Petrochemicals Manufacturing Excellence - Are You Ahead of The Competition?

In being successful, it is important to know just what your competitors are doing.

How well placed are they to deal with the new normal?

- Have they been taking action, like Lanxess, to better position themselves?

- Are they doing things in terms of product or process innovation that will leave them better placed for the future?

I know from my own experience, that it is very easy to become internally focussed, particularly during difficult times – but a level of external focus provides a very useful sense check and challenge to what you are doing.

How do your costs compare?

- Do you have industry benchmark data you can use?
- Do you know what they are doing to address challenges?

There’s a lot of information available and as you would probably expect me to say, you can always enlist the help of consultants to give you that external perspective.

Good luck!


Manufacturing Management in the New Normal

So we've already discussed the new normal  and its consequences, together with covered short and long term success factors, what I propose is a set of challenges, designed to assess just how ready is your organisation to deal with whatever the future holds.

Firstly let’s consider management

1) Do your managers understand the potential implications of the new normal?

By this I mean do they consider the economic outlook and are they identifying the various scenarios that might be created

2) Have your managers identified the things that they must be able to control in order to adapt to a changing situation?

This means having a highly capable AND highly flexible workforce, being strongly focussed on cost effectiveness and systematically eliminating all kinds of waste.

I would like to refer to the example of Lanxess. Last year Lanxess used the strap line ‘continuity meets flexibility’ for its 2008 annual report. Taking a quote from the report “The willingness to critically review our own strategies at regular intervals has played a crucial role in our company’s successful development. In view of the major challenges we now face, our reviews are becoming increasingly stringent.”

What Lanxess did was to actively implement a number of measures designed to give it the flexibility it needed to manage during the downturn.

Looking at the 2009 annual report and the comments of Axel Heitmann, the Lanxess Chairman states “Thanks to the numerous initiatives we implemented worldwide, we succeeded in keeping as many of our highly qualified employees in the group as possible, despite the crisis. We will need them urgently when the economy picks up again.”

He goes on to talk about flexibility of workforce, flexible asset management and reduction of expenditure.
In summary, he says “We are in an excellent position to emerge from the crisis a stronger company.”

I would consider that to be a very significant success.


Long and Short Term Critical Success Factors

Given the levels of investment in new capacity in recent years, it is apparent that petrochemicals manufacturers need a number of key attributes if they are to achieve long term success


- large, integrated sites with access to advantaged cost feed stocks
- sites with all plant units within close proximity to minimise transport costs
- a unified management structure to minimise overhead
- cost optimisation models to squeeze maximum margin out of every molecule


- coastal or river location with good access and excellent logistics facilities


- reliable technologies
- robust technology with good on-going development support
- low cost (every penny/tonne makes a difference


- for first quartile plants, economies of scale are essential otherwise fixed costs per tonne of product produced are too high


- recognising that major markets are shifting, producers need to be able to quickly move products to those markets offering the best returns

However these long term success factors are relatively static and whilst organisations should look to develop in this direction over time, it is also very important to consider short term success factors.

These short term factors all come down to what I would call ‘smart management’.

This means being able to identify potential issues ahead of time and develop strategies to deal with them.

The strategies will vary from one situation to the next, but I believe that all will require the highest levels of operational capability and by this I mean

• Flexibility - the capability to quickly and effectively respond to market volatility e.g. quick, safe and effective shut down, the ability to move turnarounds at short notice, swift rate changes and swift product changes

• Cost effectiveness – everyone in the organisation understanding that every penny matters AND working together to optimise costs

• Competitiveness – knowing what the competition is doing and being better than them e.g. innovation, workforce flexibility, logistics etc


Success in the New Normal

In my previous post, I referred to the 'New Normal' and what it might mean for petrochemicals producers. Today, I cover the question ‘what will success mean in this New Normal?’

We are very unlikely to see a repeat of the boom years of profitability, high operating rates and substantial capital investment.

So what success will mean is

• Firstly - Being ahead of the competition – across a balanced scorecard of key benchmark indicators as well as less tangible factors such as innovation and people development

• Being profitable and having monies to selectively invest in 'winner' projects

• Finally - Achieving sustainable improvements that leave you well positioned for the future e.g. innovation, organisational improvements, reliability etc.

So having defined success, the next question is 'how do we achieve it?'


Petrochemicals Manufacturing Strategies for the New Normal

Last week I attended the excellent Petchem Arabia conference, organised by the World Refining Association. The conference was very interesting and most valuable, giving an insight into the major issues affecting the future of the industry in the region.

My own presentation was 'Manufacturing Challenges for the New Normal'. Over the course of this week, I'd like to share some of my key themes.

The term ‘new normal’ was coined back in march 2009 by Bill Gross, founder of PIMCO, the California – based investment solutions provider. PIMCO was one of the few organisations that warned of the risks associated with the sub-prime housing bubble that drove economic boom years.

In terms of the economic recovery, PIMCO discredited the idea of a sharp rebound from recession and a rapid return to the activity levels of the boom years. Instead, they referred to a ‘New Normal’ which would bring lowered living standards, higher unemployment, stagnant company profits, heavy government intervention in the economy and disappointing equity returns.
So the key issues for petrochemicals manufacturers are

• End consumers are shifting from ‘needs’ to ‘wants’ significantly changing spending behaviour

• Financial crises, fears of ‘double-dip’ recession and fear of unemployment are driving these behaviours

• Temporary factors such as government stimulus packages have distorted demand but have not necessarily given a sustainable boost to the economies

So the net effect is increasing volatility and highly variable demand levels. And this is creating a major headache for manufacturers.

How to deal with this headache will be the theme of blog posts this week.


NiTech Solutions Wins ICIS Innovation Award

NiTech Solutions has won the prestigious ICIS Innovation award in the SME (Small/Medium size Enterprise) category.

As some may know, I do have a particular interest here - in my role as the Engineering Director with NiTech Solutions.

This award is fantastic news for an SME which is looking to make a breakthrough in the equipment market.

The picture shows the plant that won the award - installed with Genzyme, the leading biotech company. This technology essentially replaces a standard stirred-tank batch reactor and offers a major cost reduction - in both capital and operating costs, as well as better product quality, lower carbon footprint and waste reduction.

The technology is applicable to a wide range of applications, such as crystallisation, biodiesel, hydrogenationpolymerisation and pharmaceutical API's.

The mixing in the NiTech Continuously Oscillatory Baffled Reactor (COBR) is much more efficient than the mixing in a standard CSTR. The mixing, combined with high surface area per unit volume, means that steam and cooling water usage is much reduced. Furthermore conditions very near to plug flow can be attained at relatively low flow rates resulting in consistent product quality and yield.

Very much one of the 'green technologies' we hear so much about!


BP Sets Up New Safety and Risk Unit

photo : Wikipedia

The incoming BP Chief Executive Bob Dudley has announced that the company will set up a new Safety and Operational Risk function.

This change, implemented as a result of the Deepwater Horizon incident, creates a division reporting directly to Dudley and with responsibility "for ensuring that all operations are carried out to common standards, and for auditing compliance with those standards".

Dudley has also announced that BP will also review how it rewards its managers, with the stated aim of encoraging excellence in safety and risk management.

The blog applauds these actions, this is an appropriate response to such a catastrophic incident, putting process safety and risk management to the top of the corporate agenda. The only question is, why was this action not taken after Texas City?