At LogiChem in Rotterdam, on 14 March 2023, a question was put to three panellists: Justin Lanyon, Global Supply Chain Director, Arkema; Leo Kuetten, Logistics Leader EMEA, Dupon; Istvan Lencz, Global Director of Logistics at Henkel:
“How can you collaborate with your logistics procurement team to give your chemical supply chain capabilities a competitive edge?”
They were also asked, “Where does sustainability come into this? Is it even a consideration when choosing suppliers?”
When the audience was asked, “How many of you would pay a supplier 20% more for a greener solution?” nobody raised their hand. When they were asked, “Who has sustainability requirements in contracts?” only a few raised their hands. So, what did the panellists have to say in response?
Justin Lanyon, Arkema, said that in supply chain metrics, their number one consideration is cost, number two is the service offering and lead times that the customer expects. They are constantly reassessing and looking at new metrics and KPIs, the value they can bring to the logistics service provider and their ranking in ‘shipper of choice’ metrics. “We’re now competing for logistics services instead of people tendering for us”. They need to benchmark themselves against other companies.
In terms of sustainability, the supply chain produces 11% of Scope 3 emissions in the chemical industry, but they also need to focus on the rest of the operations that are moving the needle. “We make sure that people we partner with share the same sustainability vision and have shared goals, then we go through the journey together with the suppliers…”, instead of just putting out a tender, getting the quote, then asking about sustainability, with the end decision being based on either cost or a gut feeling. They want to benchmark themselves against competition, so they need more data and it’s a long journey to get there. The big question for them is, how do they keep the competitive edge? It has shifted into a sellers’ market, so chemical companies don’t have the bargaining power they used to have.
For Leo Kuetten at DuPont, the number one consideration is cost, number two is service and number three is reliability. They need to achieve the KPIs and deliver according to needs. Sustainability is part of their strategy – although they primarily focus on Scope 1 and 2 emissions, Scope 3 is a large concern too. “The ocean market is very volatile… We need to be ready, it’s changing all the time.” Collaboration is key, as well as a fair rate and fair service. There is no normal anymore. “LSPs have to be your partners.”
For Istvan Lencz, Henkel, they have gone from cost-based to value-based pricing, as the value expected from the market is changing. For him, the number one consideration is the corporate values that suppliers need to conform to, number two is service and fulfilling customer needs, number three is total cost of ownership. In terms of sustainability, they are striving to collaborate with LSPs who come with initiatives, as the demand has to come from them.
The chemical industry must integrate sustainability into its corporate strategy, but it needs better processes, technology and simplification of data gathering on Scope 3. Finding good quality Scope 3 upstream data for raw materials is a big challenge and using it to compare suppliers is very difficult, so many are working on big assumptions and making educated guesses. Procurement insight, transparency and collaboration with suppliers will deliver benefits and competitive advantage, so that stakeholders and suppliers will sit up and take notice.
Author: Julia Swales