Executive Briefings

Chemicals & Energy: Leading the Way in Asset and Energy Management

Analyst Insight: The number one strategy for companies in the chemical and energy industries is to improve demand orchestration as the economy recovers. Planning processes must manage pricing, capacity allocation, and inventory positioning to manage margins. In addition, operational processes must have visibility and business rules to manage commitments and respond to volatility. These industries are more mature than others in their approach to asset management, energy management and compliance.

AMR Research finds that companies in the chemical and energy sector are most advanced in terms of operating and maintaining fixed assets.  Specialty chemical companies excel at applications research and product formulation.  Some of the salient points associated with the chemical supply chains are:

Center-led supply chains - Best-in-class companies are balancing autonomous profit centers and shared service functions like procurement with end-to-end supply chain managers who drive performance improvements and facilitate tactical planning.
Channel segmentation - Industry leaders have established low-cost channels to deliver low-margin products and serve "price conscious" customers.   Several companies have achieved order-to-cash process automation for a significant percentage of transactions.
• Complexity reduction - Top companies are measuring cost-to-serve and product profitability metrics.   They are rationalizing low-growth, low-margin products from their portfolios and standardizing specifications and service levels for commodities.
• Sales and operations planning - Successful companies with stable operations have engaged commercial leaders in executive S&OP processes with 3-year time horizons.   They have separated operational demand forecasts from the financial budget. 
• Sustainable design - Top chemical companies are embracing regulatory changes in industrialized nations as opportunities for improvement.  Many offer products and technologies which can contribute solutions.   Leading companies see reduced emissions as consistent with efficiency and a marketable side benefit of continuously lowering their cost.

The Outlook

In 2010, expect to see continued emphasis on energy efficiency as rising energy prices put upward pressure on feedstock and transportation prices.  As business conditions improve, consolidation and capacity rationalization will continue as producers in developing countries add new capacity or make acquisitions.  Companies will focus more deeply on cost containment and demand orchestration, balancing their focus on working capital.  The impacts of REACH )Regulation, Evaluation, Authorization and Restriction of Chemical substances) and greenhouse gas regulations will command attention.

AMR Research finds that companies in the chemical and energy sector are most advanced in terms of operating and maintaining fixed assets.  Specialty chemical companies excel at applications research and product formulation.  Some of the salient points associated with the chemical supply chains are:

Center-led supply chains - Best-in-class companies are balancing autonomous profit centers and shared service functions like procurement with end-to-end supply chain managers who drive performance improvements and facilitate tactical planning.
Channel segmentation - Industry leaders have established low-cost channels to deliver low-margin products and serve "price conscious" customers.   Several companies have achieved order-to-cash process automation for a significant percentage of transactions.
• Complexity reduction - Top companies are measuring cost-to-serve and product profitability metrics.   They are rationalizing low-growth, low-margin products from their portfolios and standardizing specifications and service levels for commodities.
• Sales and operations planning - Successful companies with stable operations have engaged commercial leaders in executive S&OP processes with 3-year time horizons.   They have separated operational demand forecasts from the financial budget. 
• Sustainable design - Top chemical companies are embracing regulatory changes in industrialized nations as opportunities for improvement.  Many offer products and technologies which can contribute solutions.   Leading companies see reduced emissions as consistent with efficiency and a marketable side benefit of continuously lowering their cost.

The Outlook

In 2010, expect to see continued emphasis on energy efficiency as rising energy prices put upward pressure on feedstock and transportation prices.  As business conditions improve, consolidation and capacity rationalization will continue as producers in developing countries add new capacity or make acquisitions.  Companies will focus more deeply on cost containment and demand orchestration, balancing their focus on working capital.  The impacts of REACH )Regulation, Evaluation, Authorization and Restriction of Chemical substances) and greenhouse gas regulations will command attention.