Can the chemical industry cross the inflection point and be poised for bigger things?
Absolutely. But first, it will have to address the significant concerns of buyers and consumers. One of those concerns is the asset reliability for processing raw materials into finished goods.
Chemical manufacturers must answer the following questions:
- Are they prepared to meet a market demand increase with a steady and uninterrupted supply chain?
- Are manufacturers interested in improving equipment reliability in a market environment where response times are critical?
- Do they have a strategy in place to convey their commitment to the stakeholders?
A resounding yes to all three questions is the way forward.
What’s at stake if chemical manufacturers don’t improve productivity?
A study by Accenture revealed that 46 percent of the buyers of chemical companies are willing to pay an incremental price at the rate of at least five percent, and 56 percent of them are willing to make a sizeable increase in their purchase volumes starting from 10 percent if all their needs are met.
It is excellent news for the chemical industry players.
However, they must assure buyers and consumers of minimal fluctuations in the supply schedules. Their competitors will gain if they cannot meet the demand on time. Buyers have many options today and are unwilling to tolerate tardy supply chains.
There is also the possibility that buyers will switch to alternate materials, including those from sellers outside the chemical industry. For example, metals as an adequate substitute for plastics.
Why is reliability a dealbreaker?
Due to a sharp decline in oil prices in 2019, followed by a fall in demand due to the pandemic, chemical manufacturers worldwide were forced to reduce their production. The consequent fall in revenue and profits pushed them to decrease their capital expenditure, which led to a notable stagnation and shrinkage in the machinery and equipment asset bases.
We all know that if you reduce investment in existing assets, your overall reliability weakens, impacting asset productivity and production scalability. It is the classic domino effect.
Buyers and consumers rank logistics and delivery reliability as prime concerns. These priorities have become more urgent in the current global economic scenario, where growth has increased by 5.9% in 2021 and is projected to increase by 4.4% this year. Asset uptime and performance are, therefore, critical drivers of growth.
Let’s hear it from the industry
Fortunately, many industry players have woken up to the need for change and are focusing on improved reliability, predictive maintenance, safety, sustainability, and new construction. They are also quickly embracing digitalization, including tech-based productivity and other customer-centric technologies.
These initiatives are of high value and indicate a pressing need – to convert them into compelling stories that engage and enlighten buyers and consumers.
We live in an age of complex concerns about safety, responsibility, and the need for the pursuit of a common good. Therefore, it behooves manufacturers to open more profound, absorbing, and informative communication channels with stakeholders that show and tell their commitment to this common good.
These initiatives are of high value, and manufacturers must craft stories around them to raise awareness and confidence in buyers and consumers.
How to tell stories that will impact minds and hearts?
The stories may revolve around narratives that reveal the following:
Investment in reliability initiatives of existing assets
The Economics of Reliability Report released by Pinnacle, the world’s largest reliability analytics company, offers a clear view. According to the World Bank and the United States Bureau of Labor Statistics, the most significant 18 chemical companies, including Air Liquide, Dow, and LyondellBasell, have surpassed total spending of $236 billion annually on reliability-related initiatives collectively. Other players also spend 1%-3% of their annual revenue on reliability-related initiatives and measuring the outcomes.
This is a significant figure and development, but are manufacturers conveying this message to grab the attention of buyers and consumers? Enter reliability stories. They will fill the gap, build the bridge, and open new avenues of mutual benefit for both parties.
Scaling up production
Many players in the chemical manufacturing industry are scaling up production infrastructure to boost capacity, which directly benefits buyers. It is also the perfect opportunity for chemical industry manufacturers to share information on eliminating unpredictability by stepping up supply. This kind of reaching out is invaluable for both sides of the fence because the stories will offer comfort, reassurance, and education to strengthen bonds and burnish values for the common good.
Modernization of reliability programs
Players who modernize their reliability programs and develop reliability data strategies will stay ahead. Dan Futter, Dow’s chief commercial officer, speaking on the virtual panel at this year’s American Chemistry Council Annual Meeting, said, “As part of our customer-experience efforts, we use data to help us establish correlation, and then ultimately causation, between the services we want to invest in ― and evolve ― and the financial outcomes of our customers.”
Like Dow, some players put a lot of work into understanding those correlations. Many chemical manufacturers are working to bring valuable data to discuss and prioritize their investments for better customer experiences. But the question is: Are the buyers and consumers aware of it? Where is the information about these efforts to instill confidence in buyers and consumers and help them plan their journey?
While industry players invest in urgent strategies to help them recoup and grow faster, their efforts must not end up as unsung melodies. This era is defined by transparency and synergy; manufacturers and clients are on a shared journey towards a sustainable future. To make the experience mutually rewarding, manufacturers must tell stories that bind. It will empower buyers and consumers to share their concerns, and this shared heritage will lead to living the ideals we all aspire to for humanity.