A is for Agility in today’s VUCA world

D'turn 13Jul12.pngPity the poor purchasing manager, who:

• Must keep inventories low as end-user demand remains slow, and the CFO remains very worried about the working capital risk
• Must keep inventories high, to minimise the risk of running short if supply problems develop and prices jump

Benzene (green line), as always, is the great example of what can happen. As the chart shows, prices began to fall in early March, as oil prices fell. But May’s plant problems pushed them back up. Since then they have been down again, then up, then down. And then up again.

These moves are not being driven by a recovery in demand. This, from all accounts, remains as weak as ever. They are supply-driven, where any problems are magnified in a thin market. Thus prices have risen 16% over the past 2 weeks, having previously fallen 11% in 3 weeks.

This is a good example of the VUCA world in which we now live. Volatility, Uncertainty, Complexity and Ambiguity dominate.

The only solution is for companies to develop their own VUCA in response – Vision, strategic Understanding, Clarity over implementation plans. And, especially if you are a purchasing manager, Agility in response to unforeseeable events.

Benchmark price movements since the IeC Downturn Monitor’s 29 April 2011 launch, with latest ICIS pricing comments, are below:

HDPE USA export (purple), down 28%. “Producers were making few offers and seeking a higher price for any material they were offering”
PTA China (red), down 26%. “Polyester makers offered price discounts during the week to encourage sales”
Naphtha Europe (brown), down 25%. “Market lengthened this week as a result of imports from other regions boosting stocks, and demand from the gasoline sector declining.”
Brent crude oil (blue), down 20%
S&P 500 Index (pink), down 1%
Benzene NWE (green), up 8%. “Ongoing tightness for July, gains on crude futures, as well as firmer prices in Asia and the US, have all helped put more upward pressure on the European benzene market “

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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