In an interview, Susheel Kumar Mittal, Director, Supply Chain & Information Services, South Asia, BASF with Chemical Today Magazine delves on how safe and effective logistics of hazardous chemicals is becoming an unavoidable part of the industry supply chain.
By Shivani Mody
Global trends in safe transportation of hazardous bulk chemicals
Material flows are becoming increasingly global in the chemical industry. China now leads in global chemical production. With capacities coming back in the US and the Middle East, we will continue to see globally integrated and complex supply chains.
Moreover, consolidation in the global shipping industry is likely to put further pressure on lead times.
In such a scenario, greater emphasis needs to be placed on compliance, safety and sustainability, when transporting hazardous bulk chemicals.
The Indian chemical industry is also following this trend. There is already increased activity in the logistics infrastructure space such as ports, rail and waterways. However, from my point of view, what is very encouraging is the emergence of logistics service providers who are specialising in the chemicals sector. Another very important trend is an increasing use of digital technologies like track and trace which provides more transparency to customers.
Industry’s response for handling logistical challenges
The Indian chemical industry understands the need to establish standards for transport safety, security, and emergency response and the importance to foster cooperation and collaboration. With this larger vision in mind, initiatives like Nicer Globe were created.
Nicer Globe is a program developed by the Indian Chemical Council that aligns our industry with globally acclaimed standards, infrastructure, and services for the safe, secure, and efficient transportation through collaboration. Key benefits include behavioural safety monitoring, a 24 X 7 emergency response centre, and certification for road safety adherence.
All of BASF India’s hazardous cargoes are tracked via GPS and monitored 24 X 7. However, as chemical supply chains are global, these solutions must transcend national boundaries and provide a globally available tracking environment.
APAC’s growth potential in the chemical logistics space
Asia, led by China, is the world’s leading chemical producer. According to Cefic, China alone accounted for nearly 40 percent of global chemical sales in 2015. Yet Asia is a very diverse and large region. The heterogeneity of this region makes logistics quite challenging. On the one hand Singapore and Hong Kong rank first and second on the Enabling Trade Index (ETI), ahead of developed economies. On the other hand, several countries fall short in maturity. China ranked 56 and India ranked 100. This implies there is ample scope for development of chemical logistics in Asia.
The laggards need to catch up on infrastructure and safe handling practices. There are several areas to consider: transport emissions, greener transport options (eg. greater use of rail and waterways), further progress of supply chain security, wider adoption of the Authorized Economic Operator (AEO) program in Asia, more specialised service providers, etc.
Chemical logistics and infrastructure in India
First, from a purely Indian perspective, roads have been the primary mode of transport for the industry. Overall, freight traffic by road is estimated at 57percent. So, the potential to develop and utilise alternative modes such as rail and coastal shipping is substantial. I believe we are at a stage where planned investment in India if completed on time, will change the scenario. The Government’s ambitious Sagarmala projects hope to leverage the country’s coastline and inland waterways to drive industrial development. China has done better here and India has some ways to go.
Second, we need a more service-oriented mindset in these sectors. The frequency of services, reliability, and load building are still issues faced by shippers in India.
Third, from a regulatory perspective, there are some challenges for chemical transportation, that should be addressed via alternative transport modes.
M&A in chemical logistics sector
The chemical industry has operated under tough market conditions for several years. However, we had a very strong fourth quarter in 2016. Uncertainty will continue to be our new normal, the cycles are getting shorter and less predictable. Today, profitable growth is the priority for players in the chemical space. When you see consolidation in this context, the stakes for logistics go up. There are two ways to address this question: M&A in the chemical industry and M&A in the logistics space. Consolidation in the global shipping market already has a significant impact on the industry in terms of vessel space, service levels and increased lead times.
Specialised logistics players v/s regular logistics companies
Logistics companies specialised in the transport of chemical goods need to address two challenges. The first challenge is the safe transportation of cargo. The second is full and complete compliance.
For example, the expertise required to put up a chemical warehouse for a retail chain or a furniture manufacturer is entirely different from putting up a chemical shore tank. The design is influenced by safe handling needs, compliance requirements, and customer needs. This can mean significantly more resources and time.
Specialised logistics service providers know the chemical industry well, can understand these requirements, consider them in their projects early and therefore can provide solutions that meet expectations.
Sustainability in supply chain
I think supply chains can take the lead for achieving sustainability goals for chemical companies. When I say supply chain, I mean the entire value chain all the way from raw material procurement to distribution to our customers.
BASF co-founded the chemical initiative Together for Sustainability (TfS). TfS brings together several companies to enhance sustainability within the supply chain. The goal of TfS is to develop and implement a global audit program that will assess and improve sustainability practices within the supply chains of the chemical Industry.
In addition, BASF is using “intermodal” transport modes wherever possible. The “Kombiverkehrsterminal” in Ludwigshafen facilitates transportation by rail and truck in Europe from and to the site. Compared with road transport, transports by rail can amount to CO2 emissions of ca. 65 percent. This alone saves us close to 75000 MT annually in CO2 emissions.
Services offered at BASF
As the world’s leading chemical company we have a very broad and diverse portfolio. We supply to different industry and customer segments. One size does not fit all in this case. On the one hand, we distribute our products for crop protection in small pouches or bottles to farmers. On the other hand, we supply commodity chemicals via tankers and pipelines. We make sure our supply chain solutions are designed to create value for each of these customers.
Let’s take an Indian example: one of our automotive customers wanted us to respond fast, reliable on-demand. This was very important due to their Just In Time supply chain. We worked with our service providers to establish a unique delivery model from our manufacturing site to the redistribution centre, and finally to the customer. This model has been in place for nearly a year now and the customer is happy.
Today, nearly 40 percent of automotive shipments from this site, are done using this model.
Managing safety of materials from point-to-point during transportation
At BASF, we never compromise on safety. That is why we take every effort to make sure we transport our products and materials safely. First, all our service providers undergo a very thorough road safety assessment. We ensure all vehicles deployed to carry our material meet our minimum checks and requirements. Similarly, only trained drivers are allowed to drive these vehicles.
We conduct route surveys before allowing hazardous cargo on the road. Every curve or blind spot is checked by our transportation and distribution safety experts and preventive measures are mandated. Vehicles carrying BASF materials are tracked via GPS and monitored 24X7.
Digitisation at BASF
Digitalisation presents big opportunities for us. Adoption of digital is contributing to efficiency and creating new opportunities. At BASF, we have already begun this digital journey called “BASF 4.0” for digitally enabled products and services in the BASF value chain.
With digital solutions, we can provide our customers access to important information in real time. As part of our digitalization strategy, BASF plans to significantly expand its capabilities to run virtual experiments with a so-called supercomputer which we will build in 2017 in Ludwigshafen, Germany. The new system will make it possible to answer complex questions and reduce the time required to obtain results from several months to days across all research areas.
We are also creating an integrated supply chain with our customers and exchange logistic relevant data. This allows us to supply our customers better and faster. In production, we are using data to better forecast maintenance requirements of our plants and reduce unexpected shutdowns.
Impact of GST on the chemical industry
The chemical industry, as all industries, will certainly be impacted by GST – I think positively. Simply put, GST takes the tax distortion out from supply chain. For example, the decision to locate a factory or warehouse will now be based on where it makes most sense from the value chain perspective. Supply chain designs will be shaped by customer expectations and supply chain parameters.
© Chemical Today Magazine
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