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The role of technology in agile supply chain networks

by Guest on May 16, 2017

Dr Abdulwahab Al-Sadoun, secretary general, Gulf Petrochemicals and Chemicals Association (GPCA).
Dr Abdulwahab Al-Sadoun, secretary general, Gulf Petrochemicals and Chemicals Association (GPCA).

In today's fast-paced business environment, customers demand faster, more granular, and more precise supply chain solutions, comments Dr Abdulwahab Al-Sadoun, secretary general, Gulf Petrochemicals and Chemicals Association (GPCA).

Going forward, expansions are set to continue driven primarily by Saudi Arabia, Oman and UAE, which collectively plan to add about 14 million tonnes per annum of petrochemical capacity by 2022. Key drivers behind this growth include growing global and local demand, the availability of low cost feedstock, and efforts to maximise the impact of hydrocarbons on the economic development by manufacturing products with higher value addition.

Higher petrochemical production will likely result in increased regional and international trade, which in turn will require robust supply chain networks that enable entry into new growth markets and strengthen existing strongholds. To enable this growth, regional petrochemical companies will need to adjust their supply chain organisations and adapt to the changing digital landscape. In this context, leveraging cost effective logistics solutions while still ensuring agility of supply chains will be critical. In addition, a collective focus on investment, innovation, policy and human capital will also be needed.

Disruptive technologies such as big data analytics, advanced robotics and augmented reality allow for productivity gains, enable new business models, and will fundamentally change the way supply chains operate. Deploying these technologies on the ground can enable smart warehouses and transportation that are both intelligent and highly efficient.

The Arabian Gulf has one of the longest supply chains in the world, making it ever more important to optimise operations and adopt state-of-the-art technologies that enable better connectivity, shorter delivery times and seamless integration of key supply chain links. Yet supply operations often struggle to keep pace, as many are not sufficiently agile to capture fleeting upside opportunities or to mitigate fast moving risks.

Research suggests that companies with more agile supply chain practices have service levels that are seven percentage points higher and inventory levels that are 23 days lower than their less-agile peers. One example of a company that uses these techniques is Amazon, which adjusts prices and inventory levels in real time in response to competitors’ moves.

In a recent survey conducted by McKinsey and Company, 68 percent of global executives said they expect supply chain risk to increase in the coming five years. The growing importance of the emerging markets tops the list of these uncertainties, making supply chain configuration trickier than ever. Globalisation can bring further complexities as the developing countries become extremely desirable markets, not just manufacturing hubs, due to rising incomes. In response to this trend, a few forward-looking companies are splintering their traditional monolithic supply chains into smaller and more flexible ones to grow their opportunities for business.

The unique location of the Arabian Peninsula has already established the region as a global hub for maritime logistics. With half of the world’s international trading fleet of tankers passing through the GCC shores on average two times per year, the recent changes in the shipping industry are bound to have a significant impact on the GCC economy. Recognising this prospect, the national transformation plans outlined by the GCC countries seek to capitalise on the industry’s gigantic growth and its strategic geographic location, and cement its position as a competitive global player by investing in the development of world-class ports.

The GCC has nearly 41 ports which collectively handle 68 percent of the MENA container port traffic. Industrial cities across the region stand to gain significantly from their strategic proximity to major ports. Take Jubail, for example. As the largest industrial city in Saudi Arabia, and the world’s biggest industrial centre of its kind, Jubail Industrial City accounts for about five percent of the world’s petrochemicals, while its close proximity to key ports, including King Fahd Industrial Port, Al Jubail Commercial Sea Port and Industrial Port Jubail, plays a vital role in providing access to key infrastructure and international markets. In Oman, Duqm Refinery and Petrochemical Complex is strategically being built next to Duqm Port which is currently undergoing major expansion to its infrastructure, as well as port and storage facilities.

As the region gets more connected through rail, road, air and sea, the adoption of innovative technologies will play a key role in increasing the efficiency and agility of its supply chain networks. Going forward, only the most agile, efficient and technologically equipped supply chain organisations will be able to compete in today’s highly disruptive business landscape.


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