Top Banner

Growth and Innovation in the Chemicals Industry AMR ResearchBill Polk

2008 AMR Research, Inc. | Page 1

Introductions

Bill Polk Research Director, Value Chain Strategies 19 years of management experience in the manufacturing, supply chain software, IT operations and logistics industries Managed enterprise-wide infrastructure, technology upgrade, and outsourcing initiatives for IT Infrastructure group at State Street For Oracles Internet Supply Chain Management group led business development and implementation efforts Managed electrical component manufacturing facilities in the US, Mexico and Europe Logistics officer for the US Marine Corps BA Mathematics, College of the Holy Cross; MBA Stanford Graduate School Of Business; MA Stanford University School of Education 2008 AMR Research, Inc. | Page 2

Some of the Process Manufacturing Companies We Serve

2008 AMR Research, Inc. | Page 3

Agenda Industry Trends & Issues Innovation Sustainability Service Providers

2008 AMR Research, Inc. | Page 4

Crude Oil and Natural Gas Spot Prices

2008 AMR Research, Inc. | Page 5

Industry Trends Volatile feedstock costs rippling through supply chain Avg housing start consumes approximately $17K in chemicals and plastics, avg automobile absorbs more than $2000 in chemical products 2/3 of all US manufacturers rely on chemicals directly or indirectly 90% of manufacturers say replacing chemicals in their processes is technically or financially infeasible But US Industrial Output decreased 11.4% in Q4 2008 Global overcapacity, global demand plummeting even in emerging markets (China, Russia, India & Latin America) Last large global capacity push in 2002, next one was slated for 2009-2010 in Asia and the Middle East.

2008 AMR Research, Inc. | Page 6

Top Issues in Global Chemical Industry Rising Fuel Costs and impact on feedstock and transportation/logistics One major chemical manufacturer leases 6000 rail cars and averages only 4 return trips/year Feedstock cost increases had been outpacing final product price increases

Excess global capacity (particularly Ethylene) by 2009/2010 Sites will close in US and Europe, searching for advantaged feedstock regions Lack of Supply Chain Visibility Results in increased inventory (US Polyethylene industry $500M alone) Industry Peculiarities Terms offered Regional price protection differences Latency in settling feedstock accounts

Uncertainty over future regulatory activity REACH (KSCA), 10+2, TSCA, etc.

2008 AMR Research, Inc. | Page 7

Volatile Fuel Costs: What are Companies Doing? Passing along increases Dow 45% over 3 months Network Optimization & Simulation Tools fleets, routes, warehouses and distribution centers Increased use of IT Asset utilization, visibility tools, web-enabled communication, TMS and WMS solutions Increased transportation cost awareness (true net delivered cost) Purchasing price Transportation and logistics costs Customs and import duties Inventory carrying costs Overhead and administration Risk and compliance 2008 AMR Research, Inc. | Page 8

2007

Me t Tr an ric s/ Be

0% 0 0% 0 0% 0 0% 0 0 % 0 % 0 % 0 % 0 %10% 25%

2008

14%

Supply Chain Process Mfg Client Inquiries 2007 vs 2008

n TM chm S a sf or /Lo r ks gi m st at ic io s n/ DD SC SC S St N Pl ra an te n Ne ing gy tw T o r oo k l De s si gn Or W ga MS ni za tio n S& O Ri sk Vis P ib /C om ility Ot S he Fo plex r ( ervi c M &A es/ reca ity st , C Ou in tS os g ou tt rc o in Se g rv e, et c) 2008 AMR Research, Inc. | Page 9

Whichof thefollowingre se your toppriorityfor im pre nts prove e ove thene 00onths? m nt r xt m(%Respondents, top 0responses are in bold)C OG Providing real manufacturing costs, capabilities, and capacity to the business for effective sales and operations planning Operations excellence programs such as six sigma, TQM, and lean to reduce process / product variability, improve first pass yield, and reduce waste Reducing the impact of new product, supplier, and engineering specification changes on the manufacturing process Design for manufacturing - ensuring that new products / configurations are designed for existing or readily acquired manufacturing equipment Asset performance management and reliability centered maintenance programs to improve availability and performance of manufacturing tools and equipment Providing visibility on up-to-date inventory (FG,WIP), capacity, and manufacturing constraints to the business for order promising Providing manufacturing with accurate and timely forecasts of demand Acquiring near real time production information for site level performance metrics Managing inventory across the extended supply chain e.g. with contract manufacturers, component suppliers, and 0 PLs Managing supplier quality, compliance and performance Finite capacity scheduling to efficiently sequence production orders to meet inventory, cost, and service level targets 0% 0 0 % 0% 0 0 % 0% 0 0 % 0% 0 0 % 0 % 0% 0 0 % 1 1 00 0%

Top Priority Business Process for 2008P arm h a 1% 1 0 % 0% 0 1% 1 0% 0 0 % 0 % 0 % 0 % 0 % 0 % 1 1 00 0% HT 1% 1 0% 0 0 % 1% 1 0% 0 0 % 0 % 0 % 0 % 0 % 0 % 0 0 00 0% C P 0% 0 1% 1 0% 0 0 % 0 % 0% 0 0% 0 0 % 0 % 0 % 0 % 0 0 00 0% A to u 0% 0 1% 1 0 % 0% 0 0 % 0% 0 0% 0 0 % 0 % 0% 0 0 % 0 0 00 0% A& D 1% 1 0% 0 0 % 0 % 0 % 0% 0 0 % 0 % 0 % 0 % 0 % 0 0 00 0%

n= T otal

2008 AMR Research, Inc. | Page 10

Business Process Importance vs. PerformanceMost Important Least ImportantUS - Top 0 Box Score Gap AggregationProviding real manufacturing costs, capabilities, and capacity to the business for effective sales and operations planning (S&OP). Managing inventory across the extended supply chain e.g. with contract manufacturers, component suppliers, and 0 PLs Asset performance management and reliability centered maintenance programs to improve availability and performance of manufacturing tools and equipment Managing supplier quality, compliance and performance Providing manufacturing with accurate and timely forecasts of demand Acquiring near real time production information for site level performance metrics Operations excellence programs such as six sigma, TQM, and lean to reduce process / product variability, improve first pass yield, and reduce waste Finite capacity scheduling to efficiently sequence production orders to meet inventory, cost, and service level targets Design for manufacturing - ensuring that new products / configurations are designed for existing or readily acquired manufacturing equipment Reducing the impact of new product, supplier, and engineering specification changes on the manufacturing process Providing visibility on up-to-date inventory (FG,WIP), capacity, and manufacturing constraints to the business for order promising

Total 0% 0 0 % 0% 0 0 % 0% 0 0% 0 0 % 0 % 0 % 0 % 0 %

Process 1% 1 0 % 0% 0 0 % 0 % 0% 0 0% 0 0 % 0 % 0% 0 0 %

Discrete 1% 1 0% 0 0% 0 0 % 0% 0 0% 0 0 % 0 % 0% 0 0 % 0 %

$0 B 1% 1 0% 0 1% 1 0% 0 0% 0 0% 0 0 % 0 % 0% 0 0% 0 0% 0

IT 0% 0 0 % 0% 0 0 % 0% 0 0% 0 0 % 0 % 0 % 0 % 0 %

LOB 1% 1 0% 0 0% 0 0 % 0 % 0% 0 0 % 0 % 0 % 0% 0 0 %

BLUE = Notable performance gap RED = Significant performance gap

2008 AMR Research, Inc. | Page 11

Innovation

2008 AMR Research, Inc. | Page 12

Innovation ClassificationsCOMMODITY PRODUCER We provide reliable delivery and high volumes of well understood and commonly produced chemicals at a consistent quality and at market price We have flexible production capabilities and manufacture batches of a wide range of specialty chemicals on demand, to customer specific formulations, + command a premium We invest heavily in developing new chemistry and command a price premium for manufacturing and providing technical and joint development services on customer applications of (specialty) chemicals Based on the synergies of our integrated manufacturing and supply chain, we offer a wide range of chemicals/ products: We have a wide range of chemicals that fall into all three categories above

PRODUCT SPECIALISTS PRODUCT INNOVATOR

PORTFOLIO MASTER

2008 AMR Research, Inc. | Page 13

Progress: Products introduced in last 2 years = 1/3 of revenuesQ. What percent of your 0000 revenue is generated from product introduced...Suggests new applications, and branding/packaging, rather than new chemistry

Most new product revenue is generated from Innovators0% 0 0% 0 0% 0 0% 0

More than 0 ago yrs In the last 00 - yrs0% 0 0% 0 0% 0 0% 0

In the last 00 - yrs In the last 00 mo.

0% 0

1% 1

0% 0

0% 0

0% 0 Commodity Producers

0% 0 Product Specialists

1% 1

0% 0 Portfolio Masters

Product Innovators

Sample Size = 120

SMB ChemCos are recent innovators: 44% of their product have been introduced over last 2 years vs 30% of large enterprises 2008 AMR Research, Inc. | Page 14

Most do not have a formal NPD&L process, or less than 2 yrs oldQ. Does your company have a formal New Product Development and Launch (NPDL) process in place?In the process of implementing formal process

Formal NPDL process in place (

Accenture Chem Training Full Presentation

Oct 24, 2014

ReportDownload

Documents

naman-jain

Growth and Innovation in the Chemicals Industry AMR ResearchBill Polk

2008 AMR Research, Inc. | Page 1

Introductions

Bill Polk Research Director, Value Chain Strategies 19 years of management experience in the manufacturing, supply chain software, IT operations and logistics industries Managed enterprise-wide infrastructure, technology upgrade, and outsourcing initiatives for IT Infrastructure group at State Street For Oracles Internet Supply Chain Management group led business development and implementation efforts Managed electrical component manufacturing facilities in the US, Mexico and Europe Logistics officer for the US Marine Corps BA Mathematics, College of the Holy Cross; MBA Stanford Graduate School Of Business; MA Stanford University School of Education 2008 AMR Research, Inc. | Page 2

Some of the Process Manufacturing Companies We Serve

2008 AMR Research, Inc. | Page 3

Agenda Industry Trends & Issues Innovation Sustainability Service Providers

2008 AMR Research, Inc. | Page 4

Crude Oil and Natural Gas Spot Prices

2008 AMR Research, Inc. | Page 5

Industry Trends Volatile feedstock costs rippling through supply chain Avg housing start consumes approximately $17K in chemicals and plastics, avg automobile absorbs more than $2000 in chemical products 2/3 of all US manufacturers rely on chemicals directly or indirectly 90% of manufacturers say replacing chemicals in their processes is technically or financially infeasible But US Industrial Output decreased 11.4% in Q4 2008 Global overcapacity, global demand plummeting even in emerging markets (China, Russia, India & Latin America) Last large global capacity push in 2002, next one was slated for 2009-2010 in Asia and the Middle East.

2008 AMR Research, Inc. | Page 6

Top Issues in Global Chemical Industry Rising Fuel Costs and impact on feedstock and transportation/logistics One major chemical manufacturer leases 6000 rail cars and averages only 4 return trips/year Feedstock cost increases had been outpacing final product price increases

Excess global capacity (particularly Ethylene) by 2009/2010 Sites will close in US and Europe, searching for advantaged feedstock regions Lack of Supply Chain Visibility Results in increased inventory (US Polyethylene industry $500M alone) Industry Peculiarities Terms offered Regional price protection differences Latency in settling feedstock accounts

Uncertainty over future regulatory activity REACH (KSCA), 10+2, TSCA, etc.

2008 AMR Research, Inc. | Page 7

Volatile Fuel Costs: What are Companies Doing? Passing along increases Dow 45% over 3 months Network Optimization & Simulation Tools fleets, routes, warehouses and distribution centers Increased use of IT Asset utilization, visibility tools, web-enabled communication, TMS and WMS solutions Increased transportation cost awareness (true net delivered cost) Purchasing price Transportation and logistics costs Customs and import duties Inventory carrying costs Overhead and administration Risk and compliance 2008 AMR Research, Inc. | Page 8

2007

Me t Tr an ric s/ Be

0% 0 0% 0 0% 0 0% 0 0 % 0 % 0 % 0 % 0 %10% 25%

2008

14%

Supply Chain Process Mfg Client Inquiries 2007 vs 2008

n TM chm S a sf or /Lo r ks gi m st at ic io s n/ DD SC SC S St N Pl ra an te n Ne ing gy tw T o r oo k l De s si gn Or W ga MS ni za tio n S& O Ri sk Vis P ib /C om ility Ot S he Fo plex r ( ervi c M &A es/ reca ity st , C Ou in tS os g ou tt rc o in Se g rv e, et c) 2008 AMR Research, Inc. | Page 9

Whichof thefollowingre se your toppriorityfor im pre nts prove e ove thene 00onths? m nt r xt m(%Respondents, top 0responses are in bold)C OG Providing real manufacturing costs, capabilities, and capacity to the business for effective sales and operations planning Operations excellence programs such as six sigma, TQM, and lean to reduce process / product variability, improve first pass yield, and reduce waste Reducing the impact of new product, supplier, and engineering specification changes on the manufacturing process Design for manufacturing - ensuring that new products / configurations are designed for existing or readily acquired manufacturing equipment Asset performance management and reliability centered maintenance programs to improve availability and performance of manufacturing tools and equipment Providing visibility on up-to-date inventory (FG,WIP), capacity, and manufacturing constraints to the business for order promising Providing manufacturing with accurate and timely forecasts of demand Acquiring near real time production information for site level performance metrics Managing inventory across the extended supply chain e.g. with contract manufacturers, component suppliers, and 0 PLs Managing supplier quality, compliance and performance Finite capacity scheduling to efficiently sequence production orders to meet inventory, cost, and service level targets 0% 0 0 % 0% 0 0 % 0% 0 0 % 0% 0 0 % 0 % 0% 0 0 % 1 1 00 0%

Top Priority Business Process for 2008P arm h a 1% 1 0 % 0% 0 1% 1 0% 0 0 % 0 % 0 % 0 % 0 % 0 % 1 1 00 0% HT 1% 1 0% 0 0 % 1% 1 0% 0 0 % 0 % 0 % 0 % 0 % 0 % 0 0 00 0% C P 0% 0 1% 1 0% 0 0 % 0 % 0% 0 0% 0 0 % 0 % 0 % 0 % 0 0 00 0% A to u 0% 0 1% 1 0 % 0% 0 0 % 0% 0 0% 0 0 % 0 % 0% 0 0 % 0 0 00 0% A& D 1% 1 0% 0 0 % 0 % 0 % 0% 0 0 % 0 % 0 % 0 % 0 % 0 0 00 0%

n= T otal

2008 AMR Research, Inc. | Page 10

Business Process Importance vs. PerformanceMost Important Least ImportantUS - Top 0 Box Score Gap AggregationProviding real manufacturing costs, capabilities, and capacity to the business for effective sales and operations planning (S&OP). Managing inventory across the extended supply chain e.g. with contract manufacturers, component suppliers, and 0 PLs Asset performance management and reliability centered maintenance programs to improve availability and performance of manufacturing tools and equipment Managing supplier quality, compliance and performance Providing manufacturing with accurate and timely forecasts of demand Acquiring near real time production information for site level performance metrics Operations excellence programs such as six sigma, TQM, and lean to reduce process / product variability, improve first pass yield, and reduce waste Finite capacity scheduling to efficiently sequence production orders to meet inventory, cost, and service level targets Design for manufacturing - ensuring that new products / configurations are designed for existing or readily acquired manufacturing equipment Reducing the impact of new product, supplier, and engineering specification changes on the manufacturing process Providing visibility on up-to-date inventory (FG,WIP), capacity, and manufacturing constraints to the business for order promising

Total 0% 0 0 % 0% 0 0 % 0% 0 0% 0 0 % 0 % 0 % 0 % 0 %

Process 1% 1 0 % 0% 0 0 % 0 % 0% 0 0% 0 0 % 0 % 0% 0 0 %

Discrete 1% 1 0% 0 0% 0 0 % 0% 0 0% 0 0 % 0 % 0% 0 0 % 0 %

$0 B 1% 1 0% 0 1% 1 0% 0 0% 0 0% 0 0 % 0 % 0% 0 0% 0 0% 0

IT 0% 0 0 % 0% 0 0 % 0% 0 0% 0 0 % 0 % 0 % 0 % 0 %

LOB 1% 1 0% 0 0% 0 0 % 0 % 0% 0 0 % 0 % 0 % 0% 0 0 %

BLUE = Notable performance gap RED = Significant performance gap

2008 AMR Research, Inc. | Page 11

Innovation

2008 AMR Research, Inc. | Page 12

Innovation ClassificationsCOMMODITY PRODUCER We provide reliable delivery and high volumes of well understood and commonly produced chemicals at a consistent quality and at market price We have flexible production capabilities and manufacture batches of a wide range of specialty chemicals on demand, to customer specific formulations, + command a premium We invest heavily in developing new chemistry and command a price premium for manufacturing and providing technical and joint development services on customer applications of (specialty) chemicals Based on the synergies of our integrated manufacturing and supply chain, we offer a wide range of chemicals/ products: We have a wide range of chemicals that fall into all three categories above

PRODUCT SPECIALISTS PRODUCT INNOVATOR

PORTFOLIO MASTER

2008 AMR Research, Inc. | Page 13

Progress: Products introduced in last 2 years = 1/3 of revenuesQ. What percent of your 0000 revenue is generated from product introduced...Suggests new applications, and branding/packaging, rather than new chemistry

Most new product revenue is generated from Innovators0% 0 0% 0 0% 0 0% 0

More than 0 ago yrs In the last 00 - yrs0% 0 0% 0 0% 0 0% 0

In the last 00 - yrs In the last 00 mo.

0% 0

1% 1

0% 0

0% 0

0% 0 Commodity Producers

0% 0 Product Specialists

1% 1

0% 0 Portfolio Masters

Product Innovators

Sample Size = 120

SMB ChemCos are recent innovators: 44% of their product have been introduced over last 2 years vs 30% of large enterprises 2008 AMR Research, Inc. | Page 14

Most do not have a formal NPD&L process, or less than 2 yrs oldQ. Does your company have a formal New Product Development and Launch (NPDL) process in place?In the process of implementing formal process

Formal NPDL process in place (