EPCA ’15: Supply chain companies face volatile operating environment – McKinsey

BERLIN (ICIS)–Companies operating in the global petrochemical supply chain will have to be more agile if they are to succeed in a volatile operating environment, McKinsey & Company partner Theo Jan Simons told EPCA delegates on Tuesday.

Speaking at the 49th European Petrochemical Association meeting, Simons said logistics companies would need to have improved strategic foresight and insight coupled with greater managerial and financial agility to cope with a period of heightened volatility.

Oil price volatility, particularly, is expected to make decision-making more difficult, but slower global economic growth also presents problems to a sector that has grown rapidly with the increase of global petrochemicals trade.

“Try to design your supply network so it is robust,” Simons said. Make sure you have a strategic understanding and the tools to respond effectively to oil price movements, he added.

“Monitor the oil price much more closely than you did before,” Simons said. Supply chain companies will also need to understand the implications of the dynamics of oil price movements through the adoption of robust scenarios, he suggested.

“You can expect economic growth to get tough,” he said. “So expect a flattening of inter-regional transport growth.”

“One of the consequences [of a lower oil price] is likely to be a slowdown in petrochemicals investments,” Simons added.

“You need to think how to navigate in this world of low oil but volatile oil.”

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The annual EPCA meeting runs from 3-7 October.