Employee Engagement in the New Normal

In a recent blog I highlighted the factors that are important if manufacturing companies are to thrive in the new normal.

Capability, flexibility, innovation, effectiveness were the keywords used to describe how the highest level of operational capability could be achieved.

In the current climate the focus must be on existing assets, and that of course must include our human assets, the workforce.

When applied to human beings those words spell out an engaged and effective workforce. In his 2009 report to the UK government "Engaging for Success"  David MacLeod, no stranger himself to the petrochemical industry, reported that while 90% of businesses believed that engagement impacted on business success only 25% had an engagement plan.  So the question is 'Has the impact of the New Normal changed this thinking'?

There is certainly one organisation which believes, and is doing something about it by investing in the capability of their workforce. In winning their recent UK National Training Award for 2010, Warwick International reported soaring morale and a doubling of productivity, proving once again that making progress in a way which engages employees can be good for business.

Employee engagement is not about applying a ubiquitous formula. It's about working things out for your own situation. I came across an excellent paper, written by Eric Thompson. Entitled  "Getting Involved" the paper suggests how you can make progress in your own environment.

Achieving employee engagement will not address every issue that petrochemicals manufacturers might face right now but it will certainly be a major factor in achieving success in the New Normal

China to Invest in Petrochemicals from Coal Facility

photo : Total

Total and China Power Investment have announced that they will carry out a study into a possible 1 million-metric-ton-per-year polyolefins complex in China’s  Inner Mongolia region. The area has abundant supplies of coal, so feedstock will be readily available

Total and China Power aim to complete the plant in around 5 years, with an anticipated cost of  up to $4 billion to build.

The facility will use a coal to methanol process, together with the methanol-to-olefins technology and an olefins cracking process that Total has been testing in Feluy, Belgium.

Interesting move and one which reduces China's dependence on imported feedstocks. I don't know how this process compares economically but an abundant supply of low cost coal has to be an advantage, particularly with ethane supply becoming tighter in the Middle East and the link between naphtha and crude oil price.

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


• INTEGRATION

- 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

• LOCATION

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

• TECHNOLOGY

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

• SIZE

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

• GLOBAL REACH

- 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.