Compliance is Top Priority at Chemical Warehouses

Last year, I interviewed several warehouse managers in the chemical industry to learn more about their operations and how they are using supply chain execution (SCE) technology. Chemical manufacturers, distributors, and logistics service providers (LSPs) all operate chemical warehouses which differ in complexity. At one end of the spectrum are distributors (or LSPs that handle chemicals on behalf of manufacturing clients) who receive containers, usually drums, from suppliers and then reship them when an order is placed. These distributors are known as Factory Pack Distributors.  At the other end of the spectrum are manufacturers, distributors, and, in some cases, LSPs that receive bulk chemical shipments, often in tank cars, and then repackage and/or blend these chemicals into a variety of different containers.

If you were to walk into a more complex chemical warehouse, you would find racks filled with drums, but also other forms of containers specially designed for chemicals. You would see workers using forklifts, but also wearing various forms of protective equipment (aprons, special gloves, even air masks) when working at the filling and blending stations.

What was most surprising to me was how much more important compliance was for these managers than productivity. 

There are many complexities associated with compliance. First of all, different classes of chemicals need to be segregated, so flammables need to be stored in a different zone than oxidizers, corrosives, and so forth. Chemical warehouses also need to be specially designed for safety. If you have flammable chemicals, you need to have a designated room that contains a sprinkler system and wide aisles. Chemical warehouses also need to be designed to ensure waste streams are contained in case of an accident.

Managers must prepare for a number of inspections. A local fire department will put a facility through an annual Superfund Amendments and Reauthorization Act (SARA) inspection that takes about three hours to complete. Similar inspections are conducted by the state (in New Jersey, for example, it is every three years). Sprinklers need to be flow tested once a year, fire alarms need to be inspected by an outside certified company at least annually, and respirators also need to get inspected. All chemical companies need to have Master Data Safety Sheets (MSDS). In some states, even if you have electronic MSDSs, paper copies are also required. And companies that blend chemicals need to have their tanks inspected for corrosion on a regular basis (every 5 years for mineral oil, for example).

There are also training rules. Forklifts operators need to be recertified (i.e., retrained) every 3 years. Floor level workers also need Hazardous Materials (Hazmat) identification and handling training every 3 years, and discharge and clean up (hazardous waste) training once a year. They have 2 drills per year where they must evacuate the warehouse to meet Homeland Security regulations.

Managers must also conduct background checks before hiring new warehouse employees; make sure that returnable containers are cleaned correctly (based on the type of chemical in the container); make sure the proper processes for stacking containers are followed; and ensure that carriers have sufficient insurance (this was one manager’s biggest headache).

Compliance involved not only complying with governmental rules, but also following voluntary “good practice” guidelines like Responsible Care. To achieve certification, companies need to have a detailed and documented process for responsibly managing the logistics associated with chemicals. 

The other thing that surprised me was how few of these chemical warehouses use a WMS. And yet a WMS solution could help companies demonstrate to third party Responsible Care certifiers that many of the pertinent safety and environmental policies were not only in place, but always enforced. Why aren’t WMS solutions more widely used?  For chemical distributors, one reason is that the great majority of them are small, with less than $100 million in revenues, and their facilities also tend to be small, usually less than 50,000 square feet. They also have far fewer workers than most distribution centers (perhaps 5 at a blending warehouse and often only 2 in a Factory Pack warehouse), with limited need for more sophisticated picking strategies. They also tend to have far fewer shipments than a typical distribution center. One manager mentioned having only 15 to 18 daily shipments.

In contrast, large global chemical manufacturers use WMS, Terminal Management, and automation to enforce compliance while streamlining operational processes. They view their supply chain sustainability initiatives in the logistics area as a way to help protect their reputation, minimize liability, and improve customer service, all while reducing costs.