Galileo's Lessons for the Chemical Supply Chain | Lux Quarterly

Galileo’s Lessons for the Chemical Supply Chain

First year physics students are often shown a dramatic illustration of Galileo’s law that all objects near to earth fall at equal acceleration regardless of the object’s weight. In the experiment shown below, the projectile is fired at the precise moment the monkey releases its hold on the tree in an effort to avoid the projectile. Students are initially astonished to find that no matter the initial velocity of the projectile aimed at the monkey, it always hits its target- the monkey, albeit at different heights and times, following a downward arc.

galileos-lessons-for-the-chemical-supply-chain

This demonstration of kinematics is, I think, an apt metaphor for the way that a supply chain is configured to target and hit a particular market. This is especially true for mature or maturing markets where the primary concern is to always stay focused on hitting the established target market. This is problematic in today’s markets where the market (monkey) fluctuates, and especially so in declining ones.

Upstream participants in long, distributed supply chains such as chemical commodity manufacturers are at a particular disadvantage since they often reside far from market action. It is only after years of effort and experimentation, that they become exquisitely tuned to markets, only to see them begin to fall in volume and/or value. Hence the natural interests in new technologies like the industrial internet of things; anything to collect data more quickly in order to (hopefully) respond more nimbly.

However, this might not be the first, best question to ask. Does gathering more information more quickly in a market that is overall declining the best strategy for a manufacturer/supplier? There could be cost savings to be had of course, but does it better position you to respond to the vicissitudes of the market itself when there are longer and more complex cycle dynamics at play?

A case in point. A thermoplastics manufacturer was concerned that one of its major markets, cell phones, was evolving so quickly that turnaround times per specifications were becoming a challenge.   They were losing contracts due to their inability to meet these tighter turnaround times and specs. Any proposed solution had implications for their brownfield facilities; should they add additional production lines, did they need to greenfield new facilities in order to respond, was the market growing fast enough to justify, and was there going to be sufficient margins in doing so? The answer we provided was that the market was quickly becoming saturated both in terms of users and new entrants, and thus both margins and cycle times would continue to decrease. Should our client continue to follow this large but declining market downward? Could they seize market share when market size was stagnant? Should they continue to follow the market down? If yes, should they then seek to disintermediate their own supply chain in order to ‘get closer’ to their end clients- the cell phone makers?

The challenge of course is that these same supply chain partners were critical to other markets our client serviced. Rather than risking long term and crucial relationships, one potential path suggested was to involve their partners. Chances are, they are just as consternated and anxious as well, and seeking answers. Innovation need not and indeed is not, solely found in disruption. By far, most innovation occurs in the development and application of knowhow and expertise. Our recommendation was to have our client reach out to their supply chain neighbors to discuss how together they could find a more unified and rapid solution for this mutually important market. This was, surprisingly, found to be novel to our client; they had always viewed them as mere suppliers and not sources of innovation and collaboration. Together they could approach the market in the stance of a unique solutions provider rather than just one of many vendors.

Your supply chain can be a tremendous source of innovation, if you are willing to shift your framework perspective. When was the last time you spoke to your supply chain partners about innovation?

 

For more information contact Kevin Pang at Kevin.Pang@luxresearchinc.com

 


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