Exhibit 1: Poll Results – Impact of COVID-19 on chemical supply chains

Exhibit 2: Five key supply chain levers to be deployed in response to COVID-19 crisis

Supply chain response to the crisis

Chemical supply chain leaders have five key levers to deploy in response to the COVID-19 crisis. While some of these levers are always applicable, the appetite for collaboration and supply chain de-risking among the various stakeholders, is currently at an all time high. This willingness to change across the ecosystem, must be leveraged effectively to respond to the challenges posed by this crisis.

1. Set up a “crisis sourcing war-room” to de-risk supply chain: A “crisis-sourcing” war-room features (a) all key procurement indicators under one ‘roof/dashboard’, (b) daily discussions on key procurement activities, (c) heightened access to senior stake holders, (d) bias for quicker decisions. The war-room process is very helpful in tracking risks, ensuring transparency across inventory, pending orders, pricing, forecasted demand. The war-room approach typically supports rapid decision making whenever a supply risk is detected, or when an opportunity is observed.
2. Reduce costs and conserve cash: As in every crisis, cost reduction and cash conservation are of paramount importance currently. Broadly, there are four ways to achieve this objective in the short-term: demand management, price negotiation, specification optimization, and working capital improvement. An aggressive cost and cash reduction target should be decided upon, made transparent to all key stake holders and closely tracked through the war-room process.
3. Collaborate (even more) cross-functionally: To mount a swift response to the supply challenges arising out of this pandemic, there is a need for increased cross functional collaboration. For example, supply chain should be working closely with strategy teams to plan for potential scenarios, and analyze their implications for procurement, logistics and distribution. Collaboration with operations and manufacturing includes revision of S&OP based on assessing risks related to inbound supply and customer demand. Close collaboration and discussions with sales teams can help correct demand estimates, even if S&OP models have not yet been fully updated.
4. Build trust with mega-suppliers: Mega-suppliers with high fixed costs may become more approachable and flexible now. There is need for a dialogue with mega suppliers at the highest level of management, to determine how to work together to respond to the crisis and emerge stronger from it. Relationships forged during these tough times can help companies get preferred access to supplier’s limited capacity during lockdown and during the ramp up recovery phase.
5. Bargain hunt selectively: As some may say, “never waste a crisis”. The current situation offers several bargain deals on the market. For example, commodities have fallen by 20-25% in Q1-2020, several

companies are on the verge of bankruptcy and several industries are plagued by excess inventory. On the sourcing front, consider demand criticality and supply uncertainty to determine which suppliers to push for savings and which items must be secured at any cost.

As part of the webinar, we also polled the participants as to which actions they have taken. Clearly, cash conservation selected by 46% respondents, emerged as a top priority action. It was followed by increased cross functional collaboration selected by 32% respondents. Bargain-hunting and building trust with mega suppliers represent considerable opportunities as a lever that are yet to be fully leveraged.

Thinking Ahead: Actions to secure supply chains for the future

Although this situation is challenging, it offers real opportunities for those willing to take bold steps. Today’s chemical supply chain leaders are prioritizing supply security, cost efficiency, and supplier innovation. With this in mind, we propose six key steps for chemical supply chains to emerge stronger from this crisis.

End to end supplier risk management strategies

End-to-end supplier risk management starts with a thorough assessment of various types of risk across key suppliers. Risk assessment should focus on financial, operational, geopolitical and legal risk indicators in the current situation.  Suppliers must then be mapped according to their risk profile and business criticality to determine appropriate mitigation actions.  Best-in-class approaches include the development of a digitized dashboard that seamlessly tracks risks on an ongoing basis and a team that can perform supply risk assessments in a robust manner.

Localization of supply chain of critical goods & services

Governments across the world, and especially in the GCC have strongly backed localization.  The pandemic has become a catalyst in the localization drive, as all supply chain leaders have faced the brunt of delayed supplies with extended chains.  This may be a good opportunity to secure the required internal buy-in to develop local supply chains which could even be at a higher cost in the short-term but comes with the promise of increased availability and reduced costs, over time.

Comprehensive category intelligence

This crisis highlights the importance of internal data transparency and external market intelligence. Internal priorities include high quality spend data and demand projection. Externally, the focus is on supply market intelligence and cost intelligence for key categories. For e.g., it is critical to understand the cost breakdown structure for high spend items at quite a granular level of detail. This will support accurate and dynamic estimation the impact of commodity price movement due to COVID-19, to negotiate better with suppliers.

Exhibit 3: Poll Results – Response to the supply chain challenges posed by COVID-19 crisis

Exhibit 4: Six key steps to ensure strong recovery of supply chains from COVID-19 crisis

Exhibit 5: Poll Results – Thinking ahead of the crisis

Financial support (equity/debt) to key distressed suppliers

With eroding business volume, many suppliers to the chemical industry are under immense financial distress. Capital infusion (in form of debt or equity) may not only help secure supplies in the short term, but acquisition of suppliers with unique capabilities can potentially become a source of competitive advantage in the long run.

Digital ways of working

Forward-looking supply chain leaders will be driving innovation through a range of digital tools and technologies. BCG has identified five important disruptors that can reduce risk and greatly improve efficiency: advanced planning and AI, digital control towers, digital logistics, blockchain and digital order-to-cash. Now is a window of opportunity to drive these technologies as internal and external stakeholders will recognize the value of digitization and will rally for the cause.

Stronger collaboration with key suppliers and end users

Leaders must pursue enhanced collaboration with suppliers and end users to chart a path for successful recovery from this crisis. This is a unique opportunity to forge stronger relationship with suppliers and end users alike, to drive cost reduction across the value chain by initiating specification optimization, joint process improvement and value engineering projects.

When asked during the webinar as to which of these actions participants plan to take, the clear winner was supply chain digitization. An equal number of participants also plan to increase supplier collaboration or localize supply chains.

Conclusion

These are indeed challenging times for chemical companies, and yet these are potentially the best times for supply chain leaders to shine.  Instead of the typical response of passivity, defense and risk aversion, the need of the hour is to take firm steps now to ensure the best response in the present and a stronger, de-risked supply chain in the future.

Listen to GPCA’s webinar recording learn about ‘COVID-19’s Impact on Chemical Supply Chains’, featuring Arun Bruce, Marcin Jedrzejewski, Benjamin Wahl, and Mayank Saxena.