Operational Challenges in a Chemical Company: Key Solutions
by Xcel Digital
Posted: Jan 30, 2020
Posted: Jan 30, 2020
At a Glance
- Despite macro factors such as rising interest rates and impact of tariffs, Chemical industry in the US is expected to increase production in 2019.
- Per estimates by the American Chemistry Council (ACC), chemical output in the US is expected to rise from 3.1% in 2018 to 3.6% in 2019.
- Higher production translates to higher capacity, and production managers need to equip themselves well to brace the changing environment.
- Technology is one such critical area that modern-day production managers see as a key enabler to ease their growing challenges.
- In chemical industry, raw materials weigh in close to 50% of the cost of production. With the US government proposal of hiking tariff by 25%, the cost of raw material from China to US could go over $3B.
- A sophisticated business application (ERP) will help Plant/Production Managers keep up with the challenges and track key metrics such as inventory turnover and manufacturing throughput to optimize cost of production.
- Noncompliance to GHS Labeling standards could lead to penalties of up to $127,000. Production managers will benefit from integrated labelling solutions to streamline shop floor activities.
- Planning of resources
- Continuous production
- Optimal asset planning
- Fluctuating demand
- Tighter lead time
- Procurement delays
- Quality check
- Recalls, etc.
- Your customer calls and asks to update order quantity from 5000 to 10000 pounds.
- To meet this demand, the production manager needs to be able to respond quickly by evaluating resources at hand and scale batch sizes in the reactor.
- If your order management system is designed well, your customer service can update the sales order quantity and set the priority on the order to high.
- Order priority can be designed to consider criticality of demand, customer categories - A, B, C etc. or even your relationship with your customers. This signals your MRP system to issue an updated production order to reflect the higher batch size.
- The production supervisor needs to review production schedule and adjust resources as required to accommodate this expedited demand.
- Scheduled jobs from production orders – Gantt charts allow the production managers/schedulers to modify production plans either through a drag and drop mechanism or from the menu option. Job scheduling indicator on a Formula or a BOM needs to be turned on in order to schedule jobs for production.
- Jobs from planned production orders – These are planned production orders that are to be scheduled. Scheduling will only be in place when the production plan converts to an actual order and the production order is in a scheduled status.
- Hourly schedules of all jobs – A calendar that has active working times is a prerequisite for all production activities. Scheduling can be done on hourly timelines if needed and gives you the true picture of job status for the day such as "jobs that have started", "jobs that have ended"
- A modern-day ERP system is best suited to give Production Managers an effective and transparent solution to track actuals and accordingly account for cost of goods sold, revenue, margins, cash flow, etc.
- For organizations with cross-geographic manufacturing locations, ERP can be used to analyze the arbitrage available in low cost manufacturing destination and offset it with any other high cost location. This helps in finding newer efficiencies to ease the strain on high cost areas.
- It can help analyze order volumes, budget for cost, and arrive at better pricing and production planning.
- Ensure regulatory compliance
- Track and trace batches/lots to identify damaged or contaminated products
- Visualize the journey of the product from the manufacturing site to its end-users
- Using analytics, chemical companies can trace the root cause of the issue and treat it accordingly
- The US Chemical industry is facing strong tailwind from harnessing its shale gas reserve and soaring crude oil price. As a result US chemical companies are benefiting from lower cost of production (affordable raw material and energy), and at the same time reaping higher profits due to increase in global crude oil price.
- While the tailwinds are favoring the industry, there is a growing competitiveness among participants to distinguish their offerings, increase production, gain customer loyalty, and comply with stringent regulations.
- The life of a Production Manager in a chemical industry is complex. Production Managers are at the crossroad where the buoyancy of the industry is increasingly putting their ability to test and stay relevant. They should embrace technology to achieve their goals and ensure highest compliance with regulations.
- Microsoft D365 offers easy-to-use visualization of data across all functions of an organization including production, sales, compliance, marketing, etc. Unified access to data seamlessly across multiple sites or location enhances transparency, improves track and trace in case of an inquiry, audit or recall, leading to effective decision making.
XcelPros is a Chicago-based company delivering transformation through technology.