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Adapt To Succeed in the US Chemicals and Materials Industry

This year, the US chemicals industry has become increasingly unpredictable from a purchasing and supply chain management standpoint. At the same time top--line organic growth is proving ever more elusive. However there is light on the horizon in the form of industry and economic growth. The slower-than-expected pace of this growth has opened a short window of opportunity which companies can exploit to gain the competitive edge.

Three key drivers that are impacting today's chemical industry:

  1. Low oil prices have led to significant volatility for chemicals companies.
  2. Consumer spending and housing recovery are driving increases in demand.
  3. A strong dollar has led to a drop in export demand as well as margin erosion.

So how can industry leaders turn these drivers to their advantage? The secret lies in exploiting the lag that will happen while consumer spending and housing recovery make up for the effects of uncertain oil prices and a strong dollar. It's going to take time for the wealth transfer from falling oil prices, as well as job creation, to trickle down to the local chemicals industry. Some chemical producers are already actively moving the needle, while others are missing out on some potentially game-changing opportunities.

Four ways to capture value

What are those opportunities and what might Industry leaders stand to gain by fully exploiting them?

  1. Diversifying your direct and indirect materials costs and management and introducing increased optionality. Medium maturity companies can achieve cost reductions of 15-20%.
  2. Optimizing your logistics, distribution and warehouse costs. Engagements deliver on average an 8-12% logistics cost reduction.
  3. Rationalizing your conversion costs through footprint optimization and operational excellence. This typically yields 10-15% fixed-cost benefits.
  4. Optimizing your end-to-end value chain to drive Best-in-Class customer service metrics. This will position you to capture value when growth resumes. 

As specialists in procurement, logistics and operations, we know that there are cost savings to be found almost everywhere in the key areas of your value chain. Not only that, we have the experience, methodology and capability to deliver significant savings and help clients move up the high performance curve to achieve Total Value Optimization™.

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