Dow Chemical Company - The Supply Chain of the Human Element

By Adam Kundinger & Brady Lehman

Dow Chemical Company is a leader in the innovation and manufacturing of different chemical products to be used as raw materials by other companies. Dow’s chemicals serve many different sectors including packaging, electronics, water, coatings and agriculture. As far as size, Dow serves customers in 180 different countries and is located in 36 different countries. It employees 53,000 people and had 2013 sales of around $57 billion. (Statistics from Dow Corporate Profile)  Dow’s market capitalization is $63.68 billion, meaning it has a huge impact in the industry. (Stat from Dow Profile on Fidelity) It also has the ability to have huge impacts on the environment, since many of its products seek to prevent pollution and improve eco-efficiency. On the flip side however, a disaster involving such a large chemical manufacturer could lead to an environmental disaster. 

Dow puts a lot of focus on the resilience, flexibility, security, profitability, and responsibility of their supply chain. They manage 3 million shipments per year, keep products in 300 warehouses and 100 terminals, and ship using water, air, pipe, and truck. From a supplier perspective, Dow obtains 100 billion tons of raw materials from over 1,000 different suppliers around the world. (Statistics from U.S. Resilience Report) This puts in perspective the size and methods of transportation Dow uses on a daily basis. 

       The big weakness of Dow's supply chain is that disruptions in the supply chain process could have devastating effects on value creation as well as tremendous safety concerns for the environment and individuals within any effected area. Since a vast majority of the supply chain process involves chemical solutions and hazardous materials any risk of failure in these processes could result in environmental contamination and health threats to individuals within the surrounding area. This would result in a costly liability, damaging in both the bottom line and in the headlines. Other such threats on a global scale and in the interest of national security involve tampering with supplies. Since Dow Chemical has a vast global network of suppliers and shipments, the threat of both domestic and foreign terrorism is of growing concern. Given the nature of Dow’s chemical solutions and hazardous raw materials, the risk of these products being stolen and turned into weapons or devices used to cause harm is elevated. Dow Chemical also runs the risk of system failure. Many chemical solutions are transported by pipeline between productions centers, with a simple infrastructural breakdown the supply chain could become delayed, resulting in fewer finished goods. Dow‘s production is sensitive to the nature of its raw materials and input materials. If these supplies are even slightly altered within the shipping process or the storage process they will not be satisfactory in the production of their finished goods. With high demands on production, Dow strives to eliminate these risks to the best of their ability. (U.S. Resilience Report)

         Considering the heavy penalty of supply chain disruptions specifically applicable to Dow, they recently implemented a unique supply chain model that was developed at Ohio State University called Supply Chain Resilience Assessment and Management (SCRAM). This model works by putting

greater focus on all the risks in the supply chain with the use of models to detect how possible disruptions would affect customer service. A key to this SCRAM method is to first identify the strengths and weaknesses of the supply chain, which are then used with a disruption simulation to give a score. This score then tells how well a supply chain is able to deal with disruptions. The simulation also gives greater insight into how a given disruption affects one specific component in the supply chain more so than another. (Dow Chemical Adopts a New Model for Supply Chain Resilience)
        Dow "wins" using this supply chain model because it directly combats their weakness of disruption disasters by improving resilience and flexibility. They are able to foresee the result and probability of disruptions much better than other organizations. Another piece to note is that while the model improves the supply chain, it also has had an effect on their business strategy in some cases. The fact that business success has been found solely because of this model exceeds the expectations that the model was previously designed to fulfill. Dow also shows success when preventing security and environmental threats through other practices in the supply chain. For example, they have the ability to maintain 100% visibility over assets tagged as highly valuable, highly hazardous, or highly regulated. (Fact from U.S. Resilience Report)

       Dow Chemical is one of the world’s largest chemical manufacturing companies in the world. With this high demand for inputs in creating their finished goods, an efficient supply chain is critical. As stated before, Dow both ships and receives shipments from around the globe at a high rate using various modes of transportation. During the production process, many of these chemical solutions are transported through pipelines networking throughout the manufacturing facility. Efficient flow of this network to avoid potential delays caused by bottlenecks increases their value creation at production centers. According to a presentation conducted by Dow Chemical Company’s Global Supply Chain Director, Darren Gross, there are key essentials and attributes valued by Dow Chemical within their supply chain. Efficiency and productivity feed into the overall objective of profitability. Gross describes attributes that help Dow attain this goal through their supply chain as, "optimized distribution networks, used alternative modes of delivery, maximized payloads, maximized backhauls, and improved productivity." By utilizing the maximum levels of these attributes within their supply chain, Dow can assure they are maximizing value creation efficiently to yield greater profitability. (Darren Gross Presentation)

Additional Links

 Dow Supply Chain Rotational Program

5 Reasons to Work with Dow Supply Chain

Human Element and Sustainability Commercial 

Dow Supply Chain Videos

References:

• Dow Website - http://www.dow.com 
• Ohio State University - SCRAM Website - http://resilience.osu.edu/CFR-site/scram.htm 
• U.S. Resilience Report - Dow Chemical: Strategies for Supply Chain Security and Sustainability - http://www.usresilienceproject.org/workshop/participants/pdfs/USRP_Dow_CS_012312.pdf 
• Supply Chain Brain - Dow Chemical Co. Adopts a New Model for Supply Chain Resilience - http://www.supplychainbrain.com/content/research-analysis/supply-chain-innovators/single-article-page/article/dow-chemical-co-adopts-a-new-model-for-supply-chain-resilience/
• Darren Gross - Setting the Standard for a Sustainable Chemical Supply Chain - http://lgstdept.wharton.upenn.edu/igel/Darren_Gross.pdf
• Fidelity - Dow Company Profile - https://eresearch.fidelity.com/eresearch/goto/evaluate/snapshot.jhtml?symbols=DOW&rsrch=gqb
• Images - http://www.brocksolutions.com/images/brockimages/NEWSFEED_IMAGES/DOW-logo.png & http://blog.lib.umn.edu/mill3600/myblog/assets_c/2010/08/Dow-Advertisement-2-thumb-500x500-51740.jpg