Metrics Blog

The Blog for Business Performance Improvement

Taking Chemical Processing from Better to Best

How can a business in the chemical processing sector maintain a commitment to continuous improvement as its industry undergoes a period of financial stagnation or decline?

Optimization Realization 
Optimization isn’t an abstract idea – it’s a discipline rooted in real process changes and data-driven exploration into on-site and remote operations. After all, when companies expend the effort to improve, they’re not competing against competitors per se. They’re competing against the best version of themselves.

Unfortunately, that level of dedication does not come free. According to the American Chemical Society, many key players in the chemical processing sphere experienced turbulence coming into 2016 and throughout the first half of the year. Some stressors were milder than others, but all contribute in some way to a decrease in revenue and could impact how they optimize and innovate:

  • Petrochemicals: Although evening out after the crash in 2014, oil and gas prices are still low and production hasn’t fallen enough to affect demand.
  • Agrochemicals: Bumper crops abound after two years of abundant harvests, driving crop prices down and forcing farmers to spend less on products.
  • Electronics materials: Growing demand for consumer products has already persuaded manufacturers to seek more affordable supplies for semiconductors and displays.
  • Pharmaceuticals: Thanks to the 2016 election cycle, consumers have a renewed interest in lowering U.S. drug prices.

The question is, are there methods for sustaining optimization initiatives even when budgets are tight and if so, where should chemical processors focus their attention to derive the best results?

Be wary of diversification
Reaching out into new markets may open new frontiers for companies when business is up, but when sales plateau product diversification needs serious consideration. Deloitte research revealed that as industrial production contracted in 2015 across all industries, chemical demand also waned. In response, many chemical processors took the opportunity to focus on retooling their core business rather than take risks with experimental projects. Essentially, they chose to optimize over maximize.

However, PwC chronicled the turmoil of a subsection of chemical processing that didn’t fall in line with this mentality: engineering polymers. According to PwC, one company tried to expand into new areas of business both geographically and through product diversification during this risky market environment. The end result placed significant strain on logistics resources, internal conflict, and supply chain disruption.

So, when it comes to product diversification, how can businesses tell the difference between a sure thing and a dud? By first investing in thorough, unbiased analysis, perhaps from a third party. However, if funds are tight, that money might be better spent on next-generation productivity through an overhaul of the core processes underpinning company culture. Doing so has shown to reduce operational expenditures, thus freeing up more spend for opportunities at more stable junctures.

Understand customers – and yourself – through data
The age of big data is both a blessing and a curse for optimization in chemical processing. On the plus side, it presents an opportunity to forecast fluctuations in demand, materials performance, and internal operations charged with capitalizing on these elements. By leveraging the most actionable data management strategies, chemical companies have the power to amp up their services and dive deeper into the nuances of their industry like never before.

The problem is, so can everybody else. So, while big data can help an individual business accomplish their goals, it simultaneously raises the bar for all industry players in regards to what clients expect as the status quo.

With that in mind, chemical processors should tailor all optimization initiatives toward retaining the customers they already have, instead of playing to the clients in their competitors’ pools. Focus on what separates your company from others, then strive to optimize those services as much as possible. Also, don’t settle on what services you do best, but rather what services you do differently that resonate with your customer base.