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Home » Dow Chemical's Formula for Adapting to Ever-Changing Markets

Dow Chemical's Formula for Adapting to Ever-Changing Markets

October 13, 2015
SupplyChainBrain

Companies large and small speak of the need to become more "customer-focused." But the term takes on real meaning in the chemicals industry, where key markets and customer requirements are constantly evolving. As a result, even a global giant like Dow can't afford to rest on its laurels. Recently, in fact, the company launched a sweeping reorganization of its marketing structure - an initiative that has had a substantial impact on its global supply chain. The move wasn't just a recognition of the state of the business today; it was an attempt to prepare for dramatic changes that Dow sees materializing in the years ahead. In this interview, conducted at Gartner's Supply Chain Executive Conference in Phoenix, Ariz., Walsh lays out the reasoning behind Dow’s new marketing and supply-chain initiative, and reports on the company's progress toward crafting a true "end-to-end" approach in serving the customer.

Q: Give me a quick summary of Dow Chemical today.

A: Walsh: Dow Chemical is a $58bn-revenue company, employing about 53,000 people globally. At the end of last year, we announced our five new market segments: performance materials and chemicals, infrastructure solutions, consumer solutions, agricultural sciences and performance packaging. From a supply chain perspective, we deliver to about 45,000 customer points globally, to most countries in the world, at a rate of about 6,000 shipments a day.

Q: What are some of the challenges you see, both as an individual company and a player in the chemical industry as a whole?

A: Walsh: From a chemical company perspective, we’re used to managing production and supply chain in a highly integrated fashion, supporting large and small assets through various modes of transportation. There’s a big supply chain internally, where we make raw materials and intermediates for downstream products within our own companies. The industry as a whole, and Dow especially, have to be very customer-oriented. We’re a big chemical company that’s over 100 years old, but we’re moving toward [achieving] much greater agility, along with improved market and customer focus. That puts more pressure and opportunity on the supply chain to deliver.

Q: Was that part of the reason for creation of those five market segments? Why did you do that?

A: Walsh: We’re becoming a lot less asset-focused. It’s less about the stuff we make; it’s more about who we make them for. The five new market segments enable us to focus better on our markets and customers, and, ideally, anticipate their needs.

Q: Those were markets that you were serving before, weren’t they? Did you add any that you hadn’t been in?

A: Walsh: We’ve highlighted some new ones. We’ve brought together strengths from different parts of the company, and identified them as feeding into similar markets. I would say 80 percent were traditional and 20 percent were new. Our growth projections would be for those new elements.

Q: What were the supply-chain implications of creating those five segments?

A: Walsh: We deliver a wide range of products in a variety of ways, including liquid bulk, marine cargo containers and even tea-sachet-like bags for crop protection to small farmers in China. We deliver in spray cans and in tubes. With the five market segments, we’re looking to identify different supply-chain archetype models internally. Rather than one system delivering to multiple customers through different deviations from a one-size-fits-all approach, we will look to segment by customer type. That will enable us to deliver more professionally.

Q: Does it amount to having five separate supply chains within the company?

A: Walsh: It’s around that order of magnitude. We might have five market segments, but we’ve got 13 business groupings, and about 40 business units. It’s more complex than just those five. But we do believe that we can count the number of archetypes on one hand.

Q: Are you seeing changes in who, where and how big the customer is? Or does the profile pretty much remain the same?

A: Walsh: There has been a consistency in our customer profile over the years, which has enabled us to be successful and grow with them. And that creates a strong, loyal customer base. Going forward, however, we believe we’ll be working with new customers, and potentially smaller companies. They will have different needs and demands within those market segments.

Q: Many companies have found it difficult to synchronize their supply chains, both upstream to suppliers and downstream to customers. What has been your experience in that area, and how are you addressing that challenge?

A: Walsh: As a large company, discipline, operational and functional excellence and business acumen are important. That’s a lot of what we bring to the table. But extending that [capability] out toward our customers at one end, and suppliers on the other, is the next phase. That’s what we’re working on diligently right now. It’s another degree of collaboration. Our strong focus on the customer is enabling us to broaden our [scope of] operational excellence, allowing for a more holistic approach. And that enables speed and agility.

Q: Again on the topic of synchronization – how well a job are you doing in propagating a forecast that starts with the customer, moves through Dow Chemical and all the way up to your suppliers? Is everyone working on the same numbers and agreeing on a forecast? Have you managed that, or is it a journey?

A: Walsh: It’s a journey, I would say. By definition, every forecast is just that – it will never be the precise plan. The closer we can get to it, the easier it is for us to supply. We’re becoming more sophisticated in how we manage our forecast, but we need that combination of good forecasting predictability and the agility to manage changes and swings, be they weather-related, natural disasters, changes in a customer’s mind, or supplier interruptions.

Q: All of which we’ve seen at one point or another over the last few years. You must also have been affected by what’s happened in the energy sector, as well as the demand for chemicals overseas, especially in a growing economy like China’s.

A: Walsh: That’s true. We’re very global in nature.

Q: I’m sure you don’t feel that you can just rest on your laurels at this point. Tell me about some new ideas you might have for improving your supply chain.

A: Walsh: We touched on some of those. We’re working on delivering a competitive edge through effortless service, whereby it’s easier for our customers to do business with us.

Q: Effortless for the customer – not effortless for you.

A: Walsh: Exactly. Although in making it effortless for the customer, it might become that for us also. We’re building on our operational excellence to make work happen more seamlessly across Dow, with the customer in mind. End to end is what we’re talking about within supply chain, and we’ve launched our own end-to-end journey.

Q: At some point, every company has had to deal with organizational silos. How are you addressing that problem?

A: Walsh: A common overall scorecard helps. We’ve had that for years. But the strength of siloed operational excellence can become a weakness if you rely on that strength and don’t work across functions. That’s something we’re consciously working on right now. It doesn’t happen on its own. When you have pockets of excellence, they don’t always naturally connect.

Q: What about emerging markets? They must be making up an increasingly important part of your customer base.

A: Walsh: Africa is still a relatively new but fast-growing area for us. We have people in place there, and are also supporting it from our other regions. That’s the sort of thing that brings excitement to the profession.

Resource Link:
Dow Chemical Co.

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