Smart Logistics: The Chemicals Industry’s New Logistics Playbook

Companies are investing in smart logistics, automation, and resilient sourcing strategies to ensure safety, compliance, and continuity amid global disruptions

The supply chain and logistics landscape within the chemicals industry is undergoing a profound transformation, fueled by a confluence of global disruptions, regulatory demands, and the push for digital innovation. As a sector deeply dependent on complex global trade routes and strict safety regulations, chemical companies are increasingly re-evaluating their logistics and supply chain models to build resilience, agility, and sustainability.

One of the key challenges the industry faces is managing volatility in raw material availability and transportation costs. The Russia-Ukraine conflict, for instance, disrupted the supply of key feedstocks and fertilizers, while shipping bottlenecks in the Red Sea and Panama Canal caused delays and cost surges across global trade lanes.

To mitigate such risks, chemical manufacturers are diversifying their supplier base and adopting nearshoring strategies. A BASF executive recently noted that the company is increasingly exploring regional production hubs to reduce reliance on single-source suppliers and minimize cross-border friction. This approach is being supported by significant investment in digital supply chain tools. The global market for supply chain analytics in chemicals is expected to reach $4.3 billion by 2027, growing at a CAGR of 15%, according to MarketsandMarkets.

Digitization is at the heart of the industry’s logistics overhaul. Companies are deploying advanced technologies like digital twins, predictive analytics, and real-time shipment tracking to gain visibility across their operations. For instance, Dow Chemical has implemented AI-powered demand forecasting tools that have improved forecast accuracy by over 20 per cent, resulting in reduced inventory costs and faster customer deliveries. Additionally, chemical logistics providers are leveraging automation in warehousing and using blockchain for more secure and compliant documentation processes, especially when handling hazardous materials.

Environmental and safety regulations are also shaping logistics strategies. With increasing pressure to meet ESG goals, companies are rethinking transportation modes and packaging materials. Rail and intermodal transport are being preferred over trucking to cut carbon emissions. Moreover, the implementation of ‘Responsible Care’ logistics standards by many global players ensures adherence to safe transport and handling practices.

Ultimately, the future of supply chain and logistics in the chemicals sector lies in building systems that are not only efficient and transparent but also adaptable to a rapidly changing world. While challenges remain, particularly in balancing cost efficiency with regulatory compliance and sustainability, the ongoing transformation promises a more resilient and digitally empowered chemicals industry.

Key Developments

In 2024, the Indian chemicals industry witnessed significant advancements in supply chain and logistics, driven by government initiatives, technological integration, and a heightened focus on sustainability. 

A pivotal development was the release of the "Logistics Ease Across Different States (LEADS) 2024" report by the Indian Ministry of Commerce & Industry. This report emphasized the necessity for states to devise action plans aimed at enhancing logistics infrastructure to attract investments. Key recommendations included promoting green logistics, fostering workforce inclusivity, and facilitating central government projects. The report highlighted the importance of adopting technologies such as Artificial Intelligence, Machine Learning, and Data Analytics to boost efficiency in the logistics sector. Additionally, it underscored the need for skill development and greater participation of women in the workforce to drive the sector forward. 

Technological advancements have played a crucial role in reshaping the chemical logistics landscape. The integration of Internet of Things (IoT) technology has enabled real-time tracking and monitoring of goods, providing valuable data on shipment conditions, locations, and transit times. This digital shift has led to reduced operational costs, improved accuracy, and enhanced agility within supply chains.  

Furthermore, the Indian government's focus on developing Multi-Modal Logistics Parks (MMLPs) has been instrumental in improving the country's freight logistics sector. These parks aim to lower overall freight costs and time, cut warehousing expenses, and reduce vehicular pollution and congestion. The Govt. of India has approved 35 MMLPs for development of MMLPs.  These parks are designed to provide integrated storage and warehousing, mechanized material handling, and inter-modal transfer facilities, thereby enhancing the efficiency of chemical logistics.  

Globally, the chemical logistics market is poised for substantial growth, with projections indicating an increase of US$ 67.7 billion from 2024 to 2028. This growth is driven by the expanding chemical industry and the adoption of advanced technologies such as smart sensors, robotics, AI, and blockchain. These innovations are expected to enhance operational efficiency, ensure compliance with safety regulations, and promote sustainable practices within the industry.  

Challenges

The Indian chemicals industry, while rapidly growing, continues to face several critical challenges in its supply chain and logistics operations, many of which were further intensified in 2024. One of the primary issues is infrastructural inefficiency. Despite efforts like the PM Gati Shakti National Master Plan, the fragmented transport networks, poor last-mile connectivity, and insufficient storage infrastructure continue to hinder smooth movement of hazardous and non-hazardous chemical goods. According to the Logistics Performance Index (LPI) 2023 by the World Bank, India ranked 38th globally—an improvement, but still reflective of logistical bottlenecks that hamper sectoral growth.

Compliance and safety remain a significant concern, particularly in the storage and transportation of hazardous chemicals. As per data from the National Disaster Management Authority, incidents involving chemical mishandling during transit increased by 11 per cent in 2023 compared to the previous year. This reflects gaps in workforce training, standard operating procedures, and real-time monitoring. The lack of specialized chemical logistics providers and trained personnel contributes to the high operational risk and safety non-compliance.

Another key challenge is the volatile pricing and availability of raw materials, which severely disrupt supply chain predictability. India imports over 40 per cent of its chemical feedstock, primarily from China and the Middle East. In 2023–24, geopolitical tensions and increased freight costs led to a 12 per cent rise in the landed cost of raw materials, according to data from the Ministry of Chemicals and Fertilizers. These fluctuations complicate procurement planning and impact production schedules, especially for MSMEs that lack deep inventory buffers.

Technology adoption, though progressing, remains uneven across the sector. While large players have begun implementing advanced digital supply chain platforms, a significant portion of small and mid-sized enterprises still operate manually or with outdated ERP systems. A 2024 industry survey by FICCI found that only 35 per cent of Indian chemical manufacturers have adopted real-time tracking systems, and fewer than 20 per cent use predictive analytics to manage inventory and demand.

Environmental compliance is also a growing challenge. With stricter ESG regulations coming into effect, companies are under pressure to reduce emissions from logistics operations and adopt sustainable transport modes. However, the transition to greener logistics, such as LNG trucks or rail freight, is slowed by the limited availability of infrastructure and the high cost of transition. For instance, LNG fueling stations are concentrated mainly in western and southern India, making cross-regional adoption difficult.

Outlook

The future outlook for supply chain and logistics within the Indian chemicals industry is poised for significant transformation, driven by a combination of policy reforms, technological advancements, and increasing global demand. As the sector aims to reach a projected market size of US$ 300 billion by 2029 robust and agile supply chain mechanisms will become critical to sustaining this growth. The Indian government's initiatives, particularly the PM Gati Shakti National Master Plan and the development of Multi-Modal Logistics Parks (MMLPs), are expected to drastically improve the country’s freight infrastructure. These projects are designed to lower logistics costs, currently estimated at around 13–14 per cent of GDP, to below 10 per cent, aligning India with global standards.

Technological integration is set to play a pivotal role in future supply chain modernization. According to a 2024 Deloitte India survey, over 60 per cent of Indian chemical companies plan to invest in supply chain digitization by 2026, focusing on real-time tracking, AI-based demand forecasting, and blockchain for compliance and traceability. These technologies will enhance visibility, reduce waste, and improve the overall responsiveness of chemical logistics networks, which are traditionally prone to delays and inventory challenges.

Sustainability will be another defining feature of the future landscape. With India committing to net-zero emissions by 2070 and tightening ESG regulations, chemical logistics providers are expected to transition to greener fuels and optimize freight modes. The market for LNG-powered logistics, for instance, is projected to grow by 20% annually over the next five years. 

Furthermore, the ongoing shift toward regionalized and decentralized manufacturing—driven by global supply chain diversification trends—will lead to more distributed logistics networks across India. This decentralization is expected to benefit Tier-2 and Tier-3 cities, especially in chemical clusters like Dahej, Cuddalore, and Vizag, leading to increased demand for localized warehousing and just-in-time delivery systems. The Indian Chemical Council predicts that by 2030, over 40 per cent of the country’s chemical logistics flows will originate outside the traditional industrial corridors.

The future of supply chain and logistics in the Indian chemicals industry is anchored in modernization, resilience, and sustainability. With continued investment in infrastructure, digitization, and green technologies, the sector is well-positioned to overcome longstanding inefficiencies and emerge as a globally competitive and environmentally responsible supply chain hub.

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