Success at restoring economic health boosts the G20’s confidence, leading to an era of international cooperation.
- Dislocation: Slowdown in both developed and developing economies.
Chemicals Industry
-
Sales of Chemicals in 2020:
- Chemical sales in the EU were €491bn in 2010.
- Three scenarios for future chemical sales development: Transition, Resilience, Dislocation.
-
Divergent Views:
- Different scenarios in the chemical industry based on GDP growth, regulation, and technology.
-
Chemical Industry: Trends & Impacts:
- Europe’s Position: Expected to be the same or worse than today due to outdated capacity.
- Global Competition & Regional Specialisation
- Production Shift
- Stabilized EU Production Growth
- Clustered Facilities
- Levelled Consumption
-
Impacts on Chemical Logistics:
- Increased supply chain complexity.
- Supply chain extension.
Chemical Companies: Business Models
- Shift towards hybrid business models due to M&A activities and product portfolio differentiation.
- Acquisitions as a component of growth and profitability strategy.
- Trend towards consolidation in the industry.
- Increased competition for logistics capacities.
- Better deployment of logistics assets.
- Greater levels of control and risk management.
- Expansion as an enabler for integration.
- Process integration as a key success factor.
© 2011 Deloitte
Logistics Industry
Key Trends
Evolution of the Logistics Industry:
- Past Developments: From functional and fragmented activities to integrated logistics management.
- Integrated Systems: Increased focus on high-end services and broader geographic scope.
Impacts of Logistics Industry Trends on Chemical Logistics:
- Safety and Security Requirements
- Broader Geographic Scope
- Technology Advancement
- Increased Consolidation
- Capacity Constraints
Possible Solutions for European Chemical Logistics:
-
Improve Horizontal and Vertical Integration:
- Collaboration among shippers and logistics service providers.
- Strategic alliances through better process and system integration.
- Information sharing and reevaluation of logistics operating models.
-
Develop Sustainable Logistics Strategies:
- Shift to greener transport modes.
- Improvement of vehicle planning and utilization.
- Consideration of product swaps or postponement of manufacturing steps.
-
Continuous Improvement in Supply Chain Safety and Security:
- Focus on supply chain risk reduction.
- Continuation of safety programs.
- Emphasis on supply chain visibility and voluntary HSE initiatives.
-
Professionalize Supply Chain Organization and Processes:
- Improvement of organizational skillset, processes, and IT.
- Recruitment and development of supply chain professionals.
- Consideration of the full business value chain to align operational and business strategies.
External Factors:
-
Sustainability Regulation:
- Importance of reducing GHG emissions.
- Focus on greener transport modes and cost implications due to carbon taxes or market-based measures.
-
Safety and Security:
- Urbanization and risk aversion impacting logistics.
- Increased regulatory pressure on safety and security in logistics operations.
-
Congestion and Infrastructure:
- Growing volumes and insufficient infrastructure development.
- Administrative burdens related to transport compliance.
© 2011 Deloitte
Appendix
Scenario Analysis
Three potential future scenarios for the chemical industry:
-
Dislocation – The Worst Path:
- Weak GDP growth in both developed and developing regions.
- Stringent regulations and low technology advancements.
-
Transition – The Current Path:
- Boom-and-bust cycles in the West, with strong growth in developing regions.
- Varied regulatory intensity and high technology advancements in the West and low in developing regions.
-
Resilience – The Better Path:
- Strong economic recovery globally.
- Stringent regulations supported by public and policy measures.
- High technology advancements driven by renewable energy and innovation.
Key Points:
- Importance of Preparing for Future Trends:
Understanding these scenarios helps in planning for future regulatory, economic, and technological changes that will impact the chemical industry and its logistics. - Strategic Planning:
Chemical companies and logistics providers need to strategically plan to remain competitive, ensure safety, and meet sustainability goals.
© 2011 Deloitte
