A Chemical Manufacturer Assesses Its Supply Chain To Identify Cost Savings Initiatives Across The Enterprise

Client Context

A private equity-owned global chemical company sought to assess its supply chain capabilities after acquiring multiple businesses across North and South America. The company ships chemicals globally and faced significant challenges related to customer service, rail transportation efficiency, and cost visibility.

Despite the efforts of its employees to maintain customer relationships amid order delays and fluctuating demand, delivery performance suffered, particularly in rail transportation. The company lacked visibility into railcar dwell times, making it difficult to manage costs and establish benchmarks. Maintenance practices also varied across locations, leading to inconsistent service and an oversized fleet, driving up expenses.

Additionally, container port detention fees reached $1-$1.5 million due to poor synchronization of container arrivals. The absence of a standardized inventory reporting system across North American plants further complicated production planning, causing inefficiencies.

Following an investment in real-time data systems, the company faced integration challenges, requiring continuous emails and discussions across teams to compensate for data discrepancies.

Key Challenges

• Declining customer service due to inefficiencies in order fulfillment and transportation.
• Lack of visibility into railcar dwell times and inconsistent maintenance practices.
• Excessive costs, including rail fleet expansion and port detention fees.
• Uncoordinated system integration, leading to inefficient inventory management and production planning.

Approach & Key Success Factors

EFESO deployed a team of logistics, chemical, and rail experts to conduct an 8-week analysis focused on identifying the highest-value cost-saving opportunities. This process included:

• Two comprehensive visits to production centers to assess infrastructure and leadership practices.
• Interviews with 85+ employees to gather operational insights.
• Detailed supply chain process analysis to measure potential savings and cost-reduction strategies.

After evaluating over 100 potential initiatives, EFESO prioritized four key workstreams with an estimated savings potential of $6-$10 million USD annually.

1. Fleet Sizing and Positioning

• Identified average railcar dwell times exceeding 20 days and developed strategies to reduce them by 20%, unlocking nearly $2 million USD in savings.
• Determined that many customers received rail deliveries within 250 miles of production sites. Transitioning them to truck delivery saved over $1 million USD.
• Combined with two additional initiatives, this workstream presented a total savings opportunity of $3.5 million USD.

2. Maintenance & Infrastructure

• High railcar maintenance costs resulted in idle railcars and excessive charges from rail carriers.
• Developing a dedicated maintenance program and building railcar service/storage infrastructure could save over $5 million USD.

3. Plant to Port Costs

• Port detention fees reached $1 million annually due to misaligned product departure schedules and broker contract limitations.
• Improved transportation brokerage coordination and optimized scheduling could eliminate these fees entirely.

4. System Integration and Data Visibility

• Disconnected systems across plants lacked proper synchronization in forecasting and production scheduling.
• While improved coordination did not directly result in cost savings, implementing a Sales, Inventory, and Operations Planning (SIOP) process ensured that real-time data was accessible, maximizing the effectiveness of all cost-saving initiatives.

With workstream initiatives identified, EFESO collaborated with the client’s steering committee to evaluate potential capital expenditures and risks that could impact cost-saving goals. For example, some customers used chemical railcars for storage, delaying the transition to truck deliveries. Addressing these dependencies was a crucial part of the final assessment.

Results

85+

Interviews conducted to ensure full collaboration across production facilities and corporate headquarters.

100+

Cost-saving initiatives identified and evaluated.

Total savings

Potential exceeding $10 million USD.

Detailed implementation

Schedules provided for each initiative, with a dedicated EFESO team assigned to facilitate execution.

Scheduled follow-ups

To ensure sustainability of process improvements beyond implementation.