How to Use Predictive Procurement in Chemical Manufacturing
Predictive procurement is a must-have in chemical manufacturing. Why?
Few industries are as massive and complex as the $5 trillion chemical manufacturing industry. Using a huge range of raw materials for production, companies in this industry supply chemicals to virtually every sector. Industries as diverse as food production, automobile manufacturing, and pharmaceuticals rely on chemicals. Shipments are global, and so are the sources of raw materials.
There is a competition based on quality and price—competition made more fierce by the fact that raw materials can account for 50% or more of a chemical’s selling price. Some raw materials are in short supply. International borders bring variables like currency exchange rates and tariffs into the mix. This result in an incredibly complex and fast-moving web of supplier relationships.
And this is why predictive procurement is a must-have. It’s the only way that chemical manufacturers can effectively manage this growing complexity.
How Complex is Procurement in Chemical Manufacturing?
It’s one thing to cite the various ways that procurement and sourcing are complex for chemical manufacturing companies. But seeing the raw numbers puts it in a little more perspective. Here are some numbers from one of the world’s largest chemical manufacturers. This data covers the year 2021:
- Purchased 35,000 different raw materials
- Made purchases from over 6,500 suppliers located across the world
- Implemented a program to focus on renewable and recycled raw materials resulting in the 2021 purchase of 1.3 million metric tons of renewable raw materials
- Eco-Efficiency Analysis was used to ensure raw materials have minimal impact on biodiversity, land use, and working conditions
- Supplier Code of Conduct includes certifications, traceability, respect for human and labor rights, and more
- Enforced supply chain due diligence when importing critical mineral raw materials from countries under conflict
35,000 different raw materials and 6,500 suppliers are a lot of balls in the air to manage for this company’s procurement team. Predictive procurement in chemical manufacturing is a crucial component of keeping an eye on all of those balls.
You might be asking why. It’s simply because the amount of transactional data that is created from managing that many items and suppliers is tricky to keep track of without the correct tools (and tools that work in real-time). Imagine trying to watch 35,000 televisions at once. Even if you could put them all on one wall you would inevitably miss something that happened somewhere. But if you had a machine to help you watch the TVs and alert you when something important happened you’d have a much better chance of being on top of things.
That’s where technology can make a huge difference. Specifically, turning the power of artificial intelligence and machine learning loose on vast quantities of current and historical data. This enables predictive procurement to alert you when something needs attention and allows you to get the visibility on all your team’s metaphorical balls in the air (or TVs on the wall).
Predictive Procurement Orchestration as a Competitive Strategy
Chemical manufacturing as an industry has been somewhat slower to adopt digital transformation than some other industries. That doesn’t mean procurement teams aren’t without software, just that it tends to be behind the capabilities that have become common with more advanced applications.
Integration between systems (including the software used for sourcing-related activities by other business units) also tends to be lacking. This is an opportunity for a technology upgrade that makes a meaningful difference.
No one enjoys having to exhaust their existing processes and then learning how to use new software. Deployment takes time, data migration takes time, and onboarding takes time. Then there’s the very real risk that the new software won’t cover all of the functionality of the system it replaces.
That’s the beauty of Arkestro. Our platform can integrate with existing systems. It’s not a new software package that aims to replace what’s already there in terms of functionality or process. Arkestro leverages the power of AI and predictive machine learning to analyze an organization’s data, (including historical data). This provides instant analysis and deep insights about procurement and finance, informing and guiding decisions.
In addition, having the power of Arkestro with an organization’s data opens the doors to advanced features like Predictive Supplier Management. Arkestro has access to current and past raw material prices, production requirements, supplier reputation, global factors such as economic conditions, and many other variables.
This is too much data for humans to process at more than a superficial level. But the AI and predictive machine learning data analysis capabilities are deep enough and fast enough to support an automated negotiation process.
Arkestro represents the game-changing opportunity predictive procurement offers for the chemical manufacturing industry.
Predictive Procurement in Chemical Manufacturing — Next Steps
To learn more about how Arkestro and its advanced AI, predictive machine learning and game theory deliver revolutionary predictive procurement to the chemical manufacturing industry, be sure to read this post. It includes details on a McKinsey report about the use of technology by procurement teams in chemical manufacturing. The report unveils excellent opportunities for chemical manufacturing to create more effective procurement processes.
For a first-hand look at Arkestro the leading Predictive Procurement Orchestration platform, built to amplify the impact of procurement’s influence, book a demo today.