In today’s interdependent world economy, global supply chains are at increasing risk of disruption from a wide variety of events such as natural disasters, civil unrest, trade disputes, financial downturns and mechanical failures. In this context, Arkema, in partnership with its affiliates such as Bostik, has developed and implemented a thorough raw material risk management process designed to ensure business continuity and maximize its ability to meet customer requirements. From raw materials to logistics, this process has redefined what it means to serve customers.
Fundamental Aspects of the Risk Management Process
In 2012, Arkema established a robust yet flexible risk management process to proactively measure and assess all types of supply risk. Accounting for both short- and long-term needs, the process takes several factors into account, such as:
- Size of the supply base
- Robustness of the overall supply chain infrastructure
- Commercial agreements and market factors
Once risk is assessed, risk management teams develop and execute risk mitigation projects focused on the highest risk materials. This process in ongoing, with risk levels constantly being reassessed and new projects continually being launched as earlier ones are completed.
While understanding the various risk factors helps mitigate risk, the process’ key strength revolves around the cross-functional approach to handling it.
How Cross-Functionality Leads to Risk Management Success
With team members ranging from strategic sourcing, technical and R&D to manufacturing, supply chain and finance divisions, the collaborative, cross-functional approach enables Arkema and Bostik to maintain a holistic view of all potential problems and gain easy alignment on critical projects.
Additionally, this process has triggered a corporate-wide cultural shift in Arkema’s approach to raw material risk management. Rather than launching new products and then addressing risk retroactively, Arkema and Bostik now anticipate risk proactively, taking steps to reduce it during product development. This not only improves the reliability of offerings but also has proven to be a more resource-effective approach to risk mitigation.
Risk Management in Action
Yet risk management isn’t just a theoretical exercise at Arkema and Bostik. It has yielded quantifiable results by securing our capability to supply millions of dollars of finished goods to customers while competitors struggled with raw material supply.
As an example, one Risk Mitigation Team identified a supply risk stemming from the fact that all U.S. production of a key raw material was produced in the U.S. Gulf Coast. While there were nearly half-a-dozen producers, they were all clustered in an area prone to natural disaster. The team therefore launched a project to qualify Asian sources as a backup. When Hurricane Harvey struck, Arkema was able to very quickly secure volumes from these sources, while other consumers were scrambling to evaluate technical specifications. Thanks to the completion of this project, Arkema experienced absolutely no delivery failure for products using this material during Hurricane Harvey.
Additionally, another Risk Mitigation Team identified that it was single-sourced on a critical raw material. Although a contractual supply agreement was in place, the sensitivity of the material in the production process was so significant that qualification of a new source was expected to take multiple years. As a first step, the team initiated an adjustment to safety stock to cover any short-term production or logistics disruptions. The team then began the process of identifying, developing and qualifying a second source. This ultimately meant that a major supply disruption was averted when the primary supplier announced the closure of its plant only months after the approval of the second source.
How Arkema and Bostik’s Risk Management Process Helps Customers
By establishing this cross-functional, raw material risk management process, Arkema and Bostik are better poised to address customers’ current concerns while anticipating and avoiding future issues to come. As a result, these global entities also are able to aid in supply security for customers worldwide and proactively adapt in conjunction with the industry’s evolving landscape.
For more information on this risk management process, visit www.bostik.com/us or call 800-7-BOSTIK.