Ongoing disruptions to the chemical supply chain continue to impact not only companies within the supply chain but their customers and downstream users alike. Tim Doggett, CEO of the Chemical Business Association (CBA), outlines some of the major challenges facing the chemical supply chain industry and how it affects the plastics sector.
Since the start of the Industrial Revolution, chemistry and chemicals have been a fundamental and enabling science and with each passing century have become increasingly critical to industry and everyday life. In the UK, the chemical industry is a crucial element of almost all value chains and a vital part of the country’s economy.
In recent years, the chemical supply chain has faced its fair share of challenges. In addition to dealing with COVID, the sector has had to contend with a ‘perfect storm’ caused by regulatory changes and increased bureaucracy due to Brexit and major supply chain disruptions, with the horrific conflict in Ukraine exacerbating these factors, causing further havoc.
Additionally, it has faced challenges such as huge price increases in the cost of moving freight, the closure of manufacturing plants, raw material shortages, rising energy costs, sanctions, and a raft of new customs formalities and procedures for trading with the EU.
These challenges are far-reaching as they impact not only companies within the supply chain but their customers and downstream users, including the plastics industry, alike.
Similarities between sectors
Since their discovery more than a century ago, plastics – like chemicals – have become ubiquitous and integral to our everyday lives. And like the chemical sector, the plastics industry is an important contributor to the UK’s economy – it has an annual turnover of over £27 billion and employs approximately 182,000 people.
Another likeness is that both industries have a long and complex supply chain, with chemicals playing a key role in that of the plastics industry. According to a report by the American Chemical Society, more than 10,000 chemicals – including additives, processing aids, and monomers – are used to make plastics.
More than 95% of all plastics are made from chemicals sourced from fossil fuels and are used in nearly every industry imaginable, including construction, vehicle manufacture, fishing, agriculture, clothing, medical products and consumer goods. Hence the constraints resulting from chemical supply chain disruptions have had an immense impact on both the plastics industry and its downstream users, leading to production delays, sharp price increases, and even shutdowns.
Factors affecting the supply chain
The challenges and disruptions faced by both the chemical and plastics industries have been considerably aggravated by the conflict in Ukraine, with both Russia and Ukraine being major sources and significant suppliers of raw materials. This has had several direct consequences, including supply issues and a sharp rise in prices, as well as less obvious impacts, such as the prohibition of Russian-owned ships and vessels.
Brexit has also had far-reaching consequences for both sectors, the most obvious of which is the ongoing need to complete customs formalities and procedures – which came with an immediate administrative cost. Once the Trade and Cooperation Agreement was finally agreed, businesses had just days to put systems and people in place, yet the resources were not necessarily available, and this has taken time to establish. Even now, various aspects have been delayed and there continues to be uncertainty and disagreement between the UK and EU over factors such as the Northern Ireland Protocol.
Whilst many businesses have demonstrated their ability to adapt to these new requirements, others have had to consider alternative options, with a fair number opening offices in or moving their operations to the EU. Factors such as ‘rules of origin’ have reduced or even removed their ability to use the UK as a trading hub between the EU and the rest of the world.
The added complications and ongoing uncertainty of the Northern Ireland Protocol have had varying effects on businesses – some have exited the market altogether, whilst others have seen it as an opportunity to move into it.
via Shutterstock
Another wider consequence of Brexit is that once sophisticated and efficient supply chains have regressed due to the administrative requirements and checks required. ‘Just in time’ deliveries can no longer be relied on and as a result, bigger consignments are being moved less frequently and increased stock levels are being held locally – with more of a ‘just in case’ approach being taken.
Additionally, all industry sectors have been affected by HGV driver shortages. Although it is not a recent issue, it has been exacerbated by factors such as COVID and Brexit.
Supporting the industry
The CBA alerted the government to the HGV driver issue well before it hit the headlines last year and the association was at the forefront of the campaign to both highlight the likely impacts on the chemical supply chain and downstream users and to find solutions. As a result, Government took several steps to tackle the problem.
The association’s focus now is on continuing to lead on this issue to find longer-term solutions, not just with respect to HGV drivers, but throughout the chemical supply chain. In addition, it is taking a lead role in Generation Logistics, where it will seek to address and change the negative perceptions of the industry as well as increase availability and visibility of attractive and fulfilling jobs at all levels.
The CBA has also been lobbying on behalf of its members, with UK REACH continuing to be at the top of its agenda over concerns about the practicality, workability, and requirement for duplication of testing and costs to implement.
In this regard it achieved a breakthrough with the Department for Environment, Food, and Rural Affairs (DEFRA) late last year when it announced that it would consult on extending the deadlines, and that it would investigate a new model that would be workable and affordable for business. As a key stakeholder the association is providing expert advice and input to various working groups to progress this matter.
Furthermore, the CBA has and continues to be extremely pro-active in helping its members adjust to ongoing changes. It has invested in its people and increased its resource by employing additional staff with logistics backgrounds and expertise to provide training as well as hands-on support and guidance to its members.
Through services such as its members’ helpdesk, which provides a dedicated one-to-one advice service on specific issues, as well as through various briefings and events, including Online Advice Clinics, Best Practice Workshops, and Member Engagement Days, the CBA endeavours to keep its members informed, up to date, and ahead of the curve.
Both chemicals and plastics make a vital contribution to countless other sectors and play a sweeping role in society. While realistically there is little likelihood of a quick end to the current supply and demand imbalances, delays in delivery, and even production stoppages, the CBA, which has been the voice of the UK chemical supply chain industry for almost a century, will continue to evolve and adapt to help its members – and subsequently their customers and downstream users – to weather the storm.