The chemical industry is diverse and complex, and its supply chains reflect this complexity and diversity, particularly when you consider the array of products produced from chemicals. Everything from food storage containers to paint, shampoo to lawn care products, and even food products are based upon chemicals. Almost every product found on the shelves of homes and offices start with chemicals. Chemical supply chains handle all of these products plus many, many more. Some of these products, especially the raw materials like corrosives and acids, need special handling and unique transportation services as well as special storage facilities to prevent combustion, contamination, and spoilage. The high-risk nature of the logistics and supply chain services require high safety standards, flexibility, and adaptability. The supply chains are long and complex and require careful and sophisticated management as well as excellent information systems support and, therefore, often require special expertise as that offered by third-party logistics services companies, such as the so-called 3PLs. The chemical companies are effective and efficient in designing and producing chemicals and various chemical products but may need the special services and expertise of the logistics service providers for transporting, storing, and delivering their products to customer locations in a safe and timely manner. Consequently, it is not uncommon for chemical companies to outsource all or part of their logistics and supply chain needs to one or more of the available service providers. Company Background KEMS LLP is a chemical logistics services company located in Chester, Pennsylvania, a suburb of Philadelphia. The company was founded in 1995 by four former managers of a large and diverse, asset-based logistics service provider. The four founders saw an opportunity to specialize in offering service for chemical and related products without investing in transportation equipment or storage facilities. Essentially, they planned to operate as what is called a third-party logistics company (3PL) that would offer services to small to medium-size companies in the chemical industry. The actual transportation and related services were purchased from asset-based service providers such as motor carriers and railroads. KEMS managed these services for their customers and provided them with efficient and effective deliveries. All four partners had solid but complimentary experience, which enabled them to get started quickly. In addition, they were able to purchase part of the business from their former owners with very favorable terms, which provided a solid basis for their growth. The first 10 years were challenging as they tried to establish a foothold and an identity in the marketplace. They experimented with a portfolio of services offerings that included consulting, telemetrics to measure available stock levels in tanks on a remote basis, and selected educational services. They were very flexible and operated leanly that allowed them to adjust to the ups and downs of the very competitive marketplace. By 2005, they had established an identity and expanded their service offerings by leasing and purchasing rail tank cars to provide a more competitive service; partnered with a large computer and software company to offer Transportation Management Services (TMS) to coordinate shipments and lower transportation costs. They also purchased a small European company that offered similar services in the EU countries to provide a footprint there and to expand their global operations. KEMS has now successfully integrated the EU company and retained most their employees. Future Expansion and Opportunities The four partners are considering expanding their geographic reach either in North America (Canada and/or Mexico) or in South America. One of their advisory board members recommends considering other bulk liquid products that are less risky such as vegetable oil and other liquid agricultural products and stick to their current market area.
1. Based upon the information in this chapter and other sources at your disposal, evaluate potential global geographic opportunities for their consideration and make appropriate recommendations.
2. Would you support the recommendation of the advisory board member? Why or why not?
Coyle, John J.; Novack, Robert A.; Gibson, Brian; Bardi, Edward J.. Transportation: A Global Supply Chain Perspective (Page 33). South-Western College Pub. Kindle Edition.