Short-term management is the key to chemical supply management during a pandemic, but long-term trends are equally important.
Due to the increasing frequency of global shocks, trend analysis is becoming increasingly unreliable.
The chemical industry must have a broader understanding of resilience.
COVID-19 has broken many established beliefs, shaken the value chain, prompted governments to take action, and subverted many consumer behaviors. In the first few months of the crisis, businesses and governments logically focused on protecting people and identifying steps to recover from severe health, economic, and social shocks.
Through all these efforts, in order to maintain the availability of commodities throughout the economy, chemicals (and other manufacturing industries) attach great importance to understanding the pandemic’s inventory (such as managing quantities or production locations to meet changing needs) and flows (such as changing Supply routes to ensure the supply of consumer chemical products or intermediates).
Facts have proved that focusing on the immediate or short-term is invaluable for highly flexible management of inventory and flow, and increasing the flexibility of the commodity economy. However, it is also important not to ignore deeper trends. These dynamic processes shape the business sector and influence the mid- and long-term business strategy. Are they also affected? In what way? Are these changes temporary, or will they change the structure that has supported chemical industry activities for decades? If so, can trends provide certainty for long-term planning or investment as they have done in the past?
The World Economic Forum's Chemical and Advanced Materials Industry Action Group (IAG) cooperated with Accenture with the support of the Forum to identify opportunities to improve chemical industry and social resilience through cooperative actions. As part of this work, we emphasized how the deeper changes in the industry trend landscape have evolved, and why this has prompted a reassessment of established management practices.
The chemical and advanced materials industries have been affected by long-term stable trends, such as raw material models, continuous improvements in technology, and increased investment in production capacity. These have shifted the focus of the industry to new regions and balanced the economic cycle. The industry’s strategic decisions and commitments will last for decades instead of years, and include detailed assessments of relevant trends (for example, when planning asset investments; implementing pioneering regulations such as REACH or packaging waste; or turning to recycling operations). Any changes in underlying industry trends will have a profound impact on the success of these bets.
Although most of these trends have been around for many years, it is worth noting that many people have accelerated their adoption and reached scale in the short period of time after COVID-19. The following are the most obvious recent changes; some of them will inevitably challenge chemical company strategists to adjust their roadmaps and strategic plans.
