Accenture media people recently updated me with a new study, “Global Shifts in Industrial Investment: How Chemical Companies Can Harness The Opportunities”.
The report mentions that innovations in energy (such as tapping shale gas) and automation, as well as rising labor costs in China are changing the investment patterns of chemical and chemical consuming industries. These trends directly impact the future structure of the chemicals customer market and the industry is seeing large/new investments. Chemical companies need to be aware of which customer industries are most affected by these trends and what it will take to meet their needs.
Look for industry veteran John Berra’s column in the August issue of Automation World coming online in a few weeks where he addresses this very opportunity.
Accenture researchers Paul Bjacek, leader of global chemicals and natural resources research, and Larry Oglesby, a senior executive in Accenture Strategy, say, “Anticipating $7.6 trillion in capital projects in the next five years, chemicals leaders weigh multiple factors throughout the world. The report looks at key criteria leaders use to locate new plants and pursue high performance.”
The report continues: Chemicals companies and their industrial customers have been building cash reserves since the recession of 2008-09. The thrift mindset resulted from uncertainty about the future, and company leaders have been waiting for clear signals of growth. A less discussed factor, however, is senior executives are having a hard time pinpointing the best places to invest.
Accenture describes key factors in locating new plants: (1) expectations of exchange rates, (2) total labor costs, (3) innovation ecosystems, (4) materials and energy costs, (5) logistics/customer proximity and (6) rule of law.
Manufacturers are starting with the premise of building where demand is, unless they find a compelling reason to go offshore. China will continue as a global manufacturing powerhouse, but North America is expected to enjoy a higher rate, 21 percent, of industrial growth. Europe is projected to account for about 11 percent of new project spending, with Latin America trailing at 2 percent.
To pursue high performance, industrial leaders are expected to:
- Invest in automation. Whether improving processes or using robots in batch process and rubber/plastics manufacturing, the ability to increase high-quality output with less labor is the essence of competitiveness.
- Reduce costs and improve supply chains. Serving regions with varying characteristics means providing differentiated service levels.
- Get involved early in new product development. Companies stand to gain by partnering with customers’ businesses to compete in demanding industries.
- Optimize plant construction. Effective delivery of capital projects will be essential to avoid cost overruns and maintain profitability.
All good news to us who work in automation.
