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Which supply chain issues are key for process manufacturing?

Process manufacturers must deal with a number of supply chain management challenges. Here's a look at the top seven and why they're so tricky.

Process manufacturing companies -- such as those that deal with food and beverages, pharmaceuticals and chemicals...

-- have some shared challenges when it comes to supply chain management. Here's a look at seven of the most common ones.

Supply chain challenges for process manufacturing then include:

1. Maintaining predictable costs. Global costs of production are highly variable due to labor, transportation and other operating costs. Raw material costs vary, as we have seen with the fluctuating cost of petroleum or the prices for food due to the rising cost of labor and transportation worldwide. To mitigate these issues, forecasting systems can be used for hedging on raw material and commodity purchasing.

2. Variable supply. Surplus or shortages also plague process industries. Of course, the food industry has seasonality issues, and in petrochemicals, geopolitical factors can either produce shortages or market surplus, which also impact prices. To assist in planning, forecasting systems that look at weather are important in the food industry, and economic forecast data in petrochemicals are often used to predict supply availability and prices.

3. Differing regulations on raw materials. Each market may have restrictions or outright bans on materials considered unsafe, so sourcing can be a challenge on a global scale. What one trading block may consider safe as compared with another will also vary. Firms need to produce in accordance with these localized concerns and procurement systems, and knowledgeable professionals need to have this information and be sure materials, as well as other business practices, are in sync with local regulations.

4. Risk management. Environmental concerns are growing, as well as the impact of accidents. Though infrequent, once a community has such an event, it drives local governmental regulators to increase security and, in many cases, to change regulations. Risk audits and risk planning should be conducted by third parties who have the expertise and the objectivity to ensure best practices.

5. Bulk product traceability. Demand has increased for product track-and-trace in most markets around the world. The challenge becomes being able to peg raw material and ingredient batches precisely to the original sources. Consequently, the correct labeling of products can be a huge challenge as large batches are broken down and repackaged for end markets. A traceability module that is fully integrated with production systems is required here. 

6. Transportation methods and costs. Products related to process manufacturing tend to be heavy and require all sorts of special handling. Not all carriers have the expertise, so the transportation strategy and systems to find competent carriers is a must. 

7. Customs and security filing. Today, automatic filing of custom documentation is expected in most markets. The data associated with shipments must be precise to comply with international law. Customs information systems and an import and export filing system supports this type of requirement. Or, users can choose to access this service through the transportation or logistics solution they have. Often a freight forwarder can be used to ensure the proper processes and paperwork are adhered to.

Process manufacturing has unique challenges. What's important is getting clear on the challenges and addressing them today.

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This was last published in April 2016

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