GPCA has recently conducted surveys targeting producer companies and Logistics Service Providers (LSPs) operating in the GCC. The surveys aimed to identify the primary performance objectives supported by the GCC supply chain, while also highlighting any disparities between the importance of these objectives to the enterprise’s supply chain and the actual effectiveness of the supply chain function. Furthermore, they assess the impact of key digital technologies on these supply chain imperatives and compare the investment levels in applying digital technologies across the various departments over the next three years and the level of maturity in implementing a digital supply chain strategy in the GCC. Moreover, the surveys examine the most effective chemical supply chain organizations and their view on adopting digital technologies, their supply chain imperatives gaps, and how they are enabling and managing change. The analysis from both surveys explores any potential opportunities to enhance collaboration and enforce effective enablers across the value chain.

Business trends and strategies

When asking senior executives from both producer and logistic companies in the GCC, we found that producer companies’ primary aim is to reduce costs in their supply chain. At the same time, LSPs are most likely to leverage digital technologies to support quality and regulatory compliance.

This showcases producers’ and LSPs’ different areas of focus and their different roles in the supply chain which impacts their perspectives on supply chain quality. That being said, quality is still a common goal, and it is important for both parties to have a clear understanding of various requirements, and expectations and communicate effectively to ensure that quality is consistently evaluated and maintained within budget constraints.

Figure 1: The maturity of GCC digital supply chain strategy

Source: GPCA, digital technology adoption in GCC chemical logistics report, 2023

Profitability and sustainability are among the top three performance objectives supported by chemical supply chains. Both aspects are interrelated, as making appropriate sustainability investments, reducing costs, and increasing revenue are crucial for all supply chain partners in ensuring business growth and continuity.

At present, fewer than two in five companies have taken steps to implement a digital supply chain strategy. Encouragingly, chemical producers are showing slow but steady development in their level of maturity in developing a digital supply chain strategy. In contrast, LSPs have more varying levels of maturity, where none has fully executed their digital transformation strategy, but a good number of companies have made important progress in their transformation journey (Figure 1).

Supply chain imperatives gaps:

Supply chain imperatives gaps represent the difference between the importance of the imperative to an enterprise’s supply chain and the effectiveness of the respective supply chain function. For producer companies, 96% of executives tell us that collaboration is the most significant imperative for their supply chains. However, there is a significant discrepancy of 43% in this crucial aspect of the supply chain, which demands the attention of all stakeholders. The second largest gap (40%) exists between the importance and effectiveness of determining unplanned event scenarios. With disruptions becoming the new norm, an urgent need arises to develop contingency plans to mitigate the risks and impacts of such events.

In the region’s chemical logistic sector, supply chains’ main strategic imperatives are generally considered both important and effective. However, the existing gaps are most evident in managing transportation disruptions and implementing green initiatives such as waste and GHG emissions reduction, and circularity.

Figure 2: Overall supply chain imperatives gaps for leaders and peers (producers and LSPs)

Source: GPCA digital technology adoption in GCC supply chain surveys, 2022 and 2023
Note: A negative value indicates that the imperatives are considered highly effective in comparison with their importance.

Chemical manufacturers prioritize collaboration more than LSPs, suggesting a comparatively lower understanding within the regional logistics sector regarding the potential benefits of collaboration, particularly when dealing with a large and increasingly complex client base. However, some imperatives are considered highly effective in comparison with their importance such as managing material quality and risks for both regional chemical producers and logistics companies.

To bridge or balance these gaps, companies must identify why an imperative is not efficient and how to increase its effectiveness. That can be achieved by utilizing innovative strategies and shifting to a digitalized supply chain with end-to-end orchestrated and insight-driven processes. The overall aggregated gaps for both leading companies and their peers can be seen in Figure 2, where in general LSPs exhibit better performance in fulfilling their supply chain imperatives.

Technology priorities

Chemical companies are applying multiple technologies at different levels and in various supply chain activities. Predictive analytics is a top priority for GCC chemical producers followed by machine-to-machine connectivity, and mobile and location technologies. On the other hand, LSPs focus most on mobile and location technologies followed by predictive analytics and IoT. All these technologies positively impacted the supply chain imperatives, increasing its functionality and consequently lessening the prevailing gaps.

For the less effective producer companies, there is a call for attention to realize the importance of Artificial Intelligence (AI) and cognitive computing to their supply chain strategy. A 25% difference arose between them and the field leaders. However, a significant discrepancy of 70% exists between leading LSPs and their less effective peers in terms of acknowledging the importance of AI and cloud computing which are applied in several areas of chemical logistics, such as demand planning and forecasting, inventory management, transportation optimization, and supply chain visibility, which support better decision-making for optimal operations and cost reduction.

Digital supply chain investments realization

Amid ongoing fluctuations in oil prices and declining advantages from low-cost feedstocks, the GCC’s chemical industry is poised to attract fresh investments by delving into more high-value downstream prospects. This market evolution is projected to generate greater competitiveness for the regional chemical sector.

Distribution and logistics services such as transportation, warehousing, and packaging is expected to receive the most investment within the next three years in the logistics sector. While chemical producers’ greatest investments are allocated to manufacturing and engineering processes, given that this forms the core competencies of their business. Nevertheless, investing in digital supply chains which involves procurement and the entire process of moving products from suppliers to end customers, including planning, raw material sourcing, production, inventory management, and logistics services, stands directly in second place in terms of planned investments in digital technologies in the short term.

There is no doubt that having an effective investment in companies’ digital ecosystems will go a long way to making supply chains resilient and agile. 38% of producer companies stated that a significant to substantial level of ROI was realized from applying predictive analytics. 60% of LSPs stated that a significant to substantial level of ROI was realized from applying mobile technologies.

The common benefits obtained by investing in digital technologies are improved marketing effectiveness, reduced service costs, improved asset efficiency, and decreased supply chain downtime. Producers also experienced unique benefits, mainly reduced transportation costs, and shortened order-to-ship time. For logistics companies, their unique benefits include reduced errors and enhanced workforce utilization.

Figure 3: Five key levers for a digital supply chain

Source: IBM services, 2022

Enablers for digital technology adoption in chemical supply chains

Due to the logistics sector’s nature of heavy use of manual processes that handle a large amount of data stored in different methods and various locations, it is faced with many challenges when adopting new technologies. These challenges mostly involve costs, resistance to change in the workforce, and data management.

To overcome these challenges and unleash digital supply chains’ full potential, the industry must consolidate different dimensions into an efficient homogeneous ecosystem and employ digital supply chain levers such as those in Figure 3.

For successful talent and skills strategies, companies must establish a strong foundation by assessing and managing readiness for new technology adoption. Companies also need to have a change management strategy in place that helps employees adapt to the changes that come with digital technology. The workforce of the future should be able to utilize digital tools effectively, embrace innovation and handle emerging technologies intuitively.

Data management is the backbone of any successful digital transformation. There are vast amounts of information and data used today to drive more value with digital transformation and not miss out on valuable insights that can optimize their strategies.

Looking into monitoring and sharing commodity prices is a missed opportunity for several LSPs. Commodity prices data is useful for adapting transportation costs and logistic services dynamically, revising inventory and transportation strategies based on shifts in customer demand, and proactively anticipating any potential supply chain disruptions.

Figure 4: Potential areas for cooperation among producers and LSPs

Source: GPCA research, 2023

Conclusion

Market competition has shifted from being between individual companies to being between the supply chains in which they operate. Consequently, collaboration can form the core of sustainable, future-proof, resilient, and agile supply chains, and building a strong market position. Both chemical producers and LSPs must have a shared vision and commitment to integrating digital solutions into their supply chain operations. Expanding partnerships can be exploited in various areas as illustrated in Figure 4 to be fully equipped with digital technology, standardize digital language for exchanging data, optimize processes, develop workforce skills, and improve communication within the supply chain. By leveraging each other’s strengths and expertise, both parties can achieve better performance and a competitive advantage in the market.

Thank you for reading this article. The following GPCA reports can help you better understand the statistical results and compare them with global chemical producers’ results as well as explore some of the key global and regional practices:

1. Digital technology adoption in chemical supply chains
2. Digital technology adoption in GCC chemical logistics