INSIGHT: Clustering must go local

15 October 2007 13:38  [Source: ICIS news]

By Nigel Davis

LONDON (ICIS news)--European chemical companies operating in a highly competitive global environment will have to learn how to co-operate locally if they are to succeed.

The future of much of Europe’s chemicals sector relies on more effective clustering: the sharing of important resources at specific manufacturing sites. But developing further advantage at already productive locations will be no mean feat.

As studies continue to show, more effective clustering requires greater co-operation between companies to improve logistics and service agreements. Producing companies also will have to work more closely with logistics service providers (LSPs).

The European chemicals sector believes it has some of the strongest industrial clusters in the world. Not all may agree and it has become much more widely apparent that there is a great deal to learn from other sectors such as automobiles and consumer electronics.

The trick for chemicals makers will be to effectively manage co-operation and collaboration. Indeed the conclusion of the latest European Petrochemical Association (EPCA)-sponsored study into the petrochemical industry’s supply chain and logistics talks about laying the ground work first.

Manufacturers don’t always want to collaborate. They are concerned, rightly, about the competition aspects of doing so. They also do not, however, seem to want to talk in great detail to their logistics service providers. They seem to be more prepared to pay one LSP off against another.

The LSPs find it difficult to plan and even more difficult to plan effectively with the key cluster customers.

But if the European chemical industry is to thrive against tough global odds, new approaches will have to be found.

The EPCA report suggests that improved information exchange, discussion platforms, what it calls “collaborative end-to-end solutions development” and a long-term perspective are key to cluster development.

Clusters need leaders. So the question is who? They could be drawn from producers, LSPs and regulatory authorities.

More effective leadership, however, could be provided by local - as opposed to national or multinational - sector associations: a point made by competition guru Michael Porter at this year’s annual EPCA meeting in Berlin.

Historically, the most effective clusters have made the most of the links between local resources, both human and capital.

There is no reason then why chemicals clusters could not develop beyond the mere grouping together of production assets and certain services to embrace a much more widespread network of inputs.

Engineering, effective planning and the ability to make money from innovation lie at the core of a successful chemicals business.

Combining these resources to the benefit of more than one company is possible - it has just not yet been achieved to any noteworthy extent.

More effective clustering will be prove to be vital to the continued health of the European chemicals sector. There is a great deal more to achieve.

By: Nigel Davis
+44 20 8652 3214

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