Chemical Manufacturers: Improve Margins By Focusing on the Business Basics

It’s been a mixed year for chemical manufacturers.  While end-use markets have recovered to their pre-recession levels, growth beyond that level has been slow.  For many North American firms, exports have been especially weak as markets in Europe have all but disappeared.  There are bright spots, such as the surge in demand for ethylene-based products, driven by burgeoning natural gas capacity.  Still, it’s been a year of eking out profitability wherever it can be found.  One of the strategies many chemical manufacturers are using to improve margins is a renewed focus on business basics, the industry best practices that separate market leaders from the rest of the pack.

Common strategies in emphasizing best practices include process intensification (the merging of two or more production processes), a search for greater supply chain efficiency and a renewed drive to pare overhead even more.  While every business process can yield some additional waste and performance improvement, producers often overlook the benefits to be gained from more effective vendor management and purchasing.

Procurement leaders differ on some of the details of what constitutes purchasing excellence, but several themes recur in almost every vendor management or purchasing excellence initiative.  We’ll discuss some of these initiatives shortly.  The common foundations of purchasing excellence initiatives are better communication, more accurate data at all levels and a focus on enforceable, repeatable processes.  Finding a way to achieve these objectives can be a challenge.  Microsoft Dynamics AX ERP for chemical manufacturers provides these foundations, as well as other tools required to implement best-in-class processes that can give you the competitive advantage you need to sustain and grow margins in an already competitive business.

First we’ll discuss some of the tactics you can use to improve purchasing performance and contribute to stronger margins.  Then we’ll look at how Microsoft Dynamics AX ERP can help you, as a chemical manufacturer, to effectively implement some or all of these approaches in your company.