An industry in transition
The global specialty chemicals market size, in terms of value, is projected to reach $470B by 2020. The North American market is forecast to have a value of $262.6B by 2019. This represents an increase of 16.8% since 2014, with paints, coating & surface treatments accounting for 29.1% of the market's total value. The European Chemical Industry Council (Cefic) is forecasting moderate overall growth in 2017 for the EU, where the specialty chemicals market is supported by demand growth from manufacturing and private consumption.
Trade liberalization and the spread of process technology has led to a shift in importance of the newly-industrialized Asian economies where labor costs are low and economic growth is high. The Middle East is also growing in importance, driven by access to cheap petrochemical feedstock. The US and European markets are hampered by debt constraints, adverse demographic factors, tighter fiscal policies and a shortage of available talent.
Despite these challenges, a plentiful supply of low-cost oil presents an opportunity for the US industry to become the low-cost home for manufacturing in the next 10 years. As supply and demand finds balance in the oil and gas sector, and the manufacturing renaissance in the US regains traction, demand for specialty chemicals will grow. In the longer term, gains in specialty chemicals will continue to exceed the overall growth rate for the US economy. Meanwhile, the EU industry has proved resilient in the face of globalization and competitive challenges.
In addition, as a result of the streamlined standards that are being formed with the participation of the US Environmental Protection Agency, chemicals companies will save on costs tied to meeting safety and production requirements. In our experience, many specialty chemical companies are currently looking at areas such as procurement, logistics and operations in isolation. However, by deploying a Total Value Optimization™ (TVO) approach, our clients in this sector have achieved significant improvement in profit margins and business while minimizing operational risk.
In the wake of the $130B DuPont-Dow merger, M&A activity presents both an opportunity and a threat to the industry. M&A predators will need to be well prepared for pre-acquisition operational due diligence, post-acquisition integration, centralization and synergy cost reduction, and will need the expertise to execute strategic asset disposals. At the same time, companies will need to prepare themselves by driving cost reduction, rationalization and spin-offs of non-core / orphan assets.
Areas of innovation
Innovation in the specialty chemicals sector generally centers around two areas:
- Research and development where the drive is to develop added-value products. Rising R&D costs mean that specialty chemical companies can no longer afford to devote precious resources to developing innovative products where the size of the market and speed of customer take-up is uncertain or the risk of potential failure is high
- Supply chain optimization where the drive is to lower supply costs and speed up new product introduction. The imperative to find the shortest route from laboratory to customer is placing new pressures on the supply side of the business. Total Value Optimization™ is absolutely fundamental to transforming the supply chain into an enabler of significant competitive advantage. Areas of particular benefit include lowering materials costs, speeding up the transition from product development to mass production, meeting customer requirements more cost efficiently and effectively and utilizing suppliers' skills and networks to solve your business challenges
What Maine Pointe achieves
A leading global supplier of technology-based performance materials and chemicals for manufacturers.
- Supply chain disintermediation to reduce direct materials costs
- Developed and implemented a new Procurement Management Operating System (PMOS)
- Reduced direct materials costs by $24M
- Delivered a project ROI of 7:1
A world leader of performance interlayer for laminated glass.
- Created and implemented a Management Reporting System and dashboard to track capital projects
- Dormant projects on 'active' list reduced by 40%
- Reduced project backlog by 35%
An additives specialist for coatings, paints and printing inks.
- Fast-tracked negotiations and sourcing events to accelerate cash realization
- Developed top-level executive supplier relationships
- Installed a Management Operating System (MOS)
- Installed a Master Production Schedule
- Improved EBITDA by 36%
- Delivered a cash neutral project with a 17-week engagement
- Cut manufacturing cost by 10% and raw material cost by 5%.
- Reduced working capital by $100,000
- Achieved a ROI of 4:1
I would like to commend you for doing an outstanding job on our recent engagement to implement a Management Operating System and fast track a strategic procurement initiative to drive operational improvement in our business. The objectives were to drive double digit percentage improvement in our EBITDA by achieving 10% savings in our manufacturing costs and more than 5% savings on our raw material spend. I am pleased to say we met those objectives on time and within budget. Maine Pointe’s Total Value Optimization (TVO) and procedural approach, coupled with an accelerated schedule, were the key reasons behind our decision to move ahead with the engagement.”
Devlin Riley, President, Borchers
Industry perspectives and practical insights
- Challenges and opportunities in the Sealants & Adhesives market
- A checklist for making the move to Total Value Optimization™
- From cost containment to strategic value creation
- Six practical initiatives US chemicals executives can implement right now