Plant operations show the constraints chemical companies face in trying to pivot amid uncertainty. Production changeovers are less flexible, with higher losses on each turnaround. Production cycles are longer, so companies need to maintain more raw materials and inventory. Stricter industry regulations are placed on some materials, and equipment must be certified. Taking one recipe or product line and trying to shift it into another plant can be daunting.
Even so, some companies may find it useful to rethink some commonly held assumptions about what they can do, particularly amid so much uncertainty. If your leadership says, “Let’s get into the hygienics business,” or sees an opportunity to launch a new business, to what extent can you repurpose assets?
In response to a shortage of hand sanitizer, one large producer of isopropyl alcohol and ethanol created four new manufacturing units — in under 10 days. Each site, set up in existing facilities, now produces 1 million units per month. Later, the company opened two new plants under the name of a new business, with a wider range of branded hygiene products, and it’s exploring acquisitions to bolster its position as well, understanding that its commodity-focused operations will need different skill sets.
Today, many single-product plants are still being built, immediately boxing companies into narrowly defined use cases. Multipurpose and modular multi-batch facilities and plants cost more to build, and utilization is typically also not that high because of changeovers, but they provide greater flexibility, without being as dependent on demand in one market or group of end customers. Other industries, such as food and consumer products, are far ahead of the chemical sector in this regard.
Multipurpose and modular multi-batch plants also offer greater advantages and scale when factoring in recycling and reuse due to their semi-continuous material flow concept. Sustainability is poised to continue growing in importance. Earlier in the pandemic, lockdowns created steep economic losses but significant benefits to the environment due to reduced emissions and pollution. While single-use plastics are also in vogue right now, consumer attitudes are heading more into a green direction: the EY Future Consumer Index in May 2020 found that 26% agreed with the following statement: “I will pay more attention to the social impact of what I purchase and consume.”
One worthwhile exercise that can potentially make your business both greener and stronger is to investigate more regional, modular supply chains. When your goods spend less time in transit, there’s less of an impact on the environment, and fewer opportunities for disruption. Rethinking your supply chain is a necessary course of action if you’re also investigating how to bring new products to market and create flexibility in how you respond to demand. Having backup plans — in suppliers, logistics and operations — to move very quickly to regional, where it makes sense, can be important to prepare for future disruptions, particularly as geopolitical disputes become more frequent and globalism faces challenges.
Amid reports of crucial medical equipment stuck without getting cleared for export, the COVID-19 pandemic has some governments asking about how to reduce reliance on foreign sources of critical goods, such as medicines made with raw ingredients from across the world. Tension between countries and accusations of predatory behavior could spur tighter regional alliances and regulations, mandating at least some percentage of local production for critical goods. Scenario planning can help you understand these possible hurdles to how your company structures itself globally. And to diversify risk, lower-cost regions such as South Asia, Central and South America, and Eastern Europe may start to get more traction as operational locations.